Performance of Swiss Re Registered Shares Key Figures 1995 1 Annual Report of the Chairman and the Chief Executive Officer 2 Board of Directors, Executive Board and Auditors 4
Swiss Re Group Organisation 8 Overview of 1995/96 10 Group Report 12 Report of the Divisions 16 Group Accounts
An investor who bought 10 Swiss Re registered shares at the end of 1986 at a price of CHF78250 and reinvested all sub­ sequent dividends, share rights, and the 1996 par value repayment of CHF 10, with­ out investing any new funds, held a posi­ tion with a market value of CHF 284964 on 10 October 1996.The total performance amounts to 264.2% or an average of 14.1% per year.
An investment of CHF 78250 in the total Swiss market at the end of 1986 would have increased in value to CHF 188459 on 10 October 1996 (basis: Rietet index with reinvestment of income). The total per­ formance amounts to 140.8% or 9.4% per year.
Performance of Swiss Re registered shares and the Rietet index from 31 December 1986 to 10 October 1996
The 1995 results of the Swiss Re Group primarily reflect the consequences of our decision to focus on our core business: global reinsurance and related services. Ordinary Group profit after tax rose to CHF1092 million, representing a 54% increase over the comparable figure from the previous year. Including extraordinary income. Group profit after tax amounted to CHF1101 million or CHF75.—per share. The return on equity was 12.7 %.
With the agreement reached at the end of August 1996for the acquisi­ tion of Mercantile & General Re, Swiss Re has taken an additional, decisive step in expanding its position in the global reinsurance business.
We thank our clients for the confidence they have placed in us. We also thank our employees at over 70 locations on all continents around the worldfor their motivated contribution to the realisation of our goals.
We want to be the world's leading reinsurer. For Swiss Re, this means: offering the highest level of professionalism and quality of service to our clients, creating above-average benefits to clients through global diver­ sification of risk and tailor-made reinsurance solutions, as well as solid long-term reliability for our business partners provided by a strong balance sheet and a high level of profitability.
Ulrich Bremi Lukas Mühlemann Chairman Managing Director and of the Board of Directors Chief Executive Officer 3 Swiss Re Group
The term of office of Rainer E. Gut will also expire. He will not stand for re-election. Mr Gut was elected to the Board in 1984 and was appointed Deputy Chairman in November 1992. With his exceptional knowledge of the inter­ national financial markets and his excellent contacts, Mr Gut could always make an important contribution to the work of the Board of Directors and has done much to further the interests of Swiss Re. We thank Mr Gut for his extraordinary commitment.
The Board of Directors intends to appoint Lukas Mühlemann, who will step down as Chief Executive Officer at the end of 1996, as its Deputy Chairman subsequent to the General Meeting.
Since joining Swiss Re in September 1994, Mr Mühlemann has introduced the Group's new strategy and, in this way, has performed outstanding work. We thank him for his remarkable efforts for Swiss Re.
Near and Middle East, USA, UK; Special Risks Balz Heyer Germany, Spain, Portugal, Africa, Greece
Netherlands, Michel Lies' Credit and Surety Nordic Countries Product Management Adrian Sulzer Peter Schmid Ernst Baumann
Analytical and Mathe­ Engineering Reinsurance Services matical Services Richard Glückler Alexander Rene Held'
Swiss Re UK Swiss Re Australia Swiss Re America Swiss Re Atrium Stephen J. Riley Robert G. Watts Group NewYork, Swiss Re Canada Swiss Re Heidi Hotter European International C. Paul Graham Southern Africa
Audatex Zeno J. Amrein * Member of the Committee of the Executive Board ' until end of 1996 2 Chief Executive Officer as from January 1997 3 as from January 1997 9 Swiss Re Group
17 January A severe earthquake hits the industrial Kobe region in Japan.The tragic consequence is over 5000 dead and 300000 homeless. There are insured losses of CHF4 billion. Swiss Re Group pays about CHF 80 million. Shortly following this natural catastrophe, Swiss Re publishes a brochure entitled "The Great Hanshin Earthquake: Trial, Error, Success".
30 June Swiss Re acquires the Alhermij Group, Amstelveen.This company operates primarily in the Dutch life and health reinsurance market.
I January Heidi Nutter joins Swiss Re's Executive Board and becomes head of the Swiss Re America Division.
18 March Swiss Re launches its first "Asian Trainee Programme" with 25 participants from a total of 8 countries. Each year a group of trainees from various Asian countries will spend time in different Group companies to prepare for future employment with Swiss Re in Asia.The company will thus be able to rely on increased local support in this region.
22 March Swiss Re America reorganises in orderte better meet clients' needs.
16 April Approximately one hundred participants attend the annual meeting of Swiss Re Group's senior executives. Discussion centres on "how reinsurance benefits clients". Swiss Re subsequently publishes "Insurance and risk capital; Swiss Re's value proposition".
9 May Swiss Re's new representative office in Kuala Lumpur opens.
2 July It is announced that Lukas Mühlemann is to move to the Credit Suisse Group as of 1 January 1997. On that date, Walter B. Kielholz will succeed Mr Mühlemann as Swiss Re's Chief Executive Officer.
14 August Munich Re acquires American Re, the third largest reinsurer in the United States.
26 August In line with the Group's strategy to expand operations in life and health reinsurance, Swiss Re acquires the London-based group Mercantile & General Re for GBP1.7 billion or CHF 3.15 billion.This makes Swiss Re the world's largest life and health reinsurer and helps to consolidate the Group's leading position in the reinsurance market as a whole.
5 and 6 September Hurricane "Fran" devastates wide-spread areas in Virginia and North Carolina. There are insured losses of approximately USD 1.6 billion of which Swiss Re carries USD 10 million.
