Auditors' Report 27 1 ^ Business Years 1974/75-1983 28 Glossary of Technical Terms 50
Note on the illustrations in this Annual Report The growing need for energy calls for modern, large-scale energy producing installations in many countries. The main sources of energy which can be industrially harnessed are coal, oil, gas and water. Nuolear energy is becoming increasingly important. The use of solar and wind power is not yet of great consequence for economio reasons, although in suitable climates these could become the energy sources of the future for small-scale consumers. The production and distribution of energy require increasingly more refined know-how and immense investments. As a result energy-producing installations often contain enormous values. Here, too, insurance and reinsurance play an essential role by covering the main risks (fire, explosion, natural catastrophe, machinery breakdown and liability). Such energy installations are shown on pages 2,11,14, 30 and 43. Photos: H. R. Bramaz, Kilchberg, Switzerland
Sw frs. 105.Swfrs. 21.in millions of Swiss francs j Swiss Re Group 1983 1982
Sw frs. 197.Sw frs. 39.- * subject to approval by the General Meeting
St. Gall, Professor, St. Gall Graduate School of Economics, Business and Public Administration * Members of the Committee of Directors
Secretary to the Board of Directors Ernst A. Kubli, Senior Executive Manager, Küsnacht
Organization of Swiss Re, Zurich as per 1st January, 1985 'until 31st December, 1984
Secretariat of the Board of Directors, Executive Committee and Group Management EA. Kubll, General Secretary
Reinsurance technique and acquisition special lines J.C. Roos, Senior Executive Manager H. R. Kaufmann, Senior Executive Manager
Capital market investments, real estate A.W.Saxeri Senior Executive Manager R R Hügie, Executive Manager R Boiilger, Executive Manager* A. Decurtins, Manager B. H. Letsch, Manager E. Locher, Manager J,-R Michot, Manager B.Perrin, Manager J,-R Rreyer, Manager F E. Rohner, Manager
W. isier, Senior Executive Manager W. Schiegg, Executive Manager H. W. Kreis, Executive Manager R. Heid, Manager R. Jeck, Manager G.Schmidii, Manager
Personnel service, training E. E. Arpagaus, Senior Executive Manager R. Oberle, Executive Manager H. Spörri, Manager
Insurance companies Germany R. Ochsenbein, Senior Executive Manager* R. Hedinger, Senior Executive Manager United Kingdom
A. Brügger, Senior Executive Manager D. Söhner, Executive Manager O. Kern, Manager A, Suizer, Manager
Under difficult circumstances, as the remedial measures implemented by the Swiss Re ran counter to the market trend, gratifying improvements to individual results were produced in certain sectors of reinsurance busi­ ness during the year under report. Overall, however, the result of Non-Life reinsurance again worsened. Two rea­ sons were largely responsible. The losses in worldwide Industrial Fire reinsurance rose as a result of an accumu­ lation of arson claims and the weather damage also covered under this branch. At the same time, the claims development in North American Liability business (particularly Products Liability and Environmental Impair­ ment) placed a heavy burden on the account of the re­ porting year. Here factors not belonging to this period had a particularly pronounced effect on the result as substan­ tial reserves had to be allocated for claims made in 1983 but the causation of which often lay many years in the past. Claims, and particularly late claims, which in Europe would be considered exaggerated are repeatedly being brought with success before American courts of law. The lawyers' remuneration can reach a very substantial per­ centage of the amount awarded. The category of spe­ cifically late losses includes, for example, the claims by thousands of plaintiffs who feel they suffered in connec­ tion with the manufacture and use of asbestos. The total amount is at the moment unclear, but will greatly burden American insurers and international reinsurance.
In this position the Swiss Re is playing its leading role without regard for loss of volume and with the persever­ ance required. We are convinced that these measures put us on the right path and that we shall succeed in mas­ tering the most difficult period so far in international rein­ surance.
Life reinsurance, where, in addition to underwriting, ser­ vices in a wide variety of forms play an increasingly im­ portant role, again produced a good result.
It was possible to improve further the very good financial result of the previous yearfoliowing higher investment in­ come and increased realized capital gains.
Consistently high losses in Non-Life reinsurance appear finally to have initiated a worldwide cooling of the many years of overheated reinsurance supply. An increasing
In Swiss francs gross premiums rose by 1.7% and net pre­ miums by 5.9%. The policy of cautious underwriting was continued. The result of Non-Life reinsurance worsened, following the unfavourable trend of industrial Fire busi­ ness worldwide and substantial late claims from the North American Casualty sector. Life reinsurance showed about the same profit as in the previous year. Overall, the underwriting loss from reinsurance business was larger than In the 1982 business year. Investment in­ come again increased. After taking into account manage­ ment expenses, rate fluctuations, write-offs, value adjust­ ments and taxes, there remained a net profit of Sw.frs. 90.0 million (previous year, Sw.frs. 87.5 million).
