Swiss Reinsurance Company Mythenquai 50/60, RO. Box, CH-8022 Zurich, Switzerland Telephone 01 2082121 Telex 815722 sre ch Telefax 01 2082999 Cables swissre
Swiss Re Group 5 Group Companies 6 Group Report 8 The Group 11 Reinsurance Companies 11 Insurance Companies 16 SwissRe Holding Limited 18 Consolidated Profit and Loss Account 19 Consolidated Balance Sheet 20 Notes on Group Accounts 21 Key Figures of Group Companies in 1987 22 Business Years 1978/79-1987 26 Addresses of Group Companies 28 Glossary of Technical Terms
Note on the illustrations in this Annual Report The illustrations show human beings of various age groups and nationalities. Insurers and reinsurers afford mankind fhe greatest possible security by taking over risks and providing benefits. Photos: H.R. Bramaz, Adiiswii, Switzerland - The Image Bank, Zurich, Switzerland
Summary of mportant Figures in millions of Swiss francs Swiss Re, Zurich 1987 1986
Hans Bühlmann* Rüschlikon, President of the Federal Institute of Technology, Zurich 1988
Secretary to the Board of Directors Christoph Blanc, Executive Manager, Oberrieden
German-speaking Switzerland, Germany, Austria, Eastern Europe, Nettierlands, Denmark, Sweden, Norway, Finland, Iceland
Special lines: Engineering, Aviation, Nuclear energy. Marine Executive Managers A. Bai*, H. Fischer, W. Künzle, J.W, Youngs Managers M.A. Bloesch, H. Hefti, R. Kellenberger, H. Luthi, O. Olsson, E. Stalder Member of Management H, TIedemann
Risk management, Research/capacity control. Special assignments Managers E. Baumann, B. Porro Member of Management J. Hofmann
Capital market Investments, real estate R R Hiigle, Senior Executive Manager B. H. Letsch, Executive Manager Executive Manager F E, Rohner Managers A. Decurtins, M. Gürber, E. Locher, B. Perrin, J,-P Preyer information services
R. H. Uhler, Manager w Personnel Administration Credit and Surety reinsurance Services
Organization, public relations, economic studies, internal services, catering R. Rüesch, Senior Executive Manager O. Kern, Manager Member of Management E. Schlenker
A. Brügger, Senior Executive Manager D. Söhner, Executive Manager Managers M. Freylinger, A. Sulzer
Member of the Executive Committee and Group Management Executive Vice Rresident Senior Vice Rresident Vice Rresident
cial result less management expenses) exceeded the previous year's level by approximately Sw.frs. 41 million (a good 11%).
In Non-Life reinsurance, iarge and catastrophe claims caused an increase in the underwriting loss. In the year under report, Swiss Re was involved in considerably more, and in addition significantly graver, large losses than in preceding years. The storms which ravaged southern England and parts of France in the autumn of 1987 cost Swiss Re, Zurich, at least Sw. frs. 110 million and the Swiss Re Group as a whole probably about Sw.frs. 130 million. In addition, the result was affected by major industrial fires, storms in Switzerland and the crash of a wide-bodied aircraft.
Also to be mentioned is Mortgage Guaranty insurance, which in the southern states of the U.S. has shown an acutely npgative trend since the drop in oil prices. Thanks to its policy founded on caution and aimed at financial strength, Swiss Re performed well in 1987, a fact clearly reflected in the consolidated accounts of the Group. To ensure the successful development of the company, it is essential to have strong and sound basic business designed to achieve risk spread between classes of in­ surance and between countries and continents. Internal reserves, backed by a network of external reinsurance treaties (retrocessions), enable us to smooth the erratic movements of the loss burden from large and catas­ trophe losses inherent to the branch and to complement spread by class and region with spread in time.
Basically the following report makes reference to the an­ nual accounts, i.e. the position In Swiss francs; where the effect of foreign currency rates appears significant. It Is commented upon.
The overall underwriting result of the 1987 business year was Inferior to that of the year before. This Is due to a dis­ tinct Increase In the underwriting loss In Non-Life reinsur­ ance; In contrast, the profit In Life reinsurance - In the same range as In previous years - rose slightly. Overall, there was an underwriting loss ofSw. frs. 180 million (pre­ vious year, loss of Sw.frs. 161 million).
In view of the single EC market, a number ot takeovers and mergers involving insurance companies have taken place. As a rule these are aimed at establishing or ex­ panding market positions in the European Community. They will, however, also have repercussions on reinsur­ ance, because larger and stronger insurers will be able to bear higher retentions and as a result need less reinsur­ ance cover or because reinsurance programmes will be restructured.
