Business activities

Life & Health Reinsurance business

Market environment

The Company is an internal reinsurer primarily dedicated to the Life Capital Business Unit. Life Capital businesses represent attractive and growing primary Life and Health (L&H) risk pools: ReAssure and Admin Re US operate in the closed book pool, while Elips Life Ltd, Elips Insurance Ltd, iptiQ Life S.A. and Lumico Life Insurance Company operate in the Group and Individual L&H protection risk pools. Life Capital is successfully growing its businesses: ReAssure will increase the number of owned or administered policies by 30% to approximately 5 million in 2018. Elips Life Ltd gross premiums written grew by 25% across its “core” and “new” European markets in 2017. Also, iptiQ Life S.A. managed to more than double new policy sales across its EMEA region for the second year in a row. The Company also contributes to support capital optimisation of the Group and reinsures a proportion of the Group’s Canadian L&H business.

The Company operates in a Swiss Re-only environment, having access to L&H risk pools in European and North American markets, which present attractive opportunities for capital optimisation. In this context, the introduction of a base erosion tax in the US may impact the effectiveness of the Company’s intra-group retrocessions in the US market. Options have been identified to implement an adequate response, which will be further refined as details of US tax reform are clarified.

Strategy and priorities

The Company was created to pool risks and optimise the capital position across the Life Capital businesses, thereby maximising Life Capital’s total gross cash generation. The Company will continue to enable Life Capital’s growth strategy, reinsuring as much risk as appropriate to minimise new business capital strain from Elips Life Ltd, Elips Insurance Ltd, iptiQ Life S.A. and Lumico Life Insurance Company growth. Additionally, it will be available to support the Group’s strategic initiatives where necessary.

The Company’s priorities for 2018 include:

1. Further optimise the funding of Life Capital businesses’ growth.
2. Refine options to respond to implementation of base erosion tax in the US including the possibility of a recapture of the business ceded from Swiss Re Life and Health America Inc.

Investments

Strategy and priorities

Financial investments are managed in accordance with Swiss Re’s asset management policy and the Company’s investment guidelines, which are intended to ensure compliance with regulatory requirements. The general principle governing investment management in the Company is the creation of economic value on the basis of returns relative to the liability benchmark, while adhering to the investment guidelines and the general prudence principle. The liability benchmark is determined by approximating an investable benchmark from projected liability cash flows. A cash benchmark is used for the economic surplus.

Outlook

In terms of the economic outlook, the moderate global growth environment is set to continue during 2018, both in developed and emerging market economies, while inflation is forecast to modestly increase globally. From a regional perspective, growth is set to stay solid in the Eurozone and the US where it is supported by expected improvements in US corporate earnings from the recently passed tax reform legislation, while growth for China is expected to slow somewhat in 2018.

For the UK, growth is expected to be more modest amid continued Brexit-related uncertainty.

Reinsurance and sub-holding companies

The Company is a wholly owned subsidiary of Swiss Re Life Capital Ltd, the holding company for the Life Capital Business Unit and has no subsidiary entities. The Company has no equity interest in ReAssure Ltd, its parent companies or its subsidiaries. The Company is domiciled in Zurich, Switzerland.

Claims on and obligations towards affiliated companies

None of these balances are towards the parent company, Swiss Re Life Capital Ltd.

Share capital and major shareholder

The share capital of the Company amounted to CHF 10 million. It is divided into 10 000 registered shares, each with a nominal value of CHF 1 000. The shares were fully paid-in and held directly by Swiss Re Life Capital Ltd. As of 31 December 2017, the Company was a fully owned subsidiary of Swiss Re Life Capital Ltd.

Significant events

The Company was incorporated by Swiss Re Life Capital Ltd on 16 August 2016 with a share capital of CHF 100 000. This is the first reporting cycle of the Company, with an extended reporting period from 16 August 2016 to 31 December 2017. The Company was subsequently funded by a share capital increase of CHF 10 million effective 11 November 2016 and a capital contribution totalling CHF 86 million.

Effective from 1 January 2017, Swiss Reinsurance Company Ltd and Swiss Re Europe S.A. novated reinsurance contracts with iptiQ Life S.A., Elips Life Ltd, Elips Insurance Ltd and Swiss Re Life and Health America Inc to the Company. A new retrocession of significant blocks of US Life Capital business (the “Cresta” blocks) from Swiss Reinsurance Company Ltd to the Company was also entered into with effect from the same date. The aforementioned intra-group transactions with Swiss Reinsurance Company Ltd were all undertaken at Swiss statutory book value and hence did not impact the Company’s reinsurance result at inception, but significantly affected various balance sheet and income statement positions in 2017. The transaction with Swiss Re Europe S.A. was undertaken at market value.

During the fourth quarter, the Company received two additional capital contributions to support new business growth (CHF 81 million). The largest additional block is the Canadian in-force Life & Health business retroceded to it from Swiss Reinsurance Company Ltd, Canada branch (Canadian business).

In line with the SST recognition principles, the transactions with effect from 1 January 2017 were reflected in the SST 2017.

Report of the statutory auditors

PricewaterhouseCoopers Ltd is the auditor of the Company. For more information, please see the (PDF:) Report of the statutory auditor.The Auditor's report is available in the Annual Report of the Company on www.swissre.com.