November 1986 English translation of original German report; French and Spanish versions are also available.
Swiss Reinsurance Company Mythenquai 50/60, RO. Box, CH-8022 Zurich, Switzerland Telephone 01 208 21 21 Telex 815 722 sre ch Telefax 01 208 29 99 Cables swissre
Board of Directors Term to expire in Walter Dietil* Chairman, Zuricti 1987
Hans R. LCittiy* Deputy Chairman, Küsnactit Chairman of the Board of Directors of IBM (Switzerland), Zurich 1989
Franz Luterbactier* Zumikon, Chairman of the Board of Directors (ret.) of BBC, Brown, Boveri & Co., Ltd., Baden 1989
Secretary to ttie Board of Directors Ctiristoph Blanc, Executive Manager, Oberrieden
Executive Committee and Group Management Chairman and Chief Executive Officer Walter Diehil
Deputy General Managers Hans R.Kaufmann Ttieo Obrist Pierre-Claude Perrenoud Arnold W. Saxer Werner G. Seifert
Reinsurance technique and acquisition special lines J.C. Roos, Senior Executive Manager* R. R. Doerr, Senior Executive Manager U. Winter, Executive Manager
Risk management. Special assignments Manager E. Baumann Member of Management J. Hofmann investments
Reinsurance technique, acquisition, special risks, insurance medicine J.-G. Mayor, Senior Executive Manager H.G. Rutishauser, Executive Manager Executive Managers 8. Gourant, E. Deico, R. Eckert, L. D. Kirianott, K. Küstahler, F Lock, K. Wettenschwiler Managers R. Boutin, Y Burgener, A. Chuttart, H. Fuchs, E. Hirzel, F Joseph, A. Loye, S.Menn*, H. Menzi, Ms. F Schulthess, J.-R Vogel Members ot Management M. L. Hefti, J. Doktor, B. R. Lacock, A. Rerret
H.W. Kreis, Senior Executive Manager W. Schiegg, Executive Manager Managers J. Brun, R Fürst, R. Held, R. Jeck, K. Münger, B. Niethammer, G. Schmidii Member ot Management E. Franclick
B. Laube, Senior Executive Manager E. FrancI, Executive Manager Manager R Schweizer*
Share register, organization, public relations, economic studies and other central services R. Rüesch, Senior Executive Manager O. Kern, Manager Members of Management O. Jenni*, E. Schlanker
RE. Christen, General Manager H. Odermatt, General Manager I Obrlst, Deputy General Manager
R. Gamper, General Manager p W. G. Seifert, Deputy General Manager
Holdings, planning and control, law and taxes J. B. R, Lieberman, Executive Manager C. Blanc, Executive Manager Managers 0. E. Brooks, R Egger, H. fH. Frey Members of Management J. D. Arpel, M. Gaal
Member of the Executive Committee and Group Management Group Vice President Senior Vice President Vice President
Considering underwriting and financial results in isola­ tion has, however, lost some of its relevance in recent years since financial elements have become incorporat­ ed in certain new forms of reinsurance, a development which is likely to intensify even more in the future.
The premium volume achieved in the business year is slightly less than that of the previous year. This is attribut­ able to the weakening of the U.S. dollar and other major currencies against the Swiss franc and to the restraint exercised in those classes of business and markets where improvement had not progressed far enough.
to the necessary reforms of the American legal and court systems. Implementing them Is complex and time-con­ suming. Our objective - a substantial reduction of the un­ derwriting loss from American Liability risks - can there­ fore only be achieved In stages since, despite the strict criteria applied to new business, late losses continue to burden the result.
The Board of Directors and Executive Committee are sparing no effort to achieve continual Improvement In the prerequisites that make for the desired success.
Following an Initial step a year earlier, the Swiss Re, Zurich, enlarged Its capital basis In two further stages In 1985. Pending approval by the General Meeting of the al­
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In Non-Life reinsurance there was, tor the first time tor some years, a reduction in the underwriting loss. Life rein­ surance registered a somewhat lower profit. Overall, the underwriting loss from reinsurance business was 11% less than In the 1984 business year.
The financial result continued to improve despite cur­ rency-related setbacks. After taking into account man­ agement expenses and taxes, the net profit was Sw.trs. 119.5 million (previous year, Sw.trs. 101.2 million), an In­ crease of 18.1%.
