Swiss Reinsurance Company 50/60 Mythenquai, P.O. Box 172, 8022 Zurich, Switzerland Telephone 01 208 21 21 Telex 59261 reas oh Cables swissre
Management expenses, taxes, fluctuations In stock exchange and foreign currency rates 134 100
*Subject to approval by the General Meeting *Consolldated tigures (of. notes on page 34)
Felix W. Schulthess Zurich, Chairman of the Board of Directors (ret.), Swiss Credit Bank, Zurich 1979
Deputy Managers Roger Aeberli Kurt Aerni Albert Albrecht Erwin E. Arpagaus Alfred Bai Gunnar Benktander Fritz Bolliger Andreas Brügger
Edouard Burnens Richard R. Doerr Rolf Eckert Fritz Ehrsam Walter Isler Ernesto Jutzi Hans R. Kaufmann Lavre D. Kirianoff
Willy Honegger Peter P. Hügle Hans W. Kreis Werner Künzle J. B. Richard Lieberman Fulco Lock Robert Martignier
Albert Kunz Willy Küster Balthasar Mätzener f Jean-Claude Mayor Max Nabholz Samuel Patthey Pierre-Claude Perrenoud H. Conrad Rutishauser
Robert Rüesch Willi Rüetschi Rene Rüttimann Dieter Söhner Jürg Steinrisser Paul Würsch John W. Youngs
Reoort of the Board of Directors The business year 1976/77 embraces the reinsurance business for the caiendar year 1976 and other income and expenditure from 1st July, 1976, until 30th June, 1977.
Non-Life reinsurance showed an improvement over the previous year and closed with a positive result. The profit from Life reassurance is slightly higher than in 1975/76. The increased volume of investments and the partially firmer foreign exchange rates gave rise to a substantial growth in investment income. — Management expenses rose by approximately 2°/o (previous year, 4°/o). Tax payments increased by 28°/o (previous year, 25°/o). — The net profit of Sw.frs. 75.6 million is Sw.frs. 20.4 million more than in the previous year.
Gross premium income from non-Life reinsurance, when expressed in Swiss francs, was increased by Sw.frs. 388 million, or 16.4°/o, over the previous year to a total of Sw. frs. 2,752 million. In the year under report, the effect on premium growth of ex­ change rate fluctuations of foreign currencies against the Swiss franc was contrary to that of previous years, particularly as a result of the increased DM rate and a practically unchanged US I rate. Sw.frs. 31 million of the additional income was due to the on average higher exchange rates. Adjusted by this amount, the increase of premium income would be Sw.frs. 357 million or 15.1 °/o. After deduction of the retrocessions within and outside the Swiss Re Group, the remaining net premiums amounted to Sw.frs. 2,135 million, i.e. Sw.frs. 313 million or 17.2°/o (adjusted for exchange rates, 15.8 °/o) more than in the previous year.
Non-Life reinsurance — prior to deduction of man­ agement expenses — showed a profit of Sw. frs. 11.1 million (previous year, loss of Sw.frs. 11.0 million). Results were on the whole good from European and Japanese business in particular, whilst the losses stemmed mainly from North America, Latin America, the Middle East and certain markets in the Far East.
Although on an international scale the problems of American Liability and Workmen's Compensation business are fortunately unique, it cannot be over­ looked that in other industrial countries. Liability losses are increasing in frequency and size, a phe­ nomenon not only occasioned by inflation but even
Europe and Japan in Business, Professional and Products Liability will inevitably lead to higher pre­ miums if it cannot be kept within bounds by means of intensive loss prevention measures.
