Fixed income securities: Proceeds from sale/maturities of investments 59 042 35 037
ment expenses and ceded unearned premiums under these retrocession agreements are reported as assets in the accompanying consolidated balance sheet.
Pensions and other post-retirement The Group has adopted recent international guidance for disclosure of pensions and benefits other post-retirement benefits. The guidance requires additional disclosure about assets, obligations, cash flows and net periodic benefit costs of defined benefit pension plans and post-retirement plans. The disclosure is provided in note 11.
Total subordinated financial debt as of 31 December 2003 3 366
During 2001 the Group issued two private placements in Switzerland, which are a form of financing transaction. The first private placement was issued in June in the amount of CHF 100 million and is due in 2008 with a coupon of 3.60%. In September, an additional private placement of CHF 100 million was issued maturing in 2006 with a coupon of 3.25%.
Foreign plans pension benefits weighted average Other benefits weighted average a) Assumptions used to determine obligations at the end of the year b) Assumptions used to determine net periodic pension costs for the year ended
A summary of the activity of the Group’s fixed stock option plan is as follows: Weighted average exercise price in CHF
Employee participation plan Swiss Re‘s employee participation plan consists of a savings scheme lasting two or three years. Employees combine regular savings with the purchase of either actual or tracking options. Swiss Re contributes to the employee savings.
Reinsurance recoverable on life and health policy benefits 2 317 2 317
Unpaid claims and claim adjustment expenses 41 365 11 349 9 332 62 046
Return on operating revenues in % 10.3 2.5 8.7 2004 CHF millions Life Health Total
Contracts which do not meet risk transfer requirements, defined as transferring a reasonable possibility of a significant loss to the reinsurer, are accounted for as deposit arrangements. Deposit amounts are adjusted for payments received and made, as well as for amortisation or accretion of interest.
Funds held under reinsurance treaties contain mainly cash deposits withheld from retrocession which are stated at redemption value. Debt and other liabilities are held at redemption value. The liabilities from derivative financial instruments are valued using the same principles applied for the derivative financial instruments included under investments.
Swiss Re‘s largest product line, property and casualty reinsurance, is cyclical in nature and our strategy for revenue growth is managed according to the phase of the cycle. During the four year period 2000 to 2003, as prices were rising, we secured premium growth measured in Swiss francs of 80%, almost twice the growth rate in the global market. In 2004 our policy was to sustain the quality of earnings on this higher premium base and, as a consequence, we experienced a small reduction in top line revenues. Measured in original currencies, this was offset by growth in our life reinsurance portfolio which is not subject to the same cyclicality. Growth in our life and health business was reinforced by our most successful year for Admin ReSM transactions with CHF 1.4 billion of capital successfully invested in this product. The US dollar declined sharply against the Swiss franc for the second successive year, and while overall the Group‘s revenues rose by 3% in original currencies, in Swiss francs they fell by 1%.
1 July Swiss Re acquires Life Assurance Holding Corporation Ltd (LAHC) in Admin ReSM transaction Swiss Re announced the acquisition of shares of LAHC Ltd, including its life in surance subsidiary Windsor Life Assurance Company Ltd, for GBP 333 million in cash.
Charlotte A. Gubler Head of the Communications & Human Resources Divisionb
W. Weldon Wilson Head of Life & Health North America operations
The Target Matrix focuses on financial objectives. At Group level the focus is ultimately on return on equity and growth of earnings per share.
 Swiss Re is also a leading underwriter and structurer of bonds for clients and has introduced numerous innovations
 The EU requires all listed companies to report according to International Financial Reporting Standards (IFRS) in 2005
Property premiums declined by 11%, or 9% in original currencies. This reduction was largely due to a 47% fall in non-traditional premiums and a significant impact from prior year premiums.
The renewals also demonstrated that clients value and are prepared to pay for security and quality of service, enabling Swiss Re to achieve superior terms and conditions relative to the market. This differentiation in quality of capacity provides Swiss Re with a powerful competitive advantage and will enable the business group to navigate through a period which may show relatively low growth in business volumes. Excellent cycle management will also be a key prerequisite during this phase and Swiss Re has invested heavily in sharpening these skills. The business group’s methods ensure that the quality of risk selection and pricing stays consistent and objective. Furthermore, the business group rigorously controls and monitors pricing benchmarks to allocate capacity to those segments achieving the highest returns after cost of capital. These factors combined will enable the business group to continue producing good results.
h an xi is s itu at ed b et w ee n th e C
shareholders improve their return on the risks flowing through the balance sheet and the business benefits from a flexible financing system to support growth.
At 9.1%, the business group’s overall return on operating revenues exceeded both its three year average target of 9% and the prior year return of 8.7%. The return for life business declined from 10.3% in 2003 to 9.5% in 2004, reflecting primarily the provision for tsunami claims and higher mortality experience in the US traditional business (CHF 40 million), partially offset by increased returns from Admin ReSM business.
Conning’s three core investment management offerings include portfolio management, insurance advisory and investment accounting services. Portfolio management services include US and Canadian dollar, euro and British pound capabilities focused on fixed income and enhanced indexed equities, with select alternative investment offerings such as an insurance-linked securities fund. Insurance advisory services are delivered by an expert team that is committed to providing global asset liability management and dynamic financial analysis. Conning’s in-depth investment accounting and reporting services are available globally. This combination of tailored offerings and high-quality service provides Conning’s insurance clients with comprehensive, broad-based expertise.
