Valuation
SST balance sheet
The SST balance sheet is prepared based on the same market-consistent valuation principles as applied in 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 risk-bearing capital (RBC).
The SST valuation methodology is further described in the Appendix of this Report.
| Download |
USD millions |
Notes |
SST 2018 |
SST 2019 |
Change since |
Real estate |
|
4 071 |
4 264 |
193 |
Investments in subsidiaries and affiliated companies |
|
|
|
|
Fixed-income securities |
1 |
98 568 |
90 991 |
–7 577 |
Loans |
|
8 642 |
8 658 |
16 |
Mortgages |
|
2 591 |
2 732 |
141 |
Equity securities |
2 |
3 857 |
3 028 |
–829 |
Other investments: |
|
|
|
|
Shares in investment funds |
|
|
|
|
Alternative investments |
|
3 756 |
4 099 |
343 |
Other investments |
|
5 018 |
5 196 |
178 |
Investments for unit-linked and with-profit business |
3 |
30 687 |
22 387 |
–8 300 |
Derivative financial instruments assets |
|
467 |
562 |
95 |
Total market value of investments |
|
157 657 |
141 917 |
–15 740 |
Cash and cash equivalents |
|
6 467 |
5 695 |
–772 |
Funds held by ceding companies and other receivables from reinsurance |
|
9 319 |
21 761 |
12 442 |
Other receivables |
|
4 433 |
2 652 |
–1 781 |
Other assets |
4 |
6 918 |
3 105 |
–3 813 |
Total other assets |
|
27 137 |
33 212 |
6 075 |
Total assets |
|
184 794 |
175 129 |
–9 665 |
|
|
|
|
|
Best estimate value of insurance liabilities before retrocessions: |
|
|
|
|
Direct insurance: |
|
|
|
|
Life insurance (excluding unit-linked business) |
5 |
31 870 |
26 649 |
–5 221 |
Non-life insurance |
6 |
9 986 |
12 559 |
2 573 |
Health insurance |
|
|
|
|
Unit-linked life insurance |
7 |
29 942 |
20 764 |
–9 178 |
Other business |
|
|
|
|
Active reinsurance: |
|
|
|
|
Life insurance (excluding unit-linked business) |
|
5 949 |
8 973 |
3 024 |
Non-life insurance |
|
38 255 |
44 168 |
5 913 |
Health insurance |
|
|
|
|
Unit-linked life insurance |
|
950 |
785 |
–165 |
Other business |
|
|
|
|
Total best estimate value of insurance liabilities before retrocessions |
|
116 952 |
113 898 |
–3 054 |
Retrocessions: |
|
|
|
|
Direct insurance: |
|
|
|
|
Life insurance (excluding unit-linked business) |
|
–1 806 |
–1 555 |
251 |
Non-life insurance |
|
–1 383 |
–1 835 |
–452 |
Health insurance |
|
|
|
|
Unit-linked life insurance |
|
|
|
|
Other business |
|
|
|
|
Active reinsurance: |
|
|
|
|
Life insurance (excluding unit-linked business) |
|
–675 |
–596 |
79 |
Non-life insurance |
|
–2 071 |
–1 699 |
372 |
Health insurance |
|
|
|
|
Unit-linked life insurance |
|
–42 |
–42 |
0 |
Other business |
|
|
|
|
Total retrocessions |
|
–5 977 |
–5 727 |
250 |
Non-technical provisions |
|
1 888 |
2 217 |
329 |
Debt |
8 |
13 399 |
11 554 |
–1 845 |
Derivative financial instruments liabilities |
|
290 |
307 |
17 |
Funds held under reinsurance treaties |
|
750 |
739 |
–11 |
Reinsurance balances payable |
|
–133 |
1 |
134 |
Other liabilities |
|
6 760 |
4 872 |
–1 888 |
Total other liabilities |
|
22 954 |
19 690 |
–3 264 |
Total liabilities |
|
133 929 |
127 861 |
–6 068 |
|
|
|
|
|
SST net asset value |
|
50 865 |
47 268 |
–3 597 |
Notes
- The decrease in fixed-income securities is driven by the additional 11.8% MS&AD minority investment into ReAssure, yield increases, credit spread widening and the weakening of major currencies against the US dollar.
- The decrease in equity securities is driven by net sales and negative performance of equity investments.
- The decrease in investments for unit-linked and with-profit business is driven by the additional 11.8% MS&AD minority investment into ReAssure and underperformance of implied equity exposure.
- The decrease in other assets is due to a reduction of securities lending activities.
- The decrease in direct life insurance best estimate liabilities is mostly driven by the additional 11.8% MS&AD minority investment into ReAssure and run-off of the business.
- The increase in direct non-life reinsurance best estimate liabilities is mainly driven by natural-catastrophe events and man-made exposure.
- The decrease in direct unit-linked life insurance best estimate liabilities is driven by a decline in UK investment markets during 2018, impacting the investments for unit-linked and with-profit business. Moreover, the additional 11.8% MS&AD minority investment into ReAssure contributes to the decrease.
