What we do We offer a comprehensive range of reinsurance and financial solutions to manage risk and capital. Our aim is to create sustainable value for both clients and shareholders.
Swiss Re –3.1 –22.4 Swiss Market Index 9.7 –3.4 DJ Europe STOXX Insurance Index 6.4 –12.1
 Swiss Re  Swiss Market Index  DJ Europe STOXX Insurance Index
Earnings per share in CHF 13.49 11.95 –11 Dividend per share in CHF 3.40 4.00¹ 18
Profi le 6 Key events 8 Swiss Re at a glance 16 Strategic direction and vision 19 Talent and expertise 22 Knowledge and solutions 26 Corporate responsibility
Financial statements 127 Contents 129 Group fi nancial statements 135 Notes to the Group fi nancial statements 199 Swiss Reinsurance Company, Zurich
General information 217 Cautionary note on forward-looking statements 224 Managing Directors 228 Business contact information
As you are well aware, 2007 was a year of contrasts. Your company delivered the second-best result in its 144-year-history, with net income of 4.2 billion (CHF 11.95 per share) and outstanding performance across almost all areas of our business. However, in November we suffered an isolated, yet very significant, loss from our credit underwriting activities. There is no doubt that we failed to live up to your expectations, a fact we take very seriously.
But before we review the year in more detail and explain our outlook for your company’s future success, allow us to recognise our employees for their achievements in delivering our 2007 results.
From left: Peter Forstmoser Chairman of the Board of Directors Jacques Aigrain Chief Executive Officer
The integration of GE Insurance Solutions has advanced well, with synergies on track. Business retention at the end of 2007 was 77%, significantly exceeding our expectations, and talent retention was also strong, with 85% of targeted executives staying with Swiss Re. The quality of the assets acquired was borne out by our ability to significantly reduce retrocession recoverables from CHF 10.2 billion at the date of acquisition to CHF 5.1 billion at the end of 2007. The acquisition not only extended our market reach, it also allowed us to strengthen our expertise in several areas, including health, engineering and marine.
These results show the significant cash value we added for you, our shareholders, but are also a reflection of our success in serving clients across the world, helping them manage complex risks and protecting them against uncertainty.
Actions in response to the loss in credit underwriting As mentioned earlier, our fourth quarter result was impacted by a significant loss in our structured credit activities. This was triggered by two related transactions providing credit risk protection against the default of a basket of US mortgage-backed securities – a risk that was considered to be remote at inception. Unprecedented action by the rating agencies in October led to a rapid wave of downgrades of these securities. This resulted in a mark-to-market loss for Swiss Re of CHF 1.2 billion before tax.
The business unit in which the loss occurred is marginal to our credit reinsurance business and we have ceased writing structured credit derivative transactions, putting the existing portfolio into run-off. We have learned from the mistake and are confident that we have a stronger organisation as a result.
Outlook for 2008 and beyond Your company is strongly positioned to deliver continuous improvement in its earnings per share over the near future. New product development, in particular in our life and health business, is supporting the positive momentum in our revenues.
We have already taken steps to prepare for the changing property and casualty market by extending our approach to the trading of insurance risk. In January 2008, we entered into a significant quota share arrangement to increase your company’s operational leverage by ceding a 20% share in our new and renewed property and casualty business. The agreement includes a ceding commission of 14% after acquisition costs. It offers Swiss Re both downside protection and upside flexibility, enabling us to further advance our capital management and allowing us to increase capacity rapidly should underwriting conditions improve. This is further evidence of our commitment to actively manage the insurance price cycle in the best interest of our shareholders.
In 2007, we also accelerated our worldwide efforts to simplify and optimise our corporate structure. In Europe, we are benefiting from the new Reinsurance Directive by consolidating our EU business (excluding Admin Re®) into two entities in Luxembourg. Together with the capital released by the quota share arrangement, these efforts will deliver significant improvements in the Group’s capital flexibility, allowing us to increase our share buy-back or invest the capital elsewhere for higher returns at a moment in the cycle when capital is in surplus.
With these opportunities in mind, we are confident in your company’s growth prospects. We remain focused on our medium-term objective of 10% growth in earnings per share and have increased our return on equity target to 14% over the cycle. Our earnings power is strong and we look to the future with confidence.
1 March Share buy-back Buy-back programme launched with a value of CHF 6 billion over three years
Nordic Risk and Insurance Summit, Stockholm China Knowledge Fair, Beijing Product & Knowledge Fair, Zurich 13 March Optimisation of EU entities EU business (excluding Admin Re®) to be consolidated into two Luxembourg-based legal entities by 2009 27 March UK hybrid securities First placement of sterling hybrid securities with total value of GBP 500 million 3 April 2006 embedded value Life and health embedded value earnings grow 38% to CHF 2.4 billion; embedded value increases 13% to CHF 22.6 billion 20 April 143rd Annual General Meeting Shareholders approve share buy-back programme and dividend of CHF 3.40 per share 27 April Australian hybrid securities Placement of Australian dollar hybrid securities worth AUD 750 million 8 May First quarter 2007 results Net income of CHF 1.3 billion for the first quarter (EPS: CHF 3.85)
1 June Mediterranean earthquake bond USD 100 million issued in first securitisation of Mediterranean earthquake risk 4 June Admin Re® longevity transaction Agreement with Zurich Financial Services to acquire a closed book of 220 000 annuity policies in return for assets worth CHF 9.1 billion 20 June Healthcare in India Healthcare advisory company founded to assist insurers in the rapidly expanding Indian market 28 June Swiss Re Cat bond indices First performance indices for catastrophe bonds developed in cooperation with Standard & Poor’s 7 August Second quarter 2007 results Net income of CHF 1.2 billion for the second quarter (EPS: CHF 3.50)
Founded in Zurich, Switzerland, in 1863, Swiss Re is a global reinsurance company, providing risk and capital management solutions to clients around the world.
Swiss Re is also a leader in risk securitisation and trading. We transfer exposures to the capital markets to provide a new source of capacity for the industry.
Our success is founded on expertise, dialogue with clients and sound governance. We attract, develop and inspire the best talent to advance our performance and deliver innovative solutions.
We are committed to best practice and continually advance our corporate governance to ensure transparency for all stakeholders.
Our people drive our success. Their skills, performance and commitment help us stay ahead in the industry and deliver exceptional solutions for our clients.
Swiss Re’s combination of scale, integrated risk and capital management, and broad insurance expertise is unparalleled in the industry.
Superior scale and financial capacity to take on risk We have a unique ability to write and diversify all types of insurable risk. This is based on the size and strength of our balance sheet, our comprehensive product range and our worldwide reach.
Integrated approach to risk and capital management We blend our risk expertise with capital market capabilities to develop comprehensive and creative insurance solutions for our clients.
We are a leader in structuring and trading insurance risk. Since 1997, we have led the deployment of insurance-linked securities, underwriting 30% of all issues.
We engage closely with clients to understand their priorities and needs across all markets and lines of business.
As a recognised industry leader, we share our experience and expertise with industry bodies, regulators and governments.
Swiss Re’s products and services are backed by superior financial strength ratings. These are among the best in the industry, reflecting our very strong capital base, business position, financial flexibility and franchise, as well as prudent risk and capital management.
We are in the business of taking and managing risks. Over our 144-year history, Swiss Re has always delivered on its obligations to clients, even in the face of extreme loss events. Recognising the potential for exceptional events and maintaining the financial capacity to absorb them is the foundation of our long-term stability and success. This resilience in times of adversity has allowed us to emerge stronger and even better prepared to seize the opportunities that lie ahead.
Europe Americas Asia Globals & Large Risks Global Admin Re® & Run-off
The Client Markets business function offers clients a single point of access to the entire range of Swiss Re’s solutions and capabilities.
Building on close relationships, it combines a powerful client focus with global reach and local knowledge.
Client Markets aims to be the port of call for both the insurance and financial market needs of our clients, delivering solutions ranging from traditional reinsurance to insurance-based capital market products.
The Products business function supports Client Markets by developing innovative solutions to meet the increasingly complex requirements of clients. It integrates Swiss Re’s traditional reinsurance and financial expertise, and ensures excellence in underwriting and claims management.
The Finance, Risk Management and Operations functions provide shared services to support the business functions. The corporate functions manage Swiss Re’s common resources including: capital, the risk portfolio, brand reputation, information technology, human resources, as well as knowledge and skills.
Various corporate functions fulfil obligations to regulatory authorities and other stakeholders, provide legal and compliance support, and ensure the protection of the Group by establishing the corporate governance rules and processes under which Swiss Re operates.
(Re)Insurance Products (Re)Insurance Products is Swiss Re’s centre of competence for risk underwriting and claims management. It actively steers the Group’s insurance risk portfolio and manages the insurance cycle to ensure economic profit growth across markets and lines of business.
Financial Services Products Financial Services Products manages the assets generated by our insurance business. It also facilitates the securitisation and transfer of insurance risks to the capital markets, and develops derivative solutions for life and health assets, as well as for specialised non-life insurance.
Client Markets Products Corporate functions * Member of the Executive Committee
Generate economic profit growth Swiss Re constantly seeks to redeploy its capital to areas of profitable growth, based on its rigorous commitment to profitability throughout the insurance price cycle. The Group is committed to delivering economic profit growth for its shareholders by remaining a strong and reliable partner for clients.
Reduce earnings volatility On the basis of its disciplined underwriting practices, Swiss Re utilises a wide variety of tools to reduce earnings volatility. These include issuing insurance-linked securities, hedging financial market risks and enterprise risk management.
Reduce earnings volatility  Active cycle management  Expanded hedging for natural catastrophe and extreme mortality risks  Launch of catastrophe bond indices with
Vision The insurance industry is changing: the boundaries between risk assessment, risk bearing and risk transfer are becoming increasingly blurred. Swiss Re seeks to build upon its leadership position in the insurance industry and its ability to adapt to – and benefit from – the changing risk transfer landscape.
Swiss Re will extend its leadership in risk management solutions by accelerating its origination, transformation and trading of insurance risks, as well as by strengthening its ability to seize profitable opportunities across the entire risk landscape.
Be a bolder principal to ensure focus on profitable business and investment opportunities
Leadership in insurance risk transformation, syndication and trading A unique combination of financial strength, reinsurance expertise and capital market capabilities enables Swiss Re to deploy its capital and insurance underwriting capacity actively, flexibly and efficiently. The Group’s experience in structuring insurance risk provides further opportunities to optimise its own capital and risk management, and act as an insurance securitisation intermediary for clients.
As a global organisation, Swiss Re is committed to extending the diversity of its workforce, which currently includes over 80 nationalities based in 29 countries across the world. At the end of 2007, the Group employed 11 702 people, including 987 Norwich Union employees who joined Swiss Re as part of an Admin Re® agreement. Europe remains the largest region with 67% of Swiss Re’s global workforce, while the Americas account for 28% and Asia for 5%. Staff working for the European region increased 12%, due to the transfer of staff as part of the agreement with Norwich Union. In the Americas and Asia regions, overall numbers remained stable, despite higher recruitment in emerging countries: the Latin American workforce increased by 7% to support projected market growth.
The graduates@swissre global training programme recruits outstanding young people who have distinguished themselves through excellent academic performance, international experience, extracurricular activities and language skills. Participants come from leading universities around the world and undergo an intense 18-month programme with rotating assignments that expose them to different regions, functions, product lines and operational units across the Group. They have opportunities to meet with senior leaders, allowing them to explore the company and find the most fitting career opportunities across the organisation (for more information, see pages 40–41).
² Excluding 987 employees transferred from Norwich Union in the fourth quarter of 2007
In 2007, the Swiss Re Academy (see box below) launched a new learning and development landscape that offers employees a roadmap of courses to suit individual career levels and objectives. The new landscape aligns the curriculum more closely to business needs: it takes a solution-focused approach to business training and integrates employee courses with client workshops and seminars.
Swiss Re recognises that successful experts and leaders require a mix of business know-how and human skills such as interpersonal, leadership and multi-cultural abilities. This mix is reflected in the Academy’s courses and curriculum. The Group also provides an expert development path to facilitate high-level promotion and career advancement for experienced underwriters, actuaries and financial market specialists, enabling them to advance in the organisation without taking on leadership responsibility.
As a diverse global company, Swiss Re encourages employees to broaden their professional and personal experience by working outside their home countries and building an international career. This also fosters the sharing of knowledge and expertise across the company. To encourage global mobility, the Group has a consistent compensation structure across all regions as well as an international assignment programme to support employees and their families with the moving process.
Promoting a performance culture The Group’s success is built on the performance of teams and individuals across the organisation. Swiss Re fosters a working environment that emphasises individual responsibility and rewards personal achievements, innovation and teamwork.