The American market is still characterized by extreme price fluctuations. Following massive premium increases in 1985/86, considerable reductions were again conced­ ed in the year under report. The slump in premiums is par­ ticularly pronounced In Property Insurance, although the year under report still produced positive results. The de­ velopment In Liability business presents no clear picture: Premiums were held steady In part in the heavy risk cate­ gories, although they are likewise declining In other cate­ gories. The familiar basic problems ot American Liability insurance still remain largely unsolved. Against a back­ ground ot ominous Liability suits arising out ot environ­ mental damage and the costs in connection with the re­ moval ot health-hazardous asbestos from buildings. It is beyond comprehension that practically no attempt is be­ ing made to solve the fundamental problems.
Extreme short-term premium fluctuations have created Insecurity among numerous major insureds and prompt­ ed them to seek more stable markets, found their own in­ surance captives or consider alternative cover methods. These tendencies became clearly apparent In the year under report. Such changes contain numerous opportu­ nities tor Innovative reinsurers, although at first they nar­ row the demand tor Insurance.
Following a pronounced drop in the underwriting iossto Sw.trs. 195 million in the two preceding years, it again rose somewhat and amounts to Sw. trs. 216 million. As the Chairman mentioned in his foreword, this is largely the outcome ot the above-average number and size ot large and catastrophe claims. This burdensome accumulation ot major occurrences masks the tact that the basic under­ lying business has proved to be sound. Widespread busi­ ness segments performed well In 1987. Moreover, sub­ stantial Improvements have been achieved in numerous classes ot insurance and countries and these will have a positive effect on future results.
Hail reinsurance showed a drop in premium income, which was due to the effect of foreign exchange rates. 1987 was clearly not a hail year, so that the underwriting profit was a gratifying one.
It was possible to hold steady the premium income of Burglary, Fidelity and Allied lines, which would appear to have checked the declining trend evident in recent years. - With the exception of Water Damage reinsur­ ance, underwriting profits were once again achieved.
Fire, Business Interruption 1,287 1,391 Hail 38 45 Burglary, Fidelity and allied lines 87 89
Accident 194 185 Sickness 97 93 General Third Party Liability 442 415
In Generai Third Party Liabiiity reinsurance, premium in­ come continued to rise. The growth is, however, not as striking as the increase in volume at the insurance level, reflecting our selective underwriting practice, especially in America. The increased premium volume is also the fruit of our years of efforts to improve conditions. The suc­ cesses achieved have, however, already stimulated price competition again. - The underwriting loss rose further in the year under report. Although the results in Europe showed a distinct improvement, it is here too not yet pos­ sible to speak of a fundamental rectification of this branch; the increased loss stems entirely from the United States and once again so-called late claims play a deci­ sive role. These refer to hitherto unknown losses that occurred years, or indeed decades ago, but which are only now being reported for settlement under long since cancelled reinsurance treaties. It is particularly difficult to assess the loss potentials prevailing in this sector; we have therefore once again reinforced our reserves to a sizeable extent. Moreover, we are confident that the underwriting policy pursued by Swiss Re in recent years will exclude similar claims and developments in results for the future.
In Motor reinsurance, premium income remained practi­ cally stable. The level was maintained in Europe, whereas a drop occurred overseas. - The underwriting loss was significantly reduced in the year under report, mainly thanks to American Motor business which closed with an underwriting profit. There were also some improvements in Europe - albeit with exceptions: in France new legal provisions and in particular altered court practice have given rise to a higher loss burden. A similar development - plus an increase in serious accidents - is also respon­ sible for the unsatisfactory result in Switzerland.
The premium income of Marine reinsurance continued to decline, reflecting the shrinkage of world trade. - The re­ sult showed satisfactory development since an under­ writing profit can again be reported. Premiums and condi­ tions have, however, come under heavy pressure.
Engineering reinsurance is dependent on the general economic climate, and on investment activity in particu­ lar. The year under report lacked distinct growth im­ pulses, which explains why there was no change in pre­ mium income. - The underwriting profit has fallen dras­ tically in comparison to previous years and has become minimal. This deterioration was caused by falling pre­ mium rates, cover extensions granted in the face of com­ petitive pressure with a subsequent higher loss burden and, in addition, some major losses.
Nuclear Energy reinsurance shows unchanged premium income compared with the previous year. - Once again there were no significant losses in the year under report, leading to an underwriting profit, a substantial amount of which has been allocated to a reserve to cover the catas­ trophe risk.
The gross premiums, expressed in Swiss francs, grew by 6.9% to Sw.frs. 449.1 million (previous year, increase of 0.9%). If foreign exchange rates had remained constant, there would have been an increase of 13.7%.