The enormous underwriting losses have at last caused insurers and reinsurers in the L/n/fed States to implement drastic premium Increases in the Property and Liability sectors. Since, however, the premium level there had al­ ready reached an all-time low, further major adjustments are necessary. In the General Liability class. Indeed, all the premium Increase achieved was that losses rose no further; in the Property and Motor classes, too, the im­ provement has only been marginal. - American Liability business cannot loe remedied by premium increases alone; the fundamental problems that beset It have there­ fore been the subject of further Intensive discussion. Even though a comprehensive improvement in the situ­ ation is not yet in sight, some progress has been made in some of the states in the revision of the legal and court systems. It will, however, be mainly for the insurers and reinsurers to adapt their products so that risks can be clearly defined and clearly limited in time and amount, i.e. that they can be made calculable and insurable. The de­ velopment in the American Liability sector will have to be monitored closely, for if must be expected that the influ­ ence this market exerts on other industrialized countries will become even stronger.
In certain major European nations Fire business remains unsatisfactory. Low premium rates for industrial risks and a higher frequency of natural occurrences again led to deficits. Although reliable determination of the premiums for natural perils Is impossible, it is obvious that these risks are being underestimated. In General Liability rein­ surance the decline in capacity, the higher prices and the restrictions applied to American business caused dis­ quiet and uncertainty, following as they did all too long a period during which reinsurance capacity had been abundantly and cheaply available.
The grassprem/ums from Non-Life reinsurance, when ex­ pressed in Swiss francs, fell in the year under report by Sw.trs. 47 million (1.2%) to Sw.trs. 3,873 million. Net pre­ miums declined accordingly by Sw.trs. 50 million (1.6%) to Sw.trs. 3,098 million. This decrease is mainly due to the weakening of the U.S. dollar and related currencies against the Swiss franc. At unchanged rates the premium volume would have Increased by about 10%. This growth in terms of original currencies stems from the premium Increases that were overdue in various markets and branches. The improvement in conditions, however, did not (and still does not) come up to our expectations
everywhere. Where progress in setting the business on a proper footing has not gone far enough, we continued to exercise restraint in underwriting; for this reason pre­ mium growth, even in original currencies, was limited.
In Ha/7 reinsurance premium income rose slightly, while the result became markedly negative owing to a series of losses in Germany and Australia. Overall this business has shown an unfavourable trend in recent years and over a ten-year period registers a result that is only just positive.
With declining premium volume, Burglary, Fidelity and al­ lied lines brought a balanced result. It is encouraging that the situation in Burglary reinsurance is apparently start­ ing to stabilize. In contrast, Water Damage reinsurance is becoming increasingly negative, and Livestock reinsur­ ance continues to be problematical.
In Marine reinsurance the premium income diminished. The positive result in the year under report was one of the best achieved in the past decade. Business from British and German subsidiary companies improved consid­ erably. The good result is partly due to the absence of ma­ jor losses and should not obscure the fact that the pre­ miums have still not yet reached the level which would permit the formation of reserves for major losses.
Fire 1,396 1,351 Hail 44 40 Burglary, Fidelity and allied lines 103 117
Engineering reinsurance registered a minimal increase in premium volume. This can be explained on the one hand by the behaviour of foreign exchange rates and on the other by stagnating investments and as a result fewer insured risks in oil-producing and developing countries. The excellent result of the previous year was repeated, reflecting and confirming our selective underwriting policy.
Premium income \n Aviation reinsurance is mostly earned in U.S. dollars, so there was no increase in Swiss francs, despite the big premium increases that were implement­ ed in airline business in the past two years. The year un­ der report was the worst in the history of aviation, bringing worldwide passenger liability claims totalling some Sw.frs. 700 million and hull losses of overSw.frs. 900 mil­ lion. It is therefore all the more remarkable to note that Swiss Re, Zurich, closed the year's account with a profit; although it corresponds to only a fifth of that of the previ­ ous year, this can still be considered a success since the market average was considerably lower.
In Nuclear Energy reinsurance premium income was un­ changed. The year under report brought no significant losses. The profit achieved can therefore be used for the accumulation of the reserves needed in this branch.
Expressed in Swiss francs, ttie gross premiums in Life reinsurance declined by Sw.frs. 30.5 million (6.8%) to Sw.trs. 417 million. Net premiums fell accordingly by Sw. frs. 29.5 million (6.9%) to Sw. frs. 395 million. Ttiis de­ crease is likewise due to ttie drop in foreign currency rates; it is somewtiat more pronounced ttian in ttie case of business in force. Ttie premium income from disability covers again gained in significance, especially in Europe.
On ttie balance-stieet date ttie net amount of business in force totalled Sw. trs. 50,000 million, wtiicti was 4.7% less ttian ttiat of ttie previous year. Ttie net new business also fell, by 5.4% to Sw.frs. 10,600 million. Ttiese decreases are mainly due to ttie effect of foreign currency rate fluc­ tuations. In original currencies ttie amount of business in force stiowed an increase of 9.8%, net new business one of 17.3%.