Swiss Re Academy The Swiss Re Academy combines the Group’s staff and client training under a single global provider. The Academy offers a broad curriculum to equip employees with the business and leadership skills they need to advance their careers and deliver value for Swiss Re and its clients.
Currently, 85% of all employees worldwide participate in a voluntary stock compensation plan that combines regular savings with the purchase of shares or tracking options. This promotes entrepreneurial behaviour by giving employees a stake in the company’s success, and also strengthens their identification with Swiss Re and its shareholders.
Swiss Re gains a competitive advantage from its proprietary know-how, but it also collaborates with external experts to further extend its knowledge and gain outside perspectives. The Group has established close relationships with leading research institutions, such as the Swiss Federal Institute of Technology (ETH) in Zurich, Beijing Normal University and Rice University in Houston. In 2007, Swiss Re worked with the Earth Institute at Columbia University to develop innovative triggers for weather risk transfer solutions in emerging markets (for more information, see pages 38 – 39).
Dialogue with clients remains Swiss Re’s most important source of external expertise. The Group’s experts engage with industry partners to learn more about market trends and risk developments. Swiss Re’s executive management also devotes a significant amount of its time to meeting clients and understanding their priorities.
Swiss Re‘s publication series – covering emerging risks, industry issues, analytical studies and economic trends – help to stimulate dialogue and reinforce partnerships with industry associations, learning institutions, regulators, governments and international organisations. They also position the Group as a thought leader in the broader risk transfer business. For example, in 2007, China’s regulators invited Swiss Re to undertake an independent review of the nation ’s healthcare system and offer best practice recommendations for its future development.
Applying knowledge Swiss Re works closely with clients to leverage its wide expertise in order to develop tangible solutions for specific markets and client needs. In 2007, the Group formed a dedicated team to help Chinese insurers increase profitability in motor insurance by improving risk and claims management. This will enable these companies to fully benefit from growth in the Chinese motor sector, where premiums are predicted to double to USD 25 billion by 2012. Swiss Re is well positioned in the market and expects to benefit from the resulting increase in reinsurance cessions.
Swiss Re has also combined its global market knowledge with in-depth expertise in marine and liability lines to provide a new product for Asian companies exporting to the US and Europe. Comprehensive Exporters’ Cover is an innovative solution that combines cargo and product liability coverage for the first time. It offers significant potential in the fast-growing Asian export markets and has also been adapted for use in other emerging markets, particularly in Latin America.
Insurance-linked securities (ILS) are an effective risk management tool to increase capacity and transfer peak and volume insurance risks to the capital markets ILS help reduce capital requirements and increase capital efficiency; they reduce earnings volatility and, in the case of life insurance, can monetise intangibles
Swiss Re factors climate change risks in its risk selection, pricing and capacity deployment Swiss Re is the first major financial services company to commit to becoming greenhouse neutral
Swiss Re has been a pioneer in developing the ILS market, having underwritten over USD 13 billion of risks for itself and third parties During the recent financial market turbulence, Swiss Re underwrote over USD 1 billion in ILS; investors continue to be attracted to this diversifying asset class with only limited correlation to the broader financial markets
Swiss Re’s business opportunities derive from the world’s changing risk landscape. Identifying emerging issues and industry trends – and sharing Swiss Re’s knowledge to develop innovative solutions – is essential for the Group’s success. The table below lists a selection of Swiss Re’s Top Topics, with the Group’s related activities.
Claims are increasing, mainly due to higher insurance penetration, technological vulnerability and value concentrations in exposed areas There is increasing evidence that climate variability and climate change are affecting the catastrophe perils market The insurance industry has the financial strength to respond to natural catastrophes; there is usually no need for government action to increase capacity
Solvency II is a regulatory project for enhanced insurance solvency rules in the EU The new regulation is expected to have a significant impact on the industry by redefining capital requirements and risk management practices
Primary insurers will benefit from appropriate credit for their risk transfer to reinsurers based on the reinsurance company’s capital strength
Swiss Re has dedicated resources to assess the potential risks and manage possible exposures to nanotechnology
Swiss Re welcomes the introduction of Solvency II and encourages the use of risk-management techniques based on economic principles and internal models Swiss Re is working with regulators, analysts and clients to help implement appropriate capital models, achieve meaningful disclosure and promote the benefits of reinsurance solutions
Swiss Re supports permanent market solutions based on a risk partnership among insureds, insurers, reinsurers, capital markets and governments
Swiss Re is strongly engaged in lobbying activities for longterm public-private partnerships
Climate change On a global scale, climate change is the biggest environmental challenge facing society. Scientific evidence on its development and impact has been further strengthened by the recent publication of the Fourth Assessment Report by the Intergovernmental Panel on Climate Change. 2007 was one of only four years on record to see two category five Atlantic hurricanes. Although the US was not impacted, the storms caused significant damage in Mexico and Central America. Swiss Re’s own research clearly confirms a rising trend in the frequency and intensity of weather events over the past two decades.
Carbon markets Recently, several market mechanisms have been established to achieve cost-effective CO2 emission reductions. Under the Kyoto Protocol, the Clean Development Mechanism (CDM) and Joint Implementation (JI) allow investors to gain carbon credits for emission-cutting projects in developing and industrialised countries, respectively – so-called Certified Emission Reductions (CERs) and Emission Reduction Units (ERUs). In Europe, the emission trading system established by the EU also permits the trading of allowances issued to industry. In addition to these “compliance” markets, voluntary emission reduction (VER) markets have also been established.
Climate Adaptation Development Programme Even if carbon emissions were ended immediately, the process of global warming would continue due to the effects of past emissions. Climate change adaptation measures are therefore essential. The poorest nations are most at risk as they often lack infrastructure and institutional frameworks, have limited financial resources and depend on agricultural sectors that are strongly exposed to weather-related disasters.
Since 2004, Swiss Re has pioneered weather risk transfer instruments for emerging markets. In 2007, the Group launched the Climate Adaptation Development Programme, which will provide structuring and pricing for weather risk transfer schemes, support research activities, and develop and promote solutions. In a first phase, the Group entered into a partnership with the Millennium Promise Alliance and Columbia University to develop three innovative products providing drought cover for several African villages (for more information, see pages 38 – 39).
High-level dialogue Swiss Re is an influential voice in the international debate on climate change. In 2007, the Group’s experts and executive management were frequently asked to participate in high-level meetings and conferences. In June, CEO Jacques Aigrain attended a meeting of business leaders with British Prime Minister Tony Blair and California Governor Arnold Schwarzenegger to discuss action on climate change. In September, Jacques Aigrain was one of four business representatives invited by the United Nations Secretary-General to address a gathering of world leaders on climate adaptation. In October, Swiss Re’s CEO took part in the Mayor of Shanghai’s “International Business Leaders Advisory Council”, where he spoke on Swiss Re’s experience in building a resource-conserving and environment-friendly enterprise. Executive Committee member Roger Ferguson presented the Group’s perspective on the risks and opportunities of climate change at the C40 Large Cities Climate Summit in New York, an event co-sponsored by Swiss Re.
In the climate change area, Swiss Re established the Climate Adaptation Development Programme and provided funds for its research activities (for more information, see box on page 27).
In the US, employees donated more than USD 270 000 to the United Way, a non-profit umbrella organisation that helps fund over 1300 local charities. More than 200 colleagues in Fort Wayne volunteered for the Habitat for Humanity initiative, which builds houses for families in need. The project was also supported by a financial contribution from Swiss Re. The Boy Scouts of America also recognised Swiss Re’s support of the organisation by honouring Executive Committee Member Roger Ferguson and Executive Board Member Pierre Ozendo at two regional events.
In Mexico, 120 employees planted more than 400 trees in the Tlalpan Forest as part of a reforestation effort. Mexico City employees also donated food and water to victims of flooding in the state of Tabasco and Chiapas and provided school supplies to a state school and hospital. Employees in Canada donated gifts and food to the Salvation Army during an annual holiday toy and food drive. Canada also provided a corporate donation to the George Hull Centre for Children and Families, a leading children’s mental health centre in Ontario.
Staff in Bangalore continued their support for a local initiative to aid the victims of the 2004 Indian Ocean tsunami. This involves building a small township for the affected families to help them re-establish their livelihood. Swiss Re volunteers helped to set up the project, and employees visit the families on a regular basis to provide personal support. They also donated funds and time to organise a Christmas party for 100 disadvantaged children together with SOS Children’s Villages of India.
The theme of the 2007 Annual Report is “Advancing performance”. How has Swiss Re’s performance advanced over the past twelve months? 2007 was a year of contrast. We made significant progress in many areas of our strategy and are building a powerful foundation for the future, but we also experienced a setback when we reported a significant loss which impacted our fourth quarter earnings. This was the result of an isolated mistake, for which we have taken corrective action.
Let’s talk about the positive reinsurance results first. Was Swiss Re just lucky because of a benign hurricane season? Our results speak for themselves: 2007 saw a higher level of natural catastrophes than 2006, yet our property and casualty teams significantly improved their profits and combined ratio over the previous year. So, clearly, this was more than just luck. We are reaping the fruits of years of disciplined underwriting and our focus on actively managing the insurance price cycle. More importantly, our performance is not just driven by property and casualty business: our life and health segment also had a great year.
In November, Swiss Re reported a significant loss in credit underwriting. How did this happen? That was our major disappointment in an otherwise excellent year. Like much of the financial services industry, we were surprised by the unprecedented credit downgrades in October. These led us to write down two structured credit default swaps by CHF 1.2 billion. The transactions were at best marginal to the core business of Swiss Re.
Although the credit loss was significant, we have the financial strength and diversification to absorb such impacts. In fact, it is no larger than our natural catastrophe claims in past years. We also have the humility to learn from this tactical mistake and have ceased underwriting new transactions. We have further strengthened our risk-taking and risk management processes in the credit and financial market areas by implementing a more rigorous approval process and enhancing our monitoring. And we are working to restore investors’ trust in Swiss Re through our actions and transparency.
However, insurance risk trading is not limited to the securitisation format. We recently announced a quota share arrangement with Berkshire Hathaway which is also a form of risk trading, providing operational leverage and capital efficiency.
Where do you see other growth opportunities? In the life segment, variable annuity solutions and the entire value chain related to retirement savings offer broad growth potential, as does the health business. Swiss Re has already completed variable annuity transactions in Japan, the US and the UK, and is looking at opportunities in other countries. We are also strengthening our position in the rapidly expanding health markets of India and China.
Swiss Re is also responding to another regulatory change, the European Reinsurance Directive, by consolidating the business of our EU entities (with the exception of Admin Re®) into two legal entities in Luxembourg. This will result in more efficient capital management, while reducing our administrative burden and advancing our organisational efficiency.
On the business side, we are seeing continuing interaction between banking, reinsurance and capital markets. We have new competitors in Bermuda, and hedge funds and investment banks are selectively entering the reinsurance space. At the same time, clients are retaining more risk because they have stronger balance sheets. While this creates challenges, it also indicates that the reinsurance space is economically attractive: we must strive to apply our competitive advantage and build on it.
What does Swiss Re’s vision mean for clients? Clients are at the centre of our business. We want to offer bold, comprehensive solutions that add value for them across their insurance risk landscape. You can see this in our recent transaction with Allstate Corporation. Our leadership in risk securitisation allowed us take on a very large share in Allstate’s property catastrophe programme: we were able to securitise half the exposure and pass it on to capital market investors.
As part of our vision, we have integrated Financial Services into our Client Markets and Products organisations. Now, our client managers offer comprehensive access to all Swiss Re’s expertise. This will allow them to create more powerful and innovative solutions for clients.
We go to great lengths to attract the right people and develop them. Asia is a key growth area for us and that is why it plays an important role in the launch of our graduates@swissre programme, in which we recruit and develop the best young talents worldwide to build a foundation for Swiss Re’s future success.
Swiss Re’s share price doesn’t mirror the interesting opportunities you are talking about… It definitely does not – and we are very intent on addressing this! Our announcement of a mark-to-market loss on 19 November combined with the continuing turmoil in the financial markets has resulted in a lack of confidence. We need to work hard to restore this confidence.
We also need to increase transparency and explain our business model better. We have to show investors how we are reducing our earnings volatility by taking risks off our balance sheet and placing them with professional counterparts – such as the recently announced quota share arrangement with Berkshire Hathaway, the continuation of our Successor programme, which we initiated in 2006 for natural catastrophe risks, and our Vita Capital programme for mortality risks. We are also expanding our hedging activities in our investment portfolio. These measures will all help to make our capital and earnings positions more predictable.
Swiss Re’s financial strength and capital market capabilities enabled Allstate to grow its business and reduce exposure to natural catastrophe risks.
