“ We have been through some substantial changes and overcome some challenges in recent years, but at the start of this year, I forced us to take a long hard look in the mirror and ask ourselves where we could improve.”


emerging markets such as Vietnam. Its business in Asia measured by net premium earned grew from 11 percent in 2009 to 15 percent in 2010. For 2011, it expects to nudge the 20 percent mark.


The company is also true to its culture of empowerment in the way it


regards the practices and solutions it comes across in emerging markets. Lippe is keen to learn and import good ideas the company finds back to Switzerland and incorporate these into its businesses elsewhere.


He notes that in Africa, for example, where Swiss Re has developed


index-based products to support local farmers against natural catastrophes, the reinsurer has also taken on board some innovative products and ideas perfectly suited to that market used by local insurers. “We should not be arrogant about what we know. Often, necessity is the root of innovation and there is much we can sometimes learn from practices elsewhere,” Lippe says.


THE LONG ROAD TO NOW That Lippe is even in a position to discuss such lofty ideals as


innovation and entrepreneurship at this stage in his tenure at Swiss Re is remarkable, given the scale of the self-imposed but necessary changes he has made at the reinsurer since taking the reins some two and a half years ago.


When he became chief executive, replacing Jacques Aigrain in February 2009, the company was making big losses, had a plummeting share price and faltering investor confidence. Its problems were in part blamed on a loss of focus on its core underwriting business alongside a risky investment strategy and some questionable derivatives contracts.


The company had lost its AA rating from Standard & Poor’s and had


also agreed a 3 billion Swiss francs ($2.7 billion) capital boost from billionaire Warren Buffett’s Berkshire Hathaway, a deal that had it not been repaid on time would have left Berkshire with a more than 20 percent stake in the company. The rating agencies were talking downgrades and all this just as the global economic downturn was gathering a momentum of its own.


When asked about what he regards as his greatest achievement so far during his tenure, Lippe says simply: “To have successfully navigated what I saw as the turnaround phase.” This involved restoring the capital position of the company, repaying the debt to Berkshire Hathaway early, implementing a cost-saving programme that by the end of 2010 cut


14 | INTELLIGENT INSURER | September 2011


420 million Swiss francs ($450 million) from Swiss Re’s overheads, instigating a conservative approach to asset management, and repositioning the company’s culture to once again put high-quality underwriting and the needs of clients first.


Remarkably for such as ambitious raft of programmes within such a big company, most of these changes seem to have been completed successfully. But Lippe went further again. Another key change he has instigated is a change in the company’s corporate structure from being a single company with one balance sheet to three separate entities, representing the three main businesses within Swiss Re—reinsurance, corporate solutions and Admin Re—each with its own balance sheet.


Lippe says the new structure is a legal formality rather than representing


any significant change for the company. He says he is doing it because it will make things more transparent to investors—the performance and capital position of each will be very easy to assess. “We won’t have to keep explaining things and splitting things out in the way we do now,” he says. This process is expected to be complete by February 2012.


NOW SOME GROWTH With all this behind him, Lippe can truly look to the future. Earlier this


year, he set out new strategic priorities for the business and also named the three leaders of each corporate entity. Christian Mumenthaler was named chief executive of its reinsurance subsidiary, Swiss Reinsurance Company.


In February 2011, Lippe unveiled new five-year financial targets.


The first target is a return on equity of 700 basis points over the risk- free average over the five-year US bond—with risk-free rates as low as they are, this would be just short of 9 percent. In the second quarter, the company achieved a return of 15.6 percent.


The second target he set was for earnings per share growth to average


10 percent per year over the next five years. This was also met in the second quarter, with earnings per share hitting $2.80. The third target is economic net worth per share growth plus dividend, also of 10 percent average annual growth rate over five years. These figures are calculated on an annual basis only.


Underpinning these ambitious targets is a clear renewed focus on


underwriting combined with the ability to innovate, which should allow the company to capitalise on what are increasingly looking like favourable market conditions for reinsurers.


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