Foreign currency markets were once more dominated by the U.S. dollar which at first continued to soar and then reached a peak In February. The subsequent correction was sharp and, when compared with the previous year, led to a weakening of around 20% against the Swiss franc, with dollar-related currencies following suit. In con­ trast, European currencies gained In strength and were able to stand up well, also In comparison to the Yen.
For fixed-interest investments, too, the prevailing climate In the year under report was favourable; The continuing tendency for declining Interest rates, emanating from the United States and continuing throughout the world with varying degrees of Intensity, brought about further appre­ ciation, so that on bonds not only an attractive real Inter­ est could be achieved - thanks to modest Inflation - but also a satisfactory overall result. The excess of market value over book value of bonds grew further.
The balance-sheet value of capital market Investments and real estate of Sw.frs. 5,823 million Is Sw.frs. 402 mil­ lion higher than that of the previous year. This Increase Is attributable to substantial new Investments; It has, how­ ever, been slowed down by the significantly lower valua­ tion of certain major foreign currencies.
The main emphasis of new investments and reinvest­ ments lay or\ bonds. In view of the relatively low yield level
worldwide, the average maturity was reduced siightiy. The balance-sheet value of fixed-Interest Investments rose by Sw.frs. 471 million to Sw.frs. 4,438 million. The real estate portfolio was also expanded; fhe growth by Sw.frs. 87 million to Sw.frs. 751 million Is due to the acqui­ sition of property as well as to the completion of building projects. The share portfolio was cuf by Sw. frs. 156 million to Sw. frs. 634 million; at the same time convertible bonds were reduced.
Holdings and loans comprise holdings of Sw.frs. 51 mil­ lion (previous year, Sw. frs. 49 million) and loans to Group companies of Sw.frs. 526 million (previous year, Sw.frs. 509 million). Overall these Investments rose by Sw.frs. 19 million to Sw.frs. 577 million, largely because of the In­ crease of the loan granted to SwIssRe Holding Limited.
At the middle of September 1986 the stock exchange value of Swiss Re, Zurich, was as follows: 400,000 registered shares at Sw.frs. 6,100 44,000 bearer shares at Sw.frs. 16,900 710,000 non-voting shares at Sw.frs. 2,980 150,000 new non-voting shares at Sw. frs. 2,950
In the preceding yearthe numberof employees had been kept stable In view of the overhead value analysis; In the year under report It even tell by 25 (or 2.3%). This develop­ ment Is the result of concerted rationalization efforts stemming from the overhead value analysis.
One of the principal concerns of our personnel policy Is to provide training for our staff. The main emphasis during the year under report lay In furthering technical knowl­ edge, especially In Insurance and reinsurance, and Infor­ mation technology training. In addition an equal measure of Importance was attached to management and beha­ vioural training and to language abilities. We consider these courses and seminars as an Indispensable Invest­ ment In the future of the Swiss Re and Intend to expand personnel training In a concerted manner.
Last year's General Meeting confirmed the re-election of Messrs. Franz Luterbacher, Hans R. Lüthy and Hans Ulrich for a further four-year term of office, and of Mr. E. Luk Keller for two years in view of the prevailing age limit.
At this year's General Meeting the term of office of Mr. Hel­ mut R Rudolf expires; he is standing for re-election.
On 31st December 1985, Mr. Walter Isler, Senior Executive Manager, entered retirement. He has rendered our Com­ pany great services for decades and we should like to ex­ press our sincere gratitude to him. Mr. Heinz Stettler, Man­ ager, whom we should like to thank for his many years of valuable service, left our Company on 31sf December 1985 to take over new functions at one of our Group com­ panies.
Managers: Messrs. John D. Arpel (Member of Manage­ ment in Advisory Capacity), Jürg Bleuler, Reynald Boutin, Josef Brun, Andre Chuffart, Kevin Claridge (Member of Management in Advisory Capacity), Erwin Franclick (Member of Management in Advisory Capacity), Manfred Freylinger, Peter Fürst, Marcel Gürber, Hannes Menzi, Karl Münger, Beat W. Niethammer, Alexander Schneeberger, Erich Steider and Richard H. Uhler.
Further, the Board of Directors has granted the authority to sign as Managers to Messrs. Francis J. Wingrove and Jürg Spühler, both hitherto Members of Management in Advisory Capacity, with effect from 1st July 1986 and 1st January 1987 respectively.