It also demonstrates Swiss Re’s ability to better serve clients through a combination of close cooperation with brokers, largeline underwriting and capital market solutions.
From left: Daniel McElvany (Swiss Re), Jeff Cooper (Allstate), David Cameron (Benfield Group)
Swiss Re 2007 Annual Report 39 From left: Christina Ulardic (Swiss Re), Jeff Flug (CEO, Millennium Promise)
Participants of the 2007 graduate programme at the Swiss Re Centre for Global Dialogue in Rüschlikon, Switzerland. From left: James Xu (Beijing), Qin Zhou (Hong Kong), Yujin Ge (Beijing), Leo Poon (Hong Kong)
Financial year 2007 was a good year for the global insurance industry. Non-life underwriting results remained solid, profiting from a below-average catastrophic event burden. Life insurance saw robust growth.
Economy and financial markets The subprime crisis, which arose from a steep rise in US mortgage defaults, has led to major turmoil in global financial markets. Demand for securitised credit, which is very important in financing US mortgages, has practically dried up, leading to a banking crisis of systemic nature. Nevertheless, non-life and life insurance are not expected to be significantly affected by the current financial market turmoil. Losses from subprime investments will not threaten the industry and will be small relative to assets and shareholder capital.
Life insurance Life insurance continued to expand in 2007: inflation-adjusted premium growth was around 4%, down 2% compared to 2006.
Economic Research & Consulting and sigma Swiss Re’s team of 20 economists based in Zurich, New York and Hong Kong constitutes the Group’s centre of competence for economic analysis of risk transfer and risk financing solutions, global business cycles and financial markets. Their flagship publication series, the sigma studies, analyses market trends in the insurance and financial services industries and has been a recognised source of market information for more than 30 years.
The recent sigma study on “Annuities: a private solution to longevity risk” discusses longevity risk and the solutions currently offered by the insurance sector – primarily annuity products – to help individuals provide for their financial needs in old age.
Insurers play a major role in providing private solutions for longevity. Contrary to common belief, longer lives can offer enormous potential for profitable business, as long as the associated risk management challenges are suitably mastered.
The sigma study analyses the risks insurers assume when writing annuity business – the most relevant being the long-term interplay between financial and mortality/longevity risks. It also considers how to mitigate such risks without stripping products of their core protection against longevity risk, which is the insurance industry’s key competitive advantage over other providers of financial solutions.
In Europe, growth reached double digits in the UK. In Germany and France, after having been boosted by one-off factors in 2006, premium income decreased by 1% and 4% respectively. Sales of annuity and pension products moderated somewhat in 2007, although they are expected to be robust in the long-term as private customers become increasingly aware of their old age protection gap. Term insurance sales were sluggish in the UK, but strong in Southern Europe, where mortgage-related products profited from the continuing buoyancy of the housing market.
Insurance-linked securities Issuance of insurance-linked securities (ILS) grew robustly, unaffected by global credit problems. Total issuance for 2007 was USD 14 billion, 40% above the 2006 figure. The outstanding notional value of ILS at the end of 2007 was USD 38 billion, up from USD 26 billion in December 2006. Spreads between ILS bonds and government securities were essentially unaffected by credit market turbulence, because ILS only have limited correlation to the credit and equity markets. This underlines their value to both sponsors and investors.
Barring an unexpected worsening of the financial markets leading to a widespread recession, life insurance will continue to expand with robust growth rates. Growth in traditional mortality reinsurance premiums is expected to lag slightly behind primary market premiums, due to lower cession rates in the US and sluggish term sales in the UK. Other markets are expected to grow in line with primary market growth. However, significant growth is expected in particular segments, including the purchase of closed life books, as well as annuity and health reinsurance.
The Group’s net investment income and net realised gains include the investment result from assets backing unit-linked policies. These returns are credited to policyholders’ accounts and therefore excluded from the following comments on the investment performance of the Group.
¹ In 2007, the Group realigned its Financial Services activities, integrating them into the Client Markets and Products functions. As a result, all returns from risk taking in proprietary assets are included in the investment result while securitisation-related income and insurance or reinsurance revenues are reclassified to the relevant product line in Property & Casualty or Life & Health. Other activities related to life and health business, such as variable annuity solutions, are now included in the results for the Life & Health segment. Trading revenues have been reclassified to net realised investment gains or to net investment income, as appropriate. Interest expense related to the funding of trading activity is now included in interest expenses. Detailed information on changes in Swiss Re’s financial reporting segmentation can be found in Note18 to the Group financial statements.
² The GE Insurance Solutions acquisition was completed on 9 June 2006 and is included in 2006 earnings as of the date of acquisition.
Net investment income was CHF 9.9 billion, a 36% increase over the previous year. This rise was due to growth in the overall portfolio resulting from acquisitions and new Admin Re® transactions in 2007, as well as measures to take advantage of the market dislocation in the second half of the year, increasing yields on fixed income securities.
Other revenues were CHF 302 million, an increase of 8% compared to prior year.
Interest expenses were CHF 1.8 billion, an increase of 77% over the prior year period. The increase reflects costs related to the funding of the Insurance Solutions acquisition and two hybrid securities issued in 2007.
Shareholders’ equity rose 3% to CHF 31.9 billion, despite the return of CHF 3.7 billion to shareholders during the year through the dividend payment in April as well as through the share
Restructuring costs –117 –3 –97 Other income /expenses –143 –171 20 Net income before tax 5 856 5 187 –11 buy-back programme and shares repurchased from General Electric in March. This amount was more than offset by earnings generated during the year and an increase in unrealised gains. Shareholders’ equity was also impacted by the weaker US dollar exchange rate and the conversion of a mandatory convertible bond during 2007.
Short-term investments, at amortised cost which approximates fair value 9 757 8 786 –10
Deferred acquisition costs and other intangible assets 12 820 11 921 –7
Cash flow from operating activities 1 516 –3 764 –348 Cash flow from investing activities 2 965 –868 –129 Cash flow from financing activities 3 367 2 972 –12 Reclassification to short-term investments –2 451 – – Effect of foreign currency translation –159 –415 161 Change in cash and cash equivalents 5 238 –2 075 –140 Cash and cash equivalents as of 1 January 8 368 13 606 63 Cash and cash equivalents as of 31 December 13 606 11 531 –15
The value of a stable public-private partnership for terrorism risks was reconfirmed in discussions between the insurance industry and political leaders. To complement insurance products, state support has been extended for seven years in the USA (Terrorism Risk Insurance Program Reauthorization Act, TRIPRA) and for two years in Germany. In Belgium, a legal framework has been established for an enhanced terrorism risk-sharing pool to become operative during 2008.
Swiss Re has encouraged stakeholders in European markets to develop insurance-based solutions covering features of the new liability regime based on the EU Directive on Environmental Liability (ELD). Such solutions have been introduced in some of the nine member states that have already transposed the ELD into national law, including Germany and Spain. Swiss Re is perceived as the leading expert and process driver in the European markets.
Expenses Claims and claim adjustment expenses –11 799 –12 065 2
Claims ratio in %, including unwind of discount 63.2 62.2 Expense ratio in % 27.3 28.0 Combined ratio in %, including unwind of discount 90.5 90.2 Combined ratio in %, excluding unwind of discount 89.6 88.9
Despite a higher level of events, the impact of natural catastrophe claims, gross of retrocession recovery, was lower in 2007 compared to 2006. Including recovery, claims from natural catastrophes amounted to CHF 0.6 billion, or 3.1% of premiums, compared to CHF 0.7 billion or 3.8% of premiums in the prior year. Underlying portfolio profitability increased as a result of the tighter terms and conditions introduced in previous years. The credit reinsurance business, included in the specialty segment for both years presented, favourably impacted the traditional business in 2007. The combined ratio for the credit reinsurance unit was 81.0%, compared to 89.9% in 2006.
The net investment result increased 6% to CHF 4.4 billion, reflecting the increase of the asset portfolio due to the acquisition of GE Insurance Solutions. Claims development from prior years was broadly neutral during 2007.
Premiums earned Premiums earned increased 2%, reflecting the full-year inclusion of GE Insurance Solutions in 2007. The segment also benefited from the growth of the credit reinsurance portfolio, included for both years. Credit reinsurance contributed 6% of the Property & Casualty premiums earned in 2006 and 2007.
Premiums for non-traditional business decreased 28%, mainly reflecting the commutation of a major contract in the US and the continuing weak demand for non-traditional products.
Combined ratio Excellent underwriting performance further improved the combined ratio for traditional business from 90.5% in 2006 to 90.2% in 2007. Natural catastrophe claims, before retrocession recovery, were slightly higher in 2007 compared to 2006. Unfavourable liability experience in 2007 negatively impacted the combined ratio compared to the previous year. This was partially offset by positive development in specialty business, including credit reinsurance.
The discount of Property & Casualty reserves applied following the acquisition of GE Insurance Solutions in 2006 was further amortised in 2007. The amortisation increased the combined ratio by 1.3 percentage points in 2007, which was more than offset by the investment returns on the assets backing the liabilities. The discount, net of capital cost, unwinds over the estimated average duration of the reserves.
Claims ratio in % 45.6 82.5 54.2 63.2 Expense ratio in % 25.6 26.8 30.7 27.3 Combined ratio in % 71.2 109.3 84.9 90.5
Other operating costs and expenses –510 –732 –292 –1 534 –99 –1 633
Liability claims rose to CHF 4.1 billion, resulting in a combined ratio of 123.9% compared to 107.4% in 2006. An increase in asbestos and environmental reserves, as well as an adjustment to the tail factors applied to workers compensation business negatively impacted the second half of the year. This, combined with unfavourable development in product liability claims, resulted in an increase of 15 percentage points in the combined ratio, which was partially offset by a continuing improvement in the performance of the motor business.
Non-traditional business The combined ratio is not a suitable measure for some non-traditional treaties, since the source of profits typically arises from a combination of investment performance and underwriting performance.
The reduction in non-traditional operating income from CHF 156 million in 2006 to CHF 37 million in 2007 reflects continuing weak demand for such covers and the commutation of existing business.
Business developments Swiss Re’s life and health segment continued to grow profitably, despite a reinsurance market that remained very competitive. Although insurers have been reassessing their reinsurance strategy and structures as a result of the recent regulatory changes, Swiss Re is not experiencing any material reduction in overall cession rates.
Swiss Re supported clients by providing customised underwriting support and analysing insured lives experience for the older-age life market, an increasingly important segment given demographic trends. The Group also broadened its product offering by providing variable annuity reinsurance and placing its first private life insurance-linked securitisation in the US in early 2008. This transaction covered the “Regulation XXX” reserves of the Savings Bank Life Insurance Company of Massachusetts (SBLI).
Growth in Asian markets continued at a solid pace. In Japan, Swiss Re closed a number of variable annuity transactions. At the same time, sales of increasing term life products were negatively affected by proposed tax changes, with a corresponding impact on the volume of new reinsurance business.
Operating income rose 76% to CHF 2.7 billion. The business benefited from the successful integration of GE Insurance Solutions and GE Life UK.
In 2007, Swiss Re concluded seven Admin Re® transactions in the UK and the US. These include an agreement with Norwich Union in the UK to provide administration services for approximately 3 million policies relating to legacy business; this was further extended to a reinsurance contract incepting in 2008, which covers the majority of risks relating to the nonprofit and unit-linked policies covered by the administration agreement. In the US, Swiss Re completed an Admin Re® transaction with Conseco to reinsure a block of deferred annuities with total assets of CHF 3.7 billion.
In December 2007, Swiss Re sold the new business operations of Tomorrow (the recently rebranded GE Life UK) to LV= (formerly known as Liverpool Victoria). LV= will invest in the people and products required to grow these lines of business. This agreement honours the Group’s commitment to the market, employees and customers to maintain the business as a going concern.
Expenses Claims and claim adjustment expenses; life and health benefits –9 594 –11 112 16 Interest credited to policyholders –2 827 –2 120 –25
Operating result, excluding non-participating net realised investment gains 1 381 2 744 99
Management expense ratio in % 6.5 7.0 Return on operating revenues in % 9.2 14.7
Admin Re® operating income increased 39% to CHF 473 million, mainly due to higher realised investment gains, growth in the business portfolio driving higher net investment income and contribution from GE Life UK in 2007. These effects were partially offset by less favourable mortality in the US in the first half of the year.
Net investment income in 2007 was CHF 5.4 billion, an increase of 48% compared to the previous year, reflecting the larger volume of invested assets as a result of the GE Insurance Solutions and GE Life UK acquisitions, as well as the new allocation of the investment return to the segments. Unit-linked contracts have no impact on the operating result, as the investment result on such contracts is passed through to contract holders as interest credited to policyholders.