In Non-Life reinsurance the profit from the overseas terri­ tories handled from the Head Office was considerably less than in the previous year, in Life reinsurance only slightly less.
The Increase of the underwriting loss is due to the bad ex­ perience of worldwide Fire reinsurance business and to extensive strengthening of the reserves for Liability claims from the United States under the business ceded to us by our subsidiary reinsurance companies.
The distribution of gross premiums by branch hardly changed. The relative importance of Fire business in­ creased slightly, that of Marine reinsurance and of Acci­ dent reinsurance declined, the latteras a consequence of a further reduction in the special short-term business in the United States.
In the year under report the European business of Swiss Re, Zurich, again grew more strongly than overseas busi­ ness. Non-Life reinsurance closed in 1983 with a small profit (compared with a loss in the previous year).
In Fire reinsurance the premium income again rose after two years of stagnation. With market conditions as they are at the moment, we are not interested in expanding volume, if it is not the result of higher premium rates on business in force or on newly accepted business. The year under report closed with a loss which was again somewhat higher than that of the previous year. This loss is primarily due to the unsatisfactory price level for indus­ trial risks, which after years of often ruinous competition in the main insurance markets is still at a low. The urgently
In Hail reinsurance there was an Increase in the premium income and, after two years of deficit, a gratifying profit.
In Accident reinsurance a decline of premium income was registered, which was due to the run-off of special American business accepted in former years. Overall the result was positive, despite the negative result in Workmen's Compensation business, for which the re­ serves for late claims had to be increased.
In Motor reinsurance there was a slight decline in pre­ mium income, which was due to the weakening of certain European currencies against the Swiss franc. The under­ writing loss rose substantially. In certain major countries inflation caused the average claims costs to rise con­ siderably, which can not — not even approximately — be offset by the declining claims frequency. An adjustment of premiums can therefore not be avoided in a number of markets. The Motor Physical Damage class was adverse­ ly affected by a severe hailstorm in Switzerland.
Fire 1,256 1,155 Hail 35 29 Burglary, Fidelity and allied lines 112 91
Accident 323 370 Sickness 101 98 General Third Party Liability 346 314
Aviation 137 137 Nuclear Energy 14 12 Credit/Surety 212 201 trade as a result of recession. It is gratifying that our ef­ forts were successful and for the first time in years a profit could be shown. The pressure of competition in Marine insurance has abated somewhat and the conditions for the still needed premium increases are therefore more fa­ vourable. The result was also improved by the fact that there were no actual major losses.
The premium income in Engineering reinsurance re­ mained almost the same as that of the previous year. The recession brought about a fall in investments and conse­ quently the number of newly insured risks. Moreover, the continuing pressure of competition, particularly with re­ gard to major projects, compels us to strict selection. Despite these unfavourable conditions, it was still pos­ sible to achieve a profit, which is almost exclusively due to the reinsurance of facultative risks, treaty reinsurance business having produced a loss.
In Aviation reinsurance premium income stagnated. However, taking into consideration the increase in the foreign currency rate fluctuations and the adjustment of sums insured, the business in real terms in fact declined considerably. The drop is the outcome of our remedial ef­ forts overthe years, in spiteof which we still had to bear in the year under report a greater loss than in the previous year. 1983 is commonly regarded as the worst in the histo­ ry of Aviation insurance. The loss burden from 14 major losses (previous year, 11) was more than half as much again as that of the previous year. Since then the premium rates and the retentions forairline policies have generally been raised substantially. Whether the Aviation markets are sufficiently disciplined to persevere with improving conditions remains to be seen.
The premium volume in Nuciear Energy reinsurance rose somewhat. A substantial increase of this business cannot be reported, nor is one likely in the short term. The loss experience was again very good in the year under report, there being no claims of significance. The profit fulfils ex­ pectations and is mostly used to accumulate the re­ serves appropriate to this class.
With a continuingly cautious risk acceptance policy, the premium volume of Credit and Surety reinsurance rose by 5.5% over the previous year. The gratifying result is largely due to improvement efforts in Credit insurance and to the positive experience of Surety business.
Our net premiums rose by 1%, or Sw.frs. 3 million, to Sw.frs. 381 million. The effect of reduced foreign ex­ change rates, together with a decline in coinsurance business, the premiums for which include a savings ele­ ment in addition to the risk part, slowed down premium growth.
Claims expenditure was 3% higher than in the previous year, there being a slight increase in the number of deaths and a slight decrease in disability claims resulting from our cautious underwriting policy. Again less had to be spent in the financing of new coinsurance business than was recouped from the earlier investment of funds. The profit of Sw.frs. 35.9 million was only slightly higher than that of the previous year (Sw.frs. 35.5 million).
