EVM performance
Swiss Re achieved its over-the-cycle economic net worth per share growth target with a growth rate of 10.8%.
“EVM allows Swiss Re to measure sustainable, long-term value creation.”
David Cole
Group Chief Financial Officer
Underwriting losses in Property & Casualty Reinsurance and Corporate Solutions due to natural catastrophes, offset by strong new business contribution in Life & Health Reinsurance as well as a strong investment result.
Read online a description of the summary of significant EVM principles and sensitivities.
Economic Value Management (EVM) is Swiss Re’s proprietary integrated economic valuation and steering framework, consistently measuring economic performance across all businesses.
Swiss Re reported a total contribution to economic net worth (ENW) of USD 1.9 billion in 2017 compared to USD 4.2 billion in 2016. On a risk-adjusted basis, Swiss Re reported an EVM loss of USD 9 million, implying that the required cost of capital was essentially covered in 2017. This result was in contrast to the reported EVM profit of USD 1.4 billion in 2016.
EVM profit
in USD millions, 2017
–9
(2016: USD 1.4 billion)
ENW per share growth
over-the-cycle target: 10%
10.8%
(2016: 11.0%)
Total contribution to ENW
in USD billions, 2017
1.9
(2016: USD 4.2 billion)
Group performance
The EVM loss of USD 9 million in 2017 reflected the impact of Cyclone Debbie in Australia as well as hurricanes, earthquakes and wildfires in the Americas that adversely impacted the Property & Casualty Reinsurance and Corporate Solutions economic results. These losses were partially offset by a strong new business result in Life & Health Reinsurance, as well as a strong overall investment result, mainly due to tightening credit spreads.
The EVM loss on new business was USD 1.3 billion compared to an EVM profit on new business of USD 884 million in 2016. The drop was mainly driven by lower Property & Casualty Reinsurance and Corporate Solutions new business results following large natural catastrophe events in the Americas in the second half of 2017. This was partially offset by a strong new business result in Life & Health Reinsurance.
The EVM loss from previous years’ business amounted to USD 148 million in 2017 compared to an EVM loss of USD 579 million in 2016. The result was primarily driven by large man-made and natural catastrophe loss development in Corporate Solutions, partially offset by favourable claims experience in Property & Casualty Reinsurance.
Investment activities generated an EVM profit of USD 1.5 billion in 2017 compared to a profit of USD 1.1 billion in 2016. The results in both years reflected a positive impact from credit spread tightening and performance across equities and alternative investments, while the 2017 result also reflected a favourable performance from Principal Investments.
Economic net worth (ENW) per share growth was 10.8% in 2017, achieving the over-the-cycle target of 10%, driven by the total contribution to ENW and favourable foreign exchange impacts.
Key information
| Download |
USD millions, unless otherwise stated |
2016 |
2017 |
Change in % |
||
|
|||||
EVM profit |
1 399 |
–9 |
− |
||
Total contribution to ENW |
4 231 |
1 867 |
–56 |
||
Economic net worth (ENW) |
36 648 |
37 667 |
3 |
||
Economic net worth per share in USD |
112.42 |
119.74 |
7 |
||
Economic net worth per share growth, %1 |
11.0 |
10.8 |
|
||
Profit margin − new business, % |
3.1 |
–4.1 |
|
||
Profit margin − previous years’ business, % |
–2.9 |
–0.8 |
|
||
Profit margin − investments, % |
12.0 |
16.5 |
|
||
Business segment performance
Property & Casualty Reinsurance reported an EVM loss of USD 1.2 billion in 2017 compared to a profit of USD 562 million in 2016. The EVM loss on new business of USD 1.5 billion was driven by severe natural catastrophe events, which included hurricanes Harvey, Irma and Maria, two earthquakes in Mexico and the wildfires in California. EVM profit on previous years’ business was USD 120 million, driven by favourable experience in property and specialty, partially offset by losses from Cyclone Debbie and negative casualty development in the motor business in both the US and the UK. Investment activities generated an EVM profit of USD 212 million in 2017 compared to a loss of USD 29 million in 2016. The 2017 profit was driven by performance across equities and alternative investments, and from credit investments, while the prior year was impacted by a negative rates performance on a short duration position.
