Victor Gachin Paul E. Christen * Fritz Ehrsam * Clinton E. Geiser Johann J. Hagedorn Willy Küster Gerard Lavanchy * Paul-Francis Niquille
Assistant Managers Erwin Arpagaus Alfred Bai * Emil Baumgartner Gunnar Benktander Fritz Bolliger Andreas Brügger Richard R. Doerr * Rolf Eckert Leon Genoud
Marius Hoffmann * Georges Huguenin Walter Isler * Hans R. Kaufmarm * Lavre Kirianoff * Ernst A. Kubli Albert Kunz * Jean-Claude Mayor Max Nabholz
Reinsurance The improvement in the results of non-Life reinsurance, which has been evident for the past two years, continued during the period under review. An alarming increase in the heavy losses from industrial fires to which some of the most modern plants in highly developed industrial coun­ tries have fallen victim — a trend which unfortunately persists in the current year — contrasts with an improve­ ment in the profitability of Marine, Accident and Liability Reinsurance. The latter is equally attributable to the direct insurers' efforts to obtain premiums commensurate with the risk and to our selective underwriting practice.
The reinsurer can exercise no influence over inflation which seems to have become a permanent feature of the industrialized world or over the new and far more com­ plicated risk situation created by technological progress. He must concentrate on recognizing and assessing the ef­ fects of these factors on his business and adapting con­ ditions and premium rates to the new risk situation. The reinsurer also has an obvious obligation to process and pass on the information which he receives from all cor­ ners of the world.
This is accomplished hy means of our bulletin service, special publications, papers and by answering individual enquiries — which is perhaps the most valuable service of all.
During the year of report, the gross premiums increased by Sw. frs. 136 million to Sw. frs. 2,074 million, i. e. by 7 % (previous year, 3.3%). All branches of non-Life reinsurance contributed to this growth. In Life reassurance the business in force grew further; however, as a result of conversions to risk premium basis, the premium income declined slightly.
The premium income for own account amounted to Sw.frs. 1,696 million (previous year, Sw.frs. 1,582 million). For the Swiss Re Group the consolidated net premium reached Sw.frs. 2,684 million (previous year, Sw.frs. 2,151 million).
Fire reinsurance again incurred heavy losses. The delicacy and vulnerability of electronic equipment which is being introduced in many different forms into industrial and service enterprises proved to be the principal factor in in­ creasing losses. Apart from its sensitivity to external in­ fluences, the length of time required in many cases for repair or replacement of this equipment causes heavy losses through interruption of business in addition to the actual fire damage. This unfavourable situation cannot be corrected simply by means of premium increases which are long overdue in some markets. Measures for loss pre­ vention are equally important in the form of effective fire protection systems adapted to the requirements of each enterprise.
The reinsurance of damage caused by the forces of nature was affected by the devastation resulting from various hurricanes, the strongest of which was "Camille" in the USA, and by severe hailstorms particularly in Switzerland as well as by a number of earthquake losses. A deficit re-
In the year under review, the Marine branch re-entered the profit zone. The strict underwriting policy pursued for several years and a revision of premium rates in direct insurance were contributory factors. Marine insurance is faced with numerous problems of which we should like to mention the supertankers, expensive container ships and the increasing number of cargo thefts at ports and airports.
After producing a deficit for several successive years, the General Third Party Liability and Motor Third Party Li­ ability business yielded a profit. However, the results vary from country to country. By reason of the fact that various European markets and the USA are showing profits, we conclude — without deducing that this branch has already reached a balance — that the joint efforts undertaken by our ceding companies and ourselves in respect of this parti­ cularly inflation-prone line have already taken effect. With a rapidly growing premium volume, Aviation reinsurance had a good year. The various acts of terrorism which led to the damaging or destruction of several aircraft in the air and on the ground will affect the result of the current year. — The reinsurance of atomic risks was free of any significant losses.