In Europe, German non-Life business produced parti­ cularly heavy losses. Storms in Northern Europe in January, 1976, called for loss payments in the amount of Sw. frs. 40 million gross, Sw. frs. 35 million of which derived from Germany. Moreover, the German insurance market was characterized by a continued deterioration of premium rates in industrial Fire business which still has not come to a halt and which will also burden the current year's accounts. This unfavourable development coincided with un­ satisfactory results in German General Third Party Liability, Motor Third Party Liability, Contractors' All
The unsatisfactory experience of business from Latin America and the Middie East illustrates the huge growth problems facing these regions, the effects of which are further intensified by high inflation rates and inadequate risk spread. Moreover, some of these countries are especially exposed to earthquake and storms and premiums for these risks are subject to constant erosion in catastrophe-free years: natural catastrophes occur relatively seldom but carry a large loss potential. Natural catastrophes in the developing countries reduced the Swiss Re's result for the year by 8w. frs. 8 million gross, the major part being for earthquake damage in Guatemala. Business in Africa was satisfactory. Nevertheless, in certain African countries, the outstanding balances is a cause for concern to foreign reinsurers. If it were not possible to retrieve these amounts, the reinsurance results from the countries in question would be negative. Europe provides 62 % of the gross premiums of Swiss Re, Zurich, and the United States and Canada 19%. The remaining business is more or less evenly distributed among the other continents. The premium volume originating from Eastern Europe is very modest.
Fire 1,008 907 853 835 775 Hail 21 20 20 18 16 Burglary/Fidelity and allied lines 80 70 66 65 66
Among overall gross premiums the main contribution is made by the Fire branch with Sw. frs. 1,008 million, followed by Motor business with Sw. frs. 523 million. Life with Sw. frs. 288 million and Marine with Sw. frs. 263 million.
In addition to the balance achieved by offsetting risks geographically and by branch, spread In time also plays a major role in reinsurance, since the under­ writing results of even a large reinsurer can vary greatly from year to year. The Swiss Re is taking this fact into account in the year under report by proposing to the General Meeting of Shareholders to strengthen the reserves (Sw. frs. 20 million to the special reserve fund, Sw. frs. 10 million to the reserve fund for catastrophe losses).
Hall reinsurance produced a profit after an unfavour­ able result In the previous year. Three-quarters of the small Hail portfolio originates in Europe and is rela­ tively unbalanced. As the branch is not practiced everywhere, the building-up of a balanced inter­ national reinsurance portfolio is subject to narrow limits.
duction of deductibles and safety regulations for particularly heavy risks, this branch has almost everywhere eluded successful counter-measures in recent years.
Despite a modest profit in Europe, General Third Party Liability reinsurance produced overall a high loss. This branch is still not widespread in the developing countries.
Motor reinsurance showed pronounced growth and produced a loss. The Canadian reinsurance sub­ sidiary had to strengthen substantially its reserves for outstanding claims. Four major Motor Third Party Liability claims in France and Belgium brought losses varying between Sw. frs. 1.5 million and Sw. frs. 2.8 million. The number of claims just below the million Swiss franc mark was up on the previous years.
In the year under report, Marine reinsurance pro­ duced a profit. An analysis of results by underwriting year which is standard practice in this branch — premium accounting and loss settlement extend over several years — showed a downward trend after a period of favourable results. The reporting year's good result was largely occasioned by a positive run-off of loss reserves from previous years. The branch was not, however, spared major losses and was Involved In the storm damage in Northern Europe to the extent of Sw. frs. 8 million. The loss of several ships and a warehouse fire in Iran called for claims payments varying between Sw. frs. 1 million and Sw. frs. 6 million.
Premiums in Atomic reinsurance only showed slight growth, increasing opposition from sections of the public to nuclear power stations is delaying the realization of building projects. The sums insured per nuclear power station are substantial when viewed against the small number of such plants and the correspondingly modest premium volume.
Restructuring the intra-Group retrocession arrange­ ments to tighten and simplify procedure meant that the gross and retrocession premiums booked by Swiss Re, Zurich, decreased. This was coupled with an exceptional upsurge in surrenders.
Life Reassurance In Force for Own Account at Year's End (excluding Annuities)
In most industrial countries, first attempts at renewed economic growth were foiiowed by setbacks in the year under review, so that it was not possibie to discern any ciear trend. The general situation is marked by continuing high unempioyment, low utilization of capacity in industry and rates of in­ flation which are on the whoie still high, although somewhat declining in severai countries. Reiiable indications for a genuine economic recovery are therefore stiil iacking. At best, a gradual improvement over an extended period of time may be expected.