Life & Health Reinsurance reported an EVM profit of USD 1.6 billion in 2017 compared to USD 1.2 billion in 2016. The 2017 result included a strong new business profit of USD 987 million, driven by large transactions in EMEA and continued growth in Asia. The 2017 previous years’ business profit was USD 11 million. This was mainly driven by positive results from model conversions and the restructuring of an intra-group retrocession agreement in Australia and lower capital costs, partially offset by mortality and critical illness assumption updates in the US and UK, respectively. Investment activities generated an EVM profit of USD 627 million in 2017 compared to USD 596 million in 2016. The results in both years were positively impacted by credit spread tightening as well as performance from equity securities.
Corporate Solutions reported an EVM loss of USD 917 million in 2017 compared to a loss of USD 111 million in 2016. The EVM loss on new business was USD 595 million higher compared to 2016, significantly impacted by hurricanes Harvey, Irma and Maria, the earthquake in Puebla, Mexico and the California wildfires, partially offset by a lower impact from the non-recognition of intangible assets relating to acquisitions. The EVM loss on the Bradesco acquisition in 2017 was USD 81 million, whereas the EVM loss on the IHC acquisition in 2016 was USD 148 million. The EVM loss on previous years’ business was USD 257 million, driven by less favourable reserve development and higher natural catastrophe losses. Investment activities generated an EVM profit of USD 79 million in 2017 compared to a profit of USD 59 million in 2016, with results in both years reflecting a positive impact from credit spread tightening as well as performance from equity securities.
Life Capital generated an EVM profit of USD 572 million in 2017 compared to a profit of USD 115 million in 2016. The 2017 profit reflected a strong investment result as well as a favourable result from large transactions, while the 2016 profit reflected a strong investment result which was partially offset by losses from previous years’ business. The investment result in both years was driven by performance from all asset classes.
In 2017, an EVM loss of USD 128 million was reported in Group items compared to a loss of USD 364 million in 2016. The EVM loss from new business was USD 232 million in 2017, driven by capital costs on excess capital and expenses, partially offset by trademark licence fees charged to the business segments. The previous years’ business loss was USD 42 million, mainly driven by an increase in overhead expenses. Investment activities generated an EVM profit of USD 146 million in 2017 compared to a loss of USD 216 million in 2016, with the favourable variance reflecting an improved result from Principal Investments.
Business segments – key information
| Download |
USD millions, unless otherwise stated |
Property & Casualty Reinsurance |
Life & Health Reinsurance |
Corporate Solutions |
Life Capital |
Group items |
Total |
|
|
|
|
|
|
|
2016 |
|
|
|
|
|
|
EVM profit |
562 |
1 197 |
–111 |
115 |
–364 |
1 399 |
Total contribution to ENW |
1 589 |
1 916 |
140 |
599 |
–13 |
4 231 |
Profit margin − new business, % |
1.9 |
11.0 |
–4.2 |
− |
|
3.1 |
Profit margin − previous years’ business, % |
5.1 |
–4.7 |
–2.1 |
–17.8 |
|
–2.9 |
Profit margin − investments, % |
–1.0 |
14.7 |
10.9 |
|
–15.7 |
12.0 |
|
|
|
|
|
|
|
2017 |
|
|
|
|
|
|
EVM profit |
–1 161 |
1 625 |
–917 |
572 |
–128 |
–9 |
Total contribution to ENW |
–954 |
2 180 |
–750 |
987 |
404 |
1 867 |
Profit margin − new business, % |
–10.2 |
8.6 |
–21.2 |
4.3 |
|
–4.1 |
Profit margin − previous years’ business, % |
1.9 |
0.1 |
–18.3 |
1.0 |
|
–0.8 |
Profit margin − investments, % |
7.2 |
16.0 |
14.6 |
|
11.0 |
16.5 |