Business activities

Reinsurance business

Strategy and priorities

SRLC Re was created to pool risks and optimise the capital position across the businesses of the Life Capital Business Unit. SRLC Re will continue to enable Life Capital’s growth strategy, reinsuring as much risk as appropriate to minimise new business capital strain from growth in the open-book entities of Life Capital. Additionally, it will be available to support the Group’s strategic initiatives where necessary.

In 2018, SRLC Re reviewed the Business Unit’s ownership structure in an effort to improve capital efficiency. In the proposed new corporate structure, SRLC Re will be the owner of the open-book entities of Life Capital and will continue to provide reinsurance to those businesses. Completion of the restructuring is expected in 2019, subject to internal and regulatory approvals.

SRLC Re’s priorities for 2019 include:

• Further optimising the funding of Life Capital businesses’ growth
• Implementation of the new corporate structure
• Further restructuring of its intra-group retrocession agreements with affiliated companies in the US

Outlook

SRLC Re is an internal reinsurer primarily dedicated to the Life Capital Business Unit. Life Capital businesses provide access to attractive and growing primary risk pools: Elips Life Ltd, Elips Insurance Ltd, iptiQ Life S.A. and Lumico Life Insurance Company (the existing open-book entities of Life Capital) continue to operate in the Group and Individual L&H protection risk pools. The Admin Re US business provides access to the closed-book pool. SRLC Re has no reinsurance arrangement with the ReAssure business.

The Life Capital Business Unit will continue its strategy to grow its individual and group businesses. The ambition is to build a leading primary life and health business. During 2018, the open-book businesses continued their trend of significant policy growth, reaching new partners and distributors as well as expanding geographically.

In 2018, Life Capital added a further unit, iptiQ EMEA P&C S.A., as an indirect subsidiary of SRLC Re, which will provide access to the personal lines P&C risk pool, thereby further diversifying the business portfolio. The set-up of iptiQ EMEA P&C S.A. (together with the existing open-book entities of Life Capital) began in 2018 with new business expected to be written from 2019. Further new business including Group US business is expected in 2019 and beyond.

Investments

Strategy and priorities

Financial investments are managed in accordance with Swiss Re’s Targeted Standard on Asset Management and SRLC Re’s investment guidelines, which are intended to ensure compliance with regulatory requirements. The general principle governing investment management in SRLC Re 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

Global economic growth has peaked and is expected to slow in 2019, particularly in advanced markets. In the US and the Euro area, tighter financial conditions, the waning US fiscal stimulus and lingering political concerns are likely to weigh on growth. Economic growth in emerging Asia is expected to slow moderately, but remains the strongest region globally, while Latin America will see a modest growth recovery, albeit from a low base. In contrast to last year’s outlook, the balance of risks is seen as skewed to the downside, amid increasing protectionism (eg US-China trade conflict), ongoing monetary-policy tightening, late-cycle concerns (especially in the US), and uncertain (geo)politics (eg Brexit, European Parliament elections and elections in India, South Africa and Argentina).

For the UK, continued uncertainty around the ultimate Brexit end-state will weigh on the UK economy (eg through business investments).

Reinsurance and sub-holding companies

SRLC Re is a wholly-owned subsidiary of Swiss Re Life Capital Ltd (SRLC), the holding company for the Life Capital Business Unit. SRLC Re does not own any interest in the UK-based ReAssure Ltd, its parent entities or subsidiaries. SRLC Re is domiciled in Zurich, Switzerland.

Claims on and obligations towards affiliated companies

Share capital and major shareholder

The share capital of SRLC Re 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 SRLC. As of 31 December 2018, SRLC Re was a wholly-owned subsidiary of SRLC.

Variable interest Entities

SRLC Re and its subsidiaries do not have arrangements with variable interest entities.

Significant events

During 2018, SRLC Re received capital contributions of CHF 65 million to support new business growth, in particular the open-book business new business strain and additionally fund set up costs for the new iptiQ P&C business.

In the last quarter of 2018, SRLC Re restructured its intra-group retrocession agreement with Swiss Reinsurance Company Ltd (SRZ) for the Canadian life and health business, moving from a full funds withheld structure to a partial funds withheld and a trust structure.

SRLC Re is retroceding certain portions of business jointly originated with the Reinsurance Business Unit (Reinsurance) to SRZ to allow for an equal participation in the business between the two Business Units, Life Capital and Reinsurance.

It is expected that some of the retrocession agreements with the Reinsurance business will be recaptured in the course of 2019.

Report of the statutory auditors

PricewaterhouseCoopers Ltd is the auditor of SRLC Re. For more information, please see the (PDF:) Report of the statutory auditor.