The actuarial auditor, Mr. Marc-Henri Amsler, has con­ firmed in his report that the technical reserves of the Life reinsurance business at the end of 1983 were calculated on the basis approved by the Swiss Federal Council.
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In 1983 the world economy made a noticeable recovery although the extent varied considerably from country to country. Growth was initiated by a rapid, vigorous eco­ nomic upswing in the United States, in spite of high nomi­ nal and real interest rates. This in turn led to a widespread improvement of corporate profits - apart from those of structurally weak industries. Corporations remained little inclined to invest though and Stockbuilding also remained sluggish. American economic growth was, however, still enough to trigger a revival also in Europe in the second half of the year. Nevertheless, inflation rates declined throughout the world. The problem of inter­ national indebtedness, which had last year burdened the financial markets, remained basically unresolved in the year under report. The success of various rescue actions diminished, however, the general uneasiness.
In such overall favourable circumstances the upswing on the major share markets, which had begun in August 1982, was able to develop on a broad basis. In the second half of 1983 a more restrained attitude prevailed, and sharp price adjustments were made, particularly for American high-technology stocks. Nevertheless, the stock exchange values of our shares were - with minor exceptions -still clearly higheronthe balance-sheet date than at the beginning of the year.
On the bond markets yields remained at a remarkable level - despite falling inflation rates - or rose causing the high real interest rates to persist or even increase. In such a market situation the hidden surplus on our bond portfo­ lio remained practically unchanged.
New Investments were mainly made in standard bonds, shares and real estate; the portfolio of convertible bonds, however, experienced a considerable reduction. The pref­ erence given by our American branch to long-term taxfree bonds caused a slight increase in the average matu-
After deduction of the interest required for the Life insur­ ance and annuity fund and other technical reserves, the /nvesfmenf/ncome amounted to Sw.frs. 425 million (pre­ vious year, Sw.frs. 388 million). This increase is due to additional investments and to the slightly higher yield on reinvested funds. On the other hand, foreign currency rate fluctuations did not affect the result of investment income in the year under report, as the varying rate fluctuations of the major currencies cancelled each other out.
Net cash deposits from reinsurance business, i.e. after deduction of the shares due to retrocessionaires, fell primarily as a result of foreign exchange rates - by Sw. frs. 47 million to Sw.frs. 1,323 million.
As in previous years the number of employees rose slightly. At the end of the business year Swiss Re, Zurich, had a total staff of 1,075 employees, 44 more than at the end of 1982. The 4.3% increase was the result of 129 people joining the company and 85 leaving because of resignation, retirement or death. The fluctuation rate (total number of departures as a percentage of the initial num­ ber of employees) was 8.2% in 1983, practically the same as in 1982.
As part of its services the Swiss Re offers its clients train­ ing programmes for staff, in the year under report the reinsurance marketing and technical departments again organized numerous courses in Zurich and various coun­ tries; these included a one-day meeting on paraplegia for claims managers, a three-week seminar on reinsurance technique, a course on industrial, products and profes­ sional liability, one on rating in Engineering insurance (construction and erection) and a seminaron cost-benefit analysis.
With its courses the SITG (Swiss insurance Training Centre), Zurich, a foundation of the Swiss Re, enables companies in developing countries to give its staff general insurance training and in this way promotes the development of the insurance markets in these countries. In the year under report the SITG held four courses for 120 participants. More than 40 specialists of the Swiss Re acted as lecturers at the courses held in English and Spanish.
The stock market capitalization of a company corre­ sponds to the stock exchange value of all outstanding se­ curities of the company capital. For the Swiss Re the stock market capitalization at the beginning of Septem­ ber 1984 was as follows: 400,000 registered shares at Sw. frs. 3,660 44,000 bearer shares at Sw. frs. 7,600 240,000 non-voting shares (1980 issue) at Sw. frs. 1,410 Sw.frs.
The stock market capitalization at the corresponding timein1983and1982 (on the basis at that time of 400,000 registered shares, 44,000 bearer shares and 240,000 non-voting shares) was Sw. frs. 1,905.9 million and Sw. frs. 1,566.8 million respectiveiy. The development over the comparative three-year period is shown in the following graphic.
Bearer shares i 1 1 Non-votina shares 1980 i 1 1
Sw.frs. 134,000. Sw.frs. 115,000 was given for develop­ ment aid projects, 41% of which to domestic and 59% to foreign institutions. For humanitarian purposes, primarily the Red Cross and refugee aid, Sw.frs. 102,000 was made available. Cultural institutions received support in the amount of Sw.frs. 63,000. The remaining Sw.frs. 60,000 was for donations in the field of environmental protection and for other donations.
Last year's General Meeting confirmed ttie re-eiection of Mr. Waiter Diefii for a further four-year term of office.