In 1987 the world economy experienced the fifth year of a moderate but steady upswing. Real growth reached about 2.5% in the OECD area and proved to be particu­ larly strong in the Anglo-Saxon countries and Japan. In the course of the year, however, the economy was in­ creasingly burdened by problems of a fundamental na­ ture: there was hardly any let-up In the foreign trade dis­ equilibrium, despite the sustained marked devaluation of the US dollar since 1985. The United States monetary and fiscal policy emphasized growing fears of inflation and boosted interest rates; moreover, the payment difficulties of some highly indebted nations intensified. This climate nurtured an ominous lack of confidence on the financial markets, which finally triggered a worldwide crash of stock markets. The reaction of first the American and then other leading central banks was to slacken the reins on monetary policy, which in turn led to a worldwide drop in interest rates and enabled the economic upswing to resume.
On the share markets a mood of elation - spurred on by high liquidity and encouraging economic prospects initially inspired record prices. But on 19 October 1987 the five-year boom ended abruptly: a wave of selling of unex­ pected magnitude, radiating from the United States and
encouraged by close international links, wiped 15-30% off stock market values across the globe within days. Since the crash, however, the prices have stabilized at a lower level. Compared with the previous year, the Japa­ nese share market has risen 10%, the New York and Lon­ don markets have maintained their position, and those of Germany and Switzerland have dropped to the level of 1985. - As in the previous year, our investment policy was directed at lowering the share commitment and safe­ guarding profits; the portfolio has consequently shrunk in both absolute and relative terms.
Holdings and loans comprise holdings of Sw.frs. 47 mil­ lion (previous year, Sw. frs. 45 million) and loans to Group companies of Sw.frs. 840 million (previous year, Sw.frs. 693 million). Overall these investments rose by Sw.frs. 149 million to Sw.frs. 887 million, largely because of addi­ tional loans granted to SwissRe Holding (North America) Inc., New York, and to "Schweiz Allgemeine" Finanz Hold­ ing AG, Munich.
Bonds, certificates of deposit and mortgage bonds 3,913 3,791 Loans (including mortgages) 1,049 968 Fixed-interest securities with equity character 62 81 Shares 485 635 Real estate 975 843
On 16 September 1988, the value of Swiss Re, Zurich, on the Zurich stock exchange was as follows: 400,000 registered shares at Sw.frs. 6,100 44,000 bearer shares at Sw.frs. 12,200 860,000 non-voting shares at Sw. frs. 1,840
In view of the growing importance of these and similar services, Swiss Re decided in 1986 to expand its capacity in this sector even further, the main emphasis being on the following areas: risk assessment and handling, claims handling and insurance and reinsurance information services.
Last year's General Meeting confirmed the re-election of Mr Walter DIehl for a further four-year term of office. In addition, Mr Kurt Furgler was elected to the Board of Directors for the first time.
At this year's General Meeting, the terms of office of Messrs Hans Bühlmann, Rainer E. Gut, Paul R. Jolles and Marcel Odier expire; the Board of Directors will propose to the General Meeting that Messrs Bühlmann, Gut and Jolles, who are standing for re-election, be confirmed for a further term.
In view of the current retirement age, which he will reach in 1989, Mr Odier, who has been a Member of the Board since 1968, is not standing for re-election. Thanks to his extensive business experience - primarily in the financial sector - he has made an extremely valuable contribution and we are deeply indebted to him for his great services to Swiss Re.
The Board of Directors will propose to this year's General Meeting the election of Mr Pierre Languetin, who until April 1988 was Chairman of the Governing Board of the Swiss National Bank, Berne.
In December the Board of Directors announced the fol­ lowing promotions with effect from 1 January 1988: Senior Executive Managers: Messrs Herbert N. Haag, Peter R Hügle, J. B. Richard Lieberman and Rudolf Oberle; Executive Managers: Messrs Reinhart Jeck, Bruno H. Letsch, Michel-Lucien Musy and Gottlieb Schmidii; Managers: Messrs Hannes Arrenbrecht, Hermann Hefti, Rudolf Kellenberger, Gody Müller (Member of Manage­ ment In Advisory Capacity) and Bruno Porro.
Cn 31 December, 1987, Messrs Lavre Kirianoff, Executive Manager, Ernst Hirzel and Raul Szöllösy, Managers, and Kevin Claridge and Hans Enzmann, Members of Manage­ ment in an Advisory Capacity, entered retirement. Mr Wer­ ner Schiegg, Executive Manager, retired on 31 March 1988. All these gentlemen have rendered our Company great services for decades and we should like to express our sincere gratitude to them.
Total result before tax (1) + (2) + (3) 217,501,380 195,963,301 Taxes - 68,172,091 - 57,427,290
The 1987 business year comprises both reinsurance business and general income and outgo for the period from 1 January to 31 December 1987.