Acquisition costs increased to CHF 2.7 billion, due to the increased amortisation of the present value of future profits (PVFP) recognised for the acquired policies.
The management expense ratio increased to 7.0%, partly due to one-off integration costs for the GE Life UK business, as well as Admin Re® transactions completed in 2007.
Premiums earned and fee income Premiums and fees increased 15% to CHF 13.6 billion. The increase was mainly driven by the full integration of the GE Insurance Solutions and GE Life UK acquisitions.
Traditional life premiums and fees totalled CHF 8.4 billion in 2007, an increase of 6%, reflecting new business written in all regions as well as the European life business acquired as part of GE Insurance Solutions. Traditional health premiums grew from CHF 2.2 billion in 2006 to CHF 3.0 billion in 2007, largely due to the full-year impact of the GE Insurance Solutions acquisition. Admin Re® premiums and fees increased from CHF 1.7 billion in 2006 to 2.3 billion in 2007, primarily reflecting the full impact of the GE Life UK acquisition.
The premiums and fees earned by regions remained stable during 2007.
The return on operating revenues for traditional life business rose from 8.4% in 2006 to 16.5% in 2007, while the return for traditional health business grew from 9.9% to 17.0%. The strong increase in the operating return was mainly driven by investment income, as well as the positive impact of changes in claims assumptions in the UK. The underlying business without one-off effects showed a solid performance.
Investment strategy Swiss Re’s proprietary investment and trading activities are a core driver in the Group’s value creation. Their objective is to generate economic profit growth by actively managing and trading the investments of the business units according to a liability-driven benchmark and within a comprehensive risk limit framework. Particular consideration is given to earnings volatility management, as well as the impact on rating agency and regulatory capital adequacy.
Investment result Overall, the return on investments was 4.9%, compared to 5.0% in the prior year.
Credit and rates Swiss Re’s credit and rates portfolio rose to CHF 152.8 billion in 2007 from CHF 141.8 billion in 2006, reflecting the Admin Re® transactions in 2007, partially offset by the weakening of the US dollar compared to the Swiss franc.
¹ The return on investments includes currency exchange rate remeasurements and designated trading portfolios. The designated trading portfolios comprise trading fixed income securities denominated in foreign currency, which back certain liabilities denominated in foreign currency. The overal impact of the currency exchange remeasurements was CHF –61 million in 2006 and CHF –476 million in 2007.
Net investment income grew 37% to CHF 8.7 billion. Net realised losses on credit and rates investments were CHF 1.5 billion in 2007, compared to net gains of CHF 0.2 billion in 2006. Net realised losses in 2007 included mark-to-market losses on investments classified as trading, impairments, as well as the replacement of lower yielding securities with higher yielding investments. Net realised losses relating to assets backing liabilities were CHF –415 million in 2007. The average running yield on Swiss Re’s portfolio increased from 4.8% in 2006 to 5.2%.
Fees and expenses decreased in 2007 compared to 2006, as the prior year included Fox-Pitt, Kelton which was sold on 28 June 2006.
Swiss Re provides asset management services for insurance clients under the Conning Asset Management brand in the US, Canada, Bermuda and Europe. Third-party assets under management increased to CHF 92.8 billion at the end of 2007 from CHF 85.4 billion at the end of 2006.
Expenses increased CHF 141 million, in line with the growth in assets under management and increased securities lending activity. Expenses in relation to proprietary assets under management were 25 basis points in both 2006 and 2007. Net unrealised gains of CHF 1.1 billion at the end of 2006 increased to CHF 1.9 billion at the end of 2007.
Risk management Swiss Re actively manages its exposure to financial market risks. At the end of 2007, the credit spread exposure – as measured by a stress scenario – was reduced by means of credit default swaps from a gross exposure of CHF 2.2 billion to a net stress exposure of CHF 1.7 billion.
The insurance risk balance sheet shows the market-consistent value of insurance liabilities and capital on the liability side and a notional “minimum risk portfolio” on the asset side. This notional portfolio represents investments – typically cash and fixed income instruments replicating the risk characteristics of future liability cash flows – that minimise financial market risk relative to the liabilities.
Business developments Swiss Re is well prepared for softening property and casualty rates in the reinsurance market. The Group will not deviate from its strict focus on underwriting discipline and economic profit growth. At the same time, Swiss Re will continue its share buy-back programme started in March 2007 and expanded in January 2008. Due to current share price levels, combined with reduced risk capital requirements resulting from lower premium volumes, the buy-back is likely to be completed ahead of the original schedule. At the same time, Swiss Re is convinced that upcoming Admin Re® transactions and growth in new lines of business, such as longevity and variable annuity solutions, will offer further opportunities for attractive capital returns.
Property and specialty market conditions are expected to soften further in the near-term. However, an increased focus on pricing transparency, a rising industry trend towards returning surplus capital to shareholders and volatility in the investment markets might make the current cycle shorter than in the past.
The casualty market will remain challenging. In 2008, Swiss Re expects the subprime and credit crisis, which is currently focused on the US, to deteriorate further, with knock-on effects outside the US. The crisis will also have an impact on professional liability insurance, although it is still difficult to estimate the extent, and may potentially lead to legal reforms. Swiss Re will continue to carefully manage exposures and take appropriate pre-emptive action. Since 2004, the Group has materially reduced its exposure to US directors’ and officers’, errors and omissions, and professional indemnity business. Swiss Re thus has a low exposure to possible liability risks from the subprime and credit crisis.
Many EU member states are still reviewing their draft laws for transposing the Environmental Liability Directive. These will be enacted in the course of 2008 and beyond, leading to an increased demand for environmental insurance and reinsurance support.
The Group remains fully committed to capturing value across all property, casualty and specialty lines through active cycle management, and reiterates its emphasis on quality over quantity.
In developed markets such as the US, Europe and Japan, Swiss Re expects strong sales of accumulation and retirement products. The Group is actively addressing client needs for variable annuity solutions by offering reinsurance coverage and developing products that support clients in entering the market. Swiss Re also offers a range of solutions to assist clients in managing longevity exposure and anticipates continuing demand for longevity risk transfer products, not only from insurance companies, but also from defined benefit pension plans which provide lifetime benefits. In both areas, Swiss Re focuses on hedging the embedded options of those policies into the financial markets, thus reducing as much as possible its net financial exposure in these areas.
Swiss Re continues to see strong demand for its medical insurance business in Asia. In 2008, Swiss Re expects to further expand its healthcare business in India and plans to bring similar capabilities to the Chinese market.
The outlook for the financial markets is uncertain. Growth in the major economies is slowing in 2008, particularly in the US. As a consequence, monetary policy has been easing in the US and UK, substantially lowering yields on government bonds. Most of the decline in interest rates is already priced into the market, but there is a likelihood of further rate reductions. The European Central Bank may also lower rates in 2008, while in Japan, the ongoing threat of deflation is expected to restrain any monetary tightening. The credit crisis will keep credit spreads wide and equity markets volatile.
Risk management Controlled risk taking requires a strong and independent risk management organisation and comprehensive risk management processes to identify, assess and control the Group’s risk exposures.
The Chief Risk Officer leads the global Risk Management function, which is responsible for risk controlling across the Group (see Figure 1).
The global Risk Management function is organised by risk categories with dedicated departments for credit and financial market risk, property and casualty risk, life and health risk, and operational risk. Each of these departments is entrusted with Group-wide responsibility for identifying, assessing and controlling their allocated risks.
The Corporate Integrated Risk Management department is responsible for assessing the combined impact of all risks and reporting on Swiss Re’s overall risk position. The Sustainabilty & Emerging Risk Management unit coordinates the identification, monitoring and management of emerging risks that may become significant for Swiss Re as well as the Group’s sustainability activities. Finally, the Corporate Actuarial department assesses life and non-life insurance liabilities from an accounting, statutory and economic perspective.
Group Internal Audit is an independent, objective assurance function that assesses the adequacy and effectiveness of the Group‘s internal control systems. It monitors the execution of processes within the Group, including those in risk management.
In late 2007, two significant changes were made to the internal structure of the Credit & Financial Market Risk Management department as part of the realignment of Financial Services. In order to ensure a consistent approach to credit risk, the Credit & Financial Market Risk Management department is now organised by product areas: credit, rates, equity and equitylinked, and alternative investments. At the same time, the independence of the transaction evaluation function for the former Financial Services area was strengthened by separating the function from the business organisation and integrating it into the Credit & Financial Market Risk Management department.
Swiss Re’s risk landscape Risk management is essential to Swiss Re’s strategic planning and is embedded in the Group’s management discipline. In addition to strategic risks, Swiss Re distinguishes three types of risks: core risks, operational risks and other risks (see Figure 2).
Core risks are split into three broad categories: Insurance risk is the risk of incurring a financial loss as a result of a property, casualty, life or health insurance event. Financial market risk is the risk of assets and/or liabilities being negatively affected by movements in financial market prices or rates, such as equity prices, interest rates, credit spreads, foreign exchange rates or real estate prices. Credit risk is the risk of incurring a financial loss due to diminished creditworthiness (eroding credit ratings and, ultimately, counterparty default) among counterparties of Swiss Re and / or third parties.
The risks classified under operational risks and other risks arise as a consequence of undertaking business.
Integrated risk modelling Swiss Re uses a proprietary internal integrated risk model to determine the capital required to support the risks on its books and allocate risk-taking capacity to the different lines of business. The model is continuously updated to reflect current best practice and meet regulatory require ments. In 2007, Swiss Re took important steps to tailor its internal risk-based approach to meet the specific requirements of the Swiss Solvency Test, the new solvency regime in Switzerland.
Swiss Re’s risk model is based on two important principles. Firstly, it uses an asset liability management (ALM) approach, measuring the net impact of risk on the economic value of both assets and liabilities. Secondly, it adopts an integrated perspective, recognising that a single risk factor can affect different sub-portfolios and that different risk factors can have mutual dependencies.
Frequently used measures for summarising the risk distribution and defining the base capital requirement are 99% VaR, 99.5% VaR and 99% Tail VaR (expected shortfall). 99% VaR measures the level of loss likely to be exceeded in only one year out of one hundred, while 99.5% VaR measures the loss likely to be exceeded in only one year out of two hundred. 99% Tail VaR estimates the average annual loss likely to occur with a frequency of less than once in one hundred years. Swiss Re uses the more conservative 99% Tail VaR measure for assessing its capital requirements internally.
Each simulated pandemic produces its own particular level of excess mortality. If these are sorted from the lowest value to the highest, it is possible to gauge the probability that mortality over a one-year period will exceed a certain level.
Risk management per core risk category Swiss Re’s risk tolerance represents the amount of risk the Group is willing to accept within the constraints imposed by its capital resources, its strategy, its risk appetite, and the regulatory and rating agency environment within which it operates. Risk tolerance and appetite at Group level are defined by a set of limits approved by the Executive Committee and the Board of Directors. The relevant Group bodies allocate capacity to lower levels. In addition to limits designed to control risks in relation to capital adequacy, there are targets in place to control earnings volatility.
Insurance risk management Property and casualty risk arises predominantly from the property, casualty (including motor), and specialty lines of business. The Group Property & Casualty Risk Guidelines in conjunction with the Group Risk Management Guidelines establishes the risk governance framework for property and casualty risk. Limits to prevent excessive exposure to any individual risk, or to the same underlying risk, are monitored on a Group-wide basis. In addition, each underwriter is given a specified limit per treaty programme and single risk. There is a well-defined escalation process at various levels up to the Group Products and Limits Committee. These procedures and limits define the underwriting process and are laid down in the Group Underwriting Guidelines, which are approved by the Group Products and Limits Committee.
The economic impact of the top natural catastrophe loss scenarios has decreased greatly since the end of 2006. This mainly reflects the above-mentioned increase in hedging activities for Swiss Re’s top natural catastrophe risks, as well as changes in the respective exposure of the GE Insurance Solutions book and its assessment. The economic impact for European windstorm risk was reassessed, leading to a further decrease in the estimated impact of a potential loss event.
All large and complex transactions are subject to independent review by the central Products team and by Risk Management. An integrated approach to assurance and audit across the business provides increased oversight by Swiss Re experts on the appropriateness of technical processes and decisions.
Life & Health Risk Management is responsible for the Group-wide monitoring and reporting of life and health risk. Swiss Re also uses insurance-linked securities as a means of reducing peak exposures. The Vita index-linked security transactions, for example, were arranged to provide protection against extreme mortality events. This is now a well-established programme.
Table 3 reports the expected pre-tax mortality claims of Swiss Re for a major lethal pandemic loss event based on the new pandemic model. The scenario assumes that excess mortality will vary with age in accordance with Swiss Re’s influenza pandemic model, but is conservative in that it does not allow for the typically lower mortality experienced among insured populations. There has been no material change over the year due to the offsetting effect of increases in US mortality exposures and the decline in value of the US dollar relative to the Swiss franc.