In the monetary area, the weakening of the major currencies against the Swiss franc remained within narrow bounds and two of the more significant investment currencies, the German mark and the Dutch guilder, were even substantially stronger as compared with the year before.
For the first time since the collapse of the system of fixed exchange rates, the conversion of foreign investments at the exchange rates prevailing on the balance-sheet date resulted in an increase in value expressed in Swiss francs. Together with the new money invested during the year, which amounted to the substantial sum of Sw. frs. 396 million, the book value of investments increased by Sw.frs. 485 million, thereby passing the Sw. frs. 3,000 million mark for the first time. Despite the already mentioned lower interest rates on new Investments, current investment income rose by 21 %, due to substantial net new investments and the generally more favourable effects of foreign exchange rates. After deduction of interest required for the Life assurance and annuity fund and other technical reserves, investment income reached Sw.frs. 173 million (previous year, Sw.frs. 143 million).
The hidden surplus on investments (excluding real estate), i.e. the difference between book and market values, continued to grow in the year under review. With an increase of Sw. frs. 99 million, it reached Sw. frs. 521 million on the balance-sheet date, i.e. 18.5% (previous year, 18.1%) of book value. It should, however, be noted that the increase of the hidden surplus is again largely due to rises In quotations for fixed-interest investments. These quotations are now in many cases considerably higher than redemption values, which usually corre­ spond to the par value. Because it would not as a rule be sensible for an institutional investor to realize all these capital gains, in view of the size of the investment amounts involved and the difficulty of finding suitable alternative investments, part of the hidden surplus by which the current market price exceeds the future redemption value will inevitably disappear as the maturity dates of these bonds come closer.
A breakdown by currency shows the following distri­ bution of investments: 27% (previous year, 31%) in Swiss francs, 42 % (41 %) in other European curren­ cies, 27 % (25 %) in U.S. and Canadian dollars and the remaining 4% (3%) in Australian dollars and Japanese yen. The noticeable reduction in the per­ centage of investments in Swiss francs is primarily due to switches into Group holdings (takeover of «SWITZERLAND» General) and fixed deposits. Taking into account ail assets denominated in Swiss francs, the relative share of Swiss franc investments has fallen by much less. The increase in the percentage represented by the North American currencies is due to the considerable growth of business of our branches in the United States and Canada
Bonds and preference shares of companies 657 532 527 510 496
Net cash deposits with insurance companies 1,244 1,091 1,159 1,172 1,171 4,766 4,071 4,074 4,033 3,809
Distribution of Investments in Percent at Baiance-sheet Vaiues (Previous year In parentheses)
The growth of the overall tax burden by Sw.frs. 10.9 million or 28% (previous year, 25%) to Sw.frs. 49.3 million is due to the increase of foreign direct taxation as well as to a reserve fund allocation for the additional taxes payable for the increased net profit.
On capital investments, book values were written down in the amount of Sw. frs. 82.1 million (previous year, Sw. frs. 54 million). As the result of sales and switches in the securities portfolio, net capital gains in the amount of Sw.frs. 87.1 million (previous year, Sw. frs. 55.3 million) were realized. The net credit to the Profit and Loss Account from market rate fluctuations on capital investments was Sw. frs. 5.0 million (previous year, Sw.frs. 1.3 million).
The depreciation from other causes involved a debit of Sw. frs. 3.3 million (previous year, Sw. frs. 9.4 mil­ lion).
