Assistant Managers R. Aeberli K. Aerni A. Albrecht G. Bassin F. Bolliger H. Brodbeck E. Bumens P. E. Ghristen W. Diehl G. E. Geiser
We have the honour to present to you the 101st Annual Report and Statement of Accounts of the Company for the business year 1964/65.
The majority of our Group reinsurance companies, in whose business we participate, are encountering in their own non-Life markets similar difficulties to ours. The reinsurance transferred to us therefore seriously aggravates our overall underwriting result. For all branches combined we have contracted heavy deficits from the U.S.A. and Canada; on the other hand, the South African and Austra­ lian subsidiary companies have ceded a profit.
The following paragraphs give an account of business experience in the individual classes.
Fire insurance has brought us an appreciable increase in premium. Much sharper, however, is the increase in claims incurred, with the result that this influential branch of insurance, regularly yielding a surplus until a few years ago, concludes with a substantially greater deficit than in the previous year. The causes mentioned in the report of last year were again the determining factors. In many instances the current premium rates are now far from adequate to provide either for the numerous small and medium-sized losses or for the growing frequency of fires affecting major commercial and industrial risks. An addit­ ional burden for the reinsurer is that he has a dispropor­ tionately high participation in the large and very often under-rated insurances; moreover in most cases he has to compensate the direct insurer's average costs, whilst the costs for the aforementioned business are lower. Although premium rates have been increased in some markets, in others the overdue remedial measures are still awaited. An improvement is becoming apparent in two territories of importance for us, Germany and Great Britain. In Swiss business we suffered two major fire losses in Geneva which cost us alone Sw. frs. 4 million. The Belgian business result was influenced first by extensive windstorm claims, which were covered under Fire policies, and then by two severe explosion losses in chemical works. In Spain too we had a substantial share in unusually big industrial claims. The Philippines were once again hit by conflagrations and even with our comparatively small participation in Fire insu­ rances in the danger areas we bore a considerable overall loss. — Experience has been favourable in Flail insurance, with its minor premium volume. — In Burglary insurance the balance of business was upset by losses on commercial risks, which have produced a comparatively high deficit. Large losses in Switzerland weigh heavily in this respect. — In the Miscellaneous lines the result is marred by serious losses on building and engineering risks.
We can report a surplus in both Accident and Health insu­ rance, with a slight increase in premium income. Against the unsatisfactory experience in Workmen's Compensation, there have been gratifying results in Personal Accident business, in spite of some sizeable claims.
As a whole the Third Party Liability classes register a further premium growth. The aggregate result of the bus­ iness entered by us under this heading has also improved and it closes with a profit. Yet again. Motor insurance was particularly dissatisfying. On the other hand, surpluses accrued in General Third Party Liability, Aviation Third Party Liability and Aircraft Hull insurance.
Only in a few markets has the unhealthy state of affairs in Motor insurance, which was referred to in the last an­ nual report, been to some extent remedied; in other terri­ tories even obvious shortcomings in tariffs and conditions continue to exist. Moreover, where adjustments have indeed been effected, both in direct insurance and in our reinsur­ ance conditions, these have often become outdated again on account of the increasing claims frequency and the leaps in compensation payments. The persistently unsatis­ factory circumstances in France, Belgium and Luxembourg are reflected in notable deficits. The results for Switzer­ land too have of late been a disappointment to us. — Gene­ ral Third Party Liability insurance sustained a number of particularly big losses which have brought deficits in cer­ tain countries. Overall, however, there remains a surplus.
The premium income in Aviation insurance is less than in the previous year. The setback is due to a steep reduction in premium rates for Aircraft Hull insurance, these now being so low that they would hardly suffice to absorb the catastrophe losses which are always possible in this class of business. However, in the year of report both Aviation Third Party Liability and Aircraft Hull insurance yield a favourable result.
The Surety, Fidelity and Credit lines have again returned a small profit, but insufficient for a sector of business which can rapidly incur perceptible deficits if there is a reversal in economic trends.
Life assurance shows the greatest absolute premium growth of all branches. This increase is partly accounted for by the additional entries in connection with the change in closing date of our books. An exceptional expansion is apparent in the business in force, which rose by Sw. frs. 1,500 mil­ lion to Sw. frs. 11,000 million. Notwithstanding the atten­ dant new business costs — which we continue to amortize in full — it has still been possible to improve somewhat on the result of the previous year. The sound and steady busi­ ness returns of Life assurance remain a primary factor in our Profit and Loss Account.