Securities and holdings are in principle entered at acqui­ sition price or, if the stock exchange price is lower on the balance-sheet date, at the lower value. Non-quoted hold­ ings are, where necessary, entered at the lower intrinsic value. The lower valuation is retained until disposal ofthe corresponding securities.
Non-Life reinsurance cessionaires' share of this amount was Sw. frs. 4.4 million, so that Sw.frs. 92.6 million remained for own account.
Gross premiums in the year under report totalled Sw.frs. 3,596.2 million. After deduction of retrocession premiums of Sw.frs 737.2 million, the net premiums amounted to Sw.frs. 2,859.0 million, which corresponds to a drop of 5.2% when compared with the previous year. Without the effect of foreign currency fluctuations, net premiums would have risen by 6.2%.
These result from the total of the net premiums and the difference in the unearned premium reserve over the last reporting year. At Sw. frs. 2,837.9 million they were Sw. frs. 147.9 million, or 5.0% below the previous year's amount.
The commissions and profit commissions calculated for business assumed totalled Sw.frs. 97.0 million.The retro-
The surrenders in business assumed amounted to Sw. frs. 45.9 million, of which Sw. frs. 0.8 million was deb­ ited to retrocessionaires. A total of Sw.frs. 45.1 million remained for own account.
This group of accounts closed with a negative balance of Sw.frs. 30.6 million (previous year, Sw.frs. 50.8 million). Realized capital gains and losses on investments con­ tributed a net profit of Sw.frs. 187.2 million (previous year, Sw.frs. 168.1 million); an unchanged special allocation to the technical reserves has already been deducted. The fluctuations in foreign currency rates had a negative effect on the result of monetary transfers and the con­ version of foreign currency balances, leading to an outgo of Sw. frs. 24.2 million (previous year, profit of 7.4 million). The write-offs on capital market investments, real estate and holdings amounted to Sw.frs. 177.2 million (previous
Cash deposits with clients fell against the previous year by Sw.frs. 17.0 million to Sw.frs. 1,308.1 million. This de­ crease is also due to lower conversion rates for foreign currencies.
ization, amounted to Sw.frs. 577.0 million (previous year, Sw.frs. 894.8 million) or 12.9% (previous year, 19.9%) of the balance-sheet value of securities. This decline (to the level of 1984) is due on the one hand to substantial realized capital gains and on the other to the devel­ opment of prices on the stock and foreign exchange markets.
Holdings are largely managed by SwissRe Holding Limit­ ed and financed by loans to this company. The share­ holding of Swiss Re, Zurich, in SwissRe Holding Limited appears in the balance sheet together with certain other holdings in advisory and service companies.
The portfolio of capital market investments (fixed-interest securities, loans and shares) and real estate rose by Sw. frs. 165.3 million to Sw. frs. 6,483.5 million. The valua­ tion difference on capital market investments (excluding loans), i.e. the difference between the lower book and higher market value of the individual securities, taking into account the estimated value of taxes due on real-
Changes Valuation difference based on exchange rate fluctuations Increase of technical reserves In year under report -1-656.7 Totai business in force on baiance-sheet date 7,043.8 6,971.9
These include, in addition to various accounts payable, in particular the value adjustments on outstanding bal­ ances together with reserves for foreign-currency risks and taxes.
In addition, on 31 December 1987, there was an author­ ized non-voting share capital of Sw.frs. 2.5 million (50,000 non-voting shares with a nominal value of Sw. frs. 50.-).
Non-Life Reinsurance Unearned premiums 840.6 1,153.5 Outstanding claims reserve (incl. valuation of current annuity indemnities) 4,685.7 4,310.9 5,526.3 5,464.4 in % of earned net premiums 194.7% 183.0%
Life Reinsurance Policy reserves 1,261.1 1,250.5 Outstanding claims reserve 256.4 257.0 1,517.5 1,507.5 in % of insurance in force, net 2.9% 3.1 %
Bearer shares and non-voting shares; against presentation of Coupon No. 37.
For the Board of Directors: Walter Diehl, Chairman Christoph Blanc, Secretary
As statutory auditors of your company we have examined the accounts for the year ended 31 December 1987 in accordance with the provisions of the law.
Based on the result of our examination we recommend that the accounts submitted to you be approved.