Having reached retirement age, Mr. Edwin Stopper is re­ signing from the Board; he has been a member since the 1974 General Meeting and a member of the Committee since 1978. His extensive worldwide experience in finan­ cial and currency matters and in many other fields thaf are important for our Company made his activity in both bodies very valuable for us. We are deeply indebted to Mr. Stopper for the great service he has rendered our Company.
Managers: Messrs. Ernst Baumann, Marc-Aiain Bioesch, Michael Bradley, Yvan Burgener, Adolf Decurtins, Paul Egger, Heini Fuchs, Mikios Gaai (Member of Management in Advisory Capacity), Bernard Giiiiand, Rene P Held, Willy Hersberger, Frederic Joseph, Otto Kern, Bruno H. Letsch, Eduard Locher, Horst Lüthi, Oie Oisson and Adrian Suizer.
The General Managers: RE. Christen, P-F Niquiiie H. Odermatt, H. Schönenberger
With effect from 1st July 1984, the Board of Directors granted Mr. Herbert Haag, hitherto Member of Manage­ ment in an Advisory Capacity, the authority to sign as Manager.
Total result before tax (1) + (2) + (3) 145,452,915 138,256,586 Taxes - 55,422,573 - 50,712,695
Gash in hand and credit balances are entered in the Bal­ ance Sheet at nominal amounts. This also applies to standard loans and to mortgages.
Claims comprise benefits forterm and endowment insur­ ance, paid annuities and the adjustment in the outstand­ ing claims reserve. The total figure for own account rose in the year under report by Sw.frs. 5.4 million to Sw.frs. 203.4 million. The additional amount is the result of an increase of Sw.frs. 12.8 million in the payments for Life insurance and annuities and a decrease of Sw.frs. 7.4 million in the outstanding claims reserve.
The commissions and profit commissions accounted for gross business totalled Sw.frs. 1,067.7 million. Of this amount, Sw.frs. 231.1 million referred to retrocession­ aires, leaving Sw.frs. 836.6 million for own account.
Gross premiums totalled Sw. frs. 401.5 million, Sw. frs. 10.3 million of which were for annuities purchased. After de­ duction of retrocession premiums of Sw.frs. 20.0 million, the remaining net premiums amounted to Sw.frs. 381.5 million, corresponding to a growth rate of 0.8% over the previous year.
The commissions and profit commissions calculated for business assumed totalled Sw. frs. 76.9 million. The retro­ cessionaires' share of this amount was Sw.frs. 1.9 million, so that Sw.frs. 75.0 million remained for own account.
quent risk of loss was taken into account by means of an appropriate increase in tfie general and individual value adjustments. Tfie outgo needed for tfiis amounted to Sw.frs. 13.5 million (previous year, Sw.frs. 24.7 million).
Of the total amount of Sw.frs. 196.1 million, Sw.frs. 194.7 million was for bank balances. The major part of this amount is invested short-term in the principal currencies for our business activity and is used to meet current obli­ gations on time.
Of these balances Sw.frs. 588.0 million was for reinsur­ ance and Sw.frs. 24.5 million for retrocession business. Other liabilities totalled Sw.frs. 80.1 million, mainly com­ prising current accounts run for personnel welfare funds and pool companies.
Cash deposits for retrocessions fell compared to the pre­ vious year by Sw.frs. 18.1 million to Sw.frs. 109.4 million.
Technical reserves comprise, in Non-Life reinsurance, the reserves for unearned premiums and outstanding claims and, in Life reinsurance, the policy and claims reserves. The changes in the reporting year and the composition are shown in the following table; in millions of Swiss francs
Business in force at end of previous year Non-Life reinsurance 4,771.4 4,280.0 Life reinsurance 1,369.2 1,330.5 Total for own account 6,140.6 5,610.5
Non-Life Reinsurance Unearned premiums 1,194.9 1,198.8 Outstanding claims reserve (Incl. valuation of current annuity Indemnities) 3,679.0 3,572.6 4,873.9 4,771.4 in % of earned net premiums 173.3% 181.7%
44,000 bearer shares each with a nominal value of Sw.frs. 250.-) and a non-voting share capital of Sw. frs. 12 million (240,000 non-voting shares each with a nominal value of Sw.frs. 50.-).
The total capital funds shown at the end of the previous year amounted to Sw.frs. 624.9 million which would rise to Sw.frs. 659.7 million by the proposed allocation of the profit, provided it is approved by the General Meeting of Shareholders. The capital funds would then be com­ posed as follows: In millions of Swiss francs
Proposal of the Board of Directors proposal regarding allocation of the net profit of. Profit and Loss Account (page 20) and Balance Sheet (page 21)
If the proposal of the Board of Directors is accepted, dividends of Sw. frs. 110.- per share (nominal value Sw. frs. 250.-) and Sw. frs. 22.- per non-voting share of the 1980 issue (nominal value Sw. frs. 50.-) are to be paid. Coupon No. 32 of the registered and bearer shares may be presented for payment of a gross amount of Sw. frs. 110.- or, after deduction of the Federal Withholding Tax of 35%, Sw. frs. 71.50 and coupon No. 32 of the non-voting shares for a gross amount of Sw. frs. 22.-, or Sw. frs. 14.30 net.
