Valuation

SST balance sheet

The SST balance sheet is prepared based on the same market-consistent valuation principles as Swiss Re’s internal EVM framework. EVM is therefore used as a basis for preparing the SST balance sheet and valuation adjustments to EVM mainly affect capital costs and deferred taxes. The difference between assets and liabilities is defined as the SST net asset value, which is the basis for the calculation of the SST RBC.

The SST valuation methodology is further described in the Appendix of this Report.

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USD millions

Notes

SST 2017

SST 2018

Change

Real estate

 

 

 

 

Investments in subsidiaries and affiliated companies

 

15 300

15 476

176

Fixed income securities

 

17 192

18 004

812

Loans

 

9 892

9 450

–442

Mortgages

 

641

670

29

Equity securities

1

796

1 631

835

Other investments:

 

 

 

 

Shares in investment funds

2

10 684

12 957

2 273

Alternative investments

 

679

743

64

Other investments

3

3 933

907

–3 026

Investments for unit-linked and with-profit business

 

 

 

 

Derivative financial instruments assets

 

381

162

–219

Total market value of investments

 

59 498

60 000

502

Cash and cash equivalents

 

3 072

1 350

–1 722

Funds held by ceding companies and other receivables from reinsurance

4

14 620

23 037

8 417

Other receivables

 

630

1 520

890

Other assets

 

5 302

6 714

1 412

Total other assets

 

23 624

32 621

8 997

Total assets

 

83 122

92 621

9 499

 

 

 

 

 

Best estimate value of insurance liabilities before retrocessions

 

 

 

 

Direct insurance:

 

 

 

 

Life insurance (excluding unit-linked business)

 

 

 

 

Non-life insurance

 

 

 

 

Health insurance

 

 

 

 

Unit-linked life insurance

 

 

 

 

Other business

 

 

 

 

Active reinsurance:

 

 

 

 

Life insurance (excluding unit-linked business)

 

11 578

10 589

–989

Non-life insurance

5

27 377

34 558

7 181

Health insurance

 

 

 

 

Unit-linked life insurance

 

 

 

 

Other business

 

 

 

 

Total best estimate value of insurance liabilities before retrocessions

 

38 955

45 147

6 192

Retrocessions

 

 

 

 

Direct insurance:

 

 

 

 

Life insurance (excluding unit-linked business)

 

 

 

 

Non-life insurance

 

 

 

 

Health insurance

 

 

 

 

Unit-linked life insurance

 

 

 

 

Other business

 

 

 

 

Active reinsurance:

 

 

 

 

Life insurance (excluding unit-linked business)

 

–6 235

–6 151

84

Non-life insurance

 

–4 375

–4 758

–383

Health insurance

 

 

 

 

Unit-linked life insurance

 

 

 

 

Other business

 

 

 

 

Total retrocessions

 

–10 610

–10 909

–299

Non-technical provisions

 

1 036

878

–158

Debt

 

8 643

9 615

972

Derivative financial instruments liabilities

 

468

294

–174

Funds held under reinsurance treaties

 

5 633

5 374

–259

Reinsurance balances payable

6

728

4 403

3 675

Other liabilities

 

7 411

7 378

–33

Total other liabilities

 

23 919

27 942

4 023

Total liabilities

 

52 264

62 180

9 916

 

 

 

 

 

SST net asset value

 

30 858

30 441

–417

Notes

  1. The increase in equity securities is mainly due to higher positions in exchange-traded funds.
  2. The increase in shares in investment funds is due to changes in the structure of reinsurance intra-group agreements.
  3. The decrease in other investments is driven by the sale of short-term investments in connection with the funding of the dividend payment to the parent company and repayment of loans from intra-group companies.
  4. The increase in funds held by ceding companies and other receivables from reinsurance is due to business growth in property and casualty business and higher funds withheld percentages. In addition, life and health funds held increased due to a new intra-group transaction with Swiss Re Life Capital Reinsurance Ltd covering the Canadian in-force business. In 2017, the netting of assets and liabilities from reinsurance towards the same counterparty was decommissioned which leads to a gross-up.
  5. The increase in non-life reinsurance retrocessions is due to a new intra-group retrocession agreement and large natural catastrophe losses.
  6. The increase in reinsurance balances payable is due to the decommissioning of the netting of assets and liabilities from reinsurance towards the same counterparty, which leads to a gross-up.

SST balance sheet comparison with Swiss statutory

The SST balance sheet comparison with the audited financial statements provides insights on the main valuation and scope differences.

An overview of the main valuation and scope differences and the definition of the aggregated line items is included in the Appendix of this Report.

Assets

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USD millions

Swiss statutory

SST

Difference

Real estate

 

 

 

Investments in subsidiaries and affiliated companies

13 522

15 476

1 954

Fixed income securities

17 801

18 004

203

Loans

8 306

9 450

1 144

Mortgages

830

670

–160

Equity securities

929

1 631

702

Other investments

14 453

14 607

154

Investments for unit-linked and with-profit business

 

 

 

Cash and cash equivalents

907

1 350

443

Funds held by ceding companies and other receivables from reinsurance

34 410

23 037

–11 373

Other assets

24 865

8 396

–16 469

Total assets

116 023

92 621

–23 402

Investments in subsidiaries and affiliated companies

Differences in scope: In SST, some subsidiaries of the Company are sub-consolidated and, therefore, their assets and liabilities are reported within the respective line items. In statutory reporting, there is no sub-consolidation. Hence, the values of all subsidiaries are reported as investments in subsidiaries and affiliated companies.