- The decrease in debt is driven by redemptions and maturities and the weakening of major currencies against the US dollar.
SST balance sheet comparison with US GAAP
The SST balance sheet comparison with the audited financial statements provides insights into 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
| Download |
USD millions |
US GAAP |
SST |
Difference |
Real estate |
2 411 |
4 264 |
1 853 |
Investments in subsidiaries and affiliated companies |
|
|
|
Fixed-income securities |
95 952 |
90 991 |
–4 961 |
Loans |
1 653 |
8 658 |
7 006 |
Mortgages |
2 889 |
2 732 |
–157 |
Equity securities |
3 036 |
3 028 |
–8 |
Other investments |
11 815 |
9 295 |
–2 520 |
Investments for unit-linked and with-profit business |
29 546 |
22 387 |
–7 159 |
Cash and cash equivalents |
5 985 |
5 695 |
–290 |
Funds held by ceding companies and other receivables from reinsurance |
22 798 |
21 761 |
–1 037 |
Other assets |
31 485 |
6 318 |
–25 167 |
Total assets |
207 570 |
175 129 |
–32 441 |
Real estate
Differences in valuation: in SST, real estate is measured at market value, while under US GAAP real estate is carried at depreciated cost.
Fixed-income securities
Differences in scope: in SST, minority interests are reflected in the proportional consolidation of assets and liabilities, whereas in US GAAP minority interests are disclosed in the statement of equity.
Loans
Differences in scope: Reinsurance contracts on a funds-held basis for company-owned life insurance are reported as policy loans for SST (reflecting a look-through approach). In US GAAP, those assets are part of the funds held by ceding companies and other receivables from reinsurance.
Difference in valuation: in SST, policy loans are valued by discounting future estimated cash flows at risk-free rates, while under US GAAP policy loans are carried at amortised costs.
Other investments
Differences in scope: Derivatives and securities lending are disclosed under other assets for SST reporting purposes. For US GAAP, those financial instruments are reflected in other investments.
Differences in valuation: Equity-accounted investments in private equity and hedge funds are valued at fair value in SST. US GAAP generally values such investments utilising net asset values subject to adjustments, as deemed necessary for restrictions on redemption.
Funds held by ceding companies and other receivables from reinsurance
Differences in scope: Reinsurance contracts on a funds-held basis for company-owned life insurance are reported as policy loans for SST (reflecting a look-through approach). In US GAAP, those assets are part of the funds held by ceding companies and 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 US GAAP, they are generally accounted for at face value including accrued interest.
Other assets
Differences in scope: in SST, reinsurance recoverables are accounted for as part of the re/insurance liabilities. Derivative and securities lending agreements assets are included in other assets for SST, whereas in US GAAP they are reported as part of other investments.
Differences in valuation: SST does not recognise deferred taxes, deferred acquisition costs, goodwill and other intangibles, which are reported in US GAAP.
Liabilities
| Download |
USD millions |
US GAAP |
SST |
Difference |
Re/insurance liabilities |
118 760 |
86 664 |
–32 096 |
Unit-linked and with-profit liabilities |
31 938 |
21 507 |
–10 431 |
Debt |
10 135 |
11 554 |
1 419 |
Funds held under reinsurance treaties |
3 224 |
739 |
–2 485 |
Other liabilities |
14 786 |
7 396 |
–7 390 |
Total liabilities |
178 843 |
127 861 |
–50 982 |
Re/insurance liabilities
Differences in scope: in SST, reinsurance recoverables are part of the re/insurance liabilities; in US GAAP, those items are reported as assets. SST includes universal life-type contracts under re/insurance liabilities. US GAAP discloses those contracts in policyholder account balances. As referred to in the table in the appendix, policyholder account balances for US GAAP are part of unit-linked and with-profit business for comparison. US GAAP accounts for those under other liabilities.
Differences in valuation: in SST, re/insurance liabilities are valued using best estimates for both life and non-life business. US GAAP uses locked-in assumptions and makes allowance for possible adverse deviation (PAD) for certain life business. Further differences arise from different treatment of discounting under the two frameworks. SST generally discounts all estimated cash flows based on current risk-free rates, whereas US GAAP does not discount for non-life business and generally uses locked-in historical discount rates to discount life business liabilities.
Unit-linked and with-profit liabilities
Differences in scope: SST unit-linked and with-profit liabilities are compared with US GAAP policyholder account balances which include, in addition, universal life-type contracts.
Debt
Differences in scope: SST shows all debt, including contingent capital instruments, as debt liability. US GAAP classifies certain contingent capital instruments as debt at amortised costs or as equity depending on the instruments’ characteristics.
Differences in valuation: SST excludes own credit risk in the valuation of debt not qualified as SST supplementary capital. SST supplementary capital instruments are fair-valued. US GAAP generally values debt instruments at amortised costs.
Other liabilities
Differences in valuation: deferred tax liabilities are not valued in SST, whereas in US GAAP they are part of other liabilities.