Liabilities Current-account balances Cash deposits Technical reserves Non-Life reinsurance Life reinsurance Transitory entries, value adjustments and other provisions (incl. dividend) Capital Funds Shown (after distribution of profit)
Western Atlantic Reinsurance Corporation, New York as per November 1988 * not consolidated companies • acquired or founded 1987/88
SwissRe Advisers, Inc., New York SwissRe Advisers Limited, Flong Kong SwissRe Advisers Limited, Manila SwissRe Advisers (Singapore) Re. Ltd., Singapore SwissRe Corporation, New York Swiss Reinsurance Company, Representative Office Tokyo, Tokyo
Magdeburger Versicherung AG, Hanover Magdeburger Hagelversicherung AG, Hanover Magdeburger Lebensversicherung AG, Hanover Magdeburger Rechtsschutzversicherung AG, Hanover mh Bausparkasse AG, Munich
Riskex Group/Creative Computer Systems, Australia, Germany, South East Asia »• '
wards improvement of underwriting results continued with added vigour. The underwriting loss fell by Sw.frs. 147 million, or 40%, to Sw.frs. 222 million (previous year, drop of Sw. frs. 124 million, or 25%). Life insurance showed an underwriting profit of Sw. frs. 58 million (previous year, Sw. frs. 43 million). Overall the underwriting loss amount­ ed to Sw.frs. 164 million (previous year, Sw.frs. 326 mil­ lion). Despite on balance unchanged interest rates and lower conversion rates, the income from capital invest­ ments grew by Sw.frs. 41 million to Sw.frs. 1,134 million (previous year, increase of Sw. frs. 10 million). The autumn crash on the international stock markets caused a write­ off need on shares that could not be fully offset by realized capital gains; the result is a loss on financial operations in the amount of Sw.frs. 68 million (previous year, profit of Sw.frs. 104 million). The management expenses re­ mained unchanged, while the tax burden rose. The Group's capital funds shown (including Group profit) amounted at the end of 1987 to Sw.frs. 2,151 million (previ­ ous year, Sw.frs. 2,104 million).
In the 1987 Group accounts, the consolidated gross pre­ miums declined, as compared with the previous year, by 2.2% to Sw. frs. 10,434 million, in view of the development of foreign currency rates. Expressed in original curren­ cies, there was, however, a growth of 7.0% (previous year 6.6%). The consolidated net premiums rose by 1.3% to Sw. frs. 9,841 million, since some Group companies have increased their retentions. Reinsurance business accounts for 59% and insurance for 41% of the net premiums.
In Life reinsurance the profitability of subsidiary compa­ nies in the United States recovered further; the result of the Canadian company was, however, more severely af­ fected than it had been in the previous year by a fortuitous accumulation of large claims. Overall, the underwriting profit rose to Sw.frs. 33 million (previous year, Sw.frs. 25 million). The net amount of business in force declined to Sw. frs. 137,000 million (previous year, Sw. frs. 154,000 mil­ lion) as a result of foreign exchange rate fluctuations.
At Sw.frs. 861 million, investment income did not quite match the previous year's level of Sw.frs. 876 million because of the lower foreign exchange rates. Once again there were handsome capital gains from securities trans­ actions; the write-off requirement on securities has meanwhile clearly risen. Management expenses fell, whereas taxes caused a greater burden to the accounts. The consolidated Group profit of the reinsurance com­ panies rose to Sw.frs. 130 million (previous year, Sw.frs. 122 million).
The gross premiums of the Canadian Reinsurance Com­ pany, Toronto, fell by 15.2% to Can.$ 118.3 million. The decline could be observed in all branches with the excep­ tion of Surety business. There was a marked improve­ ment in the underwriting result, despite some weatherrelated losses in the Property portfolio. A tornado in Edmonton caused the greatest Property damage in the history of the Canadian insurance industry. The result of Liability reinsurance has improved. On balance practi­ cally unchanged interest rates and a diminishing invest­ ment portfolio led to a further drop in investment income; moreover, capital gains were lower than in the previous year. The profit of the reporting year in the amount of Can.$ 8.9 million is slightly below that of the previous year (Can. $10.8 million). In the current year the company redeemed a further part of the still outstanding preference share capital and paid out a dividend of Can. $ 1.0 million (previous year. Can. $ 1.5 million) on the prefer­ ence shares and common shares.
At the North American Reinsurance Corporation, New York, the gross premiums in the year under report fell by 7.5% to US$ 786.7 million. The main causes are lower
The Bavarian Reinsurance Company Limited, Munich, was able to increase its gross premium income in NonLife business by 10.8% to DM 1,703.5 million (previous year, DM 1,537.4 million). The underwriting loss prior to the transfer to equalization reserves worsened as com­ pared with the previous year because of the claims bur­ den from the October storm in North-west Europe. - In Life insurance the gross amount of business in force at the end of 1987 totalled DM 5,500 million. The drop in comparison with the previous year (DM 5,700 million) is primarily due to foreign exchange rates. After a series of years with underwriting losses, an underwriting profit was again achieved in the year under report. - Capital Invest­ ment income rose as against the previous year, as did the tax burden. Following a reduced allocation to the equali­ zation reserve, an overall profit for the year of DM 16 mil­ lion (previous year, DM 10 million) was shown. In order to adjust the capital fund basis to the increased premium volume, the free reserves have been significantly strengthened and the dividend left at DM 4 million (previ­ ous year, DM 4 million, plus an anniversary bonus of DM 1 million).