The General Managers: R E. Christen, R-F Niquille H. Cdermatt, H. Schönenberger
In addition the Board of Directors has announced the fol­ lowing promotions with effect from Ist January 1987: Senior Executive Managers: Messrs. Richard R. Doerr, Hans W. Kreis and Robert Rüesch; Executive Managers: Messrs. Christoph Blanc, Simon Courant, Ennio G. Franci, Herbert N. Haag, Karl Küstahler, Jörg Niederer, Felix E. Rohner, Kurt Wettenschwiler and Hans-Kaspar Zulauf;
Cast! in hiand, postal bank account, bank balances Current-account balances Casti deposits
The accounts are compiled according to Swiss law and the underlying commercial and insurance principles. The principle of caution inherent in these regulations is deter­ mining for fhe valuation and reserving practice of the Company. The principles of accounting and valuation hitherto applied were retained in the year under report.
Real estate is valued at acquisition cost, less the maxi­ mum depreciation permitted by fhe tax authorities.
Technical reserves (unearned premiums and outstand­ ing claims) are based in principle on information provid­ ed by ceding companies. Additional reserves are formed on the basis of past experience for losses that are in­ curred but not reported. In Marine reinsurance technical reserves are calculated in accordance with practice using a lump-sum method. All these reserves are entered atthe amounts which will presumably have to be paid in future for the underlying liabilities. Annuity liabilities from NonLife reinsurance and liabilities from Life business are calculated at actuarially determined present values. The technical reserves of Life reinsurance business are deter­ mined on the bases approved by the Swiss Federal Council.
Cash in hand and credit balances are entered in fhe bal­ ance sheet at their nominal amounts. This also applies to loans and to mortgages.
Securities and holdings are in principle entered at acqui­ sition price or, if the stock exchange price is lower on the
Gross premiums in the year under report totalled Sw.frs. 3,873.5 million. After deduction of retrocession premiums of Sw.frs 775.7 million, the net premiums amounted to Sw.frs. 3,097.8 million, which corresponds to a drop of 1.6% when compared with the previous year. Without the effect of foreign currency fluctuations, net premiums would have risen by 10.3%.
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. 3,012.0 million they were Sw.frs. 99.5 million, or 3.2% below the previous year's amount.
Claims comprise benefits forterm and endowment insur­ ance, paid annuities and the adjustment in the outstand­ ing claims reserve. The total figure for own account rose in the year under report by Sw.frs. 22.9 million to Sw.frs. 249.3 million. This is due to the increase of the outstand­ ing claims reserve.
The surrenders in business assumed amounted to Sw.frs. 41.9 million, of which Sw.frs. 3.7 million was deb­ ited to retrocessionaires. A total of Sw.frs. 38.2 million as in the previous year - remained for own account.
The claims incurred comprise claims paid and the adjust­ ment in the outstanding claims reserve. In the year under report this figure for own account fell by Sw.frs. 137.1 million to Sw.frs. 2,361.9 million.
The total of Sw. frs. 554.9 million is a net amount after de­ duction of various outgo items, such as the interest on the Life reinsurance and annuity fund and other technical re­ serves as well as outgo interest for bank and current ac­ count balances and cash deposits. Income rose as com­ pared with the previous year by 5.1%. Without the effect of foreign currency fluctuations, an increase of 13.5% would have been registered.
Of the total amount of Sw.frs. 600.5 million, Sw.frs. 598.1 million was for bank balances. The major part of this amount is invested short-term in the principal currencies for our business activity and is used to meet current obli­ gations on time. The increase of liquid assets by Sw.frs. 280.6 million, as compared with the previous year, stemmed largely from the capital increase effected to­ wards the end of the year (issue of 20th December 1985).
Of these balances Sw.frs. 726.2 million was for reinsur­ ance and Sw.frs. 32.2 million for retrocession business. Other liabilities totalled Sw.frs. 53.7 million, mainly com­ prising current accounts run for personnel welfare funds and pool companies.
Technical reserves comprise, in Non-Life reinsurance, the reserves for unearned premiums and outstanding claims and, in Life reinsurance, the policy and claims reserves. The changes in the reporting year and the composition are shown in the following table; the increase of the tech­ nical reserves includes further strengthening in connec­ tion with American reinsurance business of Sw.frs. 110 million (previous year, Sw.frs. 115 million) which was charged to the realized capital gains on securities.
Non-Life Reinsurance Unearned premiums 1,263.3 1,298.7 Outstanding claims reserve (incl. valuation of current annuity indemnities) 4,260.4 4,345.0 5,523.7 5,643.7 In % of earned net premiums 183.4% 181.4%
At the end of the previous year they amounted to Sw. frs. 795.8 million which would rise to Sw.frs. 1,275.3 million as a result of the two capital increases in 1985 and by the proposed allocation of the profit, provided it is approved by the General Meeting of Shareholders. The capital funds would then be composed as follows: in millions of Swiss francs
Share capital 111.0 111.0 Non-voting share capital 35.5 17.0 Reserves and profit carried forward 1,128.8 667.8 Total 1,275.3 795.8
Contingent iiabilities (sureties and contingent obliga­ tions to liberate not fully paid up shares) amounted to Sw.frs. 36,736,695 per 31st December, 1985.