As the Auditors of your Company we have examined the accounts for the year ended 31 st December, 1983, in ac­ cordance with the provisions of the law.
Magdeburger Versichemngsgruppe Magdeburger Feuerverslcherungs-AG, Hanover Magdeburger Allgemeine Lebens- und RentenversIcherungs-AG, Hanover Magdeburger Hagelversicherungs AG, Hanover Magdeburger Union Rechtsschutz f^rsIcherungs-AG, Hanover
Vereinigte Versicherungsgruppe Vereinigte Aachen-Berlinische Versicherung AG, Munich Vereinigte Eos-Isar Lebensversicherung AG, Munich Vereinigte Krankenversicherung AG, Munich Salus Krankenhauskosten-VersIcherungs-AG,
General Surety Holdings Limited, Wilmslow peneral Surety & Guarantee Co. Limited,
American Casualty business — led to a further increase of the underwriting loss to Sw.frs. 380 million (previous year, Sw.frs. 294 million).
The European General Reinsurance Company of Zurich achieved in Non-Life reinsurance a gross premium vol­ ume of Sw.frs. 409.9 million, corresponding to an in­ crease of 8.6% over the previous year's premium volume of Sw.frs. 377.5 million. The underwriting loss rose further. — In Life reinsurance the gross amount of business in force rose to Sw. frs. 62,600 million (previous year, Sw. frs. 36,600 million) with a clear improvement of the underwrit­ ing result. Despite the increase of investment income, the net profit fell slightly to Sw. trs. 0.9 million (previous year, Sw.frs. 1.1 million). As in the previous year, this profit is to be used to strengthen the reserves.
At the North American Reinsurance Corporation, New York, gross premiums fell to US$ 609.2 million (previous year, LIS$ 643.7 million). The decline in premiums affect­ ed almost exclusively Accident and Sickness business, the other classes registering a growth of premiums. The underwriting loss was higher than that of the previous year. This development was the consequence of the in­ sufficient premium level in the insurance sectorand pres­ sure of competition of undiminished severity. Although it was possible to ease the burden of the expected high claims from so-called asbestos losses (lung diseases caused by asbestos fibres) by means of special retroces­ sion measures, the negative effects on the result ot Ca­ sualty business could, nevertheless, be felt. Property in-
Lower investment income contrasted with higher capital gains. The overall result amounted to US$ 3.5 million (previous year, US$ 10.8 million). The dividend paid was increased from US$ 0.8 million to US$ 0.9 million.
Gross premiums in the Non-Life sector rose at the Swiss Reinsurance Company (UK) Limited, London, and the Palatine insurance Company Limited, London, by 8.7% to £ 79.1 million. The underwriting result deteriorated as a result of additional reserves for late claims reported in the business year and the generally unsatisfactory business experience. — The gross amount of Life business in force
At the Swiss-South African Reinsurance Company Limit­ ed, Johannesburg, gross premiums in Non-Life reinsur­ ance rose by 5% to Rand 87.2 million. The extremely se­ lective risk acceptance policyand a decreased numberof major industrial losses led to a reduction of the underwrit­ ing loss. — In Life reinsurance the gross amount of busi­ ness in force rose to Rand 5,800 million, although the underwriting result (including Accident and Sickness business) fell as a result of the bad experience of group business. Thanks to an excellent investment income and the improved result of Non-Life reinsurance an annual profit of Rand 4.5 million (previous year. Rand 1.5 million) could be achieved. This enabled a dividend of Rand 1.5 million to be paid (previous year. Rand 1.25 million).
The Austraiian Reinsurance Company Limited, Mel­ bourne, registered in Non-Life reinsurance an increase of gross premium income of 19.8% to Austr.$ 73.1 million. It was possible to reduce further the underwriting loss. — In Life reinsurance the gross amount of business in force rose to Austr.$ 2,500 million while the underwriting result (including Accident and Sickness reinsurance) worsened because of declining premium rates for new business. The considerably higher investment income led, howev­ er, to a slightly better overall result of Austr.$ 2.6 million (previous year, Austr.$ 2.5 million). The dividend could be raised from Austr.$ 0.6 million to Austr.$ 0.7 million.