The consolidated gross premiums of the Swiss Reinsur­ ance Company (UK) Limited, London, and the Palatine In­ surance Company Limited, London, fell In Non-Life busi­ ness by around 15%. About half of this decrease is due to the relative strength of the pound sterling against the U.S. dollar. Although the company was strongly affected by the October storm over southern England, the underwrit­ ing result was a further improvement on that of the previ­ ous year. - In Life business the gross amount of business in force rose to £ 3,800 million (previous year, £ 3,200 mil­ lion). Because of the additional claims expected on Aids cases, reserves have been strengthened as a precaution. -The investment return is marked by a slight drop of both investment income and realized capital gains. - The over­ all profit amounted to £ 1.4 million. The drop in compari­ son to the previous year's result of £ 2.0 million is mainly due to a higher tax burden. An increased dividend of £0.3 million (previous year, £ 0.2 million) was paid on the pref­ erence shares.
The gross premiums of the Australian Reinsurance Com­ pany Limited, Melbourne, rose in Non-Life reinsurance by 5.8% to Austr. $ 102.7 million. Despite a greater claims burden following the earthquake in the Bay of Plenty (New Zealand), the total claims experience was better than in the previous year, leading to an underwriting profit. - In Life business the gross amount of business in force rose
Fire 1,720 512 2,232 1,892 417 2,309 Accident/Sickness 267 1,955 2,222 347 2,087 2,434 Third Party Liability/Motor 1,613 985 2,598 1,593 885 2,478 Marine 224 167 391 260 141 401 Other branches 987 241 1,228 1,127 220 1,347 Life 1,008 755 1,763 1,109 587 1,696 Gross premiums 5,819 4,615 10,434 6,328 4,337 10,665 Premiums ceded 56 537 593 414 533 947 Net premiums 5,763 4,078 9,841 5,914 3,804 9,718 in millions of Swiss francs
The consolidated gross premiums of the Magdeburger Versicherungsgruppe, Hanover, including the non-recur­ ring premiums from the reserve for bonuses to policy­ holders, rose by 4.2% to DM 1,010.3 million. - The gross premiums of the Magdeburger Versicherung AG in­ creased by 2.6% to DM 732.6 million (previous year, DM 714.1 million). The underwriting loss again fell, but is still DM 10.3 million (previous year, DM 19.4 million). Over­ all, i.e. after taking into account the general income and outgo - a higher profit for the year of DM 9.1 million (previ­ ous year, DM 8.3 million) was achieved. Of this amount, DM 5.7 million (previous year, DM 5.1 million) was paid out as dividend. - The business in force of the Magdeburger Lebensversicherung AG rose by 8.6% to DM 6,900 million (previous year, DM 6,400 million). Following an allocation of DM 70.5 million (previous year, DM 76.1 million) to the reserve for bonuses to policyholders a profit for the year remained of DM 0.64 million (previous year, DM 0.61 mil­ lion).This was used to make a contribution to the paid-up capital as well as to pay a dividend of DM 0.39 million (previous year, DM 0.36 million).
mium income from Property and Casualty business has also risen significantly. The underwriting result in Bond­ ing business has again improved, and the investment re­ sult has developed well, despite unfavourable market conditions. The year's profit totalled US $ 34.1 million (pre­ vious year, US $ 22.2 million), which is why the company raised the dividend (for 100% of the capital) to US $ 22.0 million (previous year, US$ 10.0 million).
The North American Speciaity Insurance Company, Man­ chester, New l-lampshire, has been in the process of de­ velopment as a Non-Life insurance company since 1985. In the year under report, the company achieved a gross premium volume of US $ 13.2 million (previous year, US $ 4.6 million). The overall loss of US$ 1.6 million (previous year, profit of US$ 0.03 million) is due to high develop­ ment costs and to realized capital losses on investments.
The mh Bausparkasse AG, Munich, can again look back on a successful business year. Contracts were produced with a savings amount of DM 1,324.5 million, 14.3% higher than in the previous year. At the end of the year, the com­ pany had a portfolio of savings contracts totalling DM 5,302.1 million (growth of 26.1%). The year's profit was DM 1.5 million (previous year, DM 1.6 million), from which an increased dividend of DM 1.4 million (previous year, DM 0.8 million) was paid.