Fire 461,694,000 409,546,000 Hail 10,055,000 9,424,000 Burglary 25,023,000 24,234,000 Engineering, Water Damage, Plate Glass and Livestock 17,912,000 14,974,000 Marine 139,730,000 98,381.000 Accident 91,274,000 83,583,000 Health 80,202,000 77,913,000 Third Party Liability 420,046,000 381,138,000 Fidelity, Surety and Credit 58,451,000 53,363,000 Life 266,605,000 208,553,000
Premiums for own account 1,272,301,000 1,083,042,000 in millions of francs - , C-y''-
Interest Income and Investments The expanding volume of business has once more led to an increase in the interest-bearing assets and, consequently, the interest income. Furthermore, new investments have been effected in many countries at higher interest rates. In addition we have drawn interest over 18 months, for the reasons indicated at the beginning of this Report. There­ fore the net interest income, after the required allocation to the underwriting sector, has grown from Sw. frs. 52.3 million to Sw. frs. 85.1 million. This additional interest income, which is peculiar to the year under review, first covers the extra management expenses owing to the exten­ ded accounting period of 18 months, then absorbs the un­ derwriting deficit, and finally contributes decisively to the increased net profit.
Common Shares of Public Utility, Industrial, Railway and other Companies 125,448,000 145,518,000
On this one occasion the management expenses for the year of account relate to a period of 18 months. Never­ theless the increase from Sw.frs. 16.5 million to Sw.frs. 28.5 million has proved to be relatively greater, on the one hand because fully double the annual amount was in­ curred under certain expense categories and on the other because of the strong influence of rising costs in almost all sectors. There has been an above-average rise in the trav­ elling expenses, necessitated, despite the unfavourable results, by intense and sustained competition on the rein­ surance market. Only the official quota on the number of our personnel, which makes heavy demands of our existing employees, and the outstanding growth in premium income have kept the rate of management expenses approximately level. The tax expenditure for the year of account has further decreased from Sw.frs. 9.9 million to Sw.frs. 8.6 million in consequence of the decline in profit. There is a sharp reduction in the balance of the account for Depreciation, Fluctuations in Foreign Currencies and Stock Exchange Rates, from Sw.frs. 8.4 million to Sw.frs. 1.2 million. A depreciation requirement arose in respect of holdings and, as noted above, in respect of shares and especially fixed-interest securities. On the other hand there are modest book profits from fluctuations in foreign ex­ change rates and significant realized capital gains. The latter resulted from the maturing of bonds on which depreciation allowances had earlier been made — by the "cost or market" method — and from the sale of securities, particularly in North America, for investment reasons.
The last General Meeting re-elected Mr. Paul Keller and Mr. Paul Ruegger to the Board of Directors, and elected Mr. Max E. Eisenring and Mr. Werner Ahegg as new mem­ bers of the Board. Mr. C. J. Ahegg, to whom our recognition was expressed in the last Annual Report, did not wish to be considered for re-election and has retired from the Board. Mr. Paul Keller expressed the wish to be relieved of his executive functions; he withdrew from the Chairmanship of the Board on the 1st July 1964 and was elected Deputy Chairman. He has been succeeded as Chairman of the Board of Directors by Mr. Max E. Eisenring. The term of office of Mr. Ernst Froelich and of Mr. Hans Schindler has expired by rotation. Mr. Froelich retires from the Board for reasons of age. Mr. Schindler offers himself for re-election and is immediately eligible rmder the Articles of Association. Mr. Ernst Froelich was elected to the Board of Directors in 1957, after many years of successful endeavour on behalf of our Company, including 14 years as General Manager. The profound knowledge of our business opera­ tions and the extensive legal experience of this internation­ ally acknowledged insurer have been of special service to us. Mr. R. S. Hegner also resigns from the Board on account of age. Originally a member of the team of audi­ tors appointed by our Shareholders, Mr. Hegner joined the Board of Directors in 1951; as a businessman particularly well versed in international commerce, he has been a valued adviser. We are greatly indebted to Mr. Froelich and Mr. Hegner for their long collaboration. With effect from the 1st July 1964 the Board of Directors appointed Messrs. W. Leimhacher, H. F. Rudolf and H. B. Vischer as Deputy General Managers. The following pro­ motions were also made: to Manager, Messrs. A.-L. Chenaud, W. Eschmann and A. Schütz; to Deputy Manager, Messrs. E. Bosshardt, R. Hedinger, R. Ochsenhein and H. Salzmann; to Assistant Manager, Messrs. A. Alhrecht, F. Bolliger, H. Brodheck, P. E. Christen, W. Diehl and H. Schönenherger. At the end of 1964 Mr. K. Easier, Manager, and Messrs. W. Belser and M. Grossmann, Deputy Managers, entered retirement. These gentlemen have contributed m large measure to the interests of our Company and we are grate­ ful to them for their many years of valuable service.