Estimated economic impact of a single loss event in CHF billions as of 31 December 2006 2007
Financial market risk management Financial market risk arises from three main sources: Swiss Re’s investment activities, the financial market sensitivity of the economic value of liabilities, and the capital markets trading activities. The overall risk limits framework is defined by the Group Capital and Capacity Allocation Committee. All activities involving financial market risk are subject to one overall limit for each major risk class, expressed in terms of both VaR and stress testing.
Financial Services Products, formerly known as Capital Management and Advisory (CMA) and Proprietary Asset Management (PAM), determines a more detailed set of risk limits for their businesses, including stop-loss triggers. The Group Credit & Financial Market Risk Guidelines define minimum standards for managing financial market risk; these are supplemented by Derivative Guidelines, Investment Guidelines and business-specific guidelines.
Financial market risk is identified using a risk inventory of the various risk factors. The business is responsible for measuring the financial market risk arising from its activities within guidelines provided by Risk Management; the results are captured in the Market Risk Aggregation & Reporting System, which is also used for risk modelling and risk reporting at Group level. The “Report on Credit, Market Risk and ALM” summarises financial market risks at Group level. Limits for the investment activities are monitored on a weekly basis, while the capital markets trading uses a combination of daily and weekly reporting. These reports are the primary tools used to track exposures and monitor usage of limits. Credit & Financial Market Risk Management independently monitors limit usage. The limits are reported to the head of the business unit, who is also ultimately responsible for risk steering. The business unit heads seek to optimise their respective portfolios within their limits, including the use of cash and derivative instruments.
Table 4 shows the pre-tax impact of market scenarios on available economic capital. The equity scenario includes traded equities, equity derivatives, alternative investments, guaranteed minimum death benefit products and funding obligations arising from equity holdings in Swiss Re pension funds. The potential loss from a 30% fall in global equity markets slightly increased to CHF 3.8 billion in 2007. Higher exposure from alternative investments were to a large extent offset by lower exposure from listed equities. As Swiss Re’s assets are closely matched to liabilities (see box on page 63), shifts in interest rates only have a minor impact.
Credit risk management Credit risk exposure within the Group arises directly from Swiss Re’s investment activities as well as its portfolio of assets and liabilities underwritten by the business units. Swiss Re distinguishes three types of exposure: the risk of issuer default from instruments in which Swiss Re invests or trades, such as corporate bonds; counterparty exposure in a direct contractual relationship, such as retrocession or over-the-counter (OTC) derivatives; in addition, Swiss Re assumes risk with no direct contractual relationship, such as trade credit and surety reinsurance business. All contribute to an overall credit risk portfolio governed by Group Credit & Financial Market Risk Guidelines that are approved by the Group Capital and Capacity Allocation Committee.
The reporting process is supported by the Group Credit Risk Exposure Reporting Management and Information Tool that contains all relevant information including counterparty details, ratings, credit risk exposures, credit limits and watch lists. It is accessible by all key credit practitioners in the Group, thus providing essential transparency to allow for the successful implementation of active exposure management strategies for specific counterparties, industry sectors and geographic regions.
Table 5 reports the estimated pre-tax impact of the credit default stress test on available economic capital. The default scenario shows estimated unexpected losses due to adverse development of defaults. The stress test is based on corporate default data from Moody’s between 1983 and 2003, and combines the worst default frequencies observed over 12 months for each of the individual rating categories.
So far, much of the longevity business written by Swiss Re has been transactional, involving the purchase of closed books of business. This business is at the heart of our value proposition, as it provides solutions which effectively mitigate and manage the risks that are of concern to our clients.
Operational risk management The management of operational risk is an integral part of Swiss Re’s risk management framework. In 2007, Swiss Re has taken significant steps towards focussing and streamlining its Group-wide operational risk management methodology. Top-down and bottom-up assessments are being integrated into a single process to provide comprehensive assessment and management of the operational risk landscape. Progress in mitigating the most significant risks is monitored regularly. In addition, a formal referral process allows the Executive Committee to regularly review the top operational risks of the Group and their mitigation status.
Experts in specialised areas of operational risk management (such as IT Security and Business Continuity Management) have integrated their activities into the overall risk governance structure. Moreover, Group Internal Audit makes use of quantified risk landscapes provided by Group Operational Risk Management in setting its priorities.
Emerging risk management Swiss Re has extended its Group-wide Emerging Risk Management framework and implemented a process to detect, assess and mitigate such risks as well as to identify and evaluate potential surprise factors affecting known loss potentials. This framework incorporates SONAR (Systematic Observation of Notions Associated with Risk), which is a systematic process to detect emerging risks at an early stage in order to assess their potential consequences for Swiss Re.
Capital management strategy The Group aims to maximise sustainable risk-adjusted returns, subject to various constraints arising from the capital adequacy requirements of key stakeholder groups. These capital constraints use differing calculation methods for defining both the available and required capital, and are applied to the Group as well as to key legal entities. Figure 3 illustrates the focus areas of the main stakeholder groups who have an influence on defining the Group’s capital position.
Rating agency view: to maintain superior financial strength ratings that are sufficiently attractive from a client perspective (i.e. to maintain an acceptable rating after an extremely adverse year). The current target rating is AA /Aa /A+. Group Solvency I view: to ensure ongoing compliance with group regulatory capital requirements after a 99% Tail VaR loss. The current target is 180% of the minimum regulatory capital. Swiss Re’s internal view: to be able to continue operations following an extremely adverse year of losses. The target is to have an economic capital adequacy ratio (available capital divided by required capital) in the range of 175 – 200%.
The calculation of required capital is shown in table 1 on page 70.
Capital management actions The Group’s approach to capital management is to either reinvest or pay back excess capital. On 1 March 2007, Swiss Re announced a programme to buy back shares up to a maximum value of CHF 6.0 billion over a three-year period. On 23 January 2008, this was increased by CHF 1.75 billion to a total value of CHF 7.75 billion. The increase was due to the additional capital expected to be released over a 24-month period as a result of a proportional reinsurance contract with Berkshire Hathaway.
Major legal entity simplification projects are well advanced in Europe, the US, Canada and Asia, with an expected combined capital relief of around CHF 2.5 billion.
In Europe, the project benefits from recent regulatory and legal developments that allow the Group to simplify its entity structure in the EU (excluding Admin Re®) to two companies: a reinsurance and a direct insurance carrier based in Luxembourg with branch operations in other EU countries. Swiss Re will maintain its high level of service in European markets based on the same business policies, product offering and financial strength. Local branches continue to be responsible for client management. The Group started to migrate its legal structure on 1 January 2008, which will result in more efficient capital management, administration and reporting.
In the US, Canada and Asia the legal entity simplification process primarily involves the merger of existing risk carriers.
On 19 November 2007 and 20 November 2007, following Swiss Re’s announcement of a CHF 1.2 billion mark-to-market loss arising from its exposure to two credit default swaps, Standard & Poor’s and Moody’s affirmed Swiss Re’s financial strength ratings as AA– (stable outlook) and Aa2 (stable outlook), respectively. On 20 November 2007, A.M. Best placed Swiss Re’s A+ financial strength rating under review with negative implications.
On 7 September 2007 and 3 October 2007, S&P and Moody’s assigned to Swiss Re Europe S.A. the Group’s AA– (stable outlook) and Aa2 (stable outlook) financial strength ratings, respectively. The rating actions reflect Swiss Re Europe’s core status within the Group. This entity plays a key role in the legal entity simplification process for the Group’s European reinsurance business.
Corporate governance is the framework comprising a company’s organisation, structure, management and assurance functions. Transparency is an important component of the framework, designed to protect the interests of shareholders and create value for all stakeholders.
On 1 January 2007, as an advance part of the ongoing revision of Swiss company law, the new articles 663bbis and 663c para. 3 of the Swiss Code of Obligations came into force. Above and beyond the SWX Directive in its previous form, these articles require, among others, the detailed disclosure of remuneration to members of the governing bodies of listed companies. All aspects of this information are to be audited by the external auditor. The basic compensation principles are set out in section 5 of this chapter (compensation, shareholdings and loans), while the details are disclosed in note 13 of the Group financial statements on pages 172 – 177.
Swiss Re also meets the requirements of the Provisions on Corporate Governance, Risk Management and the Internal Control System, issued by the Federal Office of Private Insurance and enacted on 1 January 2007. Additionally, the Group complies with the applicable local rules and regulations of all the countries in which it does business.
Listed Group companies Swiss Reinsurance Company, the Group’s parent company, is a joint stock company, listed on SWX Swiss Exchange, domiciled at Mythenquai 50/60 in 8022 Zurich and organised in accordance with the laws of Switzerland. For details on share information, see the chapter on “Swiss Re shares”, pages 122 –126. For the other listed Group companies, see the Group financial statements, note 16 on “Subsidiaries, equity investees and variable interest entities”, pages 186 – 191.
Non-listed Group companies Please refer to the Group financial statements, note 16 on “Subsidiaries, equity investees and variable interest entities”, pages 186 – 191.
As of 31 December 2007, there were two shareholders with a participation exceeding the 3% threshold of Swiss Re’s share capital.
b. The Capital Group Companies, Inc., 333 South Hope Street, Los Angeles, CA 90071, USA (Capital Group), announced on 4 December 2007 that they held, through acquisitions by some of their Group companies, in the capacity of investment manager for mutual funds and clients, 19 364 301 registered shares of Swiss Re. Capital Group thus has 5.23% of Swiss Re’s voting rights, which can be exercised autonomously of the beneficial owners.
d. Berkshire Hathaway Inc., 3555 Farnam Street, Omaha, NE 68131, USA, notified Swiss Re on 22 January 2008 that, as of the same day, it held through its subsidiary Columbia Insurance Company, 3024 Harney Street, Omaha, NE 68131, USA, 11 250 000 registered shares or 3.03% of the voting rights of Swiss Re.
1.1 Group structure1.1 Group structure 1.2 Significant shareholders1.2 Significant shareholders 1.3 Cross-shareholdings1.3 Cross-shareholdings
Swiss Re issued shares reserved for corporate purposes (“Vorratsaktien”) prior to the revision of Swiss corporate law in 1992. These shares were paid in only at a nominal value of CHF 0.10 for a total amount of CHF 794 228 and are not entitled to dividend.
2.1 Capital2.1 Capital 2.2 Authorised and conditional capital2.2 Authorised and conditional capital
No additional conditional capital and no authorised capital was created or approved in 2007.
In 2006, the company’s share capital increased from CHF 32 million to CHF 37 million, mainly due to shares issued to General Electric (GE) and to capital markets as a result of the acquisition of GE Insurance Solutions. Total reserves increased CHF 4.5 billion to CHF 16.2 billion. The higher profit for the 2006 financial year of CHF 2.1 billion (compared to CHF 1.1 billion in 2005) led to an increase of disposable profit from CHF 1.1 billion to CHF 2.2 billion. Total shareholders ’ equity before allocation of profit increased from CHF 12.8 billion to CHF 18.4 billion. At the Annual General Meeting, shareholders approved a dividend payment of CHF 1.2 billion, compared to CHF 776 million paid in the previous year. In 2006, the company issued 100 047 shares from conditional capital for employee participation purposes.
In 2007, the company’s fully paid-in share capital remained roughly unchanged at CHF 37 million. Total reserves increased CHF 1.0 billion to CHF 17.2 billion. The profit for the 2007 financial year of CHF 1.7 billion (compared to CHF 2.1 billion in 2006) led to a decrease in disposable profit from CHF 2.2 billion to CHF 1.8 billion. Total shareholders’ equity before allocation of profit increased from CHF 18.4 billion to CHF 19.0 billion. At the Annual General Meeting of 18 April 2008, shareholders will vote on a proposed dividend payment of CHF 1.4 billion, compared to CHF 1.2 billion paid in the previous year. The company issued 451 724 shares from conditional capital for employee participation purposes, bringing the total of shares issued for employee participation purposes to 956 123, from a total of 7 000 000 shares available.
Free transferability Swiss Reinsurance Company’s shares are freely transferable, without any limitations, provided that the buyers declare they are the beneficial owners of the shares and comply with the disclosure requirements of the Federal Act on Stock Exchanges and Securities Trading (“Stock Exchange Act”) of 24 March 1995.
Procedure and conditions for cancelling statutory privileges and limitations on transferability This point is not applicable, as no statutory privileges or limitations on transferability exist.