Investment income 861 192 1,116 1,078 Otfier financial income - - 18 15 Management expenses - 365 - 132 - 525 - 526 Rate fluctuations, depreciation. value adjustments - 39 - 35 - 68 104 Otfier outgo - - - 11 9
Casfi in fiand, postal bank account, bank balances 692 111 819 1,136 Current-account balances 1,276 423 1,719 1,731 Casfi deposits 1,432 93 1,525 1,777
Fixed-interest investments 9,257 8,947 18,899 18,159 Stiares 1,111 1,166 2,277 2,235 Real estate 1,312 643 1,959 1,780 Non-consolidated fioldings 81 44 437 424
Building society deposits _ _ 579 459 Transitory entries, value adjustments and otfier provisions 1,093 330 1,513 1,697
Profit applicable to minority sfiarefiolders _ 8 8 11 Capital funds applicable to minority sfiarefiolders - 45 53 47
The Group accounts were compiled according to the published financial statements as at 31 December 1987 of the companies belonging to the Swiss Re Group. Only the results of the Bavarian Reinsurance Company Limit­ ed and the European General Reinsurance Company of Zurich had not yet been published at the time of the con­ solidation.
Furthermore, in the year under report, the North American Reinsurance Corporation, New York, founded the West­ ern Atlantic Reinsurance Corporation, New York, al­ though this company only started operating in the current year.
As in previous years, advisory and service companies are not consolidated in view of their insignificant effect on the Group's funds and income or because of the nature of their activity. The mh Bausparkasse AG in Munich is, how­ ever, included in the consolidation.
The Federation Insurance Limited, Melbourne, acquired by the SWITZERLAND General Insurance Company at the start of the year, was consolidated for the first time. Also new to the scope of consolidation is the "Schweiz Allge­ meine" Finanz Holding AG, Munich, founded at the end of 1987 as a subsidiary company of SwissRe Holding Limit­ ed, Zurich. The new company has taken over the majority holding of the mh Bausparkasse AG, Munich, from the Magdeburger Versicherung AG, Hanover. Comparison with the previous year is not affected by including these two companies in the consolidated Group accounts for the first time.
The foreign currencies used in the Group accounts again weakened clearly in the wake of the continuing loss of value of the US dollar as compared with the previous year. Sole exception is the pound sterling which showed a slightly higher rate against the Swiss franc (cf. table on page 22).
The published annual accounts of the various Group companies must be compiled in the relevant local curren­ cies and in accordance with local accounting regulations. For the consolidation, however, uniform valuation rules are applied.
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 lower valuation is retained until disposal of the corresponding securities. Special treatment is given only to registered debentures owned by Group companies in Germany which, in accordance with Ger­ man practice, are shown at nominal value and incorporat­ ed in the Group accounts unchanged.
Shares and non-consolidated holdings are valued ac­ cording to the same principles as fixed-interest securi-
Real estate is entered at ttie balance-stieet values of thie individual Group companies: these correspond as a rule to the acquisition cost less the maximum depreciation permitted by the tax authorities.
The valuation of all other items of the Group balance sheet plays a subordinate role. Foreseeable risks of loss are taken into consideration by means of value adjust­ ments by the individual Group companies.
These items refer to components of the profit and loss account of the holding companies and of the mh Bau­ sparkasse AG which, in view of their special nature, are not included under insurance and reinsurance.
This item comprises a slight positive balance from realized capital gains and depreciation on investments of Sw.frs. 7 million (previous year, Sw.frs. 209 million), foreign currency losses of Sw.frs. 34 million (previous year, Sw.frs. 3 million) as well as value adjustments and depreciation on assets outside the investment sphere of Sw.frs. 41 million (previous year, Sw.frs. 102 million).
The consolidated balance-sheet values of capital invest­ ments (incl. non-consolidated holdings) increased over­ all by 4.3%, or Sw.frs. 974 million, to Sw.frs. 23,572 mil­ lion. This affected all investment categories, fixed-interest investments rising by 4.1% (previous year, 5.3%), shares by 1.9% (previous year, 21.0%) and real estate by 10.1% (previous year, 8.8%). The item "Non-consolidated hold­ ings" contains holdings of 50% or less in insurance and reinsurance companies as well as in service companies.
The profits and capital funds applicable to third party shareholders correspond to the percentage shares of non-Group shareholders in the capital funds or in the results of the relevant Group companies. The capital funds applicable to minority shareholders rose in the reporting year by Sw.frs. 6 million to Sw.frs. 53 million, while applicable profit fell by Sw.frs. 3 million to Sw.frs. 8 million. These changes are respectively due to the higher capital funds and to the lower reported earnings.