The consolidated gross premiums of the Magdeburger Versicherungsgruppe, Hanover, increased by 4.5% to DM 840.5 million. — The gross premiums of the/Masfdebur'ge/' Feuerversicherungs-AG rose by 2.9% to DM 620.9 million (previous year, DM 603.1 million). The underwriting loss was practically halved. This development was mainly due to the decline in claims and cost ratios. Together with the increased investment income, it was possible to achieve an annual profit of DM 7.7 million (previous year, DM 6.2 million). This amount was paid out in full as a dividend (previous year, DM 2.8 million). Part of this dividend, taxed at a lower rate, was returned to the company for the com­ pany's capital increase in 1984. — The amount of busi­ ness in force of the Magdeburger Aligemeine Lebens­ und Rentenversicherungs-AG rose by 8.2% to DM 5,160 million (previous year, DM 4,770 million). The increase of new business and the growth of business in force and premium income were above the average for this class. As in the market in general, voluntary terminations, parti­ cularly by cash surrenders, increased. The maturity of tax-favoured endowment insurances accounted for the high maturity benefits. Overall the result improved, the in­ creased investment income making a substantial contri­ bution. The annual profit of DM 0.5 million (previous year, DM 0.5 million) remaining after an increased allocation to the reserve for policyholders' bonuses was used to make a contribution to the paid-up capital as well as to pay a slightly increased dividend of DM 0.3 million.
At the beginning of 1984 the Salus KrankenhauskostenVersicherungs -AG, Munich, part of the Vereinigte Versi­ cherungsgruppe, was merged with the Vereinigte Kran­ kenversicherung AG, Munich.
The Genera/ Surety & Guarantee Co. Limited, Wilmsiow, registered gross premiums of £ 2.9 million (previous year, £2.5 million). The improved annual result of £61,000 (pre­ vious year, £ 26,000) reflects the company's prudent risk acceptance policy. The dividend payment amounted to £ 50,000.
The SwissRe Holding Limited comprises all majority holdings whose figures have been consolidated - with the exception of Swiss Re, Zurich - together with a num­ ber of minority holdings in the insurance and reinsurance sectors.
The net profit amounted to Sw.trs. 3.3 million (previous year, Sw. trs. 2.6 million) and enabled a dividend payment of Sw. trs. 3.0 million (previous year, Sw. trs. 2.5 million) to be paid to Swiss Re, Zurich.
The capitai structure of the company remained un­ changed. As a result of a repayment the loan granted by the parent company tell by Sw.trs. 13.1 million to Sw.trs. 441.2 million.
Gross premiums 4,883 3,053 7,936 7,823 Premiums ceded - 296 - 527 - 823 -1,020 Net premiums 4,587 2,526 7,113 6,803 Adjustment in unearned premiums - 38 - 221 - 259 - 248 Earned premiums 4,549 2,305 6,854 6,555 Interest on Sickness insurance fund - 168 168 148 Commissions, profit commissions, underwriting expenses -1,227 - 735 -1,962 -1,763 Claims incurred -3,702 -1,726 -5,428 -5,259
Gross premiums 1,725 490 2,215 2,235 Premiums ceded - 424 - 10 - 434 - 298 Net premiums 1,301 480 1,781 1,937 Adjustment in policy and annuity valuations - 13 - 193 - 206 - 446 Interest on Lite insurance and annuity fund 93 227 320 302 Commissions and profit commissions - 416 - 271 - 687 - 554 Claims incurred incl. adjustment in outstanding claims reserve - 745 - 160 - 905 - 888 Surrenders - 171 - 63 - 234 - 278
Tectmical reserves Non-Lite insurance 8,091 3,594 11,685 10,965 Lite insurance 2,976 2,882 5,858 5,671
Building society deposits _ _ 145 95 Ottier liabilities 799 225 1,038 824
Stiare and non-voting stiare capital 123 123 Reserves stiown 502 467 Consolidation reserve fund 206 185 Group Profit 105 97 *The figures In this column do not always amount to the total ot the figures In the two preceding columns as figures tor holding and other companies are also Included.
The data shown in the Group accounts are based on con­ solidation and valuation principles which are uniform for all Group companies. Exceptions are of minor impor­ tance and are mentioned. The consolidation and valua­ tion principles are the same as in the previous year.
The scope of consolidation includes all domestic and for­ eign companies in which Swiss Re, Zurich, directly or in­ directly maintains a holding of more than 50%. Each indi­ vidual item of the profit and loss accounts and the bal­ ance sheets of these companies is shown at 100%. The shares of the capital funds and profit applicable to minor­ ity shareholders are shown as separate items in the con­ solidated balance sheet and profit and loss account.
Gross premiums as well as all balance sheet and profit and loss account figures from foreign Group companies which are shown in local currency were uniformly con­ verted into Swiss francs using the average foreign cur­ rency rates as at 31st December, 1983.
Of the foreign currencies used in the Group accounts, the U.S. and Canadian dollars showed higher exchange rates than they did on the previous closing date, while the Ger­ man mark, the South African rand and the pound sterling were valued lower (cf. table on page 22).
