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 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 |
|
|
|
|
Investments in subsidiaries and affiliated companies |
|
15 476 |
15 145 |
–331 |
Fixed-income securities |
1 |
18 004 |
16 459 |
–1 545 |
Loans |
2 |
9 450 |
10 085 |
635 |
Mortgages |
|
670 |
804 |
134 |
Equity securities |
|
1 631 |
1 135 |
–496 |
Other investments: |
|
|
|
|
Shares in investment funds |
|
12 957 |
12 467 |
–490 |
Alternative investments |
|
743 |
788 |
45 |
Other investments |
3 |
907 |
2 174 |
1 267 |
Investments for unit-linked and with-profit business |
|
|
|
|
Derivative financial instruments assets |
|
162 |
222 |
60 |
Total market value of investments |
|
60 000 |
59 279 |
–721 |
Cash and cash equivalents |
4 |
1 350 |
2 191 |
841 |
Funds held by ceding companies and other receivables from reinsurance |
|
23 037 |
23 030 |
–7 |
Other receivables |
|
1 520 |
829 |
–691 |
Other assets |
5 |
6 714 |
4 197 |
–2 517 |
Total other assets |
|
32 621 |
30 247 |
–2 374 |
Total assets |
|
92 621 |
89 526 |
–3 095 |
|
|
|
|
|
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) |
|
10 589 |
10 102 |
–487 |
Non-life insurance |
|
34 558 |
38 016 |
3 458 |
Health insurance |
|
|
|
|
Unit-linked life insurance |
|
|
|
|
Other business |
|
|
|
|
Total best estimate value of insurance liabilities before retrocessions |
|
45 147 |
48 117 |
2 970 |
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) |
|
–6 151 |
–6 311 |
–160 |
Non-life insurance |
|
–4 758 |
–5 793 |
–1 035 |
Health insurance |
|
|
|
|
Unit-linked life insurance |
|
|
|
|
Other business |
|
|
|
|
Total retrocessions |
|
–10 909 |
–12 104 |
–1 195 |
Non-technical provisions |
|
878 |
1 121 |
243 |
Debt |
6 |
9 615 |
8 642 |
–973 |
Derivative financial instruments liabilities |
|
294 |
283 |
–11 |
Funds held under reinsurance treaties |
7 |
5 374 |
3 191 |
–2 183 |
Reinsurance balances payable |
|
4 403 |
4 595 |
192 |
Other liabilities |
|
7 378 |
7 034 |
–344 |
Total other liabilities |
|
27 942 |
24 866 |
–3 076 |
Total liabilities |
|
62 180 |
60 879 |
–1 301 |
|
|
|
|
|
SST net asset value |
|
30 441 |
28 647 |
–1 794 |
Notes
- The decrease in fixed-income securities is driven by the restructure of the Canadian intra-group retrocession (IGR) agreement with Swiss Re Life Capital Reinsurance Ltd, the transfer of the Singapore branch to Swiss Re Asia Ltd, increase in yields and the weakening of major currencies against the US dollar.
- The increase in loans is mainly related to the set-up of additional cross-segmental loans between Property & Casualty and Life & Health Reinsurance, increase in loans in connection with the US tax reform and new external infrastructure loans.
- The increase in other investments is driven by the purchase of short-term investments due to reinvested proceeds from the Canada IGR restructuring, from the sale of exchange-traded funds and from cash pooling.
- The increase in cash and cash equivalents is mainly related to an increase in NZ dollars to finance a large transaction and other asset management activities.
- The decrease in other assets is mainly due to a reduction of securities lending activities.
- The decrease in debt is driven by redemptions and maturities and the weakening of major currencies against the US dollar.
- The decrease of funds held under reinsurance treaties is mainly due to the restructuring of the intra-group retrocession agreement with Swiss Re Life Capital Reinsurance Ltd for the Canadian business and a change in the reserving basis on the Canadian business.
SST balance sheet comparison with Swiss statutory
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 |
Swiss Statutory |
SST |
Difference |
Real estate |
|
|
|
Investments in subsidiaries and affiliated companies |
15 549 |
15 145 |
–404 |
Fixed-income securities |
16 631 |
16 459 |
–172 |
Loans |
8 760 |
10 085 |
1 326 |
Mortgages |
825 |
804 |
–21 |
Equity securities |
941 |
1 135 |
194 |
Other investments |
15 580 |
15 428 |
–152 |
Investments for unit-linked and with-profit business |
|
|
|
Cash and cash equivalents |
879 |
2 191 |
1 313 |
Funds held by ceding companies and other receivables from reinsurance |
26 863 |
23 030 |
–3 833 |
Other assets |
21 840 |
5 248 |
–16 592 |
Total assets |
107 869 |
89 526 |
–18 343 |
Investments in subsidiaries and affiliated companies
Differences in scope: In SST, some subsidiaries of SRZ 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 in 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 FX 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 less necessary depreciation to address other-than-temporary market value decreases.
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. Infrastructure loans are carried at their amortised cost less necessary depreciation to address other-than-temporary market value decreases.
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, whereas 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.
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 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.
Liabilities
Download |
USD millions |
Swiss Statutory |
SST |
Difference |
Re/insurance liabilities |
66 807 |
36 014 |
–30 793 |
Unit-linked and with-profit liabilities |
|
|
|
Debt |
8 313 |
8 642 |
330 |
Funds held under reinsurance treaties |
6 968 |
3 191 |
–3 777 |
Other liabilities |
15 437 |
13 032 |
–2 405 |
Total liabilities |
97 525 |
60 879 |
–36 645 |
Re/insurance liabilities
Differences in scope: In SST, reinsurance recoverables are shown in re/insurance liabilities. In statutory reporting, reinsurance recoverables are disclosed within other assets.
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 for life and health business requires provisions for adverse deviations (PADs). 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 yields of the backing assets for life and health technical provisions. For more details on the general differences in valuation of re/insurance liabilities, please refer to the table in the methodology section of this report.
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 consideration received or market value of the underlying assets.
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 derivatives are carried at fair value.