Performance of Swiss Re registered shares Key figures Annual report of the Chairman and the Chief Executive Officer 1 Board of Directors 3 Executive Board structure 4
Swiss Re Group Group report 5 Business report 13 Group accounts
Proposal for allocation of profit 56 Report of the statutory auditors 57
We should like once again to thank all our employees throughout the world: to thank them for the enthusiasm with which they have taken on ever-new challenges, and for the intense, long-term commitment which has helped make Swiss Re the successful company it is. We would also like to express gratitude to our clients – many of whom have carried on business relations with us for decades – for the trust they have placed in us.
Ulrich Bremi and Hans Bühlmann will retire at the Annual General Meeting of 30 June 2000, having both reached the mandatory retirement age. The Board of Directors proposes to the General Meeting that George L. Farr be re-elected to the Board for a further four-year term of office.
Swiss Re acknowledges its debt of gratitude to Mr Ulrich Bremi and Prof Hans Bühlmann for their intense commitment as Chairman and Member, respectively, of the Board of Directors.
All the above are members of the Executive Board 1 Committee of the Executive Board 2 until 30 June 2000
Gross premiums rose strongly in life as well as in non-life reinsurance to CHF 22.4 billion, up 24% from the previous year. Life business contributed 29% of total premium volume, making Swiss Re the leading reinsurer in this field. Net premiums reached a new high of CHF 20.5 billion, up 26%, largely due to growth of life business and positive currency adjustments. The increase in net life premiums – by 78% to CHF 5.9 billion – ref lects the acquisition of Life Re Corporation in the United States, as well as considerable organic growth. Non-life premiums increased to CHF 14.6 billion, up 12%. This ref lects several factors: the positive impact of acquisitions and currency f luctuations exceeded the negative impact from soft market conditions and from the cancellation of non-performing business, including the discontinuation of the US medical business.
Non-life technical provisions further increased to CHF 49.6 billion, leading to a ratio of technical provisions to premiums of 342%. These provisions include CHF 2 566 million prescribed by local regulatory authorities for future claims f luctuations and for large and catastrophe losses. To absorb the effects of the extraordinary loss burden in 1999, CHF 696 million was released from this type of technical provision while a strengthening of CHF 450 million was taken as an extraordinary charge in the profit and loss account.
A Group-wide programme, Triple 20, was launched in May 1999 in response to unsatisfactory non-life market conditions. It comprises three objectives: carefully review the reinsurance contracts generating the lowest value, reduce catastrophe capacity where prices fail to ref lect the level of risks assumed, and increase overall productivity by reducing the administrative expense ratio by two percentage points. During the 1999/2000 renewal period, Swiss Re achieved the majority of its objectives in re-underwriting underperforming reinsurance contracts. Most clients were retained at better terms and conditions and comparatively little business was lost. This will contribute positively to the expected underwriting result for the year 2000. Swiss Re reduced its capacity allocation for natural catastrophes by approximately 10% in 1999. Swiss Re also took quick and decisive measures to improve productivity, contributing to an improvement in the ratio of administrative expenses to premiums.
During 1999 Swiss Re had two extraordinary items: a guarantee provision of CHF 450 million, set up in 1994 in relation to a minority stake in Credit Suisse Financial Products, London, was released upon the expiration of indemnities related to the sale of the holding. This was then fully used to make an extraordinary contribution to provisions for future claims fluctuations and for large and catastrophe losses. Taken together these transactions did not affect the profit.
Württembergische AG Versicherungs-Beteiligungsgesellschaft, which was formerly equity-consolidated in Swiss Re’s accounts, merged retroactively as of 1 January 1999 with the German building society Wüstenrot AG to form a new bancassurance group. Following this merger, Swiss Re’s participation in the combined group was reduced to 16%, and the holding subsequently deconsolidated.
During 1999, Swiss Re took advantage of the maturity of about CHF 1.7 billion of senior debt, which had been issued mainly to finance acquisitions, to further refine its capital structure. By replacing CHF 1 billion of senior debt with hybrid capital, Swiss Re substantially increased financial f lexibility for a very low increase in marginal costs. The overall maturities of Swiss Re’s interest bearing capital were lengthened and spread over several years. In addition, the currency mix of senior debt and hybrid capital has been better balanced to match the assets’ currency exposure.