Currency 30/6/77 30/6/76 30/6/75 30/6/74 30/6/73 76/77 75/76 74/75 73/74 72/73
German mark 105.32 96.04 106.34 118.— 121.10 -F 9.7 — 9.7 — 9.9 — 2.6 4- 1.9 Pound sterling 423.50 440.50 546.— 715.50 748.— — 3.9 —19.3 —23.7 — 4.3 —18.2 French franc 50.05 52.13 61.95 61.80 70.90 — 4.0 —15.9 -F 0.2 —12.8 — 5.2 Belgian franc 6.829 6.229 7.10 7.905 8.03 -F 9.6 —12.3 —10.2 — 1.6 — 5.9 Dutch guilder 99.50 90.38 102.62 113.10 110.65 -Fl 0.1 —11.9 — 9.3 -F 2.2 — 6.3 Lira 0.278 0.295 0.397 0.462 0.505 — 5.8 —25.7 —14.1 — 8.5 —21.1 Peseta 3.53 3.64 4.475 5.24 5.22 — 3.0 —18.7 —14.6 + 0.4 —11.7 U.S. dollar 246.50 247.20 250.30 299.50 293.— — 0.3 — 1.2 —16.4 -F 2.2 —21.7 Canadian dollar 231.90 252.— 243.25 310.50 293.— — 8.0 -F 3.6 —21.7 -F 6.0 —23.1 Yen 0.923 0.83 0.847 1.07 1.098 -F11.2 — 2.0 —20.8 — 2.6 —11.5 Rand 283.— 285.43 350.50 441.— 436.57 — 0.9 —18.6 —20.5 -F 1.0 —14.7 Australian dollar 274.50 304.32 331.75 440.— 415.12 — 9.8 — 8.3 —24.6 -F 6.0 — 7.8 *Rates in Swiss francs for 100 units of currency
The last General Meeting re-elected Messrs. Max E. Eisenring, Marcel Odier and Hans Schaffner for an additional four-year term of office. At the same time, Mr. Hans Bühlmann was elected to the Board for a first term.
Mr. Troendle was elected to the Board in 1969. His rich experience in some of our prinoipal markets was always of great value to us and we are very grateful to him for his services to our Company.
At this year's General Meeting, the Board of Directors will propose election to the Board of Mr. E. Luk Keller, Erlenbach, Chairman and Managing Director of Eduard Keiler Ltd., Zurich.
Donations In accordance with the credit approved by last year's General Meeting of Shareholders, donations of Sw. frs. 500,000 were made during the business year. About a fifth was allotted to foreign and domestic development aid and a similar share to charitable and welfare institutions (in particular charities for the sick and disabled and also for old age and juvenile care). A number of institutions or projects in the field of education and research received approximately a quarter of the total sum, whilst the remaining funds were donated mainly to humanitarian aid (the Red Cross and refugee aid), protection of the environment and national heritage and various cultural institutions.
Dividend If the Board of Directors' proposal is accepted, a dividend of Sw. frs. 100.— per share is to be paid. Thus, upon presentation of Coupon No. 23 of the registered and bearer shares, a gross amount of Sw. frs. too.— or, after deduction of the Federal With­ holding Tax of 35 %, Sw. frs. 65.— will be paid.
Audit After tfie witfidrawal last year of Mr. Adolf Efirbar, for reasons of age, tfie Board of Directors appointed tfie Zuricfi brancfi of tfie Swiss Auditing and Fiduciary Company to carry out tfie independent audit. In accordance witfi Art. 723 of tfie Swiss Code of Obligations, tfie present Annual Statement fias been examined and found correct by tfie Swiss Auditing and Fiduciary Company. Following tfie election of Mr. Flans Büfilmann to tfie Board of Directors at tfie 1976 General Meeting, tfie Board of Directors appointed Mr. Marc-Henri Amsler, Professor of Actuarial Sciences at the University of Lausanne, as the new actuarial auditor; he confirms in his report that the technical reserves of the Life Department at the end of 1976 were correctly calculated on the basis approved by the Swiss Federal Council.
The report of the Auditors appointed by the Share­ holders appears on page 24.