European General Reinsurance Company of Zurich Sw. frs. 100 81,694 1,983,037 880,026
SwissRe Holding (North America) Inc. US $ 100 269,114 449,475 -
K General Surety & Guarantee Co. Limited £ 100 1,361 8,463 3,362 1 North American Specialty Insurance Company ÜS$ 100 12,852 16,279 13,173 1 Saar-Rhein Allgemeine Versicherungs-AG DM 55 2,045 15,964 19,305 1 SWITZERLAND General Insurance 1 Company Limited Sw.frs. 99.9 160,087 1,249,306 711,235
SCHWEIZ Compahia Anönima Espahola de Seguros y Reaseguros Ras. 100 2,355,780 10,222,483 8,826,631 1 SWII ZERLAND Insurance Company DK Limited £ 100 8,104 27,145 12,367 1 The Federation Insurance Limited Austr.$ 100 25,840 120,502 76,541
Cash in hand, postal bank account, bank balances Current-account balances Cash deposits Fixed-interest investments Shares and real estate Transitory entries and other assets
• Insurance business of the calendar year 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 30 June to 31 December of Swiss Re,
Canada Canadian Reassurance Company 99 Yorkvllle Avenue, Suite 300 Toronto, Cntarlo M5R3K5 with a branch office in Montreal
South Africa Swiss-South African Reinsurance Company Limited Swiss Park, 10 Queens Road Parktown 2193, Johannesburg 2000 with branch offices in Durban, Cape Town and Pretoria as per November 1988
Colombia Compania Suiza de Reaseguros Oficina de Asesorfa Tecnica Calle 72, No. 12-65, Of. 502, Bogotä
Mexico OFATEC (Mexico) S.A. de C.V. Viena 71, Piso 5 Col. del Carmen Coyoacän 04100 Mexico, D.F
Singapore SwissRe Advisers (Singapore) Re. Ltd. 24 Raffles Place No. 25-06A Clifford Centre, Singapore 0104
Germany «Schweiz Allgemeine» Finanz Holding AG Leopoldstrasse 4, D-8000 Munich 40
Spain SCHWEIZ Compahia Anbnima Espaöola de Seguros y Reaseguros Via Augusta 153-157 E-08021 Barcelona
North American Specialty Insurance Company 650 Elm Street, Office Suite 600 Manchester, NH 03101
Saar-Rhein Allgemeine Versicherungs-AG Sulzbachstrasse 16-18 D-6600 Saarbrücken 3 as per November 1988
Capsco Software Canada Ltd. 160 Eglinton Avenue East, Suite 500 Toronto, Ontario M4P 3B5 (Canada)
Gateway Information Services, Inc. 4040 Vincennes Circle Indianapolis, IN 46268 (USA)
Insurance Software and Systems Inc. 120 Wfiite Plains Road Tarrytown, NY 10591 (USA)
POL Computer Services Limited 47 Higti Street Rickmansworth, Herts WD3 1ES (UK)
Accident insurance: Insurance providing payment in the event of death, temporary or permanent disability and/or for medical costs as a result of an accident, of individuals (personal accident) or groups (group accident insur­ ance).
Cash deposits: A sum left by the -•reinsurer in the hands of the -• ceding company to guarantee contractual lia­ bilities.
Ceding company: The client of the reinsurer, i.e. an -• in­ surer that cedes (passes on) ^ risks to the ^ reinsurer.
Claims handling: The work in connection with the in­ vestigation, settlement and payment of claims from the time of their occurrence until settlement.
Commission: Remuneration paid to the -• insurer, to ->• brokers or other commercial intermediaries for their costs in connection with the acquisition and administration of insurance business.
Earned premiums: Premiums applicable to the expired part of a reinsurance period continuing after the balancesheet date (^ unearned premiums).
General third party liability: Insurance of industrial, commercial, employers, products, professional or private liability to third parties.
Gross premiums: Reinsurance premiums of a business year before deduction of retrocession premiums.
Life insurance: Insurance providing payment of a sum of money upon death of the insured and, in the case of en­ dowment insurance, upon survival of a specified period.
Life reinsurance in force: All reinsured Life business in the ^ portfolio of the reinsurer.
Policy reserve: Reserve fund needed to cover future claims under ^ Life insurance and annuity contracts.
Portfolio:The totality ofrisks assumed by an -•insurer or -• reinsurer; also the totality of investments of a com­ pany.
Reinsurer: Company which accepts a share of the • surer's risks.
Retrocessionaire: Company which accepts -• risks by way of -• retrocession.
Risk premium basis: System of Life reinsurance under which the reinsurer only participates in the death risk in so far as it exceeds the -• policy reserves (cf. co-insur­ ance basis).
Surety Insurance: Sureties and guarantees issued to third parties for the fulfilment 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).