In January 2000 North American Specialty, a Swiss Re Group company which is active mainly in corporate business, acquired Washington International Insurance and International Collections, Inc. With these acquisitions Swiss Re extended its service capabilities and expertise in the surety business in the North American market.
e-business e-business will have a profound impact on the insurance industry. The primary insurance market has already become acquainted with such innovative solutions as fully electronic distribution channels or even virtual companies. Now, Swiss Re is aiming to mobilise the power of the internet to capture new growth opportunities with a broad e-business initiative. The goal is to make Swiss Re Group “fit for e-business”, using new business models to forge even closer client relationships and bring about significant increases in efficiency. In addition, e-business will open radically new future perspectives. Swiss Re’s e-business strategy is based on four pillars: e-enable, e-extend, e-new business and e-attack.
e-enable aims primarily at making existing internal processes fit for e-business by mid-2002. Web-based applications will lend Groupwide support to marketing, client management, underwriting, administration and claims management, as well as financial and asset management and human resources. This will significantly reduce costs, spread know-how internally and increase efficiency. Development of the necessary architectures for business applications, information and for financial and risk management is well under way.
Group report easily. Global Underwriting Manual (GUM) is defined as Swiss Re Life & Health’s global underwriting manual, which contains our computerised guidelines for rating individual life and health risks. Life Automated Underwriting is an interactive software program aiming to provide initial underwriting decision and generate any further evidence request for life insurance. It significantly reduces costs for a life office and revolutionises the service to its sales people and customers.
e-attack goes a step further. Here, Swiss Re is developing radical new business concepts to take full advantage of the e-business potential: concepts that may permanently alter the risk and capital management industry. Although Swiss Re expects to generate a significant number of these ideas internally, it also intends to reach out to entrepreneurs outside Swiss Re who have business ideas that they would like to develop. Though the partnerships and alliances deriving from this concept may develop into independent spin-offs or go the IPO route, the new knowledge gained can only enhance the Group’s conventional business.
With a newly developed website, www.RiskMountain.com, Swiss Re will attract innovators in the risk industry. RiskMountain is an online community that will offer support and sponsorship including investment capital to innovators seeking to develop their ideas into businesses.
Having initiated a policy of comprehensive environmental management, Swiss Re is now implementing continuous improvement of environmental performance throughout the company. The Environmental Report for 1999 describes the benefits expected from this implementation and the progress made by individual divisions. It provides in-depth information on environment -related initiatives in reinsurance and investment business as well as the continuing internal and external dialogue on environmental risk. In addition, the report provides full business-ecology statistics for Swiss Re’s activities in Zurich and describes measures for improving data acquisition on energy and resource use, as part of the Groupwide programme to reduce consumption. The report is available on www.swissre.com or from Swiss Re Publishing.
Swiss Re expects further growth in non-life business in the year 2000, partly due to the first-time consolidation of Underwriters Re (to be closed in the second quarter 2000) and partly due to improving rate levels in several primary and reinsurance markets. In particular, there are clear signs of a turnaround in the US commercial risks and workers’ compensation markets. Some European motor and liability markets are improving and a selective approach to natural catastrophe business should yield higher premiums. The Triple 20 programme, which aims to improve the efficiency and profitability of Swiss Re’s non-life business, was launched in the second quarter of 1999 and has already delivered encouraging results. The year 2000 will see the first significant impact of the systematic re-underwriting efforts which are an essential element of this programme. Other hopeful indicators for Swiss Re’s year 2000 non-life results include a “f light to quality”; a lower frequency of large claims in the first quarter of the year compared to the same period in 1999; and an expectation that there will be no or few claims relating to the Y2K date-recognition problem.
In the wider economy, most central banks have adopted a bias towards tighter monetary policy in order to prevent economies from overheating. As a consequence, yield curves have either turned inverse or f lattened significantly; equity markets have experienced a pronounced correction, particularly in the technology sector. Swiss Re has substantially reduced its equities exposure in the first three months of the year 2000: at the quarter’s end, shares represented 22% of total invested assets. This shift in emphasis has led to additional investments in bonds, which – in some markets – are now offering attractive returns. Looking ahead, Swiss Re expects the stock-market volatility to remain high. Even so – barring a further serious drop in share prices – Swiss Re is confident it will achieve another attractive investment result for the year 2000 that will contribute strongly to the overall result. This confidence is based both on the company’s current cautious stance and on the first-quarter results.
The growth of e-business presents the global insurance industry with unprecedented challenges and opportunities. From the beginning of the year 2000, Swiss Re moved to include e-business in its overall business plans. Swiss Re expects that a significant part of the standardised reinsurance business to be transacted over the web within a few years – at least in those lines of business
where reinsurance capacity can be considered as a commodity. This will certainly increase cost pressure on reinsurers, but it should also help make reinsurance products more attractive as an alternative to other forms of risk capital. Swiss Re is therefore confident that e-business will benefit the reinsurance market overall. The competitive advantage in this market will go to those reinsurers with the size, the means and the reputation enabling them to adopt e-business quickly as an integral part of their business process, leveraging their skills and excellent brand recognition. Swiss Re is therefore planning to allocate substantial resources – both financial and human – and is implementing a broad portfolio of e-business initiatives.
Since the mid-nineties, the insurance industry has undergone a period of profound structural change. Insurance companies have become global, driven by the General Agreement on Trade in Services (GATS), as well as the advent (within the European Union) of uniform licensing and home country control. The continued boom in the financial markets has led not only to a wave of mergers and acquisitions, but also to overcapacity. The resulting pressure on non-life profits has been joined by cost pressures. These trends are expected to intensify, given the increased productivity that the application of new information technology will bring.
The annual non-life renewal round also provided signs that the reinsurance market is recovering, and permits a guardedly optimistic forecast for the 2000 business year.
Property Net premium volume in property increased 13% to CHF 3.9 billion, a figure which was affected positively by currency f luctuations. All divisions except Europe showed premium growth; the performance of North America in particular was strongly inf luenced by the increased value of the US dollar.
An extraordinary number of large individual claims, as well as natural catastrophe losses, produced a very disappointing result of CHF – 748 million in the property portfolio. These losses principally affected non-proportional treaties and the Europe division. In general, however, insufficient margins, low insurance and reinsurance rates and adverse loss experience have combined to produce unsatisfactory results in all parts of the property business.
In 1999 Swiss Re saw the first signs of improvement in the property market. In general, prices for retrocession covers have increased considerably, while in early 1999 the decrease in property catastrophe rates was by far the smallest in recent years. Swiss Re also noted an increased focus on security and continuity.
Further important events, such as the earthquake in Taiwan and hail losses in Sydney, affected Swiss Re in proportion to the company’s market share and were within expectations. Selective underwriting in Turkey over recent years helped to reduce Swiss Re’s loss burden from the Izmit earthquake. Nevertheless, the reinsurance industry as a whole was strongly affected by these events and it is expected that this should further contribute to a firming of premium rates.
In addition to natural catastrophes, several large explosions and fires occurred during 1999. The property business was heavily affected by these extraordinary losses. In casualty, Swiss Re contributed its share to several large claims, including the pharmaceutical loss arising from the Fen-Phen weight-loss drugs and the Mont Blanc Tunnel fire. Aviation, engineering and credit & surety were each also called upon to pay a large loss. There were no large losses arising from the Year 2000 date-recognition issue, although some cases have been reported to primary insurers.
Accident and health Accident and health business written by non-life divisions saw growth in both the Asian and US markets, as well as in the corporate market served by Swiss Re New Markets. Premium volume grew substantially to CHF 915 million and results showed a strong profit. Swiss Re was not involved in the Unicover workers’ compensation facility in the US which is generating significant losses for its participants. The demise of that facility, however, is leading to significant reinsurance rate strengthening in the large US workers’ compensation market, which should therefore present enhanced profit and growth opportunities.
As expected, the development of accident and health business written by Swiss Re Life & Health was affected by the run-off of US medical business. Overall premium volume in 1999 was CHF 1.9 billion. However, excluding US medical business, the inclusion of Life Re and other one-time effects, premiums grew marginally at constant exchange rates. Increased provisions
Business report were made against adverse claim development in certain markets, most notably Argentina, although these were largely offset by reserve releases in the US and UK.
Net premiums in other lines rose to CHF 2.5 billion, up 13% over 1998. The positive results in credit & surety and aviation offset the negative results in engineering (caused by some unusually large claims) and in marine.
Marine Premium volume increased marginally to nearly CHF 510 million due to currency appreciations. Latin America registered the largest growth, followed by North America and Europe, respectively, while Asia saw its premiums decrease as a result of the regional economic crisis.
Results continued to be below expectations due to the ongoing problem of insufficient rates driven down by surplus capacity. The indications of a capacity contraction in the retrocession market should have a favourable impact on the reinsurance market.
Credit and surety Net premiums rose strongly to CHF 1.1 billion, up 32% on the previous year, partly due to the first-time, full-year consolidation of NCM, with its strong positive result. The positive overall result benefited not only from NCM’s contribution, but also from an improvement in the claims situation – mainly in the German market – and from favourable economic conditions in other major markets. Swiss Re Group maintained its leading position in the credit and surety business.
of credit-risk business allowed Swiss Re to meet the challenges of the market in 1999; the prospects for 2000 are promising.
Risk-financing solutions for corporate and insurance clients by Swiss Re New Markets
Swiss Re New Markets has been successful in extending the use of insurancerelated innovations within the world of corporate finance. This success is apparent from clients’ growing interest in integrated risk management solutions. Such solutions offer greatest value when directed at a defined market segment. To do this, Swiss Re New Markets has formed “practices”: dedicated teams that address the corporate risk financing needs of particular industries.
The trend towards integrated risk management is also ref lected in a Swiss Re solution combining directors’ and officers’ liability, employment practice liability and fiduciary liability. In the past, many providers sold these coverages only separately.
The fast-growing market for weather derivatives allows Swiss Re to further diversify its book of business with an attractive product covering weatherexposed industrial operations – particularly power production utilities. Building on Swiss Re’s experience as one of the largest market players in the
The integration of Life Re was completed on schedule during 1999. Swiss Re realised cost savings of USD 40 million (against plan of USD 30 million) through the elimination of under-performing business lines and the increased centralisation of core business functions.
As a result of the Life Re acquisition, Swiss Re’s life premium income grew strongly, showing a 78% increase over the previous year. Excluding Life Re, the growth achieved is 40% (26% at constant exchange rates). North America and the UK were the principal growth markets. The 1999 result for life business was CHF 761 million, more than double the 1998 result. Much of this increase was due to the first-time inclusion of Life Re. Excluding the effect of Life Re and eliminating exchange rate f luctuations, the technical result for life business also showed good growth.
Expense reduction remains a major concern for primary insurers. The challenge for Swiss Re is to continue providing high service standards to clients at lower cost. Significant progress was made during 1999: the life business expense ratio was reduced from 10.2% to 6.2%. However, there are wide variations among geographic units within this aggregate ratio: expenses vary from a low of 3% for traditional business lines in North America to more than 10% in emerging markets where Swiss Re continues to invest resources. Swiss Re firmly believes it is in the interests of both clients and investors that the expense ratio should be further reduced; the target for Swiss Re Life & Health is 5% for 2002.
The drive to reduce costs and improve capital efficiency has benefited Swiss Re’s new Administrative ReinsuranceSM operations in the US. Admin Re frees insurance company capital previously tied up in businesses which lack critical mass or are no longer considered core lines. It also relieves clients of policy administration burdens.
Looking ahead, Swiss Re expects e-business to increase the emphasis on expense management and to present new challenges for risk management as underwriting and claims practices adapt to the new environment. Even in the short term, web technology can be used to support Swiss Re’s plans to improve efficiency while expanding the company’s knowledge-transfer and client-service capabilities.
The importance of fixed income securities further increased: they now represent 65% of the total portfolio (1998: 63%); the proportion invested in shares decreased one point to 25%. The proportion invested in real estate was 4% (1998: 5%) and in unconsolidated subsidiaries and affiliated companies, 3% (1998: 4%).
Swiss Re investments in minority holdings in insurance companies, managed by Swiss Re Capital Partners, had a market value of CHF 4.4 billion and a book value CHF 2.7 billion. Divestitures in 1999 aggregated CHF 1.8 billion while additions to the portfolio aggregated CHF 1.5 billion. Initiatives for 2000 include active examination of under-performing holdings with a view towards further divestiture.
lion to the investment result (1998: 50%). Profits on shares sold, favoured by strong stock markets, accounted for almost the entire realised gains. In addition, restructuring to a Europe-wide equity portfolio from the previous singlecountry approach contributed to this extraordinarily high level of realised capital gains. The revaluation reserve – indicating the net unrealised gains on shares and real estate after tax – increased during 1999 by CHF 403 million to a total of CHF 7.9 billion. Net unrealised gains on other investments after tax decreased to CHF 899 million, largely because of rising interest rates. The overall return on investment was 8.4% (1998: 8.5%); shares reached a return on investment of 16.4% (1998: 6.2%) whereas the return on fixed income investments decreased to 5.6% (1998: 9.7%).
In 1999, Swiss Re Investors launched its third-party asset management initiative, offering insurance companies global portfolio and asset-liability management, marketing, and investment support. Swiss Re will soon launch several institutional equity and fixed-income mutual funds to complement its third-party service offerings. The investment bank, Fox-Pitt Kelton, reported pre-tax profits of CHF 11.7 million on revenues of CHF 91 million for the eight months since its acquisition by Swiss Re. More than 50% of its revenues are derived from sales and trading operations. During 1999, Fox-Pitt Kelton engaged in significant equity market activity, co-leading and co-managing on significant transactions involving Fortis, Deutsche Bank, Manulife and Goldman Sachs, among others. Fox-Pitt Kelton is consistently among the industry leaders in research and advisory services for the financial service industry.
Change in the provisions for claims outstanding 4. Change in the provisions for life, health and disability reinsurance 5. Change in other technical provisions 6. Profit commissions 7. Operating expenses
I Investments 1. Land and buildings 2. Investments in unconsolidated subsidiaries and affiliated companies 3. Loans to unconsolidated subsidiaries and affiliated companies 4. Shares 5. Fixed income securities and registered debt instruments 6. Loans 7. Mortgages 8. Time deposits 9. Other investments 10. Deposits with ceding companies
V Technical provisions for unit-linked life reinsurance policies where policyholders bear the investment risk
Companies in which Swiss Re, Zurich, directly or indirectly holds a voting majority are consolidated in the Group accounts in terms of assets, liabilities, income and outgo. Companies in which Swiss Re, Zurich, maintains a direct or indirect holding of between 20% and 50% and has a significant but not controlling interest are valued at Swiss Re’s share of their equity. Swiss Re’s share of net profit or loss is accounted for in dividend, interest and other income from affiliated companies in the profit and loss account. Equity and net income of these companies is adjusted to be in line with the Group accounting policies. The method of consolidation used is the purchase method whereby a company is first consolidated at the time of acquisition. Deconsolidation takes place at the time the shares in the company are disposed of.
Intangible assets are not capitalised. Purchased intangible assets are amortised in the year of acquisition. Goodwill arising on the acquisition of consolidated companies and on companies consolidated using the equity method is offset through retained earnings.
Shares and units in investment funds are valued at market value. Unquoted shares are valued at an estimated prudent market value. Realised gains and losses on sales as well as valuation adjustments included in the profit and loss account are based on cost. Realised gains and losses from previous years on sales of shares in Swiss Re, Zurich, which were carried out within a particular period because of the requirements of Swiss law, are not included in the profit and loss account insofar as the shares were replaced within a short period at comparable prices.
Fixed income securities are valued at amortised cost. The difference between cost and redemption value is amortised as a premium or discount. This amortisation is included in income from fixed income securities in the profit and loss account. Provisions required for permanent impairment in value are deducted.
Other investments are valued at their nominal value, less provisions required for permanent impairment in value.
Provisions for claims outstanding are based on the full expected amount of the related payments, with the exception of the life business, for claims paid in the form of annuities, and partly for accident, health and disability business, in which the present value of future income and outgo is set aside as provisions. In alternative risk transfer business, provisions for claims outstanding are also partially accounted for at present value for some products.
Pension and employee benefit obligations are calculated using the unit credit cost method. These encompass all obligations towards employees and pension funds.
Share capital and the share premium account are disclosed separately. The retained earnings brought forward show the cumulative retained earnings on the balance sheet date. The revaluation reserve is the difference between cost and market value of land and buildings and shares, after provision for deferred taxes. The reserve for own shares corresponds to the cost value of shares in Swiss Re, Zurich, held by Group companies.
Previous year 1 refer to glossary for definition 2 not including Life Re and Alianza 3 not including 1999 Administrative ReinsuranceSM transactions
Dividend by the parent company for the financial year according to proposed allocation of profit1
As of 31 December 1999, NCM, the Dutch credit insurer, increased its share of Maryland Netherlands Credit Insurance Company from 49% to 100%. The Company was subsequently renamed NCM Americas Inc.
The capitalised part of deferred acquisition costs in the amount of CHF 487 million (1998: CHF 433 million) is offset against the unearned premium reserve. The change in deferred acquisition costs of CHF 4 million (1998: –6 million) is offset against the change in the unearned premium reserve. In addition capitalised deferred acquisition costs of CHF 981 million (1998: CHF 644 million) are offset against provisions for life, health and disability reinsurance. The change in capitalised deferred acquisition cost of CHF 263 million (1998: CHF 174 million) is offset against the change in the provision for life, health and disability.