(i) Holders may convert the bonds, due in 2021 and issued in denominations of USD 10 000 principal amount and integral multiples thereof, into registered shares of Swiss Reinsurance Company (nominal value CHF 0.10 per share) at any time on and after 22 November 2001, and prior to the close of business on 21 November 2011, at a conversion price of CHF 207.19 per share and a fixed exchange rate of USD 1 = CHF 1.6641. The exercise of this convertible bond will not affect Swiss Re’s conditional capital, as Swiss Reinsurance Company purchased a call option to hedge the underlying shares. If bond holders exercise this convertible bond, Swiss Re will exercise the hedge option to obtain the necessary shares without accessing Swiss Re’s conditional capital.
Governance Corporate governance and compensation report 3 Board of Directors Initial Current Name Nationality Age Additional function election term ends
AC = Audit Committee FRC = Finance and Risk Committee CC = Compensation Committee GC = Governance Committee
Information about managerial positions and significant business connections of non-executive directors All members of the Board of Directors are non-executive. John R. Coomber was a member of Swiss Re’s executive management and CEO until 31 December 2005. Walter B. Kielholz, former Executive Vice Chairman and non-executive Vice Chairman since 2007, was Swiss Re’s Chief Executive Officer from 1 January 1997 to 31 December 2002. Of the other ten non-executive directors, none has ever held a management position in the Group.
Mr Forstmoser, a Swiss citizen born in 1943, received a doctorate in law from the University of Zurich in 1970, became an attorney-at-law in 1971 and earned a master’s degree in law from Harvard Law School in 1972.
Mr Forstmoser has been a law professor at the University of Zurich since 1974 and a partner of Niederer Kraft & Frey, Attorneys, in Zurich, since 1975. Mr Forstmoser was elected to Swiss Re’s Board of Directors in 1990. His mandate was renewed in 1994 and 1998, each time for a further four years. The Board of Directors elected him Chairman on 30 June 2000. He was re-elected as Chairman in 2002 and 2006 for further four-year terms.
Mr Forstmoser is also chairman of the board of directors of Hesta AG and Hesta Tex AG, a member of the boards of Mikron Holding AG, Bank Hofmann AG (until January 2007), Ernst Basler AG, Remer Holding AG, and Hyos Invest Holding AG, as well as Vice Chairman of Gebert Rüf Stiftung.
Mr Forstmoser is the author of numerous publications on a variety of law disciplines, such as business, company, capital markets and data protection law. In the context of corporate and investment fund legislation, he has been engaged in numerous expert committees, some of which he presided as chairman.
At the beginning of 1989, Mr Kielholz joined Swiss Re, Zurich. He became a member of the Executive Board in January 1993 and was Swiss Re’s Chief Executive Officer from 1 January 1997 to 31 December 2002. In June 1998, he was elected to Swiss Re’s Board of Directors, which at the same time appointed him Executive Director. Mr Kielholz was appointed Executive Vice Chairman with effect from 1 January 2003 and Vice Chairman in 2007. His mandate was renewed for a further four-year term in 2002 and 2006.
Mr Baer was elected to Swiss Re’s Board of Directors in May 2005. He also serves on the boards of directors of Adecco S.A., Rieter Holding AG, Allreal Holding AG, Stäubli Holding AG, and two small-sized companies.
Mr Bechtler, a Swiss citizen born in 1949, received a doctorate in law from the University of Zurich in 1973 and a master’s degree in law from Harvard Law School in 1975.
Mr Bechtler joined Swiss Re’s Board of Directors in November 1993. His mandate was renewed in 1997, 2001 and 2005, each time for a further four years. Mr Bechtler also serves on the boards of directors of Credit Suisse Group, Zurich, Bucher Industries, Sika AG and Conzzeta Holding. From 1987 to 1999, he served as chairman of “Swisscontact”, a large Swiss development foundation, and from 1987 to 2002 as chairman of the Zurich Art Society. Since 2005 he has been chairman of the Zurich committee of Human Rights Watch.
Mr Coomber was elected to Swiss Re’s Board of Directors at the Extraordinary General Meeting of 27 February 2006 for a term ending at the Annual General Meeting of 2009. Mr Coomber also serves as a member of the supervisory board of Euler Hermes, as a director of Pension Insurance Corporation Holdings LLP, MH (GB) Limited, Parhelion Capital Ltd, telent plc and as a trustee of The Climate Group.
Mr Maerki, a Swiss citizen born in 1946, graduated with a master’s degree in business administration at the University of Basel in 1972.
Hans Ulrich Maerki Non-executive and independent director Hans Ulrich Maerki Non-executive and independent director
Mr Maerki was elected to Swiss Re’s Board of Directors at the Annual General Meeting of 20 April 2007 for a four-year term of office. He is also a member of the boards of ABB, MettlerToledo International and the Menuhin Festival Gstaad. He serves on the board of trustees of the Hermitage Museum in St. Petersburg as well as on the international advisory boards of the Ecole des Hautes Etudes Commerciales (HEC) Paris, the IESE Business School University of Navarra (IESE), the IMD Business School in Lausanne and Bocconi University in Milan.
Mr Smith is also a director of The Procter & Gamble Company and serves as a member of the chancellor’s executive committee of the University of Massachusetts.
Kaspar Villiger Non-executive and independent director Kaspar Villiger Non-executive and independent director
Changes in the course of the 2007 business year Dennis D. Dammerman retired from the Board of Directors at the Annual General Meeting of 20 April 2007. At the same time, the shareholders re-elected Raymund Breu and John F. Smith, Jr., as members of the Board of Directors. Mr Breu was elected for another four-year term. Mr Smith was elected for a one-year term only, as he will have reached the retirement age of 70 by the Annual General Meeting in 2008.
Raymond K. F. Ch’ien, a Chinese citizen born in 1952, has been chairman of CDC Corporation since 1999. He served as chief executive officer of the company in 2005 and as acting chief executive officer in 2004. From 1984 to 1997, he was group managing director of Lam Soon Hong Kong Group.
Mr Ch’ien studied at Rockford College and the University of Pennsylvania, graduating with a PhD in economics in 1978. He became a Trustee of the University of Pennsylvania in 2006.
Please refer to the information provided in each director’s biography on pages 89 – 92.
First election and remaining term of each director Please refer to the table at the beginning of section 3 of this chapter.
In addition, he convenes meetings of the Board and its committees, makes preparations for, and presides at Board meetings. He coordinates the activities of Board committees and ensures the Board is kept informed about their activities and findings. In cases of doubt, he makes decisions regarding the authority of the Board or its committees and about the application and interpretation of the Corporate Bylaws.
3.4 Elections and term of office3.4 Elections and term of office 3.5 Organisational structure of the Board of Directors 3.5 Organisational structure of the Board of Directors 3.5.1 Allocation of tasks within the Board of Directors 3.5.1 Allocation of tasks within the Board of Directors
He receives comments from the directors as to the Board’s performance, reports annually to the Board with an assessment of its performance and ensures that newly elected Board members receive a suitable introduction to their role.
If the Chairman of the Board is prevented from performing his duties, they are performed by the Vice Chairman or another member of the Board.
Each committee is headed by a chairperson. He or she prepares and presides the committee meetings and informs the Board on any committee’s actions and decisions.
Members of the Audit Committee Jakob Baer, Chair Raymund Breu Rajna Gibson Brandon Robert A. Scott John F. Smith, Jr.
Compensation Committee Responsibilities of the Compensation Committee The Compensation Committee, among others, ensures the development of a set of Group compensation principles, submits them to the Board for approval, monitors adherence to the principles and regularly discusses their appropriateness; keeps itself informed of industry and peer compensation practices; recommends to the Board the remuneration of the members of the Board, the compensation of the Chief Executive Officer and the total amount available for compensation of the other members of the Executive Board; determines the individual compensation amounts of the members of the Executive Board (other than the Chief Executive Officer), based on the Board’s determination of the total amount available; determines the total amount for bonus payments and related share deferral plans, on the basis of achieved performance, and approves long-term incentive plans (subject to the approval of the Board of Directors for new option plans); reviews and approves the Group’s compensation and pension plans; ensures compliance with any remuneration disclosure requirements; 
Governance Corporate governance and compensation report approves employment contracts with the Chairman, the Vice Chairman, the Chief Executive Officer and the members of the Executive Committee and the Executive Board; reviews its own performance annually.
Finance and Risk Committee Responsibilities of the Finance and Risk Committee The Finance and Risk Committee, among others, annually reviews and recommends for approval to the Board of Directors the Group Risk Policy, including Swiss Re’s risk tolerance targets regarding capital adequacy, risk concentration, and earnings volatility; regularly monitors the usage of limits set out in the Group Risk Policy and decides on actions to be taken following breaches; discusses with the Chief Risk Officer the top risk issues for the Group and corresponding risk mitigation actions; reviews the most important risk exposures in all major risk categories – insurance (including reserve risk), financial market, credit, funding and liquidity, and operational – highlighting significant risk concentrations; reviews new products or strategic expansions of the Group’s areas of business, which would result in a substantial change to the Group’s risk profile and provides comments to the Board of Directors from a risk perspective; reviews the assurance activities of the Risk Management function; reviews critical principles used in internal risk measurement, valuation of assets and liabilities, capital adequacy assessment, and economic performance measurement, and reviews their implementation; reviews the Group’s funding structure and capital adequacy; reviews the Group’s treasury strategy, including cash and liquidity management; discusses external risk mitigation activities (including retrocession, insurance bonds, and investment hedging) and their impact on counterparty risk; reviews reports on the Group-wide use of derivative instruments; annually reviews its own performance.
Governance Committee Responsibilities of the Governance Committee The Governance Committee, among others, keeps itself informed on corporate governance developments, measures the Group’s governance against relevant best practice standards and informs the Board of its findings and emerging trends; evaluates Board member candidates and makes recommendations to the Board with regard to their nomination for election or re-election at a General Meeting, while ensuring an adequate size and a well-balanced composition of the Board as well as the independence of the majority of the Board; evaluates proposals of the Chief Executive Officer for the appointment and removal of members of the Executive Committee and the Executive Board; ensures the effectiveness of executive succession and emergency planning processes; reviews compliance with corporate governance disclosure requirements; annually reviews the company’s Articles of Association and the Corporate Bylaws, and informs the Board of its findings and proposals; reviews the Group’s communication policy; periodically reviews the Group’s guiding principles, as well as the corporate citizenship and corporate sustainability activities; monitors investor relations activities and the relationship with rating agencies; examines how public reports are perceived, especially with regard to whether they fulfil the needs and expectations of international investors; monitors the shareholder structure; has initial responsibility for assessing any merger and take-over proposals submitted to the Group; has initial responsibility for reviewing material transactions with any of the Group’s significant shareholders; reviews its own performance annually.
Governance Corporate governance and compensation report a. General work methods of the Board of Directors and its committees Extraordinary meetings are called at short notice if and when required. Board members can also join such meetings by video or telephone conference. A quorum is constituted when at least half of the members of the Board or the Board committee are present in person or participate using some alternative means of communication.
The members of the Board of Directors receive an invitation to Board and committee meetings with a list of the agenda items approximately two weeks before each meeting. They also receive written documentation on the items for discussion, so that they can prepare thoroughly. The first set of pre-reading material is usually sent out with the invitation two weeks prior to the meeting, followed by a second delivery one week later.
Specific subjects can be discussed in a closed session with a reduced number of participants. Depending on the item being discussed, these closed sessions consist solely of Board members (private session) or Board members and the Chief Executive Officer (executive session).
Governance Corporate governance and compensation report c. Specific work methods of the Audit Committee The Audit Committee normally meets eight times a year. The first two meetings of the year mainly deal with the annual closing. In the subsequent meetings, the committee focuses on topics such as embedded value, the internal control system, or legal, regulatory and compliance issues. The committee receives a status report from Group Internal Audit about four times a year. The meetings at the beginning of May, August and November are mainly dedicated to the discussion and approval of the quarterly results.
Besides the committee members and the company secretary, selected individuals are invited to attend Audit Committee meetings in an advisory capacity. In 2007, the following people exercised an advisory role on the committee: Peter Forstmoser, Chairman of the Board of Directors Walter B. Kielholz, Vice Chairman of the Board of Directors Jacques Aigrain, Chief Executive Officer Ann F. Godbehere, Chief Financial Officer (until 28 February 2007) George Quinn, Chief Financial Officer (as of 1 March 2007) David Doyle, Head of Group Internal Audit (until 28 February 2007) Clare Bousfield, Head of Group Internal Audit (as of 1 March 2007)
d. Specific work methods of the Compensation Committee The Compensation Committee normally holds five regular meetings per year. The main purpose of the January and February meetings is to set the total amount for bonus payments in the organisation, including bonuses for Executive Board members, as well as to allocate benefits from the long-term incentive plans. The June and September meetings are to review the compensation principles and instruments. In December, the committee undertakes an initial assessment of Executive Board members’ performance for the pending bonus allocation and decides on any amendments to the compensation system for the following year.
e. Specific work methods of the Finance and Risk Committee The Finance and Risk Committee normally holds six regular meetings per year. The topics discussed at committee meetings depend on current developments and corporate requirements. In the reporting year, the committee reviewed derivative transactions, risk management in life and credit business, the company’s reserving policy for life and non-life business, the optimal approach to the insurance price cycle, treasury issues, climate change, the Group’s earthquake exposure, investment policy and the internal risk identification process. The committee also discusses the Chief Risk Officer’s latest written report at almost every meeting. This report outlines the Group’s position in terms of the main quantitative risk metrics.
