Admin Re®
In 2015 Admin Re® made a strong contribution to the Group and delivered against its strategy. Since 1 January 2016 it has become part of Life Capital.
“At Admin Re® we achieved a strong performance across all metrics.”
Bob Ratcliffe
CEO, Admin Re®
Strategy and priorities
As part of Life Capital from 1 January 2016, Admin Re® aims to enhance profitability by leveraging its core competencies of selective growth, value extraction and operational excellence.
Admin Re®’s strategy of selective growth means pursuing opportunities to build and enhance the franchise in the UK market. All transactions need to meet Swiss Re’s Group investment criteria and hurdle rates.
Value extraction relates to the active management of the portfolios of assets and blocks of businesses and a focus on consistently creating value through capital and tax synergies.
Operational excellence involves continuous improvement of the operating platform. It also means focusing on transformation and management actions, including business efficiency and cost reductions.
For future periods, Admin Re® will be reported as part of the Life Capital Business Unit.
Admin Re® results
| Download |
USD millions |
2014 |
2015 |
Change in % |
Revenues |
|
|
|
Premiums earned |
502 |
368 |
–27 |
Fee income from policyholders |
453 |
414 |
–9 |
Net investment income – non-participating business |
1 256 |
938 |
–25 |
Net realised investment gains/losses – non-participating business |
–114 |
275 |
– |
Net investment result – unit-linked and with-profit business |
1 306 |
772 |
–41 |
Other revenues |
1 |
0 |
–100 |
Total revenues |
3 404 |
2 767 |
–19 |
|
|
|
|
Expenses |
|
|
|
Life and health benefits |
–1 415 |
–790 |
–44 |
Return credited to policyholders |
–1 442 |
–1 106 |
–23 |
Acquisition costs |
–181 |
–138 |
–24 |
Other expenses |
–359 |
–320 |
–11 |
Interest expenses |
–25 |
–16 |
–36 |
Total expenses |
–3 422 |
–2 370 |
–31 |
|
|
|
|
Income/loss before income tax benefit |
–18 |
397 |
– |
Income tax benefit |
52 |
25 |
–52 |
Net income attributable to common shareholders |
34 |
422 |
– |
Performance
Admin Re® announced the acquisition of Guardian Financial Services (Guardian) in September 2015, which closed in January 2016 following regulatory approval. The acquisition is a strong demonstration of progress against Admin Re®’s strategy to be a leading closed life book consolidator in the UK. The sale of Aurora National Life Assurance Company (Aurora) closed in April 2015, continuing Admin Re®’s exit from the US market; in the third quarter, HSBC policies were successfully migrated to Admin Re® platforms.
Admin Re® generated gross cash of USD 543 million in 2015 compared to USD 945 million in the prior year. The 2015 result includes the positive impact of USD 231 million primarily from updates to UK annuitant mortality assumptions and USD 80 million from the UK half year statutory valuation. The 2014 result included USD 217 million from the sale of Aurora and USD 225 million release of surplus reserves held against the risk of credit default. In addition, the prior year included USD 234 million following the finalisation of the UK statutory valuations. A dividend of USD 401 million was paid to the Group in June 2015.
Admin Re® reported net income of USD 422 million in 2015 compared to USD 34 million in 2014. The 2014 result included a USD 203 million loss from the sale of Aurora. Excluding this loss, the 2014 net income would have been USD 237 million. The increase in the current year was driven by higher realised gains from sales of government bonds as part of the preparation for Solvency II and tax credits following the finalisation of the UK year-end statutory results and changes to the UK corporation tax rate.
Investment result
The return on investments was 4.7% for 2015 compared to 4.6% for 2014, reflecting a lower average invested asset base, which more than offset the impact of the decrease in the investment result of USD 156 million. The decrease in the investment result was mainly attributable to a reduced asset base, following the sale of Aurora.
Net investment income of USD 656 million in 2015 was lower than USD 901 million in 2014 mainly due to the net asset outflows related to the sale of Aurora and the impact of foreign exchange rate movements. The fixed income running yield was 3.6% in the reporting period. Net realised gains were USD 264 million in 2015 compared to USD 175 million in 2014, as the current period included additional net realised gains from sales of government bonds related to the preparation for Solvency II.
Insurance-related investment results are not included in the figures above.
Expenses
Expenses were USD 320 million in 2015 compared to USD 359 million in 2014. Admin Re® delivered against its strategy with cost reductions in 2015 and lower deal-related costs.
Shareholdersʼ equity
Common shareholders’ equity at the end of 2015 was USD 4.9 billion or USD 1.5 billion lower than as of 31 December 2014. The decrease was mainly due to dividends paid to the Group and a USD 1.0 billion decrease in unrealised gains, driven by increasing interest rates in the UK and the US during 2015, partially offset by net income.
The return on equity was 7.5% for 2015, compared to 0.6% for 2014. The 2014 result included the loss following the sale of Aurora. Excluding this loss, the return on equity would have been 3.8% for 2014. The year-on-year increase was mainly due to higher net income and lower average equity in 2015.
Outlook
As part of the Life Capital Business Unit, Admin Re® will continue to pursue selective growth opportunities in the UK closed book market and potentially in continental Europe. All transactions must meet Group strategic and investment criteria as well as hurdle rates. Overall Admin Re® aims to improve efficiency, to achieve capital and operational synergies and to continue to actively manage its asset portfolios and blocks of business. From 2016 through 2018, Life Capital aims to generate significant cash for the Group and to invest into its open life strategy.