In the Life branch the net business in force rose from Sw. frs. 15,000 million to Sw. frs. 16,400 million, the profit having been slightly reduced, in comparison with the pre­ vious year. For the Swiss Re Group the net business in force increased from Sw. frs. 29,900 million to Sw. frs. 35,800 million. In certain important industrial countries a deter­ ioration of the mortality occurred which is attributable to flying and other accidents, as well as to the stress of modern living. In general the observation still applies that the profitability of newly acquired business is declining and that at the same time the cost of services is increasing. As in previous years, the acquisition costs have been fully amortized.
Fire 650,185,000 603,788,000 Hail 12,652,000 12,212,000 Burglary 38,180,000 35,918,000 Engineering 39,516,000 33,025,000 Water Damage, Glass and Livestock 5,852,000 5,630,000 Marine 170,149,000 157,816,000 Accident 138,734,000 135,006,000 Sickness 164,252,000 130,551,000 Third Party Liability 530,675,000 494,131,000 Surety, Fidelity and Credit 75,078,000 71,968,000 Life 249,254,000 258,237,000
Investments The income from investments again rose steeply during the year under report. This is attributable on the one hand to the further rise in fixed-interest investments and shares, and on the other hand to the exceptionally favourable rates of return which were achieved throughout the world with new investments and re-investments at fixed interest. As in the previous year, the New Holding Ltd. distributed a divi­ dend of Sw. frs. 4 million and a bonus of Sw. frs. 2 million.
The total profit-bearing investments (cf. table on page 8) decreased slightly at the end of the business year in con­ nection with the transfer of the six overseas subsidiary reinsurance companies to the New Holding Ltd.; the cash deposits with ceding companies also declined slightly. By contrast, the actual investments — excluding Permanent Holdings — rose during the year under report by Sw. frs. 73 million (in the previous year by Sw. frs. 235 million); the accrued funds were placed in approximately equal proportions in fixed-interest investments and investments of an equity nature. On the balance-sheet valuation date the distribution of these investments was as follows: At Balance-Sheet Values Fixed-interest investments including convertibles 74.5 % (75.7 %) Shares (excluding Permanent Holdings) 16.6 % (15.3 %) Real Estate 8.9 % ( 9.0 %)
At Market Values Fixed-interest investments including convertibles 70.3 % (69.3 %) Shares (excluding Permanent Holdings) 21.6 % (22.8 %) Real Estate (at balance-sheet values) 8.1 % ( 7.9 %)
The share markets have been in an unfavourable state during the period under review. Set-backs had already occurred in the previous year in North America; these spread during the business year under review to the European and Japanese share markets which finally re­ sulted in a world-wide depression against which not even a broad geographical and inter-sectoral spread of invest­ ments could offer any protection. Despite substantial new investments, the proportion of shares at market values has therefore slightly decreased. The quotations for bonds were already under pressure in the previous year; this pressure increased during the period under report as a result of a recent, unprecedented rise in the costs of capital which led to a real drop in prices in all major investment countries shortly before the balance-sheet valuation date.
Bonds and Preference Shares of Banks, Public Utilities, Industrial and other Companies
During the year under review the management expenses increased by Sw. frs. 5.9 million or 19% to Sw. frs. 37.6 mil­ lion. Two thirds of these costs and of the increase were due to personnel expenses and were caused by the ex­ pansion of the personnel by more than 15 % over the past two years as well as by salary increases. The allocation to the Staff Life Assurance and Pension Fund had to be fixed at Sw. frs. 3.5 million (in the previous year, Sw. frs. 3.0 mil­ lion). Other factors contributing to the increase in manage­ ment expenses were: the higher costs of our travelling force, the running costs of the extension building and the introduction of higher capacity electronic data-processing equipment. Taxes rose during the year of report by Sw. frs. 4.7 million to Sw. frs. 13.0 million. More than half of this increase was linked with the fact that the double-taxation agreements concluded by Switzerland with France, the Netherlands and Spain have not unburdened us to the extent expected. The account for depreciation, fluctuations in foreign cur­ rencies and stock exchange rates only partly reflects the substantial depreciation requirement during the past year; reference is made to the foregoing comments regarding investments. The gains and losses realized following the devaluation of the French Franc and various other cur­ rencies were approximately compensated by those result­ ing from the revaluation of the German Mark and the release of the exchange rate of the Canadian Dollar.