Bearer shares and non-voting shares: against presentation of Coupon No. 35.
As the Auditors of your Company we have examined the accounts for the year ended 31 st December, 1985, in ac­ cordance with the provisions of the law.
Casti in hand, postal bank account, bank balances Current-account balances Cash deposits
Group companies directly owned indirectly owned by Swiss Re, Zurich not consolidated
In the year under report the development of foreign ex­ change rates was contrary to that of the preceding year. The strong appreciation of the U.S. dollar a year earlier was followed by a not insignificanf weakening, which also affected related currencies. Among major foreign curren­ cies in the Group's accounts, only the German mark showed a slight improvement. The generally lower for­ eign exchange rates not only had repercussions on pre­ mium growth but also affected the development of most items of the consolidated profit and loss account and the balance sheet.
The consolidated overall result rose by 20.8% to Sw.frs. 145 million (previous year, increase of 14.3% to Sw.frs. 120 million). The individual elements of the Group accounts showed differing developments. The underwriting loss in Non-Life insurance was lower by Sw. frs. 35 million (6.6%). This has broken the downward trend which has persisted for years. Whether it marks a turning point remains to be seen, in Life insurance there has been a substantial fail in profit compared with the previous year. The reasons for this development are inadequate profit margins as a resuit of intense competition, an increase of major losses and a structural reorganization of the North American portfolio. Overall the underwriting loss amounted to Sw.frs. 466 million (previous year, loss of Sw.frs. 450 mil­ lion). The declining trend of interest rates and the lower foreign exchange rates led to a growth in investment in­ come by a mere Sw.frs. 28 million to reach Sw.frs. 1,068 million (previous year, increase of Sw. frs. 188 million). De­ spite slightly higher write-offs than in the previous year, the favourable climate on the international stock ex­ changes led to a further improvement of the result of fi­ nancial operations in the amount of Sw.frs. 218 million (previous year, Sw. frs. 166 million). The outgo for manage­ ment expenses and taxes rose less sharply than in the previous year. The Group's capital funds shown, including Group profit, amounted at the end of 1985 to Sw.frs. 1,605 million (previous year, Sw.frs. 1,172 million).
in Life reinsurance profitability worsened especially at the subsidiary companies in North America. Measures to re­ organize business in the United States and a fortuitous accumulation of major claims in Canada caused the profit to drop sharply to Sw. frs. 19 million (previous year, Sw. frs. 68 million). The net amount of business in force declined to Sw.frs. 158,000 million (previous year, Sw.frs. 175,000 million) as a result of foreign exchange rate fluctuations.
Investment income of Sw.frs. 886 million did not quite reach the previous year's mark (Sw.frs. 888 million) because of lower foreign exchange rates. The high price levels on world stock exchanges reduced the write off requirement and brought an increase of realized capital gains. Management expenses fell while the tax burden rose slightly. The consolidated Group profit of the reinsur­ ance companies rose to Sw. frs. 93 million (previous year, Sw.frs. 86 million).
The following overall results of the individual Group com­ panies correspond to the results published in accor­ dance with local accounting provisions.
The European General Reinsurance Company of Zurich shows in Non-Life reinsurance an increase of gross pre­ mium volume by approximately 80% to Sw. frs. 950.2 mil­ lion (previous year, Sw. frs. 526.1 million). This exceptional growth is due to the assumption of reinsurance of Mort­ gage insurance business in the United States. The under­ writing loss rose slightly. - in Life reinsurance fhe gross amount of business in force fell in Swiss francs as a resuif of lower conversion rates to Sw. frs. 72,400 million (previ­ ous year, Sw. frs. 88,800 million). The deferioration in morfaiify of Norfh American business caused a loss, although lower than in the previous year, investment income and realized capital gains showed a marginal increase. The net profit was Sw.frs. 2.0 million, as in the previous year, and is again to be used to strengthen the reserves.
remaining classes. The share of the Property lines is now around 50%, while that ot Liability has fallen to 25%. The American insurance industry again suffered high under­ writing losses in the year under report. For Non-Lite rein­ surers the average rate tor paid and reserved claims plus acquisition costs and management expenses was 22% more than the premiums earned. Our subsidiary com­ pany which ranks among the largest U.S. reinsurers was not able to escape this market development. The under­ writing loss rose despite persistent remedial efforts. In the Liability sector a special reinforcement ot reserves tor claims from former years led to an increased burden. Surety business suffered a marked deterioration whereas the remaining Non-Lite reinsurance showed greatly im­ proved results. In the investment sector there were high realized capital gains, and investment income rose signi­ ficantly. The company published a negative overall result ot US$ 15.3 million (previous year, loss ot US$ 11.4 mil­ lion). No dividend was paid (previous year, payment ot US$ 4.5 million).