The net assets of foreign companies have been adjusted in accordance with the altered exchange rates at the end of the business year. The resulting conversion differences were not entered into the consolidated profit and loss account, but were reflected directly in the consolidated capital funds. In the year under report this revaluation of the net assets in foreign currencies led to a conversion profit of Sw.frs.15 million (previous year, Sw.frs. 19 mil­ lion).
Balances receivable and payable among consolidated companies were offset against each other; intra-Group interest and dividend payments were likewise eliminated. The Group's consolidated figures contain no premiums from intra-Group cessions.
In the published annual accounts in local currencies of the individual Group companies capital investments are valued in accordance with local accounting regulations. These regulations vary from country to country. For the consolidation, however, uniform valuation rules are ap­ plied.
Fixed-interest investments are in principle entered at ac­ quisition cost or, if they are quoted and the stock ex­ change price is lower on the balance-sheet date, at the lower value. The lowervaluation is retained until disposal of the corresponding securities. Special treatment is given to registered debentures of Group companies in Germany which, in accordance with German practice, are shown at nominal value and incorporated in the Group account unchanged.
Shares and non-consolidated holdings are valued ac­ cording to the same principles as fixed-interest securi­ ties. Non-quoted participations are entered at acquisition cost taking into consideration any necessary deprecia­ tion.
The technical reserves are calculated according to un­ changed principles and correspond to the presumed future liabilities towards ceding companies. All compa­ nies apply the principle of caution in their reserving prac­ tice.
All other items of the Group balance sheet play a subor­ dinate role in the valuation. Foreseeable risks of loss are faken into consideration by means of value adjustments by the individual Group companies.
The income from the Group's capital investments rose by 8.7% (previous year, 21.8%) and (before the crediting of in­ terest in Life and Sickness business) reached a total of Sw.frs. 1,340 million (previous year, Sw.frs. 1,233 million). Of this amount, the interest on the Life insurance and An­ nuity fund accounted for Sw.frs. 320 million (previous year, Sw.frs. 302 million); in the Non-Life classes it includ­ ed a credit of Sw. frs. 168 million (previous year, Sw. frs. 148 million) to Sickness business.
The consolidated gross premiums of the entire Group in all classes rose by 0.9% (previous year, 7.8%) to Sw.frs. 10,151 million. The effect of foreign exchange rates on the gross volume is negative with 1.6% (previous year, 3.9% positive). In Non-Life insurance the premium in­ come rose only by 1.4% (previous year, 7.2%) to Sw.frs. 7,936 million, while in Life insurance it fell by 0.9% (previ­ ous year, increase of 9.7%) to Sw.frs. 2,215 million.
In addition to commission payments and profit commis­ sion reimbursements this item includes the general ex­ penses incurred in insurance operations.
These items comprise a positive balance from realized capital gains and depreciation on investments of Sw.frs. 167 million (previous year, Sw.frs. 67 million) from foreign currency losses of Sw.frs. 11 million (previous year, profit of Sw.frs. 12 million) as well as from value adjustments and depreciation on assets outside the investment sphere of Sw.frs. 52 million (previous year, Sw.frs. 33 mil­ lion).
The claims incurred comprise claims payments and the adjustment in the outstanding claims reserve. In the year under report this outgo item for own account rose by Sw.frs. 169 million to Sw.frs. 5,428 million. Of this amount, Sw.frs. 3,702 million was for reinsurance companies and Sw.frs. 1,726 million for insurance companies.
These Items correspond to the capital funds at book value of the Swiss Re as parent company. The reserves shown comprise the statutory reserve fund, the special reserve fund, the reserve fund for catastrophe losses as well as the profit carried forward from the previous year.
