Net premiums written in 1997 for the North American property/casualty operations of $3,058 million decreased 0.7 percent from $3,081 million in 1996, as the effects of competitive market conditions offset the growth in premiums arising from the National Re acquisition. The pie chart to the right depicts the relative share of property/casualty premium by operating unit and the table below shows net premiums for the past three years by operating unit. PIE CHART
Investment income for the global life/health operations was $73 million in 1997, compared to $59 million in 1996. The increase in investment income was due to the significant growth in premium volume and invested cash flow.
General Re's reinsurance operations have exposure to movements in various currencies around the world, particularly the German mark, British pound and Australian dollar. Changes in currency exchange rates primarily affect the international components of General Re's balance sheet, income statement and statement of cash flows. This exposure is somewhat mitigated by the fact that General Re's reinsurance premiums and invested assets are partially offset by claims incurred and claim liabilities, respectively, denominated generally in the same currency.
GRC, General Star and Genesis have a claims-paying ability rating of AAA by Standard & Poor's and are also rated A++ by A.M. Best Company, a leading insurance industry rating agency. GRC has a financial strength rating of Aaa by Moody's. Each of these ratings represents the highest category for the respective rating agency. Cologne Re has a claims-paying ability rating of AAA by Standard & Poor's and an A+ rating from A.M. Best Company. National Re has a claims-paying ability rating of AA+ by Standard & Poor's and is rated A+ by A.M. Best Company.
10) Decreases in interest rates causing a reduction of income earned on new cash flow from operations and the reinvestment of the proceeds from sales, calls or maturities of existing investments;
General Re's liabilities for claims and claim expenses displayed in Tables 1 and 2 have been significantly affected by the emergence of environmental and latent injury claims. Starting in 1979, General Re considerably strengthened the liability for claims and claim expenses for latent injury (e.g., asbestos- related) and environmental (e.g., hazardous waste) claims. When originally written, these exposures, some dating back to the 1940s, were not known to cause bodily harm or property damage. Coverage, if any, was provided to policyholders on a very limited basis. Liberal interpretations of very carefully worded insurance policy contract language have, in retrospect, created unanticipated liabilities for the property/casualty insurance industry. Adjustments to General Re's liabilities have been made in each year's current operating results since 1979 to reflect the evolution of case law which has widened the nature and extent of insurance and reinsurance coverage
The Plan also permits the granting of restricted stock awards as compensation to officers of General Re. Shares of restricted stock become outstanding upon grant, receive dividends and have voting rights identical to other outstanding shares of common stock. Restrictions lapse upon termination of the restriction period or upon death, disability or normal retirement. During 1997, 1996 and 1995, General Re made aggregate compensatory restricted stock awards of 16,715, 96,153 and 31,900 shares, respectively. At December 31, 1997 total restricted shares outstanding were 307,322 shares. The cost of restricted stock awards is based on the market value of the common stock at the date of grant and is recognized as an expense over the restriction period.
Mortgage and loans receivable/payable--The fair value of General Re's mortgage and notes receivable/payable was estimated using discounted cash flow analyses, based on General Re's current incremental borrowing rates for similar types of arrangements. The fair value of General Re's debt was based on market price quotations.
General Re has the authority to issue 250 million shares of $.50 par value common stock, of which 103 million have been issued. Common stock purchased in the open market is carried at cost and shown as a reduction to common shareowners' equity. When treasury shares are reissued, the treasury stock account is reduced for the cost of the common stock reissued on a first-in, first-out basis. No treasury stock of General Re is held by any subsidiary. The number of shares included in treasury stock were as follows: