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Swiss Reinsurance Company 50/60 Mythenquai, P.O. Box 172, 8022 Zurich, Switzerland Telephone 25 88 00 Telex 52201 a reas oh / 59261 z reas ch Cables reassurance
Management expenses, fluctuations in stock exchange and foreign currency rates, taxes 133 148
Dividend total (for 1973/74 incl. bonus) Dividend per share Bonus per share
Management expenses, fluctuations in stock exchange and foreign currency rates, taxes Profit applicable to minority shareholders
*Subject to approval by the General Meeting **Consolidated on new basis; llgures lor previous year not given as no comparison possible
Zurich, Chairman of the Board of Directors, Swiss Credit Bank, Zurich
St. Gaii, Professor, St. Gaii Graduate Schooi of Economics, Business and Pubiic Administration
Willi Rüetschi Arnold Saxer Otmar Schmidlln Wim Schürpf Jürg Stelnrisser Max Tobler Paul Würsch Hans Wyler
On the income side, a considerably reduced profit from non-Life reinsurance contrasted with a further improvement of the result from Life reassurance and increased investment income. Write-offs on securities were substantially lower than in the previous year. On the other hand, management expenses increased further. Additionally, the conversion of foreign curren­ cies into Swiss francs gave rise to a considerable loss. The net profit fell by Sw. frs. 10.3 million to Sw. frs. 53.4 million (previous year, an increase of the net profit by Sw. frs. 11.1 million).
Gross premium income from non-Life reinsurance, when expressed in Swiss francs, declined slightly to Svi/. frs. 2,237 million (previous year, Sw. frs. 2,250 million). Once again, the development of premium volume during the reporting year was affected by sharply lower rates of exchange for almost all foreign currencies against the Swiss franc, the French franc being the sole major exception. Had exchange rates remained unchanged since the last balance-sheet date, gross premiums would have increased by Sw. frs. 323 million, or approximately 14°/o. After deduction of the retrocessions within and outside the Swiss Re Group, the remaining net premiums amount­ ed to Sw. frs. 1,731 million, which corresponds to an increase of Sw. frs. 2 million over the previous year.
The net resutt in non-Life reinsurance was Sw. frs. 16.1 million, prior to deduction of management expenses, which is substantially less than in the previous year (Sw. frs. 57.7 million). Whereas all major geographical areas served by the Swiss Re and its Group companies contributed to the good reinsurance result of the previous year, the Group companies' reinsurance business during the reporting year was affected by a number of events and trends which produced an overall underwriting loss from the business retroceded to the parent company. Foremost among these were the unfavourable devel­ opment of Liability business in North America; the adverse results worldwide in both the Credit and Surety branches and Burglary insurance; the storm and flood damage at Darwin and Brisbane, Australia, and a fire and explosion in the Flixborough petro­ chemical plant, England.
Among the difficult but traditional obligations of reinsurers is to provide cover against naturat catastrophes. Experience has shown that they are rather infrequent occurrences, but usually entail significant loss payments because they strike a large number of insured risks at once.
The interreaction ot intiation and recession charac­ teristic of the current world economic situation forces business — and insurance is naturally no exception — to control costs carefully. The Swiss Re is watching this problem closely.
Furthermore, the growing influence ot the state on insurance activity is a matter of some concern to the industry in certain countries. Previous reports have already pointed out difficulties of this sort in devel­ oping areas. A demonstrable example of unreason­ able government intervention in an industrial country is the case in certain states of Australia, where retroactive benefit increases under Workmen's Com­ pensation insurance were decreed. This measure subjected numerous Australian companies to con­ siderable financial strain because the premium increases required were refused, delayed or cur­ tailed. Government interference of this kind not only jeopardizes the financial equilibrium of the companies affected but could also provoke a situation in which they become unable to meet their
It is to be hoped that the currently difficult situation in Medicai Malpractice insurance, which has pro­ duced a serious threat In a number of states to medical care of the population, will accelerate the introduction of appropriate reforms for the entire Liability Insurance field in the United States. As a consequence of the upward leap In claims, premiums for Medical Malpractice insurance have reached the point where many doctors have been forced to close their practices or discontinue use of certain methods of treatment. Some states have reacted by limiting
The distribution by branch and continent is virtually unchanged from the previous year.
lawyers' fees for medical malpractice cases or by establishing pre-trial panels which are responsible for considering, in advance of the trial, the Indemnity question with greater expertise than can be expected of a lay jury. The Swiss Re Is following developments In American Liability business very closely and is exercising great restraint In acceptances of these risks. In view of the fact that negligence and human error continue to gain in significance, we are lending full support to loss prevention measures in all branches. The promising results of loss prevention and contain­ ment In specific countries and branches give rise to the hope that the insurance Industry will redouble Its efforts In this respect. At a time when the general public has not only gained ecological insight but has also realized its responsibility to use limited raw material reserves sparingly, efforts by the Insurance industry to prevent or contain losses will doubtless meet with the interest of authorities and the public at large.
Aviation 62 i ! 65 73 101 90 Atomic Risks Si 2 2 2 2 Credit, Surety ^ 95 f 89 75 78 74
In the year under report. Marine reinsurance produced a loss. Marine Flull claims require about as much time to settle as major Liability claims, and thus, are similarly susceptible to inflation. In Liability business, the time-consuming delays often emanate from ulti­ mately determining the degree of injury to persons, in the case of Marine insurance, in repairing damage to property. For this reason, a very large part of the loss burden shown in a calendar year consists of reserves for outstanding claims. Swiss Re attaches great importance to their being estimated as realisti­ cally as possible.
Unfortunately, a weakening of premium rates is be­ coming evident in the Marine branch, particularly as a result of the overcapacity currently prevailing in the international Marine market. A reduction, caused by recession, in the volume of international shipping has forced many ships to lie idle and will likewise work to the detriment of the branch.
Engineering reinsurance produced its first loss in years because of an unusual accumulation of major claims. This branch is also suffering under increasing repair costs. So far, it has not been possible everywfiere to effect the necessary premium adjustments quickly enough.
Aviation reinsurance broke even, but premium volume was slightly down from the previous year's total, due to lower traffic frequencies caused by depressed economic conditions. In this branch, too, the over­ capacity prevalent for some time is slowing the necessary rise of premium rates.
In Atomic reinsurance, there has again been a growth of premium volume. The result is good. In view of the still relatively small number of nuclear reactors and
the high sums insured per reactor, all premiums not needed to pay claims are placed in reserves for future losses. Despite widespread public opposition to atomic energy, additional nuclear power stations will probably be built to satisfy growing energy re­ quirements and to ease the dependence on oil. In the coming years, a substantial growth of premium volume and an improved underwriting balance result­ ing from the larger number of risks may be expected.
The Credit and Surety branches closed with a sub­ stantial loss as a consequence of the deteriorating economic situation and the growing number of insol­ vencies. Construction Contract Bond business was particularly affected, as was Credit insurance involv­ ing textiles and certain branches of the engineering industry.
The gross amount of new business, in terms of sums reassured, was Sw. frs. 8,394 million. The net amount reached Sw. frs. 7,419 million, i.e. 13% more than in the previous year. At Sw. frs. 26,037 million, the net business in force at the end of 1974 was 7 % higher than a year earlier. Devaluation losses of 13% on the previous year's portfolio were such that, despite a considerable increase in the amount of new busi­ ness, growth in the amount of business in force was weakened. Due to favourable claims experience in most of the leading markets and reduced financing requirements for new business, the profit rose from Sw. frs. 21.4 million to Sw. frs. 24.7 million.
Total in thousand millions of francs 5 10 15 20 25
On the leading stock markets, prices continued to slide until late 1974, many exchanges touching levels lower than any registered in years. Then, influenced by an official policy of bolstering liquidity, a marked recovery set in at the turn of the year, so that, by 30th June, 1975, share prices had virtually regained their levels of a year earlier.
In the still unstable monetary situation, the Swiss franc was valued extremely high against almost all other currencies on the balance-sheet date.
Low conversion rates clearly impaired the value of our extensive investments abroad. Despite new in­ vestments of Sw. frs. 203 million, the balance-sheet valuation eroded by Sw.frs. 57 million to Sw.frs. 2,571 million. Current investment income also rose less quickly, amounting to Sw.frs. 145 million (previous year, Sw.frs. 133 million) after deduction of interest on the life assurance and annuity fund and other technical reserves. This corresponds to a growth of only 9 % compared with one of over 20 % in the preceding business year.
On the whole, share prices at the end of the financial year were relatively unchanged. Lower interest rates, however, favourably influenced bond prices.
The hidden surplus on the entire investment portfolio rose by Sw.frs. 162 million to Sw.frs. 342 million, i.e. to 14.9% of the present balance-sheet value (previous year 7.6%; two years earlier 15.2%).
Government and Government-guaranteed Bonds ^ 1,056 1 1,059 856 864 696 Municipal Bonds
Personnel costs at Head Office represented a share of 73 % of total management expenses (previous year, 72%). The number of employees remained basically stable, but inflation and the necessary allo­ cation of funds to the Employees' Welfare Foun­ dation created substantial additional costs. The cost of Initially offering shares to employees at half the market price added Sw. frs. 1 million to the general Increase of outgo.
The depreciation from other causes involved a debit of Sw. frs. 1.7 million (previous year, Sw. frs. 4 mil­ lion).
The tax burden fell during the year under report by Sw. frs. 1 million to Sw. frs. 30.5 million. Although taxes In the Canton and City of Zurich were higher, as were indirect taxes, the additional expenditure was offset by lower direct taxes abroad, a result of the deteriorated profitability in the United States.
In contrast to the previous year, foreign currency rate changes had a negative effect on the Profit and Loss Account for the reporting year. The conversion of the balance-sheet figures at the beginning of the busi­ ness year, on the basis of the average rates of exchange at the end of the business year, together Swiss Re sports centre, Adiiswil (near Zurich)
The last General Meeting re-elected Mr. Walter Berchtold to the Board of Directors for an additional fouryear term of office. At the same time, Mr. Edwin Stopper was elected to the Board for a first term. At its subsequent statutory meeting, the Board ap­ pointed Mr. Heinz B. Vischer as Deputy Chairman to succeed Mr. Matheus Klaas.
At this year's General Meeting, the term of office of Mr. Felix W. Schulthess expires; Mr. Schulthess is standing for re-election.
Mr. Rudolf Huber-Rübel and Mr. Peter G. Syz, as Auditors, and Mr. Max Honegger and Mr. Hans Karrer, as Substitutes, are standing for re-election.
Mr. Andre-Louis Ghenaud, Manager, and Mr. Hans von Gunten, Member of the Management in an Advisory Capacity, retired on 31st December, 1974, as did Mr. Max D. de Sails, Deputy Manager, on 30th June, 1975. We should like to express our sincere gratitude to them for their many years of valuable service to our Company.
After distribution ot ttre profit in accordance with the proposal on page 16, the capital and tree reserves, including the balance brought forward, would be raised from Sw. trs. 314 million to Sw. trs. 327 million.
Free Reserves, including Reserve Fund tor Catastrophe Losses *Subject to the approval ot the General Meeting
The actuarial auditor, Mr. H. Bühlmann, has moreover confirmed in his report that the technical reserves ot the Lite Department at the end ot 1974 were correctly calculated on the basis approved by the Swiss Federal Council.
Taxes 30,564,155 31,491,741 Fluctuations in Stock Exchange and Depreciation, Foreign Currency Rates 20,174,586 : 46,255,390 Resuit from Further Income and Outgo ; 12,558,357 ^ —15,309,882
510,896 514,725 Postal Bank Account fe, 1,864,920 1,623,659 Bank Balances a 114,176,624 176,834,730
Sfiares (excluding Holdings) "A 465,735,645 542,991,357 Real Estate 'M •' " 282,549,631 t 255,338,013
Unearned Premiums for Own Account All Classes excl. Life Life Business (Policy and Annuity Valuations)
Balance j Profit brought forward from previous year 1,372,511 f Net Profit for the Year 53,421,643 54,794,154
The General Management: W. Leimbacher H. F. Rudolf H. B. Vischer W. Diehl H. Odermatt
"Ei Paso Paul Kayser" (281 metres long, 91,336 C.R.T.), the first of nine similar ships designed to carry liquefied gas, each having an insured value of about Sw. frs. 400 miiiion.
I Swiss-South African Reinsurance Co. Ltd. i Johannesburg aenefal Surety & Guarantee [Company Ltd., Wilmslow, England
Extending the basis of consolidation was also taken as the occasion to replace the previous individual reports with actual Group accounts — a Profit and Loss Account and a Balance Sheet. Complemented by the other statistics, this gives a more compre­ hensive picture of the entire Group. Notes on the Group accounts are to be found on page 32.
The non-Lite reinsurance result was considerably reduced from that of the previous year; the losses incurred in North America and Australia almost equalled the profits of the Swiss Re, Zurich and the Bavarian Reinsurance Company Ltd.
awards, usually fixed by jury In the United States, have taken an unexpectedly sharp upward turn In the recent past, sometimes amounting to multiples of the basis used for rating in earlier years. These extraordinarily high awards have so far primarily affected the reinsurer. The remedial measures cur­ rently being taken by both Group companies are aimed at a more equitable distribution of claims inflation between insurer and reinsurer by applying the so-called stability or index clause. Nevertheless, Improved profitability is not to be expected before 1976. — In addition to the underwriting losses, both companies were hit by substantial stock-exchange losses on their capital funds so that, at the end of 1974, additional funds of US $ 23 million and Can. I 4 million had to be provided. Thanks to the stock market recovery, U8$ 10 million and Can. I 2 million had been repaid by the end of June 1975.
Life Reassurance in force (consolidated) in millions of francs 1974* 1973 1972 1971 1970
Gross Business 57,057 51,554 ; 45,249 45,691 41,741 Net Business 54,241 47,229 42,164 42,585 39,285 *scope of consoiidation extended; figures not comparable with previous years
Life Business Premium Income and Annuities Purcfiased 587 182 1 i 769 Adjustment in Policy and Annuity Valuations — 124 — 92 — 216 Interest on Life Assurance and Annuity Fund 60 55 115
Investment Income (less Interest on Life and Sickness Assurance and Annuity Fund and other Technical Reserves) 260 52 312
Cashi in Hand, Postal Bank Account, Bank Balances 156 45 201
Fixed-interest Investments 3,261 1,921 5,182 Shares (excluding Holdings) 740 113 853 Real Estate 420 243
Profit applicable to Minority Shareholders Capital Funds applicable to Minority Shareholders
The basis of consolidation includes the companies listed on page 24. The outgo and income and assets and liabilities of the consolidated companies are shown at 100%; an adjustment was made for the amount applicable to minority shareholders for the items "Profit" and "Capital funds shown".
All conversion rates for foreign currencies into Swiss francs were the average rates as at 30th June, 1975.
The following pages show the geographical structure of the Group, including the branch offices of rein­ surance companies but only the head office of in­ surance companies.
North American Reassurance Company 245 Park Avenue, New York, N.Y. 10017 with offices in Aurora (Denver), Chicago, Dallas and Hartford
Australian Reinsurance Company Ltd. Embank House, 325 Collins Street, Melbourne, Vic. 3000 with offices in Sydney and Auckland, New Zealand