All figures in Table 4 depict the pre-tax impact of market scenarios on available economic capital. The equity scenario includes traded equities, private equities, equity derivatives, Guaranteed Minimum Death Benefit products and funding obligations arising from equity holdings in Swiss Re pension funds. The interest rate scenario depicts the net economic impact on assets and liabilities from a rise in interest rates. Real estate exposure includes investments in real estate and own-use property.
In June 2004 Swiss Re arranged a syndicated five-year USD 2 billion LoC facility, which was strongly supported.
 Swiss Re also published “Tackling Climate Change”, an easy-to-understand overview of climate-related facts and trends, initiatives, implications for the insurance industry and innovative approaches.
Awareness of corporate governance has grown rapidly worldwide in recent years due to increased legislative and regulatory activities, as well as evolving best practice recommendations. As an industry leader, Swiss Re is committed to adopting the highest governance standards and adjusting them as required. In addition, Swiss Re complies with the local rules and regulations of all the countries in which it does business.
With regard to the conditional capital for employee participation purposes, shareholders ’ subscription rights are excluded. Such shares may be issued at a price below the current market price. The Board of Directors shall specify the precise conditions of issue. Swiss Re issued shares reserved for corporate purposes (“Vorratsaktien”) prior to the revision of Swiss corporate law in 1992. These shares were paid in only at a nominal value of CHF 0.10 for a total amount of CHF 794 228 and are not entitled to dividend.
(ii) The Mandatory Convertible Bond (MCS) may, at the option of each holder, be converted into registered shares of Swiss Reinsurance Company at any time from 2 September 2004 until 4.00 pm CET on the business day (as defined in the prospectus) before the 20th trading day (as defined in the prospectus) prior to the maturity date. Holders exercising such early conversion right will be entitled initially to receive 15.796 shares, subject to adjustment as described in the prospectus, for each MCS.
Mr Breu was elected to Swiss Re’s Board of Directors in 2003 for a four year term of office. He is Chief Financial Officer of the Novartis Group and member of the executive committee of Novartis, positions he assumed when Novartis was created in December 1996. He joined the group treasury of Sandoz, a predecessor company of Novartis, in 1975. Ten years later, he was appointed CFO of Sandoz Corporation in New York. In
Mr Smith joined Swiss Re’s Board of Directors in 2003 for a four year term. He was chairman of the board of directors of General Motors Corporation, Detroit, from 1996 to April 2003, when he retired. He served as chief executive officer from 1992 to 2000. In addition, he was president from 1992 to 1998. Mr Smith joined General Motors in 1961.
In respect of Group finance, the Committee reviews cash management, the relationships with banks and, semi-annually, all of the Group’s open derivative positions. The Investments Committee reviews its own performance annually.
gramme defines the accountabilities and duties of both management and compliance officers at Swiss Re. The compliance officers, supporting management in ensuring compliance with laws, regulations and ethical standards, report to the Group Compliance Officer on any instances of non-compliance or other compliance-relevant matters. In certain areas, the compliance officers also assist management in ensuring compliance with internal Group procedures and local or regional practices. Training for staff and compliance officers is carried out regularly at both local and Group level to ensure ongoing best practice in compliance matters. An essential and growing feature of the compliance function is to ensure that Swiss Re complies with regulatory requirements at both legal entity and Group levels. Swiss Re has established a Group Regulatory Affairs function and a Group Regulatory Affairs Network supporting the compliance officers to ensure regulatory compliance at all levels. Each compliance officer also conducts periodic compliance risk assessments and advises management on appropriate control measures. The compliance officer network subsequently organises the implementation of action plans in cooperation with key functions such as Group Internal Audit, Group Risk Management, Group Regulatory Affairs and line management. The Group Compliance Officer regularly provides the Audit Committee with a compliance report and consults with the Chief Risk Officer, the Group General Counsel and the Head of Group Regulatory Affairs.
5 Compensation, shareholdings and loans 5.1 Content and method of determining the compensation and shareholding programmes
Swiss Re also grants its top management long-term performance incentive awards. There are two selectable plans, a stock option plan and a restricted share plan. The size of the award depends on the labour market, the degree of influence on the Group result, and the potential and acceptability of the resulting dilution. Swiss Re options have a total duration of ten years with a four year vesting period. Entitlement to the award is forfeited in the event of resignation during this period.
News release 14 May 140th Annual General Meeting Meeting in Zurich and news release 17 May Reporting of life and health embedded value 2003
Frequent adverse news about the insurance industry, including hurricanes, typhoons and reserving exercises, depressed investor sentiment. The insurance industry performed positively in the fourth quarter despite investigations by New York’s Attorney General and the SEC into US broker business and non-traditional insurance products. At 12.9%, Swiss Re’s shares rose more than the industry (11.4%) and outperformed the SMI
Insurance-linked securities In risk securitisation, bonds issued by an insurance or reinsurance company or corporation and purchased by institutional investors. The underlying risk of the bond is a peak or volume insurance risk, and the payment of interest and/or principal depends on the occurrence or severity of an insurance event.
Annual Report 2004 Business Report Swiss Reinsurance Company Mythenquai 50/60 P.O. Box 8022 Zurich Switzerland www.swissre.com