Claims provisions for long latent injury claims arising out of policies written prior to 1985 showed a favourable development. The prior year’s provisions for claims from 1998 and earlier for all other business segments were in total adequate when reassessed for the current year.
Unrealised gains on unit-linked life reinsurance were CHF 68 million (1998: CHF 55 million). On derivative financial instruments unrealised gains were CHF 58 million (1998: CHF 47 million ) and unrealised losses were CHF –97 million (1998: CHF –63 million).
These items contain charges and income of the service companies, currency differences and other charges and income not attributable to the technical account or investments. Also included are restructuring expenses of CHF 123 million, mainly related to the Triple 20 costmanagement initiative.
Affiliated companies valued at Swiss Re’s share of their equity 786 1 450
The amount in the respective balance sheet positions related to affiliated companies is as follows: CHF millions 1999 1998
Own shares held on 31 December 1999 at market value 580 496 1 497
Own shares held on 1 January 1998 at cost 1 032 443 1 052
The portfolio includes shares serving as a guarantee for obligations arising from the convertible bonds issued by SwissRe Finance (Bermuda) Ltd and the call warrants issued
Technical provisions, including technical provisions for unit-linked life reinsurance policies where policyholders bear the investment risk,
The provisions for claims outstanding include provisions of CHF 2 566 million (1998: CHF 2 818 million) prescribed by local regulatory authorities for future claim fluctuations and for large and catastrophic losses. In 1999, a net amount of CHF 696 million was released after revaluation at current exchange rates (1998: increase CHF 8 million). This was partly compensated by an addition of CHF 450 million to the provision which was charged to the extraordinary account.
The routine reassessment has demonstrated favourable claims development, which, in combination with several commutations, allowed an overall release in provisions relating to long latent injury claims during 1999 of roughly 6%. The increase in payments for 1999 was partially due to these several commutations. When commutation payments are made, the traditional “survival ratio” is artificially reduced by premature payments which should not imply a reduction in reserve adequacy.
Other liabilities contain liabilities for current taxes of CHF 901 million (1998: net liabilities for current taxes CHF 233 million)
The following derivative instruments were held on 31.12. of the respective year: 1999 Contract Replacement value Balance sheet values
CHF millions amount positive negative assets liabilities 1998 Contract Replacement value Balance sheet values
M e th o d o f c o n so li d a ti o n
The Mercantile and General Reinsurance 100 f Company of Australia Limited
Our audit was conducted in accordance with auditing standards promulgated by the profession and with the International Standards on Auditing issued by the International Federation of Accountants (IFAC), which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements give a true and fair view of the financial position, the results of operations and the cash f lows in accordance with the Accounting and Reporting Recommendations (ARR) and comply with the law.
Swiss Re, Zurich, performs a dual role within the Swiss Re Group as both a reinsurance and a holding company. Around 27% of the total gross premium income of the Swiss Re Group is attributable to business acquired directly by Swiss Re, Zurich. An assessment of the market position, profitability and financial strength of our worldwide organisation must focus primarily on the consolidated financial statements.
The following commentary on the 1999 financial year of the parent company therefore complements the review of the financial year of the Swiss Re Group and is intentionally kept short.
The investment result rose by CHF 1 100 million to CHF 3 524 million largely due to exceptionally high income from participations. As a result of capital market trends, which continued favourable, realised gains on the sale of investments increased once again and reached CHF 2 787 million. These were accompanied by valuation adjustments of CHF 1 738 million, consisted predominantly of precautionary valuation adjustments to the securities portfolio as well as the write-off of goodwill resulting from acquisitions in recent years.
The nominal share capital of the company as at 31 December 1999 was unchanged from the previous year at CHF 147 309 510, consisting of 14 730 951 registered shares with a par value of CHF 10. At the General Meeting to be held on 30 June 2000 a capital reduction will be proposed.
The company took on two further perpetual subordinated liabilities in 1999. These liabilities combine elements of debt and equity, and may be included in solvency calculations.
The technical provisions continued to rise and amounted to CHF 21 779 million on the balance sheet date. A large part of the CHF 3 244 million increase can be attributed to the change of currency exchange rates. Due to the exceptionally high catastrophe loss burden, CHF 833 million were released from the provision for catastrophe claims; as of the balance sheet date, this provision amounted to CHF 1 325 million including the extraordinary allocation of CHF 450 million.