At the Canadian Reinsurance Company, Toronto, gross premiums tell in 1985 by 4% to Can.$ 111.1 million. The drop in premium is due to the pruning ot Motor business. Higher premiums and greater volume in other classes were only partly able to offset this decline. The underwrit­ ing loss showed a slight rise as compared with the previ­ ous year. Thanks to higher investment income and sub­ stantial realized capital gains, the company achieved a profit ot Can. $ 10.9 million (previous year. Can. $ 4.5 mil­ lion). A dividend ot Can.$ 2.9 million (previous year. Can. $ 1.2 million) was paid on the preference shares and one ot Can.$ 0.2 million (previous year, no dividend) on the common shares.
The Lite reinsurance business in force otthe North Ameri­ can Reassurance Company, New York, the SwissRe Life insurance Company, New York, and the Swiss-Am Reas­ surance Company New York, remained at about the pre­ vious year's level as a result ot a selective underwriting policy. Far-reaching remedial measures led to a reduction ot the premium income and impaired the underwriting result. Management expenses increased slightly. The growth ot Investment income was only moderate. Overall a loss was shown ot US$ 17.1 million (previous year, profit ot US$ 1.3 million), which was, however, offset by high realized capital gains. No dividend was paid (previous year, US$ 0.9 million).
The Canadian Reassurance Company, Toronto, increased further its amount ot conventional business in force. The underwriting profit tell short otthe previous year's result following an accumulation ot major claims. On the other hand, realized capital gains rose. The result shown amounted to Can. $ 11.1 million (previous year. Can. $ 6.0 million); the dividend remained unchanged at Can. $0.55 million.
Fire 1,897 426 2,323 1,902 402 2,304 Accident/Sickness 472 2,069 2,541 985 1,928 2,913 Third Party Liability/Motor 1,559 807 2,366 1,448 714 2,162 Marine 331 126 457 356 119 475 Other branches 1,482 196 1,678 1,085 174 1,259 Lite 1,227 557 1,784 1,901 518 2,419 Gross premiums 6,968 4,181 11,149 7,677 3,855 11,532 Premiums ceded 624 569 1,193 1,125 592 1,717 Net premiums 6,344 3,612 9,956 6,552 3,263 9,815 in millions ot Swiss francs
same level. - In Life reinsurance the gross amount of business in force grew to DM 5,500 million (previous year, DM 5,300 million). The measures initiated in foregoing years to improve profitability led to a reduction in the negative result. - Investment income continued to rise. Overall the company showed an unchanged profit forthe year of DM 8.0 million, so that an unchanged dividend of DM 4.0 million can be expected.
At the Australian Reinsurance Company Limited, Mel­ bourne, the gross premiums in the Non-Life sector rose by 2.4% to Austr. $ 83.4 million. The previous year's underwriting loss was further reduced. - The gross amount of Life business in force grew to Austr. $ 3,100 mil­ lion and the underwriting result (including Accident and Sickness reinsurance) was more favourable following the satisfactory claims experience. - A marked increase of in­ vestment income and the improved reinsurance results led to an overall profit of Austr. $ 5.7 million (previous year, Austr. $ 4.3 million). The dividend was raised from Austr. $ 0.75 million to Austr.$ 1.0 million.
(previous year, DM 3.1 million). - The business year of the Vereinigte Eos-Isar Lebensversicherung AG was satisfac­ tory. The amount of insurance in force rose by 4.0% to DM 11,800 million (previous year, DM 11,400 million). Claims payments increased. After direct credits and an allocation to the reserve for policyholders' bonuses, a profit for the year remained of DM 2.1 million (previous year, DM 2.8 million). A dividend of DM 1.1 million (previ­ ous year, DM 0.8 million) was paid. - The premium in­ come of the Vereinigte Krankenversicherung AG rose by 7.2% (previous year, 5.2%) to DM 2,144.6 million. This amount includes non-recurring premiums of DM 166.5 million from the reserve for return of premium. An in­ crease of claims payments and higher expenses led to a lower allocation to tfie reserve for policyholders' bonuses. With a profit for the year of DM 16.5 million (previous year, DM 16.0 million) the free reserves were strengthened, a dividend of DM 5.5 million (previous year, DM 5.0 million) paid and, as in the previous year, DM 3.0 million contri­ buted to the outstanding paid-up capital.
The General Surety & Guarantee Co. Limited, Wiimslcw specializing in surety business - increased its gross pre­ mium income by £ 0.2 million to £ 3.0 million. The result shown for the year of £ 119,000 is slightly below that of the previous year (£ 138,000). A dividend of £ 90,000 was paid (previous year, £ 70,000).