Besides the committee members and the company secretary, selected individuals are invited to attend Finance and Risk Committee meetings in an advisory capacity. In 2007, the following people acted in an advisory role on the committee: Peter Forstmoser, Chairman of the Board of Directors Jacques Aigrain, Chief Executive Officer Ann F. Godbehere, Chief Financial Officer (until 28 February 2007) George Quinn, Chief Financial Officer (as of 1 March 2007) Christian Mumenthaler, Chief Risk Officer (until 31 December 2007) Stefan Lippe, Head of (Re)Insurance Products Roger W. Ferguson, Head of Financial Services Products Benjamin Meuli, Chief Investment Officer
In 2007, there were six regular meetings of the Finance and Risk Committee. There were no extraordinary meetings and no resolutions by written agreement. On average, the meetings lasted 2.5 hours. Between four and eight agenda items were discussed per meeting, with an average of six items. Average attendance was 90.5% during the reporting year.
f. Specific work methods of the Governance Committee The Governance Committee normally holds three regular meetings per year. The committee usually spends its first meeting of the year discussing developments in corporate governance and reviewing the Articles of Association, Corporate Bylaws and the Corporate Governance section of the Annual Report. The committee’s other meetings address the media and investor response to the annual results, the Group’s Guiding Principles, social commitment, approach to sustainability, the activities of Investor Relations and shareholder structure.
Board of Audit Compensation Finance and Risk Governance Dates Directors Committee Committee Committee Committee 31 January  1 February    2 February  27 February    28 February  2 April  18 April    19 April  7 May  11 May  14 June   15 June    6 August  13 September    14 September  22 October  26 October  5 November  16 November  18 November  6 December   7 December   28 December 
3.6 Definition of areas of responsibility of the Board of Directors and the Executive Committee 3.6 Definition of areas of responsibility of the Board of Directors and the Executive Committee
The Executive Committee holds, as a rule, two meetings per month. In 2007, the Executive Committee met 30 times.
The Executive Committee is supported by the larger Executive Board made up of 21 senior executive officers (including the seven members of the Executive Committee). All members of the Executive Board are appointed by the Board of Directors upon recommendation of the Chief Executive Officer and after consultation with the Governance Committee. The Executive Board supports the Executive Committee as a sounding forum. It met eight times in 2007. One of those meetings covered strategic issues and stretched over three days.
Swiss Re maintains effective and consistent control of the Executive Committee through the Board of Directors. The Board of Directors has a number of controlling and information-gathering mechanisms in place to monitor the handling of responsibilities it has delegated to the Executive Committee.
f. Risk management Swiss Re’s governing bodies recognise the value of a high quality corporate Assurance Framework. Swiss Re has therefore created a comprehensive management and controlling instrument over the past few years to enhance its risk management capability. This instrument monitors five main risk classes: insurance risk, financial market risk, credit risk, funding and liquidity risk, and operational risk. These risk classes are subdivided into approximately 20 risk categories. The framework defines associated responsibilities and reporting processes for each of the categories. The Finance and Risk Committee received a detailed progress report and several updates on the Assurance Framework in 2007. As governance standards continue to evolve, the corresponding framework is subject to periodic reviews and improvements as required.
i. Right to obtain information At Board meetings, any member of the Board of Directors can demand information on any aspect of the Group’s business. Any member may, in such meetings, request that books and records be produced for timely inspection. Outside Board meetings, any member can direct a request for production of business records to the Chairman of the Board. In the event the request is denied, the Board decides whether such information shall be produced.
j. Special investigations Each Board committee is entitled to undertake or commission special investigations at its own discretion into any matters within its respective scope of responsibility. They may also enlist assistance from independent legal advisers, auditors or other experts if deemed necessary.
Based on the authority to conduct special investigations, the Audit Committee initiated a review of the mark-to-market loss from credit underwriting activities in November 2007.
GIA staff govern themselves in accordance with the Code of Ethics established by the Institute of Internal Auditors (IIA). The IIA’s “International Standards for the Professional Practice of Internal Auditing” constitute the operating guidance for the department.
Jacques Aigrain Swiss and French 53 Chief Executive Officer Andreas Beerli Swiss 56 Chief Operating Officer Roger W. Ferguson US 56 Head of Financial Services Products Michel M. Liès Luxembourg 53 Head of Client Markets Stefan Lippe German 52 Head of (Re)Insurance Products Christian Mumenthaler Swiss 38 Chief Risk Officer George Quinn British 41 Chief Financial Officer
Mr Aigrain, a Swiss and French citizen born in 1954, received a PhD in economics in 1981 from the Sorbonne in France and a master’s degree in economics from Paris-Dauphine University.
Mr Aigrain started his career with JP Morgan in 1981 and had various functions in investment banking in London, Paris and New York. Immediately prior to joining Swiss Re, he was a managing director and a member of JP Morgan‘s investment banking management committee, where he was co-head of client coverage.
Mr Aigrain is a member of the Supervisory Board of Deutsche Lufthansa AG, a member of the Board of Directors of Swiss International Air Lines Ltd., Basel, and a member of various advisory committees of a regional or financial nature.
Mr Beerli, a Swiss citizen born in 1951, graduated in law in 1976 and received a doctorate in law from the University of Basel in 1983. He joined Swiss Re in 1979, serving in various marketing functions until 1984. He then worked for Credit Suisse in private banking and for the Baloise Insurance Group, where he served in the company’s foreign operations.
He rejoined Swiss Re in 1993 as chief of staff. Two years later, he assumed marketing responsibilities for Austria, Italy and Switzerland. In 1997, he was appointed managing director of Swiss Re Italia SpA in Rome, successfully restructuring and integrating the newly acquired Italian reinsurance company Uniorias. In 1998, he assumed an additional position as Head of the Global Clients unit. He served as Head of the Americas Division from January 2000 to December 2005 and took on a new role as Chief Operating Officer on 1 January 2006.
A US citizen born in 1951, Mr Ferguson received a PhD in economics in 1981, a JD in law in 1979 and a BA in economics in 1973, all from Harvard University. Prior to his employment at Swiss Re, Mr Ferguson served as Vice Chairman of the Board of Governors of the US Federal Reserve System from 1999 to 2006 and, from 1984 to 1997, was an Associate and Partner at McKinsey & Company, where he managed a variety of studies for financial institutions, and was Director of Research and Information Services. From 1981 to 1984, he was an attorney at the New York City office of Davis Polk & Wardwell, where he worked on syndicated loans, public offerings, mergers and acquisitions, and product development.
Mr Ferguson is a member of the Board of Overseers of Harvard University and of the Board of Trustees of the Institute for Advanced Study. He is also a member of the Council on Foreign Relations and the Group of Thirty.
In October 1983, he joined Bavarian Re as a team member of a business analysis project. He was appointed deputy member of the board of management in 1988 and a full member in 1991, when he assumed general responsibility for the company‘s operations in the Germanspeaking area. In 1993, he became chairman of the board of management of Bavarian Re. Since 2001, he has been chairman of the board of directors of the renamed Swiss Re Germany Holding AG.
Mr Lippe was appointed a member of Swiss Re‘s Executive Board in 1995, as Head of the Bavarian Re Group. In 2001, he was assigned as Head of the Property & Casualty Business Group and appointed a member of the Executive Committee. In September 2005, he assumed the position of Head of the Products business function. In November 2007, the Financial Services and Products business functions were aligned and Mr Lippe assumed the title of Head of (Re)Insurance Products.
Between 1999 and 2002, Mr Mumenthaler was responsible for a number of key company projects, including securitisation solutions for the Group. In 2002, he established a new unit, Group Retro & Syndication, which was responsible for optimising the Group‘s risk and capital base through retrocession and securitisation. He was appointed Group Chief Risk Officer and
Christian Mumenthaler Chief Risk Officer Head of Global Risk Management (until 31 December 2007) Head of Life & Health (as of 17 September 2007) Member of the Executive Committee (until 31 December 2007)
Mr Quinn, a British citizen born in 1966, holds a degree in engineering from University of Strathclyde and is a member of the Institute of Chartered Accountants in England and Wales. He started his career at KPMG in London where he held a number of positions as adviser and consultant to insurance and reinsurance companies.
Changes in the course of the 2007 business year In March, George Quinn succeeded Ann F. Godbehere as Chief Financial Officer and member of the Executive Committee.
In September, it was announced that Christian Mumenthaler would assume the responsibility of Head of Life & Health with immediate effect. In October, it was announced that Raj Singh would succeed him as Chief Risk Officer and member of the Executive Committee as of 1 January 2008.
Governance Corporate governance and compensation report 5 Compensation, shareholdings and loans
Compensation philosophy and guiding principles To attract, motivate and retain the qualified talent necessary for its success, Swiss Re, as a global company, aims to provide remuneration that is competitive in the labour markets in which it operates.
The total reward offering comprises the following elements: Set in relation to market medianBase salary and benefits
Measured against prior-year development Applies above a certain threshold Paid after three years
Base salary Base salary is a compensation for the function and scope of the job performed. Swiss Re aims to position the base salary around the market median for equivalent positions in comparable companies. It reviews pay against market benchmarks on a regular basis to ensure that competitive pay is maintained and undesired fluctuation minimised. Base salary is primarily driven by the markets where the company competes for talent, but factors such as individual expertise are also considered when making any salary-related decision.
Annual Performance Incentive (API) The Annual Performance Incentive (API) is a discretionary, variable component of Swiss Re’s total cash compensation package for employees. The API, together with the base salary, is intended to provide an income around the market median for total cash compensation when performance targets are achieved. Where exceptional performance justifies it, the API provides an opportunity for additional income.
The Annual Performance Incentive pool for the company is determined by the Compensation Committee of the Board based on company performance measured against a set of predefined targets. Group performance levels must be considered before function, division or individual performance levels are determined and compensated for. The API for a year’s service is paid after the publication of the Group’s result, in March of the following year.
Long-term Incentive (LTI) The Long-term Incentive plan is a discretionary grant for a select group of key executives at Managing Director, Executive Board and Executive Committee level, over and above their annual cash remuneration. The intention is to achieve competitive total compensation for top executive talents by offering the participant a long-term incentive opportunity.
Benefits Swiss Re’s aim is to provide an appropriate package of employee benefits for each distinct operating environment. Employee benefits are one component in Swiss Re’s total reward offering and should contribute to achieving competitive advantage, relative to general local market employment conditions, in recruiting, motivating and retaining talent. The primary purpose is to establish a level of security for the employee and their dependents in respect of major events in their lives in the areas of age, health, disability and death.
Performance management in Swiss Re is multidimensional. An employee’s individual performance is determined by: performance in the current position, based on a set of objectives, and assessed in terms of timeliness, quality and quantity of achievement; ability to build trust and confidence, as well as to coach and transfer knowledge to enable others to succeed in broader positions; demonstration of competencies in the areas of thought, results, people and personal leadership.
The Committee also approves the total remuneration philosophy of the company as well as annual and long-term incentive plans for executives. It ensures the development of a set of Group-wide compensation principles and compliance with remuneration disclosure requirements. It determines the total amount for Annual Performance Incentive payments and related deferral plans, and regularly reviews and approves the Group’s compensation and pension plans. The Committee’s work is governed by its charter, which is set forth in the Corporate Bylaws of Swiss Re.
Bob Scott succeeded George Farr as committee chairman in January and Hans Ulrich Maerki joined the Committee in April, succeeding Dennis Dammerman. The Head of Group Reward & Policies acted as committee secretary during 2007. Mercer is the external adviser to the Committee. In this role, Mercer provides information on market competitive pay and remuneration trends and provides timely advice on executive compensation issues. Mercer is engaged directly by the Compensation Committee.