IV Provisions for other risks and charges 1. Provisions for taxation 2. Other provisions
The profit and loss account and the balance sheet are presented in a format which follows the Accounting and Reporting Recommendations issued by the Swiss Foundation for Accounting and Reporting. The financial statements and the notes are prepared in accordance with the regulations of the Swiss Company Law.
The1999 financial year comprises the accounting period from1January to 31 December1999. However, due to local convention, reinsurance business from Japan included in the accounts is for the period from1April1999 to 31 March 2000.
The allocated investment return includes the actual investment income which can be directly attributed to the reinsurance business. In addition, it contains the investment return generated on the investments covering the technical provisions. The interest rate reflects the currencyweighted five-year average yield on five-year government bonds.
With the exception of property, fixed assets are stated at cost, less individually scheduled straight-line depreciation over their useful lives. Items of minor value and all purchase costs prior to1994 are not capitalised.
The technical provisions for life reinsurance business are determined on the basis of actuarially calculated present values taking experience into account.They also include the provisions for unearned premiums of life reinsurance and the deduction of deferred charges.
Provisions for other risks and charges are formed according to business principles and are based on estimated needs. Provisions for taxation contain prospective taxes on the basis of the financial year just ended.
Deposits retained from ceded reinsurance business as well as other liabilities are stated at redemption value. Exceptions are the derivative financial instruments included under the item Other creditors: these are valued using the same principles applied for the derivative financial instruments included under investments.
The currency exchange rates applicable for key currencies are shown on page 30.
Capital funds on 31 December after allocation of profit 1 Assuming the proposal to reduce the share capital is approved by the General Meeting and no further shares are repurchased.
The company has the following outstanding bonds and debentures: 33⁄4% interest, CHF 500 million, 2 July1997–2007. 33⁄4% interest, CHF 600 million, perpetual from 15 June 1999 but no less than 12 years; this bond is included in the item Subordinated liabilities.
Details on the Swiss Re Group’s subsidiaries are to be found on pages 42 ff.
Own shares held by the Swiss Re Group are stated on page 39.
In the 1999 income statement, income and charges in the equal amount of CHF 3 500 million were netted. These positions result from a Group internal restructuring of participations and have no impact on the profit for the financial year.
The independent actuary, Paul Embrechts, Oberrohrdorf, has confirmed in his report that the balance sheet provisions for the life reinsurance business stated at year-end1999 have been calculated in accordance with European Union guidelines.
Administrative reinsurance is the acceptance of closed blocks of in-force life and health insurance business either through acquisition or through the assumption of a reinsurance agreement.
Investments at average balance sheet values in relation to net premiums.
Remuneration paid by the insurer to its agents, brokers or intermediaries, or by the reinsurer to the insurer, for its costs in connection with the acquisition and administration of insurance business.
e-business involves the continuous optimization of an organisation’s value proposition and value-chain position through the adoption of digital technology and the use of the Internet as the primary communications medium. This transformed business is e-business, able to call industry boundaries into question and outperform traditional businesses by adapting more rapidly to market changes, responding faster to customer needs and operating at the lowest possible cost. e-commerce focuses primarily on electronic purchase and sales activities enabled by the Internet, digital communications and appropriate IT applications, and thus forms part of e-business.
Sum of commissions, administrative expenses, profit commissions and other technical charges and income, in relation to net premiums written. This ratio enables the assessment of business performance in non-life reinsurance.
Accident insurance: Insurance of individuals or of groups against economic risks in the event of death or temporary or permanent disability by accident.
Hail crop insurance: Insurance of crops in open fields or of greenhouses and their contents against hail, storm and other natural hazards.
Health insurance: Insurance against sickness as a result of accident or illness.
Marine insurance: Insurance against damage or loss of ships and cargoes: also includes offshore drilling platforms and oil rigs.
Mortgage guarantee insurance: Insurance protection of the mortgagee against loss of capital and interest.
The amount received from shareholders for shares in excess of par value.
Profit on extraordinary activities before tax Tax on extraordinary activities Extraordinary profit after tax
French, German, Italian and Spanish translations of this report are also available.
The publication Swiss Re 2000: Creating value through knowledge and the Environmental Report are available on our website www.swissre.com
The Annual Report 1999 summary is available in: English, French, German, Italian, Portuguese and Spanish.