The North American Specialty insurance Company, Man­ chester, New Hampshire, acquired by the Swiss Re in March 1985, is being redeveloped as a Non-Life insur­ ance company, in the year under report the company achieved a gross premium volume of US$ 9.0 million and an overall result of US$ 0.6 million.
The increase of dividend payments by Sw.frs. 2.9 million to Sw.frs. 34.4 million is primarily due to higher dividends from minority holdings, in the case of Group companies dividend increases and decreases largely balanced out. SR Beteiligungen AG, the Vereinigte Aachen-Berlinische Versicherung AG, the SWITZERLAND General insurance Company Limited and the Bavarian Reinsurance Com­ pany Limited increased their dividends, in contrast, the SwissRe Holding (North America) inc. and the SwissSouth African Reinsurance Company withheld payment of a dividend. Foreign currencies had overall a slightly negative effect on dividend payments.
Cash in hand, postal bank account, bank balances 740 103 861 522 Current-account balances 1,539 351 1,903 2,436 Cash deposits 1,684 122 1,806 2,302
Current-account balances 788 769 1,606 1,670 Cash deposits 309 181 490 668
Building society deposits - - 340 228 Transitory entries, value adjustments and other provisions 1,139 241 1,404 1,178
The Group accounts were compiled according to the published financial statements as at 31st December, 1985, ofthe companies belonging to the Swiss Re Group. Only the results of the Bavarian Reinsurance Company Limited and the European General Reinsurance Com­ pany of Zurich had not yet been published at the time of the consolidation.
The scope of consolidation includes all domestic and for­ eign companies In which Swiss Re, Zurich, directly or in­ directly maintains a holding of more than 50%. Each indi­ vidual Item of the profit and loss accounts and the bal­ ance sheets of these companies is shown at 100%. The shares ofthe capital funds and profit applicable to minori­ ty shareholders are shown as separate items in the con­ solidated balance sheet and profit and loss account.
In the wake of the tall In the exchange rate ofthe U.S. dol­ lar the foreign currencies used in the Group accounts weakened - some considerably-as against the previous year. The only exception was the German mark which was valued slightly higher against the Swiss franc (cf. table on page 22).
Fixed-interest investments are In principle entered at ac­ quisition cost or. It 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 to registered debentures owned by Group com­ panies in Germany which. In accordance with German practice, are shown at nominal value and incorporated In the Group accounts unchanged.
Shares and non-consolidated holdings are valued ac­ cording to the same principles as fixed-Interest securi­ ties. Non-quoted participations are entered at acquisition cost taking into consideration any necessary deprecia­ tion.
Reai estate Is entered at the balance-sheet values ofthe Individual Group companies: these correspond as a rule to the acquisition value less the maximum depreciation permitted by the tax authorities.
All other Items of the Group balance sheet play a subor­ dinate role In the valuation. Foreseeable risks of loss are taken Into consideration by means of value adjustments by the Individual Group companies.
The Consolidated gross premiums feil In all classes by 3.3% to Sw.frs. 11,149 million, although in original curren­ cies a growth rate of 6.3% was achieved. The reason for the fall in premium income when converted into Swiss francs lies in the lower valuation of the U.S. dollar and re­ lated currencies. In Non-Life insurance premiums rose by 2.8% (previous year, 14.8%) to Sw. frs. 9,365 million, while in Life Insurance - mainly because of remedial measures in the United States - they fell by 26.3% to Sw.trs. 1,784 million (previous year, rise of 9.2%).
In addition to commission payments and profit commis­ sion reimbursements, this item Includes the general ex­ penses Incurred In Insurance operations.
The claims Incurred comprise payments for Life and An­ nuity Insurance as well as the adjustment in the outstand­ ing claims reserve. The total outgo for own account fell In the year under report by Sw.trs. 300 million to Sw.frs. 719 million. Of this amount, Sw.trs. 553 million concerned reinsurance companies and Sw. frs. 166 million Insurance companies.
The income from the Group's capital investments rose by 1.6% (previous year, 25.8%) and (before the crediting of in­ terest in Life and Sickness business) reached a total of Sw.frs. 1,713 million (previous year, Sw.frs. 1,686 million). Of this amount, the Interest on the Life insurance and An­ nuity fund accounted for Sw.frs. 406 million (previous year, Sw.frs. 441 million); In the Non-Life classes it includ­ ed a credit of Sw.frs. 239 million (previous year, Sw.frs. 205 million) to Sickness business.
