Board of Directors Max E. Eisenring, Chairman Paul Keller, Deputy Chairman Paul Guggenbiihl Matheus Klaas Hans Schindler Paul Ruegger Max H. Schneebeli Max Petitpierre Werner Abegg Felix W. Schulthess Marcel Odier
Managers W. Bruppacher A.-L. Chenaud W. Eschmann R. Hedinger J.-E. Rossier A. Schütz
Assistant Managers R. Aeberli A. Albrecht E. Arpagaus E. Baumgartner G. Benktander F. Bolliger A. Brügger P. E. Christen F. Ehrsam L. Genoud G. Huguenin
We have the honour to present to you the Annual Report and Statement of Accounts of the Company for the business year 1968/69. The 105th business year embraces the reinsurance business for the calendar year 1968 and the other income and expenditure from 1st July, 1968 until 30th June. 1969.
Business Experience Our 105th year of operations closes with a substantially higher profit than the previous year. The principal con­ tributory factor was the improved underwriting result in non-Life business. The experience in Life reassurance was again satisfactory and the investment income was further increased. On the other hand, the outlay on management expenses and taxes was considerably higher and depre­ ciation, together with fluctuations in foreign currencies and stock exchange rates, placed an appreciable charge on the Profit and Loss account.
Reinsurance In last year's annual report it was pointed out that the rapid technological progress, the worldwide depreciation of money and also various sociological phenomena — for example the greater demands of the insured in an affluent society — are changing the risk situation in insurance. This trend has continued during the year under review. Naturally this affects both direct insurers and reinsurers.
Fortuitous positive and negative fluctuations in the overall loss pattern occur even with the broad geographical spread obtainable in the portfolio of a reinsurer operating inter­ nationally. He is therefore compelled to seek a compen­ sation in time. Consequently, underwriting surpluses which derive not from the basic business but from the cover relating to peak risks should not be regarded as profit but should be set aside to offset future major and catastrophe losses. A glance at the current business year, burdened as it already is by the windstorms in the U.S.A. and Scan­ dinavia and a series of other large losses, will confirm the need for prudence and far-sightedness in setting up reserves.
During the year of report, we — and in particular our American subsidiary, the North American Reinsurance Corporation — have extensively eliminated business which we regard as offering little or no possibility for improve­ ment. On the other hand, we were always attentive to the acquisition of new business wherever this was justified. On account of the pruning of business, the gross premium income increased by only 3.3 % (previous year, 3.7 %).
The premium income for own account of your Company amounted to Sw. frs. 1,582 million (previous year, Sw. frs. 1,556 million). For the Swiss Re Group the net premium income reached Sw. frs. 2,151 million (previous year, Sw. frs. 2,101 million). The structure of our business, both geographically and with regard to branch composition, changed little from the previous year. The aggregate underwriting result, which was a deficit of Sw. frs. 23.4 million in the previous year, improved by Sw. frs. 24.0 million. The result is therefore an underwrit­ ing profit of Sw. frs. 0.6 million.
In the Fire branch, which includes Loss of Profits insur­ ance, and more especially in the Industrial Fire business, the reinsurance business emanating from the United States, from Australia and South Africa produced deficits. The business deriving from our ceding connections in Great Britain varied in experience. A profit was earned in the remaining areas; in our view, this may be attributed in small measure to an improving trend in the risk/premium relationship but in larger measure to the favourable run of events. In most markets, the intensive efforts of direct insurers in the fields of loss prevention and the intro­ duction of premiums appropriate to the risk have begun to bear fruit. The primary force for a lasting improve­ ment of this business must be the gradual, universal reali­ zation that any tariff structure requires constant super­ vision and adaptation to the situation which really pre­ vails. In the year of report, caution was apparent in the approach of direct insurers and reinsurers to the granting of cover for certain categories of large risks. Complete coverage could not therefore be found for a number of these risks. This phenomenon, until recently inconceivable, is not primarily an indication that direct insurers and in­ ternational reinsurers have insufficient cover capacity at their disposal, but rather that the insurance industry is no longer willing to sell its cover facilities at inadequate terms.
The sector of insurance against losses caused by the forces of nature has been spared any exceptional claims. How­ ever, this pattern may change once again during the current year. The year under review proved — the world over — to be a «hail year».
The Burglary business as a whole closed with a profit. Greater precautions taken by the insured have not matched the rising crime rates, especially in highly industrialized countries, which heightens our scepticism with regard to
In Marine insurance, the premium increases achieved by direct insurers have been largely responsible for a con­ siderable expansion in premium volume, also for the re­ insurers. The unsatisfactory loss run-off from previous years, coupled with the need to carry reserves in line with the substantial premium growth during the current year, result in a loss for the year of report, albeit a smaller loss than that of the previous year.
Accident business returned a profit whereas Sickness in­ surance was at breakeven level. Drastic premium increases are urgently needed in Sickness insurance as a result of the heavily increased costs of medical treatment and hospitalization.
Fire 603,788,000 584,296,000 Hail 12,212,000 10,089,000 Burglary 35,918,000 31,154,000 Engineering 33,025,000 25,061,000 Water Damage, Glass and Livestock 5,630,000 5,011,000 Marine 157,816,000 140,836,000 Accident 135,006,000 121,112,000 Sickness 130,551,000 118,240,000 Third Party Liability 494,131,000 517,867,000 Surety, Fidelity and Credit 71,968,000 71,792,000 Life 258,237,000 251,494,000
On Market Values: Fixed-interest investments, including convertibles 69.3 % (previous year, 72.4 %) Shares (excluding Permanent Holdings) 22.8% (previous year, 19.3%) Real Estate (at balance-sheet values) 7.9 % (previous year, 8.3 %) The marked rise of interest rates during the year of report has particularly depressed the quotations for bonds in North America and Great Britain; this also had a direct effect on bond prices on the Eurodollar market and, to a lesser extent, on the bond quotations in various European countries. — During the period under review the state of our important share markets was generally less favourable than in the previous year. Gertainly the rise in quotations continued at the beginning of the year; however, the trend was later reversed. First of all, distinct setbacks occurred in America and these finally spread, shortly be­ fore the balance-sheet valuation date, to the European and Japanese stock exchanges. Appreciation in the share port­ folio did not match that of the previous year. The balance-sheet position — which again was obtained by application of the «cost or market» method — was affected by this development as follows: The amounts re­ quired for depreciation on fixed-interest investments were unprecedentedly high; the depreciation requirements on shares were also higher than in the previous year. The considerable realized capital gains only partially compen­ sated these allowances for depreciation. — The hidden surplus on the quoted securities rose by only Sw. frs. 10.4 million (previous year, Sw. frs. 72.8 million) to Sw. frs. 278.1 million. Of the assets of your Company shown on page 8, Sw. frs. 162 million are held by Trustees appointed by us in over­ seas territories.
For three reasons the management expenses rose excep­ tionally sharply by Sw. frs. 8.1 million: first, the expen­ diture previously debited to this account increased in the year of report by Sw. frs. 3,1 million or about 13%. Twothirds of the expenditure and of the increase related to personnel costs, necessitated by the further 10 % rise in the number of staff and by salary increases. — A further amount of Sw. frs. 2.0 million refers to expenses which were previously debited to other accounts but which are now incorporated in the account for management ex­ penses. This represents the investment advice fee which we credit to the SwissRe Corporation in New York, our commitment in financing the Swiss Insurance Training Centre in Zurich, and the costs of our rating, claims ser­ vice and advisory offices abroad. — Finally, the allocation to the Staff Life Assurance and Pension Fund, which was hitherto made from the net profit, is now debited direct to the management expenses account. In contrast to former times, welfare benefits have now become a matter of course with large companies and are a legal entitlement of the employee under his contract of employment. Your Company is thus legally obliged to finance the Staff Life Assurance and Pension Fund. On account of the higher number of employees and the increased salaries, the re­ quisite contribution had to be raised this year to Sw. frs. 3 million (previous year, Sw. frs. 2.5 million).
For the year of report the account for depreciation, fluc­ tuations in foreign currencies and stock exchange rates reflects almost exclusively the considerable depreciation requirement on securities, and in particular on bonds, the prices of which had fallen sharply by the end of the period under review. This depreciation requirement would have been appreciably greater if it were not for the substantial capital gains realized before the decline in share prices.
Mr. Hans Schindler was elected to the Board in 1957 and was a member during the past year of the Committee of Directors. Thanks to his vast experience in dealing with the problems of developing countries and his close asso­ ciation with the engineering industry, Mr. Schindler was able to give us most valuable counsel; we are very grate­ ful to Mr. Schindler for his contribution to our Company's interests.
To succeed these outgoing members the Board will no­ minate for election at this year's General Meeting, Mr. Max Troendle, former Ambassador and Swiss Commis­ sioner-General for the World Fair in Osaka in 1970, as well as Mr. Hans Ulrich, Professor Ordinarius for Manage­ ment Policy, Methodics of Business Management and Or­ ganization at the Graduate School, St. Gall. The Board is confident that with their wide knowledge and great ex­ perience these two gentlemen will prove valuable members.
The net profit for the financial year amounted to Sw. frs. 36.9 million, compared with Sw. frs. 30.0 million in the previous year. Including the balance brought forward, the sum of Sw. frs. 38.3 million is at the disposal of the General Meeting. The Board of Directors proposes payment of a dividend of Sw.frs. 75.— per share, as against a dividend of Sw. frs. 60.— plus a bonus of Sw. frs. 10.— in the previous year. Furthermore, it proposes allocations of Sw. frs. 375,000 to Directors' Remuneration (previous year Sw. frs. 350,000), of Sw.frs. 375,000 to Donations (previous year, Sw. frs. 350,000) and of Sw. frs. 6 million to the Reserve Fund for Catastrophe Losses. Upon acceptance of these pro­ posals by the General Meeting the balance carried forward would be Sw. frs. 1.6 million.
