Swiss Re’s management said today that a stronger focus on and investment in research & development (R&D) and technology will create a competitive advantage and facilitate better client support in today’s complex and fast-changing environment.
In an investor day presentation, Group CEO Christian Mumenthaler explained the strategy was consistent with the global reinsurer’s top priority of meeting its financial targets over the cycle and strengthening its long-term financial performance.
In a statement, the company said the current insurance environment is “challenged by pricing pressures, low interest rates, political instability and regulatory fragmentation.”
On a lighter note, the company claims to be convinced that the long-term trends for the insurance industry are positive. “For example, risk pools will continue to expand based on rising GDP in the world’s economies and demographic trends,” it said. “Insurance penetration levels are still low in many parts of the world, especially in high growth markets. Technology in particular will help to close protection gaps worldwide by providing better, more efficient and cheaper offerings.
Amid the difficult short- and mid-term environment, Swiss Re said its strategic framework, and particularly its investment in R&D and technology, positions the Group to leverage its unique capabilities to weather the challenges.
Christian Mumenthaler, said: “We acknowledge significant challenges in some of our markets but we remain optimistic for our industry in the long term. In the current environment, it is absolutely essential that we focus on what we do best: leverage our capability to price risk and allocate capital to those opportunities that are most
attractive. In practice this means we will continue to focus on our disciplined underwriting approach and further cut our capacity in some property and casualty businesses. On the other hand, we will invest more in life and health businesses. By placing even stronger emphasis on serving as the knowledge partner to our clients and by investing in those risk pools with the most attractive returns, we will be able to set ourselves apart.”
Swiss Re reiterated its plan achieve the individual Business Units’ return on equity (RoE) targets and its two Group financial targets over the cycle. In terms of profitability, the target is an RoE of or above 700 basis points over the risk-free rate, measured by 10-Year US government bonds. The growth target aims for an increase in Economic Net Worth (ENW) per share of 10% or more per annum.
David Cole, Swiss Re Group Chief Financial Officer, added: “We are committed to meeting our ambitious targets. We’ve generated an RoE of more than 11% over the past 10 years and an economic net worth per share growth over the same period of over 14%. This gives us confidence that we can continue delivering strong performance over the cycle.”