The terms of office of Mr. Paul Keller, Deputy Chairman, Mr. Max Petitpierre, Mr. Paul Guggenbiihl and Mr. Matheus Klaas have now expired by rotation. Having attained the prescribed retirement age, Mr. Paul Keller withdraws from the Board. The other gentlemen stand for re-election and are immediately eligible under the Articles of Association.
At this year's General Meeting the Board will nominate for election as the new member Mr. Walter Berchtold, Presi­ dent of Swissair.
On 31st December, 1969 and 30th June, 1970 respectively Mr. Charles Robert-Tissot and Mr. Hans Ryffel, Deputy Managers, entered retirement; we should like to express our sincere gratitude to these gentlemen for their many years of valuable service to our Company.
If this proposal is accepted, an amount of Sw. frs. 80.— will be paid on presentation of Dividend Coupon No. 15 (Sw. frs. 56.— after deduction of the Federal Withholding Tax of 30 %).
Capital Funds After distribution of the profit as proposed above, the capital and free reserves would be increased from Sw. frs. 236.0 million to Sw. frs. 245.0 million to which is added the balance brought forward of Sw. frs. 1.7 million (pre­ vious year, Sw. frs. 1.6 million).
Audit In accordance with Art. 723 of the Swiss Code of Obliga­ tions the present Annual Statement has been examined and found correct by an independent auditor.
The actuarial auditor, Mr. H. Bühlmann, has moreover con­ firmed in his report that the technical reserves of the Life department at the end of 1969 were correctly calculated on the basis approved by the Swiss Federal Council.
Acting upon our terms of reference, we have today checked the Profit and Loss Account and the Balance Sheet against the accounts of the Company, which have been kept in proper form and order, and have found that the figures concord. We have further satisfied ourselves that the pre­ sentation of the operating results and of the assets of the Company conforms with the methods of valuation legally prescribed.
We have taken cognizance of the report made by the in­ dependent auditor appointed by the Board of Directors in accordance with Article 723 of the Swiss Code of Obliga­ tions, and in particular of his findings that the accounts have been correctly kept.
We have pleasure in recommending that the Accounts as at the 30th June, 1970 be approved, that the Adminis­ tration of the Company be given full discharge in this respect with best thanks, and that the proposals of the Board regarding the distribution of the profit be accepted.
Swiss Reinsurance Company i * 1964/65 investment income converted to 12-month basis
The gross business in force increased by US $ 1,049 million to US I 4,094 million. About half of this growth resulted from group business yielding little profit. Following reserve adjustments, the underwriting result was negative despite the continued favourable development of mortality. The marked improvement in the financial result is attributable both to increased investment income and a reduced tax burden. — The dividend remained unchanged at US $ 360,000.
The gross business in force rose by Can. $ 91 million to Can. $ 915 million. During the year of report the develop­ ment of business was good both in the underwriting and financial sectors. A comparison with the results of the previous year is not possible as they were strongly in­ fluenced by a change in the retrocession treaties. For the first time a dividend of Can. | 50,000 was paid.
The again negative result of the non-Life business was decisively influenced by Earthquake and industrial Fire claims. The development of Life reassurance was satis­ factory. The substantial improvement in the financial result is partially attributable to non-recurring gains. — The former rate of dividend was retained on the share capital which has been doubled from own funds; the dividend therefore amounted to Rand 55,800.
North American Reinsurance Corporation 245 Park Avenue, New York, N.Y. 10017 with Offices in Atlanta, Chicago, Houston, Los Angeles and San Francisco
Australian Branch Embank House, 325 Collins Street, Melbourne, Vic. 3000 with an Office in Sydney
Swiss Reinsurance Company (U.K.) Ltd. 108 Caimon Street, London E. C. 4