27 September Swiss Re and Crawford & Company, Atlanta, USA, announce the formation of a joint ven­ ture in claims management, with the Thomas Howell Group, London.
1 October Swiss Re opens a new office in Milan.This should provide enhanced opportunities for exploiting the potential of the Italian market.
6 November Swiss Re opens a representative office in Tel Aviv in order to write local facultative business more intensively and efficiently.
Our new strategy showed a very positive influence on the 1995 result. In addi­ tion, substantial efforts have been made in all business divisions in order to achieve the goals we have set for ourselves. We intend to further improve our market position in the reinsurance business by providing a broad, innovative product range combined with first-class services - and on terms which ensure an appropriate return on the required risk capital. For the three key economic regions, this means we must defend and strengthen our excellent position in Europe, extend our leading position in the fast-growing Asia Pacific region and undertake great efforts in the USA in order to regain a top position.
With the two business units which each carry worldwide responsibility — alternative risk transfer markets and life and health reinsurance - we aim on the one hand to systematically exploit market and product opportunities and on the other to gain market share in growing segments which offer sustained profitability. In our investment management, we aim to optimise total return, being current income and capital gains. We will be successful in reaching these ambitious goals only if we engage excellent employees and ensure that their knowledge and skills are always up-to-date and meet the needs of our clients.
The decline of the life reinsurance result from CHF 188 million in 1994 to CHF 151 million is attributable to the build-up of new product lines and to claims fluctuations.
Cross premiums fell by about 1% as a result of exchange rate movements. Premium income rose by about 6 % in local currencies.
Balance sheet Return on equity Investments of the Swiss Re Group were stated at CHF 41.7 billion in the in 04. ^
We have initiated numerous individual measures which are not directly productrelated. Some of these were concluded in 1995, while others are in different stages of realisation. Only a few are mentioned here: — Opening of new offices: We are pursuing our goal of establishing a local pres­
ence in the growth markets in order to swiftly and directly meet the needs of our clients. We established representative offices in Bangkok, Beijing and Kuala Lumpur in 1996. Our new office in Sao Paulo began operations in Brazil in mid-year, and we are thus already present in South America's largest reinsurance market prior to its forthcoming deregulation. In order to better exploit the potential of the local markets in Italy and Israel, we opened new offices in Milan and Tel Aviv.
— The development of five additional intensive training programmes for different employee target groups, including the first programme exclusively for 25 Asian university graduates, who will he staffed in various Swiss Re Group companies in their home countries following two years of training.
Following on from the acquisition of the Netherlands-based Alhermij Group, we will further consolidate our life and health reinsurance business with the planned acquisition of Mercantile & General Re. Swiss Re thus becomes the world's leading life and health reinsurer. This step has improved our capabilities in terms of product development and increased our ability to offer comprehensive services to clients around the world.
On the basis of the developments to date, and assuming neither large claims from natural catastrophes nor materially negative events on the financial markets prior to year-end, we anticipate another substantial improvement in results in 1996. "We wish also to point out that provided the required regulatory approvals are obtained in due time, we intend to fully consolidate the Mercantile & General Re Group in the balance sheet as of 31 December 1996, but to consolidate its results for only part of the year in the profit and loss account.
Success within the ever decreasing circle of financially strong professional reinsurers will depend on the ability to clearly demonstrate and quantify value added for clients, from the original insurance product to the comprehensive reinsurance solution.
In recent years the Swiss Re Group has steadily added attractive financial reinsurance components, tailored to specific needs, to its traditional reinsurance products and services. The primary focus is to provide comprehensively formu­ lated solutions to financial problems which allow our clients to employ their risk capital more efficiently. In this way, we help our clients reach their business goals. Just as important for us is the range of high-quality services in such fields as risk research and risk management as well as in claims management, which complement our reinsurance products.
Switzerland Switzerland displays the world's second highest insurance density (insurance premiums per capita), following Japan.This market saturation combined with the sluggish economy held the domestic market at the previous year's level. In contrast, business acquired abroad expanded, mainly as a result of corporate acquisitions by Swiss insurers. The efforts to cut costs, as well as a lower claims frequency, had a favourable influence on results. The continuing poor performance of the accident and health business must be followed carefully.
In both motor liability and general third party liability treaty reinsurance, we anticipate high underwriting losses due to increased claims provisions for severe personal injuries and nursing expenses.
France The growth in non-life premium volume is mainly attributable to changed operating conditions. A more favourable claims experience in total enabled insurers to notably improve their underwriting result. Good conditions in the investment area were able to more than offset the need for additional pro­ visions in the real estate sector. The profitability of the French insurance market remains however unsatisfactory.
Property insurance was burdened by few claims. In contrast, the liability line recorded several large claims.
Belgium The non-life lines of the insurance market are stagnating. As in other European markets, the motor business is the focal point of competition. The extreme differences in tariffs will jeopardise the results of mainly those companies which possess insufficient statistical data. The project for compulsory cover of natural hazards was still not realised.
Premium rates for non-proportional treaties continue to erode. The past financial year led to positive underwriting results, with rising premium volume.
Netherlands The withdrawal of the state from ever more areas of social insurance opens up new business lines for private insurers. Growth is expected primarily in the personal lines. In response to a report by experts, the idea of a pool for earth­ quake/flood cover promoted jointly by the government and insurers has been abandoned. The state now intends to handle these claims on its own. The introduction of revised industrial and commercial liability policies in order to provide improved risk control is expected to be realised in 1997, yet separate environmental cover will still be lacking.
We maintained our strong position in the United Kingdom. Due to the lack of large catastrophe claims, we achieved very favourable results. Yet premium growth in original currency was only moderate.
Non-proportional reinsurance is gaining significance. Profit margins are still too low for reinsurers and cannot be brought fully into line with our return targets. We accordingly expect premium volume to decline.
Results were again favourable, and we further expanded our market share in Japan even though foreign reinsurance cessions declined.
We further strengthened our position in all three markets, not least due to the opening of a representative office in Beijing. The results of the reinsurance business, especially in Taiwan, do not yet meet our expectations.
Southern Africa Crime-related losses adversely affected the results in the non-life business in South Africa. Despite this, the market remains highly competitive, with increasing interest from foreign insurers and reinsurers. Business performance was marked by the continuing high claims frequency in the industrial property business. The operating result of Swiss Re Southern Africa, which since 1996 also has responsibility for the remaining sub-Saharan African markets, was posi­ tive in total.
Gross premiums by region 1995: 100% = CHF 3571 million in %
USA Reinsurance market premium volume increased by 13% in 1995 and again exceeded the growth rate in the insurance market, in which price levels remain extremely competitive.
Swiss Re America reorganised at the beginning of 1996, creating three divisions concentrated on client segments as well as a division centred on under­ writing and claims service.The focus on the return on risk-adjusted capital 21 Swiss Re Group
The opening of a representative office in Sao Paulo, Brazil, will provide us with a good starting point for establishing a strong position in this market.
We will continue to promote the trend from premium-intensive proportional business to less premium-intensive non-proportional business. To this end, we are focusing on developing and designing products which offer alternative forms of cover and extend beyond individual lines.
As a result of renewed demand for multi-year cover agreements, clients in­ creasingly desire long-term security in the area of large risks and in inter­ national programmes. However such long-term treaties can only be concluded on the basis of open dialogue and mutual trust, which require close cooperation between industry, insurers and reinsurers.
Developments are especially dynamic in the fields of environmental, product, professional, and directors' and officers' liabiliry. In order to improve the assess­ ment of covered environmental risks, we support their separation from covers for industrial and commercial liability and product liability. Cover for ecological claims is controversial since such claims are difficult to quantify. In professional liability insurance, escalating treatment costs are a concern. In directors' and officers' liabiliry insurance, the insurance industry's efforts are concentrated on the development of tools for improved and risk-related underwriting and pricing.
It remains difficult to estimate the danger posed by potential large claims in risk areas such as electromagnetic fields, genetic engineering and tobacco. The judicial system still does not take a clear stand on these issues.
We received another profit in this line, given the lack of large claims and the improvement in conditions in past years.
Aviation Due to higher fleet values and passenger figures, global premium volume for airlines rose slightly. Despite a favourable backlog of orders at manufacturers, product liability risks already generated lower premiums. 1995 was a good year in terms of results. The market remained largely untouched by large claims, except for the crash of an American Airlines aircraft in Colombia.
Swiss Re further strengthened its favourable position in the aviation market.
Engineering The present economic uncertainty suppresses investment volume and thus also the premiums in this insurance line. Our premium volume has therefore slightly decreased compared to the previous year. The underwriting result im­ proved substantially due to a smaller number of large claims. We expect notable premium growth to come especially from project insurance in Asia and Latin America. Moreover, we are increasing our underwriting capacity in areas where we see attractive profit potential. We attach great importance to the expansion of our global know-how network and are increasingly placing our engineers and specialists in local field offices.
The ART division (Alternative Risk Transfer Markets) was created at the be­ ginning of 1995. It comprises two main fields of business: special and financial services business for insurance companies worldwide as well as reinsurance business with the captives of the largest globally active service and industrial companies. For support of its own underwriting activity, the division can draw on a series of specialised service companies which operate mainly in the fields of risk advice, captive management, actuarial mathematics, claims handling and management, and run-off management.
The business units of the ART division underwrote gross premiums of CHF 1684 million in 1995, while the service companies generated gross revenues of CHF 204 million from their advisory activities. The division showed a satisfactory result, in particular taking into account significant investments for the future.
Some of the other units active in this field were founded in 1995 and began operation around year-end: Swiss Re Financial Products develops products in connection with the securitisation of insurance risks; Securitas Investment Programme makes equity investments in the insurance industry worldwide; Run-off Management and Risk Services advises insurance companies on the management of situations arising from the discontinuation of business activities; the units in Zurich and New York which focus on actuarial mathematics provide advice on the calculation of the risk-adjusted capital needs of entire companies or individual activities.
driving force behind the development of innovative cover forms and concepts. In order to satisfy their needs, they turn not only to leading primary insurers with a global product range but also directly to large reinsurers. Direct contact with these clients is extremely important for reinsurers. Swiss Re was quick to recognise this trend, and its International Business department now belongs to the small circle of global leaders and favoured advisers for risk questions.
The unfavourable development in disability insurance in the USA lowered the 1995 result by CHF 149 million due to claims payments and additions to provisions. The difficulties in this product line were market-wide and arose mainly from policies issued in the mid-1980s with liberal underwriting condi­ tions and guaranteed premium rates. Without this special correction, profit­ ability from our worldwide accident and health business achieved an adequate level. It is our express goal to improve this figure in future years.
Outlook The life and health reinsurance markets continue to present opportunities for profitable growth. Swiss Re, strengthened by the acquisition of the Alhermij Group and the planned acquisition of Mercantile & General Re, and with its wide client network and extensive know-how, is well-positioned to realise these opportunities.
Investments as stated in the balance sheet rose by CHF 7.1 billion to CHF 41.7 billion in 1995. This notable increase is attributable to the proceeds from the sale of our insurance operations, the first-time consolidation of the Alhermij Group, the cash flow from business activities and the capital raised through our capital market issues in mid-1995. The strength of the Swiss franc against most foreign currencies restrained investment growth.
sidiaries and affiliated companies 1 784 4 1 926 5 Other 411 1 422 1
The numerous job applications in the past year indicate that the Group has increased its stature and significance as an attractive employer. Nevertheless, we still intend to publicise the outstanding future prospects of our company through public relations work and close cooperation with universities. In this process, we also point out the exceptional variety of job profiles which are represented at Swiss Re. This range encompasses nearly all of the natural sciences and the humanities, especially economists, mathematicians, engineers, lawyers and specialists in finance and banking. People from over 50 nations and with more than 30 languages are employed in our Group at present.
The Swiss Insurance Training Centre in Zurich, founded by Swiss Re more than thirty years ago, forms a cornerstone of our training activities. In 1995 it conducted courses in English and Spanish and trained over 100 participants from more than 60 countries, primarily from Asia, Latin America and eastern Europe.
Realised gains on sale of investments 737 2. Unrealised income on investments for unit-linked life reinsurance Unrealised gains Unrealised losses 30 Swiss Re Group
III Total result 1. Technical result 755 512 2. Non technical result 642 452 3. Profit on ordinary activities before tax 1 397 964 4. Tax on ordinary activities - 305 - 255
Other assets Fixed assets Cash at bank and in hand Other
V Provisions for other risks and charges 1792 1756 1. Provisions for pensions 62 64 2. Provisions for taxation 1 010 1 057 3. Other provisions 720 635
Vil Creditors 4475 2761 1. Creditors arising out of reinsurance operations 2313 1702 2. Debenture loans 1 137 170 3. Amounts owed to banks 217 325 4. Other creditors 808 564
The Group accounts are based on the accounts of the consolidated companies that have been prepared in accordance with uniform accounting policies and valuation principles. Inter-company transactions are eliminated.
Companies in which Swiss Re, Zurich, directly or indirectly holds a voting majority are consolidated in the Group accounts in terms of assets, liabilities, income and outgo. Companies in which Swiss Re maintains a holding of between 20% and 50% and has a significant but not controlling interest are valued at Swiss Re's share of their equity. Swiss Re's share of net profit or loss is accounted for in dividend, interest and other income from affiliated companies in the profit and loss account. Equity and net income of these companies is adjusted to be in line with the Group accounting policies.
Land and buildings are valued at market value. Market value is periodically assessed by experts. Any decrease in the market value between assessments by experts is taken into account. Realised gains and losses from sales as well as valuation adjust­ ments included in the profit and loss account are based on cost.
Shares and units in investment funds are valued at market value. Unquoted shares are valued at an estimated prudent market value. Realised gains and losses on sales as well as valuation adjustments included in the profit and loss account are based on cost.
Inter-company transactions Inter-company transactions are eliminated. Remaining profit and loss account differences are included in net income; remaining balance sheet related differences are eliminated through retained earnings. Details relating to unconsolidated Group companies and minority holdings are disclosed in the notes to the financial statements.
Foreign currency translation All items in the balance sheet and the profit and loss account denominated in foreign currencies are translated at the currency exchange rates applicable on the balance sheet date. The currency translation adjustment from the recalculation of the opening balance sheet is netted against retained earnings.
Currency exchange rates in CHF per 100 units of foreign currency 31.12.95 31.12.94 % Deutsche Mark DEM 80.40 84.43 - 4.77 Pound sterling GBP 178.65 204.76 -12.75 French franc FRF 23.63 24.52 - 4.04 Dutch guilder NLG 71.78 75.41 - 4.81 Spanish peseta ESP 0.95 0.99 - 4.60 Italian lira ITL 0.07 0.08 - 10.16 ECU XEU 151.23 160.96 - 6.05 US dollar USD 115.07 130.86 - 12.07 Canadian dollar CAD 84.37 93.30 - 9.57 Japanese yen JPY 1.12 1.31 -14.95 Australian dollar AUD 85.60 101.50 -15.67 South African rand ZAR 31.56 36.92 - 14.51 37 Swiss Re Group
Germany 2 641 20.6 2 661 20.6 United Kingdom 1 031 8.0 1 122 8.7 France 912 7.1 924 7.1 The Netherlands 577 4.5 496 3.8 Spain 306 2.4 340 2.6 Italy 246 1.9 253 2.0 Other EU countries 975 7.6 670 5.2
Others 315 2.4 549 4.2 North and South America 27.8 28.3 1995 1994 CHF millions Gross Retroceded Net Gross Retroceded Net
Premiums by line Property 3713 - 268 3 445 4 047 - 2^1 3750 Liability 1 485 ' - 42 1 443 1 795 - 37 1758 Motor 2 460 - 68 2 392 2 380 - 97 2 283 Accident 535 - 46 489 564 - 38 526 Health (including disability) 615 - 68 547 539 - 17 522 Marine 552 - 31 521 612 - 48 564 Aviation 336 - 14 322 298 - 17 281 Credit/Surety 551 - 13 538 546 - 10 536 Engineering/Other lines 847 - 17 830 658 - 17 641 Subtotal Non-Life 11 094 - 567 10 527 11439 - 578 10861 Life 1754 - 178 1 576 1 511 - 193 1 318 38 Swiss Re Group
Net technical account by line Premiums 3 445 1 443 2 392 1 036 2211 10 527 1 576 12103 Change In the provision for unearned premiums - 51 3 - 35 6 100 5 0 5 Allocated investment return 264 425 309 236 247 1 481 311 1 792 Other technical income 3 0 0 13 2 18 9 27 Claims paid -1 705 - 779 -1 502 - 840 -1 175 -6001 -1 117 -7118 Change in the provision for claims outstanding - 416 - 529 - 631 - 290 - 533 -2 399 - 63 -2 462 Change in the provision for life, health and disability reinsurance 42 42 - 124 - 82 Change in other technical provisions 0 0 2 0 124 126 0 126 Bonuses and rebates - 145 - 28 - 49 - 29 - 39 - 290 - 140 - 430 Operating expenses -1 087 - 390 ^539 - 294 - 595 -2 905 - 301 -3 206
Key figures* Claims ratio 62 91 90 106 69 78 Expense ratio 36 29 25 30 29 30 Combined ratio 98 120 115 136 98 108 Operating ratio 90 91 102 113 87 94
Previous year: Claims ratio 69 105 85 95 75 81 Expense ratio 32 24 24 27 30 28 Combined ratio 101 129 109 122 105 109 Operating ratio 94 104 96 101 95 97
Investments Land and buildings Investments in unconsolidated subsidiaries and affiliated companies Loans to unconsolidated subsidiaries and affiliated companies Shares Fixed income securities and registered debt instruments Loans Mortgages Time deposits Other investments * Deposits with ceding companies
Accident, Other Subtotal Property Liability Motor health lines Non-Life Life Total
Provisions for unearned premiums Provisions for life, health and disability reinsurance Provisions for claims outstanding Provisions for bonuses and rebates Other technical provisions
Changes In capital funds Capital funds at end of the previous year
Net premiums written 12 103 12 179 Allocated investment return 1792 1 525 Net claims paid - 7118 - 7 345 Bonuses and rebates 269 177 Operating expenses - 3168 - 3 208 Other net technical charges for own account 10 46 Change in debtors and liabilities from reinsurance operations 112 128 Change in cash deposits (assets and liabilities) 163 353
Non technical operations Investment income 2 097 1942 Investment charges excluding valuation adjustments - 195 - 206 Technical interest expense - 1792 - 1 525 Other net charges 73 25
Cash flow from business operations 3171 3 097 11 Cash flow from investment activities Purchase of holdings in unconsolidated subsidiaries and affiliated companies - 644 - 1259 Sale of holdings in unconsolidated subsidiaries and affiliated companies 4715 1 129 Net increase in other investments - 7 697 - 3 558 Change in fixed assets 0 8
Cash flow from investment activities - 3 626 - 3 680
Deferred acquisition cost For the reinsurance business assumed, the accrual of deferred acquisition costs is partially accounted for as part of the unearned premium reserve calculation. For consistency purposes, the capitalised part of the deferred acquisition cost (CFIF 135 million in 1995 compared with CFIF 164 million in 1994) is offset against the unearned premium reserve. The change in the deferred acquisition cost of CFIF 12 million (1994: CFIF-7 million) is offset against the change in the unearned premium reserve. Moreover, capitalised deferred acquisition costs of CFIF 150 million (1994: CFIF 157 million) are offset against provisions for life, health and disability reinsurance.The change in the deferred acquisition cost of CFIF-3 million (1994: CFIF -5 million) is offset against the change in the provisions for life, health and disability.
Claims development The provisions for long latent claims outstanding in 1995 and previous years were strengthened by CFIF 500 million from the extraordinary profit. Included in the profit on ordinary activities are CFIF 149 million for claims developments in US disability reinsurance.
Other income/other charges These items refer mainly to charges and income of the service companies active in the fields of loss adjustment and risk management.They also include currency differences and other charges and income not attributable to the technical account or to investments. 1995 also includes additional precautionary provisions for pos­ sible liabilities arising from the capital market issues in mid-1995.
Book profit from the sale of insurance companies Other income Extraordinary income
Affiliated companies valued at Swiss Re's share of their equity 606 520 Unconsolidated subsidiaries 633 629 Other minority holdings 545 564 Investments in unconsolidated subsidiaries and affiliated companies as stated in the balance sheet 1784 1 926
Income from insurance companies sold as of 31 December 1994 or 1 January 1995 0 67
The amount in the respective balance sheet positions related to affiliated companies is as follows: Cash deposits (assets) 7 7 Debtors from insurance operations 50 34 Other debtors 21 4 Cash deposits (liabilities) 13 13 Liabilities from insurance operations 36 21 Other liabilities 3 3 46 Swiss Re Group
The shares stated at market value in the balance sheet cost CHF 6.421 billion (1994: CHF 4.144 billion).
Own shares held by the Swiss Re Group are stated in the notes of Swiss Re, Zurich, page 62.
During the last yearthe Swiss Re Group obtained improved information from several ceding companies and developed further refinements to its methods for estimating the prospective claims burden arising from long latent injury claims. Reserve strengthening in 1994 proved to be adequate in total. The above figures reflect various minor adjustments, and a slight extension of the scope of claims considered. In the same way as for other claims, the Swiss Re Group continues to make provisions for long latent injury claims on a cautious but realistic basis, being the undiscounted value of potential ultimate claims payments and claims settlement charges, less amounts paid to date.
Capital market issues made in 1995 resulted in obligations of CHF 983 million, of which CHF 493 million are Convertible Bonds and CHF 490 million Bull Spread Warrants.
Shareholders' capital and reserves at market value, after taxes 10 143 9 008 10 973
Key figures* Combined ratio non-life 110 109 108 Operating ratio non-life 98 97 94 Technical provisions ratio non-life 205 230 244 Return on equity 7.4 8.7 12.7 * Refer to glossary for definition 51 Swiss Re Group
Executive Board and Staff Managing Director and Corporate Staff Corporate Communication Chief Executive Officer and Economic Research
France, Belgium, Luxembourg Pierre Bieri Jean-Pierre Bugnon, Jacques Burri, Daniel Corbaz, Gerhard Felder, Peter Gasser, Christian Herzog, Peter Neuwirth
Spain, Portugal, Latin America Gerhard HölzeiVMichel Lies^ Andres Lorenzana, Pietro Marcionelli, Franco Renggli, Max Scagnetti, Hans Sigrist, Antonio Solari, Jakob Wind
Product Management Ernst Baumann Martin Albers-Schönberg, Alfred Bloch, Peter Bütikofer, Fritz Eugster,Thomas Hiltmann, Marcel Lemble, Robert Martignier\ Werner Meier, NIklaus Müntener, Werner Schaad, Peter Schranz, Jürg Spühler, Heinz Stettier
Near and Middle East, Africa, Greece Bernard Giliiand Theodore Dritsas, Urs Rudoif Kaeser
Swiss Reinsurance Company Representative Office Tokyo Tokyo 52 Swiss Re, Zurich
Swiss Re Atrium Zurich US/UK; Special Risks Balz Heyer, Michael Bradley', Hans-Peter Brunner, Alfred Diezi, Lorenz Flückiger, Ruurd de Flulter, Yu Chung Fok, Ernst Huber, Rolf Hunziker, Eduardo JeanMairet, Peter H. Luck, Johannes Scherrer, Jürg Stoll
International Business Hans-Kaspar Zulauf Christian Cotti, Hansjörg Fricker, Rene Greber, Hans Hefti, Thomas Raschewski, Werner Schläpfer, Johann Thinnhof, Richard H. Vögeli, Hans Zimmermann
Product Management Douglas B. Keir Andre Chuffart, Kurt Wettenschwiler, Hans Peter Würmli
Human Resources Carol Franklin Engter Jean-Jacques Bertschi', Josef Elmiger, Peter Eugster, Walter Frei, Erich Giger, Fritz Gutbrodt, Max Klingler, Peter G. Meier, Rudolf Oberle
Accounting Ennio Franci Martin Benz, Ernst Fröhlich, Erich Hunold, Gottlieb Schmidii
Controlling and Divisional IT Walter Engter Marie-Louise Gänger, Roland Nyffeler, Carol Stadler-Graf
Logistics Dieter E. Söhner Heinz von Aesch, Daniel Haessig, Gody Müller, Andreas Bernhard Soliva * Member of the Committee of the Executive Board ' until end of 1996 2 Chief Executive Officer as from January 1997 ^ as from January 1997 53 Swiss Re, Zurich
Swiss Re, Zurich, performs a dual role within the Swiss Re Group: it is both a reinsurance and also a holding company.
The following commentaty on the 1995 financial year of the parent company therefore complements the review of the financial year of the Swiss Re Group and is intentionally kept short.
Absolute amounts in the profit and loss account and the balance sheet in 1995 differ, in some cases substantially, ftom those of the previous year. This is due to a redefinition of business ceded from the Group companies to the parent company. These changes are particularly reflected in clearly reduced premium volumes and in the balance sheet amount.
Ordinary profit for the financial year amounted to CHF 501 million after taxes, compated with GHF 292 million in the previous year. No extraordinary profit was repotted for 1995; in 1994 the exttaordinary profit had totalled CHF 238 million after taxes as a result of the sale of the ptimary insurance operations.
The marked increase in the ordinary profit is due to significant improve­ ments in the technical result, which rose from CHF 361 million in 1994 to CHF 707 million in the year under review. The financial result was com­ parable to that of 1994, despite increased valuation adjustments.
An increase of CHF 1.0 billion in subsidiaries is mainly due to additional investments in Swiss Re America and the acquisition of the Dutch reinsurance group Alhermij.
Ordinary profit after tax 501 292 5. Extraordinary income - 3888 6. Extraordinary charges - - 3548 7. Tax on extraordinary profit - - 102
Assets CHF millions I Investments 1. Land and buildings 2. Investments in subsidiaries and affiliated companies 3. Loans to subsidiaries and affiliated companies 4. Shares 5. Fixed income securities and registered debt instruments 6. Loans 7. Mortgages 8. Time deposits 9. Deposits with ceding companies
I Shareholders' capital and reserves 1. Share capital 2. Legal reserve 3. Reserve for own shares 4. Other reserves 5. Disposable profit
The accounts of the parent company are prepared in accordance with the regula­ tions of Swiss Corporation Law. Swiss Re's profit and loss account and balance sheet are presented in line with European Union directive-based accounting and reporting recommendations for insurance companies.
The following assets are stated at cost, less necessary and legally permissible depre­ ciation: - Land and buildings (purchase or construction cost) - Investments in subsidiaries and affiliated companies - Shares - Fixed income securities - Loans These assets are not subject to revaluations.
Deposits retained from ceded reinsurance business as well as creditors are stated at redemption value.
Change in capital funds Capital funds on 31 December of previous year
Dividend paid for the previous year Share premium Profit for the financial year
Contingent liabilities Contingent liabilities, mainly towards Group companies, amounted on 31 December 1995 to CHF 1.757 billion (1994: CHF 617 million). In addition there were six unlimited guarantees; three of these are for obligations towards Group companies. No payments are expected under these guarantees. The increase in contingent liabilities is attributable to the issue of Convertible Bonds and Bull Spread Warrants by SwissRe Finance (Bermuda) Ltd.
Assets with reservation of title To secure the technical reserves on the 1995 balance sheet date securities in the amount of CFIF 1.040 billion were deposited in favour of ceding companies (1994: CHF 988 million).
Fire insurance value of tangible assets The insurance value of tangible assets, comprising the real estate portfolio and other tangible assets, amounted on 31 December 1995 to CHF 1.720 billion (1994: CHF 1.730 billion).
Own shares held on 1 January 1994 Purchases in 1994 Sales in 1994 Realised gains Own shares held on 31 December 1994 at cost Own shares held on 31 December 1994 at market value
Personnel Information Swiss Re, Zurich, employed a staff of 1862 on the balance sheet date (1994:1666). Personnel expenses for the 1995 financial year amounted to CHF 283 million (1994: CHF 241 million).
Hanspeter Thiel Peter Ochsner Auditors in charge 65 Swiss Re, Zurich
On 2 December 1993 and on 1 December 1995 respectively, the bearer participation certificates and the bearer shares were converted Into registered shares.
Number of shares per shareholder Shareholders % Shares % 1- 100 21 039 73.85^ 756 960 6.33
American Depository Receipts Program On 1 February 1996, Swiss Re launched an American Depository Receipts Program (Level I, over-the-counter), together with Morgan Guaranty Trust Company of New York.This offers American Institutional Investors a simple and attractive way to Invest In Swiss Re. One American Depository Share corresponds to V20 of a Swiss Re registered share. Its ticker symbol Is SWCEY.
Stock exchange listing The shares of Swiss Re are listed on the Swiss Stock Exchange.
Single class of share The General Meeting on 24 November 1995 approved the creation of a single class of share through conversion of bearer shares into registered shares of equal nominal value. Swiss Re's equity is now made up of 15 043 301 registered shares, of which 423140are reserved registered shares.
Reduction of capital The General Meeting on 24 November 1995 also approved the reduction of the par value of Swiss Re shares from CHF 20 to CHF 10 per share.This repayment of capital to the shareholders took place on 1 March 1996.
Convertible bonds and issuance of bull spread warrants SwissRe Finance (Bermuda) Ltd., a wholly owned subsidiary of Swiss Re, placed a convertible bond issue and issued bull spread warrants on 29 June 1995.The con­ vertible bonds, in the nominal amount of USD 500 million and maturing in five years (on 30 June 2000), can be converted into a total of 490 330 registered shares of Swiss Re.The simultaneously issued bull spread warrants are securities which give the investor the opportunity to benefit from the appreciation potential of Swiss Re registered shares within a range and to limit the risk of loss.These warrants were Issued on 500 000 Swiss Re registered shares.They expire on 26 June 1998. In order to secure conversion and option rights, no new securities were issued.
The signing of the UNEP statement On 23 November 1995, Swiss Re signed the insurance industry's statement of its commitment to the environment within the scope of the United Nations Environment Programme. This forms the basis for the inclusion of ecological principles in all aspects of business (logistics, underwriting, product manage­ ment, risk management, investment management, etc). As the statement has now been signed by around 60 companies in 18 countries, it also assumes an important function of coordination within the insurance industry. Swiss Re has committed itself as one of the signatories to a coordinated approach to climate protection. This led to a joint statement which was presented publicly on 9 July 1996 at the Climate Convention in Geneva.
Environmental liability and risk management Since 1989, Swiss Re has offered support to direct insurers in the form of two pioneering products relating to environmental liability: environment impairment liability for businesses and liability insurance for waste treatment plants. By in­ corporating risk analysis with consulting and a fundamental long-term relation­ ship between insurer and insured, these products can make an essential con­ tribution to tackling environmental liability risks, not only in the case of sudden and accidental damage but also for gradual impairment.
Swiss Re's contribution to environmental funds Initial investments have been made in so-called environmental funds. In May 1996, Swiss Re invested USD 10 million in the UNI StorebrandlScudder Environmental Value Fund2inA, in April 1996, contributed 10% of the share capital of the oeco capital Lebensversicherung AG, the first ecological life insurer 68 Swiss Re Group
in Europe. We are convinced that ecological firms can also be economically viable and offer potentially attractive investment opportunities. Eco-efficiency can lead to lower costs for raw materials and disposal, greater benefits for clients and a reduced risk potential.
information and communication Through organisational and financial support for forums and client seminars, Swiss Re makes an important contribution to the transfer of knowledge, participating for example in the seminar on ecological tax reform in September 1995, the forum on "Climatic risks - a challenge to the Swiss economy" in January 1996, the client seminar on "Climate change and natural catastrophes" in May 1996, and the "Aspen energy and environment round table" in September 1996.
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Switzerland Audatex Holding AG Seestrasse 315 8038 Zurich with 17subsidiaries and affiliated companies in 12 countries
European Reinsurance Company of Zurich Mythenquai 50/60 8022 Zurich with branch offices in Madrid and Hamilton, Bermuda
Societe Anonyme Frangaise da Reassurances 153 rue de Courcelles 75017 Paris
Italy ServiziTecnici Swiss Re s.r. I.' Via Brera 5 20121 Milan
The Netherlands Algemene Levensherverzekering Maatschappij nv Burgemeester Rijnderslaan 28 1185 MC Amstelveen
Spain Suiza de Reaseguros (Iberica) Agencia de Reaseguros, S.A. de la Cia. Suiza de Reaseguro Paseo de la Castellana, 135 28046 Madrid 73 Swiss Re Group
Barbados Atlantic International Reinsurance Company Ltd. ICB Building, Upper Roebuck Street Bridgetown
SwissRe Investments (Bermuda) Ltd. • Insurance 41 Cedar Avenue e Banking Hamilton HM 12 • Services O Holding Canada
Swiss Reinsurance Company Canada Method of 99 Yorkville Avenue consolidation; Toronto, Ontario M5R 3K5 e equity with branch offices in Montreal f full and Vancouver non-consolidated Swiss Re Life Canada 1 acquisition/ 99 Yorkville Avenue foundation 1996 Toronto, Ontario M5R 3K5 2 consolidated figures with a branch office in Montreal
USA European Reinsurance Corporation of America 380 Madison Avenue New York, NYlGGiy
North American Specialty Insurance Company 65G Elm Street Manchester, NH G31G1-2524 with branch offices in Cleveland and Sarasota
SwissRe Advisers, Inc. 2GG Park Avenue New York, NY1G166 1GG USD -G.2 1.5
Swiss Re Capital Markets Corporation^ 12 East 49th Street NewYork, NY1GG17 1GG
Brazil Swiss Re Brasil Servigos e Participagöes Ltda.^ World Trade Center Av. des Nagöes Unidas, 12551,17. Andar 04578-903 Sao Paulo-SP
Mexico Suiza Re Mexico, S.A. de C.V. Av. Insurgentes Sur No.1685, Piso 13-B Colonia Guadalupe Inn Apartado Postal 19-334 03901 Mexico, D.F.
China Swiss Reinsurance Company • 100 Beijing Representative Office^ Unit 1110 Landmark Building 8 North Dongsanhuan Road Chaoyang District Beijing 100004
Israel Swiss Re (Israel) LtdJ • 50 Mozes House Rothschild Boulevard 76 65785 Tel Aviv
Japan Swiss Reinsurance Company • 100 Representative OfficeTokyo Otemachi First Square 9F 5-1 Otemachi 1-chome Chiyoda-ku,Tokyo 100
Malaysia Swiss Reinsurance Company • 100 Kuala Lumpur Branch^ Suite 27-01 Menara Keck Seng 203 Jalan Bukit Bintang 55100 Kuala Lumpur
Philippines Swiss Reinsurance Company Manila • 100 19DTower One, AyalaTriangle Ayala Avenue, Makati City 1200 Metro Manila
South Korea Swiss Reinsurance Company Korea Liaison Office 7th Floor, Kwanghwamun-Building 211 Sejang-ro, Chongro-ku Seoul 110-050
Taiwan Swiss Reinsurance Company < Taipei Liaison Office 10th Floor, Suite C Flung Tai CenturyTower 156-158 Ming Sheng East Road, Section 3 Taipei,Taiwan 105
Thailand SR Risk Management Services Limited^ 24th Floor,Tower2 Business Centre, Room 8 MuangThai-Phatra Complex 252/119 Rachadaphisek Rd Fluay Kwang Bangkok 10320 78 Swiss Re Group
Each year we publish our own considerations on global risks. You can take advantage of our specialised knowledge by ordering our publications free of charge.
Current titles are introduced below: What added value does Swiss Re create for its clients? (96-66; languages E,G)
The facts, the losses - and the consequences to be drawn by technology, science and insurers from the Kobe earthquake disaster. (95-06; languages E,G,J)
Terrorism risks are catastrophe risks - but under which circumstances can they be insured? The principle of a central pool should also be applied here. (93-25; languages E,F, G,l)
Corrosion and frost are the most trivial of all damages: coverage and weighting of pipe water damage. Includes a checklist. (95-53; languages E,F, G,I,S)
Analysis of the catastrophic East Bay Hills fire which hit Oakland, USA - the "rural-urban fire" phenomenon: an unstoppable com­ bination of city and forest fires. (92-13; languages E,G)
A study showing that most accidents in aviation are due not to individual but to collective error - errors in the "aviation" system itself. (92-47; languages E,G)
Legal principles and practice con­ cerning compensation for bodily injury and death in road traffic accidents. With examples of calcula­ tions from 11 European countries. (93-41; languages E, F, G, I)
Risk management in construction: What influence can the insurer have on the various phases of a construc­ tion project? FIDIC contract, CAR policy. Loss prevention and claims handling. (90-20; language E)
Risk coverages, methods of insuring, underwriting, marketing and finan­ cial controlling: the basic principles of group insurance. (94-29; languages E,S)
The broad range of 8wiss Re publications - at a glance. (96-67; multilingual edition)
if you are interested in receiving any of our publications, please contact us at the address below, stating the order number, language required, and your name, address and tele­ phone number.
Swiss Re Mythenquai 50/60 8022 Zurich Switzeriand Fax +41 1 285 20 23 For orders via e-mail: publications(§)swissre.com
Claims handling:The work in connection with the investigation, settlement and payment of claims from the time of their occurrence until settlement.
Aviation insurance: Insurance of accident and liability risks, as well as hull damage, in connection with the operation of aircraft.
Business interruption/loss of profits/business income protection insurance: Insurance against the financial effects of an insured loss on a company's income.The insurance covers overhead costs and lost profit.
Engineering insurance: Insurance of construction and erection objects during the construction or erection period and the insurance of machinery in operating plants.
General third party liability insurance: Insurance of industrial, commercial, employers', product, professional or private liability to third parties.
Hail crop insurance: Insurance of crops in open fields or of greenhouses and their con­ tents against hail, storm and other natural hazards.
Property insurance: CoWect'tve term for fire and business interruption insurance as well as burglary, fidelity guarantee and allied lines.
Non-proportional reinsurance: Form of reinsurance in which the reinsurer assumes that part of the insurer's claims that exceed a certain amount against payment of a specially calculated premium.
Risk spread: Stabilisation of the claims experience by as large a number of risks as possible.
Technical provisions in relation to net earned premiums.This ratio enables the assessment of provisions in the non-life business.
Investor Relations J.B. Richard Lleberman Telephone (411)285 22 84 Telefax (411)285 47 09 Internet CHVS9KZ8@ lbmmail.com
Public Relations/Media Andreas Jäggl Telephone (411)285 24 81 Telefax (411)285 20 23 Internet CHVS9L58(® lbmmall.com