New Building In April 1965 the authorities gave permission to commence the first phase of construction. At the time of printing this Report the work of pile-driving is nearly completed and the concrete containing wall below ground is half-finished. Excavation for the underground construction is planned to start at the beginning of next year.
The net profit for the 18-month accounting period amounts to Sw. frs. 43.5 million, compared with Sw. frs. 24 million in the previous 12-month business year. In view of the continued unsatisfactory experience in the non-Life bran­ ches, the Board of Directors proposes to the General Meet­ ing that as a precautionary measure the balance carried forward be augmented by aroimd Sw.frs. 5 million and that a further Sw.frs. 5 million be allocated to the Fund for Extraordinary Losses, thereby raising this Fund to
In addition the Board of Directors proposes that the remainder plus the balance brought forward from 1963
Sw.frs. 35 million — a sum which is deemed appropriate by reason of the continually mounting commitments of the Company. The Board of Directors further proposes pay­ ment of an unchanged ordinary dividend of Sw.frs. 60.—per share on the share capital, as increased from Sw.frs. 75 million to Sw. frs. 100 million in the year of report, and, in consideration of the income deriving in part from a period of 18 months, a non-recurring "adjustment dividend" of Sw.frs. 15.— per share. In addition the Board proposes the allocation of Sw.frs. 3 million to the Staff Life Assurance and Pension Fund, Sw. frs. 300,000 to Donations, and Sw. frs. 443,600 to Directors' Remuneration.
The formal proposal of the Board of Directors accordingly reads: Sw. frs.
should be allocated as follows: Additional Dividend Adjustment Dividend Fimd for Extraordinary Losses Donations to Charity
for the period from the 1st January 1964 to the 30th June 1965
The securities, or the corresponding deposit certificates, were examined on the 13th and 14th July and on the 15th September 1965 and found to be in order. A check carried out on the 15th September 1965 showed that the cash in hand corresponded with the books.
Dividend Sw. frs. 60.— per Share 24,000,000 Adjustment Dividend Sw. frs. 15.— per Share 6,000,000 Fimd for Extraordinary Losses 5,000,000 Staff Life Assurance and Pension Fund 3,000,000 Donations to Charity 300,000 Directors' Remuneration 443,600 Carry Forward 6,059,779
The tables below and on pages 18-20 provide a summary of the principal consolidated figures for the parent and subsidiary companies.
The distribution of these consolidated retained premiums between the parent and subsidiary companies is as follows: Swiss Reinsurance Company Premiums for Own Account
Net Profit in millions of C | in millions of C $ p
Despite keen competition the gross Life business in force in­ creased by C1104 million to C1380 million. The substantial new business involved correspondingly high production costs which have not been carried on the asset side and could not be fully covered by the net investment income and mortality profit. As in the previous year, no dividend was paid.
Swiss-South African Reinsurance Company Ltd. Johannesburg Share Capital Rand 372,000 in millions of Rand in millions of Rand
By the end of 1964 the intended transfer of business from the Australian Branch to this youngest of our subsidiary companies had been completed only in the non-Life bran­ ches. It was necessary to call upon the investment income and the realized capital gains in order to cover the under­ writing deficit; no dividend was paid.
Canadian Branch 1959 All classes 250 University Avenue, Toronto 1, Ontario
Canadian Reinsurance Company 1953 All classes excl. Life 250 University Avenue, Toronto 1, Ontario with an Office in Montreal
Canadian Reassurance Company 1960 Life 250 University Avenue, Toronto 1, Ontario with an Office in Montreal
Australian Reinsurance Company Ltd. 1962 All classes 51 Queen Street, Melbourne C. 1 with Offices in Sydney and Hong Kong