Non-Life Insurance Unearned premiums 1,609 1,802 3,411 3,234 Outstanding claims reserve 6,466 1,329 7,795 7,456 Resen/e for profit commission 16 463 479 275
Life insurance Life Insurance and annuity fund 2,565 2,359 4,924 4,856 Outstanding claims reserve 400 17 417 365 Reserve for profit commission 11 506 517 450 in % of Life Insurance in force, net 1.9% 24.3% 3.4% 4.2%
The capital funds shown In the consolidated balance sheet (sum of share and non-voting share capital, re­ serves, consolidation reserve funds and Group profit) correspond to the book value of the funds Invested In the entire Group by shareholders and non-voting share­ holders of Swiss Re, Zurich. In the year under report Group capital funds rose by Sw.frs. 64 million to Sw.frs. 936 million. Reasons for this rise are the higher Group profit, the Increase of the capital funds achieved by the In­ dividual Group companies and the overall positive effect of foreign currency rates. The following table shows the changes In the Group capital funds: Changes In Group Capital Funds In millions of Swiss francs
European General Reinsurance Company of Zuricti Sw. frs. 100 52,739 1,203,893 613,816
General Surety & Guarantee Co. Limited £ 100 1,115 5,197 2,903
«SWITZERLAND» General Insurance Company Limited Sw. frs. 99.7 55,363 777,082 532,225
SWITZERLAND General Insurance Company (London) Limited £ 100 2,313 13,860 6,185
SwissRe Holding (North America) Inc. US $ 100 233,160 282,063 -
• Insurance business of the calendar year 1979 and general income and outgo for the period from 1.7.-31.12.79 . •• These figures are not comparable with those of the other years as a result of the change of the balance-sheet date from 30th June to 31st Decemberof Swiss Re,
United States North American Reassurance Company 100 East 46th Street, New York, N.Y 10017 with branch offices in Dallas, Lakewood (Colorado) and Schaumburg (iiiinois) Swiss-Am Reassurance Company 100 East 46th Street, New York, N.Y 10017 SwissRe Life insurance Company 100 East 46th Street, New York, N.Y 10017 North American Reinsurance Corporation 100 East 46th Street, New York, N.Y 10017 with branch offices in Atlanta, Boston, Chicago, Dallas, Los Angeles, Philadelphia, San Francisco and Seattle
Switzerland «SWITZERLAND» General insurance Company Limited Gotthardstrasse 43, CH-8022 Zurich with branch offices in Barcelona, Brussels, Genoa, Hamburg, Vienna, Manila, Melbourne and Montreal
Magdeburger Feuerversicherungs-AG Magdeburger Allgemeine Lebens- und Rentenversicherungs -AG Magdeburger Hageiversicherungs AG Magdeburger Union Rechtsschutz Versicherungs-AG Kirchhorster Strasse 2, D-3000 Hanover 51
Australia / New Zealand Australian Reinsurance Company Limited 31 Cueen Street, Melbourne, Vic. 3000 with branch offices in Sydney and in Auckland and Wellington, New Zealand
United Kingdom General Surety Holdings Limited Hawthorn Hall, Hall Road, Wilmslow, Cheshire, SK9 5BZ
Annuity: Contract under which the benefits consist of a regular Income payment for a specified period of time (of. death and maturity benefits).
Aviation insurance: Insurance of accident and liability risks, as well as -> hull damage. In connection with the operation of aircraft.
Cash deposits: A sum left by the -»• reinsurer In the hands of the ceding company to guarantee contractual liabilities.
Claims incurred: All claims payments plus the adjust­ ment in the -»• outstanding claims reserve of a business year.
Co-insurance: Where a number of -> insurers and/or ^ reinsurers each share part of a ^ risk.
Co-insurance basis: System of Life reinsurance under which the ^ reinsurer assumes a share of the -> risk (i.e. premiums and benefits) as well as setting-up of reserves at the same terms as the ^ ceding company.
Earned premium: Premium applicable to the expired part of a reinsurance period continuing after the balancesheet date.
Engineering insurance: Insurance of construction and erection objects during the construction or erection pe­ riod and the insurance of machinery in operating plants (incl. EDP Installations).
Fire insurance: Insurance against fire, lightning, explo­ sion and damage caused by falling aircraft; can also embrace Insurance against windstorm, earthquake, flood, other natural hazards, political risks (strike, riot, etc.) and loss of profits (business interruption) as a result of these events.
Life insurance: Insurance providing payment of a sum of money upon death of the insured and, in the case of
Marine insurance: Insurance against damage or loss of ships and cargoes; also includes off-shore drilling plat­ forms and oil rigs.
Non-Life insurance: All classes of insurance business with the exception of -> Life.
Portfolio: The totality of-»- risks assumed by an or ^ reinsurer; also the totality of investments.
Products liability insurance: Insurance of the liability of the manufacturer or supplier of goods for damage caused by their products.
Profit commission: Contractually agreed commission paid by the ^ insurer or ^ reinsurer in proportion to his profit on a particular piece of insurance or reinsurance business.
Reinsurance premium: ^ Premium paid to the ^ rein­ surer by the -»- insurer for the ^ proportional or -> nonproportional cover granted by the reinsurer.
Retrocession: Passing on by the -»- reinsurer of the ^ risk accepted in reinsurance to other companies (of. retrocessionaire).
Retrocessionaire: Company which accepts ^ risks by way of ^ retrocession.
Surety insurance: Sureties and guarantees issued to third parties for the fulfillment of contractual liabilities (executing construction projects, providing services, etc.).
Surrender: (Surrender value): In Life insurance pay­ ment to the insured (or assessment) of the cash value of an insurance policy before the policy has run its course (in general after deduction of the non-amortized costs of the insurer).
Proportional reinsurance: Form of reinsurance in which the premiums and losses of the ^ insurer are shared proportionally by the insurer and reinsurer.