Zurich, 14th October, 1977 For the Board of Directors: M. E. Eisenring, Chairman
All Classes excl. Life Commissions and profit commissions 837,531,454 191,185,851 646,345,603 569,605,104 Claims paid 1,438,591,991 343,577,675 1,095,014,316 850,666,659 Adjustment in outstanding claims reserve 253,441,469 276,144,412 Result from ail classes excl. Life 11,114,792 — 11,034,982
Balance Profit brought forward from previous year 3,205,286 Net Profit for the Year 75,567,909 78,773,195 56,606,286
For the Board of Directors: M. E. Eisenring, Chairman H. B. Vischer, Deputy Chairman and Managing Director
Acting upon our terms of reference, we have checked the Profit and Loss Account for the business year 1976/77 and the Balance Sheet as at 30th June, 1977, against the accounts of the Company, which have been kept in proper form and order, and have found that the figures concord. The assets of the Company and the operating results are presented in accor­ dance with the methods of valuation legally pre­ scribed.
In this year's accounts, the scope of consolidation was unchanged. Additional notes on the Group accounts are to be found on page 34.
In the United States, a more favourable loss experience and higher premiums in insurance and reinsurance led to a clear improvement of results. The North American Reinsurance Corporation, New York, was able to reduce its underwriting loss in the year under report from US I 19.9 million to US I 4.1 million. On the other hand, the Canadian Relnsuranoe Company, Toronto, showed a slightly higher underwriting loss. In the Liability branches, with run-off periods lasting several years, the effects of claims inflation, which were commented on in previous years, persisted and continue to impair underwriting results. Remedial measures were there­ fore continued undiminished in the year under report.
The underwriting result of the Swiss-South African Reinsurance Company Ltd., Johannesburg, was also unsatisfactory. The unfavourable development of the South African market and the concurrence of several major losses in Property insurance contributed to an obvious worsening of the result. The company was partly relieved by an intra-Group catastrophe cover.
In non-Life reinsurance, most companies experienced in 1976 an acceleration of premium growth which was partly due to the effects of inflation. The under­ writing account closed with a marginal profit of Sw. frs. 4 million, compared with a loss of Sw. frs. 60 million in the previous year. The under­ writing result was negatively affected by the storm losses in Germany; North American business has also not yet been restored to a profitable basis.
The major losses which the storm "Gapella" caused in North Germany at the beginning of 1976 and the unfavourable development of German insurance led to a noticeable increase of the underwriting loss of the Bavarian Reinsurance Company Ltd., Munich.
The North American Reassurance Company, New York, and the Canadian Reassurance Company, Toronto, which operate exclusively in the Life reassurance field, achieved good results thanks to good mortality experience and financing requirements which were lower than in the previous year.
In 1976, the underwriting result of the German insurance companies, in which SR Beteiligungen AG, Munich, maintains a majority holding, again worsened because of the unfavourable development of non-Life insurance. Thanks to higher investment income and stabilization of management expenses, the overall profit remained on the level of that of the previous year.
The Generai Surety and Guarantee Company Ltd., Wilmslow, which only writes Surety business, con­ tinued its gratifying progress in the year under report. Profit was good and the company was again able to expand its business.
The capitai structure of the company remained un­ changed. The current account credit granted by the parent company was increased by Sw.frs. 24 million to Sw. frs. 308 million. The increase is particularly due to the additional Magdeburger Feuer shares acquired by Swiss Re.