Differences in valuation: SST reports investments in subsidiaries and affiliated companies at market-consistent value. In statutory reporting, participations are carried at cost, less necessary and legally permissible depreciation, fixed at historic foreign exchange rates.

Fixed income securities

Differences in valuation: SST carries fixed income securities at market value. In statutory reporting, fixed income securities are valued at their amortised cost.

Loans

Differences in valuation: In SST, policy loans and intra-group loans are valued by discounting future estimated cash flows at risk-free rates, while under statutory reporting those loans are carried at nominal value. Value adjustments are recorded where the expected recovery value is lower than the nominal value.

Mortgages

Differences in scope: In SST, some parts of mortgage loans are carried under other assets in accordance with US GAAP mortgage accounting standards. In statutory reporting, all mortgage loans are shown in mortgages.

Equity securities

Differences in scope: In SST, Swiss Re shares are not valued, although they are part of equity securities for statutory reporting. For SST, some shares in public equity investment funds are included in equity securities. Under statutory reporting, those shares are part of other investments.

Differences in valuation: SST values equity securities at market value. In statutory reporting, equity securities are carried at cost or lower market value.

Other investments

Differences in scope: In SST, short-term investments are defined on the basis of the remaining duration at time of purchase. Statutory reporting classifies short-term investments between cash and cash equivalents and other investments on the basis of initial duration. In SST, some public equity investment funds are classified as part of the equity securities. In statutory reporting, shares in investment funds are classified as other investments.

Differences in valuation: SST reports other investments such as investment funds, private equity or hedge funds at market value. In statutory reporting, these investments are generally valued at cost or lower market value. In SST, variable annuities derivatives are carried at market value.

Cash and cash equivalents

Differences in scope: In SST, short-term investments are defined based on the remaining duration at time of purchase, while statutory reporting classifies these investments based on the initial duration into short-term or cash and cash equivalents.

Funds held by ceding companies and other receivables from reinsurance

Differences in scope: In SST, pipeline premiums are included in re/insurance liabilities, whereas statutory reporting includes them in other receivables from reinsurance.

Differences in valuation: In SST, funds withheld for which a fixed interest is credited are valued by discounting future estimated cash flows at risk-free rates. Under statutory reporting, those are generally measured at the consideration received or at market value of the underlying assets.

Other assets

Differences in scope: In SST, reinsurance recoverables are part of re/insurance liabilities, whereas they are disclosed in other assets in statutory reporting. Some parts of mortgage loans are carried in other assets under SST. In statutory reporting, these are part of mortgages.

Differences in valuation: In SST, other assets are measured at fair value. In statutory reporting, other assets are generally carried at nominal value. Deferred acquisition costs are not valued for SST but are for statutory reporting.

Liabilities

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USD millions

Swiss statutory

SST

Difference

Re/insurance liabilities

72 659

34 238

–38 421

Unit-linked and with-profit liabilities

 

 

 

Debt

9 121

9 615

494

Funds held under reinsurance treaties

8 261

5 374

–2 887

Other liabilities

14 877

12 953

–1 924

Total liabilities

104 918

62 180

–42 738

Re/insurance liabilities

Differences in scope: In SST, reinsurance recoverables and pipeline premiums are shown in re/insurance liabilities. In statutory reporting, reinsurance recoverables are disclosed within other assets, while pipeline premiums are part of the funds held by ceding companies and other receivables from reinsurance.

Differences in valuation: SST uses best estimates to value the re/insurance liabilities without specific margin for prudence. Statutory reporting values reinsurance liabilities at best estimates, and requires provisions for adverse deviations (PADs) for the life and health business. For the property and casualty business, statutory reporting allows for an equalisation provision. Other valuation differences arise from the discounting of the liability cash flows. In SST, liabilities are generally discounted using current risk-free rates. Under statutory reporting, there is generally no discounting for non-life, and discounting at backing asset yields for life and health technical provisions.

Debt

Differences in valuation: In SST, senior debt and intra-group loans are discounted at risk-free rates. SST supplementary capital instruments are carried at fair value. In statutory reporting, debt is carried at redemption value.

Funds held under reinsurance treaties

Differences in valuation: In SST, the valuation is based on best estimates of the underlying cash flows. Under statutory reporting, funds held under reinsurance treaties are carried at the consideration received or at market value of the underlying assets.

Other liabilities

Differences in scope: In SST, pipeline claims are included in re/insurance liabilities. Under statutory reporting, pipeline claims are part of other liabilities.

Differences in valuation: In SST, no specific provision is made for currency fluctuations. In statutory reporting, a provision for currency fluctuation comprises the net effect of foreign exchange gains and losses arising from the revaluation of the opening balance sheet and the translation adjustment of the income statement from average to closing exchange rates at year-end. Derivative financial instruments are measured at fair value under SST. In statutory reporting, derivatives are generally carried at cost, less necessary and legally permissible depreciation. Back-to-back and variable annuities derivatives are carried at fair value.