In addition the Board of Directors proposes that the remainder plus the balance brought forward from 1967/68 should be allocated as follows: Additional Dividend Allocation to Reserve Fund for Catastrophe Losses Donations
Sw. frs. Sw. frs. Sw. frs. Sw. frs. Ali Classes excl. Life
Premium Income 1,680,045,076 326,404,100 1,353,640,976 1,333,439,154 Adjustment in Unearned Premiums - 9,634,788 - 50,297,254
The securities, or the corresponding deposit certificates, were examined on the 15th, 16th and 17th July and on the 11th September, 1969 and found to be in order. A check carried out on the 11th September, 1969 showed that the cash in hand corresponded with the books.
The Swiss Re Group The composition of the Swiss Re Group in the narrower sense of the word remained unchanged during the year of report. It comprised the parent company, the New Hold­ ing Ltd., the European General Reinsurance Company of Zurich and, besides a number of rating, claims-service and advisory offices, the six subsidiary reinsurance companies domiciled abroad, the principal figures for which are given on pages 21—23. In August 1969, after the close of the period under review, the Swiss Reinsurance Company (U. K.) Ltd. was founded in London, its activities being confined to the markets of Great Britain and Ireland. The functions of the London Contact Office have been trans­ ferred to this new subsidiary reinsurance company. The share capital of the Group companies has remained unchanged during the year of report. In order to reinforce the assets for the development of Life business, additional funds in the amount of A $ 500,000 were placed at the disposal of the Australian Reinsurance Company by the parent company. The business year of the New Holding and of our over­ seas subsidiaries corresponds to the calendar year 1968. For this reason, the sale in June 1968 by the New Holding of the shareholding in the Mercantile and General Re­ insurance Company, Ltd. is only now evidenced in the consolidated capital and free reserves of the Group (cf. table on page 20). As a whole, the results of the subsidiary reinsurance com­ panies were satisfactory. Although the outcome of nonLife reinsurance in the U.S.A. remains adverse, several years of effort to improve the business are beginning to take effect.
Premium Income The first table shows the total premiums actually produced by the Swiss Reinsurance Company and its subsidiaries; the inter-company exchange of business has not been taken into account.
Fire 748 736 Hail 17 11 Burglary 40 36 Engineering 34 26 Water Damage, Glass and Livestock 6 5 Marine 162 152 Accident 193 151 Sickness 135 136 Third Party Liability 558 589 Surety, Fidelity and Credit 105 109 Life 416 385
1968/69 1967/68 in millions of Sw. frs. in millions of Sw. frs.
The consolidated capital and free reserves of the Swiss Re Group, after distribution of the profit and incorporation of the reserve fund for catastrophe losses, attained the figure of Sw. frs. 454 million at the 30th June, 1969, as against Sw. frs. 389 million at the end of the previous business year. The figures for previous years have been made comparable by inclusion of the reserve fund for catastrophe losses.
'North American Reinsurance Corporation, New York Share Capital US $ 6,000,000
Investment Income, Net Realized Capital Gains, and Taxes 5,880,000 5,289,000 * adjusted for changes in commission equity
Net Investment Income, Net Realized Capital Gains, and Taxes 385,000 - 626,000
Underwriting Result (incl. Management Expenses) Net Investment Income and Net Realized Capital Gains
The gross business in force increased by C $ 88 million to C $ 824 million. A change in the retrocession arrange­ ments effected the recapture of previously amortized financing costs and was largely responsible for the extra­ ordinarily good underwriting result shown. — As in the previous year, no dividend was paid, because the com­ pany will require further substantial funds for the deve­ lopment of its business.
The results of the non-Life business were adversely affec­ ted by an air disaster near Windhoek and floods in Port Elizabeth, but in spite of this closed with only an insigificant loss. The Life reassurance was again satisfactory. The ca­ pital gains realized in the Life Fund are, for the first time, included in the underwriting result, and the com­ parative figures for 1967 were adjusted accordingly. — The dividend remained unchanged at Rand 27,900.
Underwriting Result (incl. Management Expenses) - 659,000 - 448,000 Investment Income, Net Realized Capital Gains, and Taxes 399,000 319,000
North American Reassurance Company 245 Park Avenue, New York, N.Y. 10017 with Offices in Chicago, Dallas and San Rafael (nr. San Francisco)
Swiss-South African Reinsurance Company Ltd. Swiss House, 86 Main Street, Johannesburg with an Office in Cape Town
Swiss Reinsurance Company (U.K.) Ltd. 108 Cannon Street, London E. C. 4