Accident/Sickness 1,316 1,107 1,032 378 363 Third Party Liability/Motor 1,516 1,218 1,245 754 727 Marine 359 310 298 257 249 Other branches 624 522 478 384 364 Life 900 840 806 540 473 Gross premiums Retrocessions to companies outside Croup
Net Business 66,049 58,306 54,241 47,229 42,164 *scope of consolidation extended; figures not comparable with the years 1972 and 1973
All Classes excl. Life Commissions, profit commissions, underwriting expenses 973 416 1,389 1,196 Claims paid 1,713 990 2,703 2,166 Adjustment in outstanding claims reserve 459 72 531 556 Result from all classes excl. Life 4 — 17 — 13 — 65
Life Business Commissions and participation in profits 135 124 259 238
Adjustment in policy and annuity valuations — 161 — 121 — 282 — 237 interest on Life assurance and annuity fund 69 77 146 122
Investment income (less interest on Life and Sickness assurance and annuity fund and other technical reserves) 307 71 378 323
Shares (excluding holdings) 869 68 937 908 Real estate 439 317 756 670 Non-consolidated holdings 218 12 230 133
Reinsurance Companies insurance Companies 30th June 1977 Total 30th June 1976 Total
Profit applicable to minority shareholders Capital funds applicable to minority shareholders
With the exception of the «SWITZERLAND» General (of. page 27), all companies in which Swiss Re, Zurich, directly or Indirectly maintains a majority hold­ ing were included In the consolidation. The degree of holding in consolidated companies varies between 55% and 100%. The outgo and income and assets and liabilities of the consolidated companies are shown at 100%; an adjustment was made for the amount applicable to minority shareholders for the items "Profit" and "Capital funds shown".
Investments (except for real estate) were valued at the lower of cost or market. The hidden surplus on the entire investment portfolio rose by Sw. frs. 277 million to Sw.frs. 838 million, thereby totalling 10.7% of the present balance-sheet value (previous year, 8.7 %).
The capital funds applicable to minority shareholders correspond to that part of the relevant Group company's capital funds which is held by non-Group shareholders. This rose by Sw. frs. 7 million net during the year under report to Sw.frs. 45 million; the increase is largely due to the corresponding amounts of the previous year's profit and the higher valuation of the German mark.
The consolidated capital funds of the Group increased over the previous year by Sw. frs. 67 million net to Sw. frs. 555 million. This substantial Increase Is mainly due to the Group profit, which is considerably higher than the paid-out profits.
Group Personne At the end of 1976, a total of 12,192 people were employed by the Group companies, 93 % of them by foreign Group companies.
Although approximately two-thirds of the Group's premium income emanates from the reinsurance sector, the reinsurance companies only accounted for 17% of all Group personnel. The inherently greater number of staff employed by the insurance companies inciudes those permanently working in the field service.
European General Reinsurance Company of Zurich 50/60 Mythenquai, 8022 Zurich with an office in Madrid
Swiss Reinsurance Company (U.K.) Ltd. 108 Cannon Street, London EC4N 6HE with an office in Hong Kong
Magdeburger Feuerversicherungs-Gesellschaft Magdeburger Allgemeine Lebens- und Rentenversicherungs-AG Magdeburger Hagelversicherungs-Gesellschaft Magdeburger Rückversicherungs-AG Magdeburger Union Rechtsschutz Versicherungs-AG Aegidientorplatz 1, 3000 Hanover 1 Union und Rhein Versicherungs-AG Wotanstrasse 88, 8000 Munich 38
Berlinische Feuer-Versicherungs-Anstalt Nymphenburger Strasse 112, 8000 Munich 19 Aachen-Leipziger Versicherungs-AG Theaterstrasse 7-9, 5100 Aachen Eos Lebensversicherung AG Königinstrasse 19, 8000 Munich 22 Saar-Rhein Allgemeine Versicherungs-AG Sulzbachstrasse 16-18, 6600 Saarbrücken 3 Salus Krankenhauskosten-Versicherungs-AG Schleissheimer Strasse 124, 8000 Munich 40 Vereinigte Krankenversicherung AG Leopoldstrasse 24, 8000 Munich 40
SwissRe Advisers Ltd. 2306-2309 Connaught Centre, Hong Kong with offices in Tokyo and Manila 5-15, Nihonbashi 3-chome, Chuo-ku, Dowa Building, Tokyo 103 Dona Narcisa Building 8751 Paseo de Roxas, Makati, Metro Manila
SwissRe Advisers (Singapore) Private Ltd. Clifford Centre, Raffles Place, Singapore 1
Individual and Group assurance: Endowment/Term assurance Annuity assurance Supplementary assurance (Accident, Disability, etc.; Catastrophe cover