GRC Realty Corporation, also a wholly owned financial services subsidiary of General Re, has retained title to General Re's former home office site in Greenwich, Connecticut. This site consists of approximately four acres of land and an office building which has about 160,000 square feet of office space that is leased to nonaffiliates. The Greenwich site is subject to a mortgage expiring December 31, 1998, which had a remaining balance of $4 million at December 31, 1996.
GRFP is a dealer in derivative products and offers a full line of interest rate, currency and equity swaps, options and other derivative products. GRFP's gross trading revenue was $144 million in 1996, compared to $142 million in 1995 and $135 million in 1994. The overall growth of GRFP's business in the U.S. derivatives market was slower than in international markets.
The overall pretax yield on the [PIE CHART] international portfolio was 5.9 percent in 1996 and 5.5 percent Australian Dollar 7.6% during 1995. The international operations write a greater portion of Sterling 16.2% their business in property lines of business than General Re's North French Franc 3.5% American operations and, accordingly, invest in shorter duration securities Japanese Yen 1.6% as part of their program to match asset and liability durations. The Other 12.9% sharing of investment income under certain reinsurance agreements lowers German Mark 32.0 the international investment yield.
In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 (the "Act"), General Re sets forth below cautionary statements identifying important factors that could cause General Re's actual results to differ materially from those which might be projected, forecasted, or estimated in General Re's forward-looking statements, as defined in the Act, made by or on behalf of General Re in press releases, written statements or documents filed with the Securities and Exchange Commission, or in its communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls. Such statements may include, but are not limited to, projections of premium revenue, investment income, other revenue, losses, expenses, earnings (including earnings per share), cash flows, plans for future operations, common stockholders' equity, financing needs, capital plans, dividends, plans relating to products or services of General Re, and estimates concerning the effects of litigation or other disputes, as well as assumptions for any of the foregoing and are generally expressed with words such as "believes," "estimates," "expects," "anticipates," "could have," "may have" and similar expressions.
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994 (IN MILLIONS)
General Re Corporation is the ultimate controlling entity in its insurance holding company system, which includes North American insurance companies that are subject to the insurance holding company acts of Delaware and various other states. General Re Corporation is dependent upon the ability of its operating subsidiaries to transfer funds in the form of loans, advances or dividends. The insurance holding company laws require the filing of annual reports by the insurance company members of the system and regulate transactions between the holding company and affiliated insurance companies to the extent that such transactions must be fair, reasonable and assure the adequacy of insurance companies' statutory surplus in relation to their liabilities and financial needs.
Interest rate, currency and equity options grant the purchaser the right, but not the obligation, to either purchase from or sell to the writer a specified financial instrument under agreed terms. Interest rate caps and floors require the writer to pay the purchaser at specified future dates the amount, if any, by which the option's underlying market interest rate exceeds the fixed cap or falls below the fixed floor rate, applied to a notional amount.
GRFP is subject to liquidity risk in funding its portfolio of open transactions. Movements in underlying market variables affect both future cash flows intrinsic in the transactions, and collateral required to cover the value of open positions. Management believes GRFP has sufficient resources to cover its potential liquidity needs through its access to General Re's commercial paper program and lines of credit.