Life insurance Life insurance and annuity fund 2,556 2,920 5,476 5,479 Outstanding claims reserve 459 21 480 562 Reserve for profit commission 7 810 817 671 in % of Life insurance in force, net 1.9% 24.3% 3.9% 3.5%
The capital funds shown in the consolidated balance sheet (sum of share and non-voting share capital, re­ serves, consolidation reserve funds and Group profit) correspond to the book value of the funds invested in the entire Group by shareholders and non-voting share­ holders of Swiss Re, Zurich. In the year under report Group capital funds rose by Sw.frs. 433 million to Sw.frs. 1,605 million, mainly because of thetwo capital increases of Swiss Re, Zurich, which strengthened the Group's capi­ tal by Sw.frs. 432 million.
Capital funds at end of previous year 1,172 936 Effects of exchange rate fluctuations on opening balance-sheet figures - 81 66 Paid-out profits for previous year - 60 - 55 Issue of non-voting share capital of Swiss Re, Zurich 432 95 Group profit 145 120 Other movements - 3 10
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. 9 million to Sw.frs. 42 million, applicable profit by Sw.frs. 1 million to Sw.frs. 10 million. These increases are respectively due to the higher capi­ tal funds and to the higher valuation of the German mark.
In July 1986 Swiss Re, Zurich, issued further non-voting shares in an international placing. This transaction raised the capital funds of Swiss Re, Zurich, and consequently of the Group by a further Sw.frs. 459 million.
SWITZERLAND General Insurance Company Limited Sw. frs. 99.9 85,597 1,026,669 636,762
SWITZERLAND Insurance Company UK Limited £ 100 5,977 21,592 1,804 *not consolidated
Gross premiums 4 Magdeburger Versicherungsgruppe: 1 Vereinigte Versicherungsgruppe: 1 Vereinigte Aachen-BerlinisctieVersictierung AG DM 96.8 132,143 956,620 654,965 i 1 Vereinigte Eos-Isar Lebensversicherung AG DM 95 24,773 3,444,630 425,115
Liabilities Current-account balances Cash deposits Technical reserves Non-Life insurance Life insurance Transitory entries, value adjustments and other provisions (incl. share of minority shareholders and building society deposits) Group Capital Funds Shown (incl. Group profit)
SWITZERLAND General Insurance Company Limited Gotthardstrasse 43, CH-8022 Zurich with branch offices in Barcelona, Brussels, Genoa, Hamburg, Istanbul, Milan, Munich, Paris, Thessaloniki, Vienna, Hong Kong, Jakarta, Manila, Melbourne and Montreal SWITZERLAND Insurance Company UK Limited Three Quays, Tower Hill, London, EC3R6DS Finasyr Seguros y Reaseguros S.A. Via Augusta 153-157, E-08021 Barcelona
Vereinigte Aachen-Berlinische Versicherung AG Vereinigte Eos-Isar Lebensversicherung AG Vereinigte Krankenversicherung AG Fritz-Schäffer-Strasse 9, D-8000 Munich 83 Saar-Rhein Allgemeine Versicherungs-AG Sulzbachstrasse 16-18, D-6600 Saarbrücken 3
United States Fidelity and Deposit Company of Maryland Charles and Lexington Streets, Baltimore, MD 21203 North American Specialty Insurance Company 650 Elm Street, Office Suite 600 Manchester, New Hampshire 03101
Japan Swiss Reinsurance Company, Representative Office Tokyo Sansho Building 7 E 2-9 Nihonbashi 3-chome, Chuo-ku, Tokyo 103
Philippines SwissRe Advisers Limited Dofia Narcisa Building, Room 703, 8751 Paseo de Roxas, Makati, Metro Manila
Colombia Compafiia Suiza de Reaseguros, Oficina de Asesoria Tecnica Calle 72, No. 12-65, Of. 502, Bogota
Cash deposits: A sum left by the-^reinsurer in the hands of the ^ ceding company to guarantee contractual lia­ bilities.
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.
Motor insurance: Insurance against accident and liabil­ ity, as well as against accidental collision damage, in con­ nection with motor vehicles.
Portfolio: The totality of ̂ risks assumed by an ̂ insurer or ^ reinsurer; also the totality of investments.
Premium: Amount paid by the policyholder to the surer in return for insurance cover.
Proportional reinsurance: Form of reinsurance in which the premiums and losses of the ^ insurer are shared proportionally by the ^ insurer and ^ reinsurer.
Reinsurance commission: Amount paid by the rein­ surer, to the ̂ insurer for costs in connection with the ac­ quisition and administration of insurance business.
Retrocessionaire: Company which accepts -> risks by way of ^ retrocession.
Retrocession premiums: Premium paid to the -> retro­ cessionaire for the part of the risk accepted.
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).
Underwriting result: Result of underwriting after taking into account ^ earned premiums, ^ commissions, ^ profit commissions and ^ claims incurred.