Walter B. Kielholz

Dear shareholders

At this time last year I wrote of my confidence in Swiss Reʼs prospects for 2013. That confidence has now been confirmed. Based on Swiss Reʼs very strong 2013 performance, the Board of Directors will recommend a regular dividend of CHF 3.85 per share at this yearʼs Annual General Meeting. We will also propose a special dividend of CHF 4.15 per share. Altogether this represents a return of about USD 3.1 billion of capital to our shareholders.

I am pleased to propose these dividends in our 150th year. While the anniversary is an impressive testament to our endurance and strength, strong dividends are proof.

We have earned another very strong profit in 2013, but the business environment remains challenging. We face headwinds from a few sources, such as regulatory developments as well as the inflow of so-called alternative capital into re/insurance markets. I am confident that we have the right business model in place to withstand these pressures, but we need to watch these trends carefully, analyse what they mean for us and respond proactively.

Central banks have kept interest rates artificially low for several years. This policy, pursued to stimulate economic growth and lower unemployment, has undoubtedly had some success. But it comes at increasing cost. One of the costs has been financial repression, ie, depriving long-term savers and investors, such as large re/insurers and pension funds, of important returns on their shareholdersʼ and policyholdersʼ assets. In returning to more ʼnormalʼ interest rates, central banks will face the risk of policy error. We are monitoring developments and preparing accordingly — indeed, the strategic short duration position that we implemented was meant partly to give us the flexibility to respond to changing conditions.

In the broader environment we saw in 2013 that the G-20 designated nine large insurers as globally systemically important insurers (G-SII). By all indications the companies named will be subject to additional reporting and higher capital requirements. The designation of reinsurers has been postponed to July 2014. We are looking at different scenarios although we continue to emphasise that our core activities are neither a source nor an amplifier of systemic risk. We believe we are well prepared for any additional requirements that would arise from such a designation.

These are major changes, and change should give us confidence. Indeed, our business depends on change. As we have often said, we enable the risk-taking on which economic progress depends. For our 150th anniversary we have celebrated under the motto “Open minds connecting generations”, examining ways to tackle some of the large-scale risks facing us today — longevity, climate change, natural disasters and food security. By highlighting ʼgenerationsʼ, we looked at the long-term consequences and implications of change in these areas and discussed possible solutions.

The long term has always been the focus in our business. The reinsurance business is long-term and long-tail by nature. We look forward to helping clients and society to manage the changes they are facing on a daily basis with innovative and forward-looking solutions.

Thank you for your trust.

Zurich, 20 February 2014

Walter B. Kielholz
Chairman of the
Board of Directors