5.1 Content and method of determining the compensation and shareholding programmes 5.1 Content and method of determining the compensation and shareholding programmes
Important changes to remuneration policy and structure In early 2007, in connection with the Annual Performance Incentive (API) payment for 2006, the Group introduced the Value Alignment Incentive (VAI) as a new variable compensation element. The VAI links a significant part of the API to the development of prior-year economic performance indicators related to each plan cycle over a three-year period. Key drivers of plan success include property and casualty reserving accuracy, stable life and health actuarial performance, and sustainability of assets under management. The part of the API which is allocated to the VAI is multiplied by a factor that varies between 62.5% and 187.5%. The factor is linked to the surplus or deficiency of the claims provisions set at the end of the current financial year after a three-year development period or alternatively the relevant key indicators of the specific unit (e.g. for third-party asset management, the difference between the initial amount of assets under management and the amount three years later). The VAI is paid in cash at the end of the three-year period.
On 1 January 2007, pension plans in Switzerland were changed from defined benefit to defined contribution plans. Under the new regime, retirement benefits payable from the pension plan depend on the employee and company contributions that are paid into each employee’s individual account, as well as the yearly interest credited to these accounts and the rate used to convert the account balances into annuities at retirement. A one-time allowance was paid to the pension plan in favour of entitled employees to partially compensate for the shortfall in expected annuities at the age of 60.
Mercer conducts an annual review of total compensation of the Executive Committee relative to an identified group of reference companies within the financial services industry to ensure that market competitiveness is maintained.
Voting right restrictions, statutory group clauses, exception rules There are no voting right restrictions, no statutory group clauses and thus no rules on making exceptions.
There is no statutory rule on the deadline for registering shareholders in connection with the attendance of the General Meeting. In recent years, Swiss Re acknowledged the voting rights of shares which were registered at least two working days before the General Meeting. In 2007, the qualifying date for the Annual General Meeting held on Friday, 20 April 2007 was Wednesday, 18 April 2007.
Governance Corporate governance and compensation report 7 Changes of control and defence measures
7.1 Duty to make an offer7.1 Duty to make an offer 7.2 Clauses on change of control7.2 Clauses on change of control
Other fees include permitted advisory work related to a range of projects and due diligence.
The external auditor, PricewaterhouseCoopers AG, is responsible for performing an independent audit of the consolidated financial statements in accordance with generally accepted auditing standards. The Audit Committee liaises closely with the elected external auditor. In particular, it discusses with the auditor any significant risks, contingencies or other obligations of the company; it reviews and approves the planned audit services to be provided by Group Internal Audit and the external auditor and discusses the audits with them; it approves in advance non-audit services expected to be provided by the external auditor, and reviews and approves other non-audit services that have been pre-approved by the Chairman of the Audit Committee between committee meetings; it reviews major changes to the company’s accounting principles and practices; it reviews the adequacy and efficacy of the financial reporting process, the system of internal controls and quality control procedures, as well as any significant findings and recommendations made by the external auditor.
The auditor is requested to supply a formal written statement at least once a year, delineating all relationships with the company that might affect auditor independence. The Audit Committee actively engages in a dialogue with the auditor in respect of any disclosed relationships or services that might impact the auditor’s objectivity and independence, and recommends to the Board of Directors appropriate action in response to the auditors’ statement to satisfy itself of the external auditor’s independence; it obtains from the auditor and reviews, at least annually, a report describing the auditor’s own quality control procedures, and any material issues raised by the most recent internal reviews, or inquiries or investigations by governmental or professional authorities within the preceding five years and any steps taken to deal with any such issues. In addition, it reviews the audit fees to consider whether the level of fees is appropriate, as well as any fees paid to the auditor in respect of non-audit services.
One of the core values of Swiss Re’s guiding principles is integrity through an uncompromising commitment to transparency and ethical principles. As a result, the Group’s information policy goes beyond legal requirements, aiming to meet best practice standards.
In 2007, the Group began to report its financial performance on a quarterly basis. Following the release of Swiss Re’s Annual Results, all shareholders registered in the Swiss Re share register automatically receive the Shareholders’ letter along with an order form. Shareholders can elect to receive a copy of the Annual as well as Quarterly Reports published throughout the year. Further, all registered Swiss Re shareholders also automatically receive an invitation to the Group’s Annual General Meeting.
Swiss Re is strongly committed to treating all investors equally. The Group prevents selective disclosure by observing ad-hoc publicity rules and a policy of restrictions for the so-called “close period”, during which quarterly and annual financial results information is finalised. With the introduction of quarterly reporting, Swiss Re has changed its close period regime and newly subjects all employees globally to the corresponding trading restrictions in Swiss Re securities. The close period commences on a given date preceding the official publication of the financial information and ends after a “cooling off” period following the public release. No meetings are held with analysts or investors during this period.
Date News Method of dissemination 16 January Placement of USD 750 million News release of extreme mortality risk protection through Vita Capital programme 13 February Reporting of January 2007 News release and telephone conference non-life renewals 1 March 2006 annual results News release, press conference and analysts’ meeting in Zurich (including telephone conference and web cast) 1 March Completion of first step in a CHF News release 6 billion share buy-back programme – approximately 17 million shares repurchased from General Electric 13 March Announcement of optimisation News release of legal entities in EU 27 March Placement of GBP 500 million of News release hybrid debt securities 3 April Reporting of life and health News release and telephone conference embedded value 2006 20 April 143rd Annual General Meeting Meeting in Zurich and news release 27 April Placement of AUD 750 million of News release hybrid debt securities 8 May First quarter 2007 results News release and telephone conference 1 June Placement of USD 100 million of News release Mediterranean earthquake protection through a retrocession agreement with MedQuake Ltd. 7 August Second quarter 2007 results News release, press conference and analysts’ meeting in Zurich (including telephone conference and web cast) 11 September Investors’ presentation on News release, press conference and upcoming renewals analysts’ meeting in Monte Carlo 26 October Appointment of Raj Singh as News release Chief Risk Officer and member of the Executive Committee, effective as of 1 January 2008; appointment of Christian Mumenthaler as Head of Life & Health 6 November Third quarter 2007 results News release and telephone conference 19 November Announcement of CHF 1.2 billion News release mark-to-market loss arising from credit underwriting activities 11 December Investors’ Day on capital management Meeting in London and telephone and Financial Services business conference
Swiss Re’s share price declined 22.4% in 2007. The CHF 7.75 billion share buy-back programme is expected to be completed within the next 24 months.
From 1 February 1996, Swiss Re’s shares are also traded in the form of an American Depository Receipt (ADR) level 1 programme in cooperation with Morgan Guaranty Trust Company of New York.
Swiss Security Number (Valorennummer) 1233237 – ISIN (International Securities Identification Number) CH0012332372 US8708872051
Share RUKN VX RUKN RUKN.VX ADR level 1 SWCEY US SWCEY SWCEY.US
Swiss Re’s share price fell 22.4% in 2007, from CHF 103.60 on 1 January to CHF 80.45 on 31 December. It reached its high for the year of CHF 119.40 on 4 June and its low of CHF 78.70 on 27 November. Swiss Re shares outperformed most peers and indices in the first months of the year, when the company reported very strong earnings for 2006 and the first quarter of 2007, and announced a share buy-back programme of CHF 6 billion over three years. However, Swiss Re’s share price fell in line with the vast majority of financial stocks from mid-June, and further declined after 19 November when the Group reported a pre-tax mark-to-market loss of CHF 1.2 billion from its credit underwriting activities.
Share trading The average daily trading volume for 2007 was 2.6 million shares on-exchange and 0.7 million shares off-exchange. The highest volume traded on-exchange was on 19 November, when Swiss Re announced a CHF 1.2 billion write-down from its credit underwriting activities, with 15.1 million shares changing ownership. The publication of the 2006 annual results on 1 March marked the most active day off-exchange, with 21.3 million shares traded. This also marked the day with the highest cumulative volume throughout the year.
Figure 1: Swiss Re share price and trading volume in 2007 Volume in millionsClosing price in CHF
Shareholder base Table 2 shows that Swiss Re’s shareholder base is highly diversified, both geographically and between private and institutional investors.
Institutional shareholders, including nominee accounts, represent roughly two-thirds of Swiss Re’s share capital. These shareholders are geographically diverse: 27% are based in Switzerland, 33% in Europe (excluding Switzerland), 36% in North America and 4% throughout the rest of the world. The top ten institutional shareholders hold 22% of Swiss Re’s shares, down 11% from the previous year; the top 100 institutional investors hold 48% of total outstanding shares.
 First trading line closing price  Second trading line volume-weighted average price (VWAP)  Second trading line volume
Institutional investors Switzerland 26.8 53.5 14.4 Europe (excluding Switzerland) 33.0 65.7 17.7
Rest of world 4.2 8.4 2.3 Total institutional investors 100 199.4 53.8
Index representation In addition to the relevant industry indices, Swiss Re is also represented in various global, European and Swiss indices – including the SMI, Financial Times Stock Exchange (FTSE), Eurotop 100 and S&P GLOBAL 100. The composition of these indices is usually based on freefloat market capitalisation. Swiss Re is also a member of various sustainability indices, including the Dow Jones Sustainability and FTSE4Good index families.
Insurance indices DJ Europe STOXX Insurance 3.97 Bloomberg Europe 500 Insurance 4.33 FTSE E300 Insurance 4.17
Sustainability indices Dow Jones Sustainability World 0.24 Dow Jones Stoxx Sustainability 0.48 FTSE4Good Global 0.18 KLD Global Climate 100 Index 1.00
Share custody Swiss Re offers its shareholders the opportunity to deposit shares in their own names with the Share Register in Zurich. Share custody is free of charge. The application form can be downloaded from Swiss Re’s homepage at: www.swissre.com
Investor Relations homepage More information on Swiss Re’s shares and the share buy-back programme is available at: www.swissre.com / investorrelations
Price per share, year-end 83.50 81.10 96.20 103.60 80.45 Price per share, year high (intraday) 108.00 97.05 103.40 108.50 119.40 Price per share, year low (intraday) 49.60 66.35 75.10 79.60 78.70 Daily trading volume (CHF millions) 115 104 126 153 253
¹ Nominal value of CHF 0.10 per share ² Dividend divided by year-end share price of corresponding year ³ Based on shares entitled to dividend ⁴ Figures for 2003 and 2004 represent the previously applied accounting policy, Swiss GAAP FER; 2005 – 2007 are based on US GAAP
Group financial statements 129 Income statement 130 Balance sheet 132 Statement of shareholders’ equity 133 Statement of comprehensive income 134 Statement of cash flow
153 Note 6 Debt 157 Note 7 Unpaid claims and claim adjustment expenses 159 Note 8 Reinsurance information 161 Note 9 Shareholders’ equity 162 Note 10 Income taxes 165 Note 11 Benefit plans 169 Note 12 Share-based payments 172 Note 13 Compensation, participations and loans of members of governing bodies 178 Note 14 Commitments and contingent liabilities 179 Note 15 Information on business segments 186 Note 16 Subsidiaries, equity investees and variable interest entities 192 Note 17 Restructuring provision 193 Note 18 Changes to Group presentation and disclosure 196 Note 19 Subsequent Event 197 Report of the Group Auditors
Swiss Reinsurance Company, Zurich 199 Annual report 201 Income statement 202 Balance sheet 204 Notes 214 Proposal for allocation of profit 215 Report of the Statutory Auditors
Net realised investment gains/losses 2,15 2 106 –739 Other revenues 280 302
Expenses Claims and claim adjustment expenses 7,8,15 –11 799 –12 065 Life and health benefits 8,15 –9 594 –11 112 Interest credited to policyholders 15 –2 827 –2 120
Other expenses 15 –3 590 –4 077 Interest expenses –1 026 –1 814 Total expenses –34 915 –37 687
Income before income tax expense 5 856 5 187 Income tax expense 10 –1 296 –1 025
Trading (including 10 980 in 2006 and 15 000 in 2007 subject to securities lending and
Equity securities: Available-for-sale, at fair value (including 923 in 2006 and 1 528 in 2007 subject to securities lending and repurchase agreements) (cost: 2006: 8 839 ; 2007: 9 039)
Additional paid-in capital Balance as of 1 January 6 852 11 136 Issue of common shares 4 234 38 Share based compensation 57 –18 Realised gains/losses on treasury shares –7 52 Balance as of period end 11 136 11 208
Net unrealised gains/losses, net of tax Balance as of 1 January 1 908 2 230 Change during the year 322 889 Balance as of period end 2 230 3 119
Dividends on common shares –776 –1 162 Cumulative effect of adoption of FIN 48 30 Balance as of period end 18 682 21 712
Other comprehensive income, net of tax: Change in unrealised gains/losses (tax:178 in 2006 and 213 in 2007) 322 889 Change in foreign currency translation (tax: 38 in 2006 and –201 in 2007) –1 176 –2 349 Change in adjustment for pension benefits (tax: 210 in 2006 and –194 in 2007) –665 609
Cash flows from operating activities Net income 4 560 4 162 Adjustments to reconcile net income to net cash provided /used by operating activities: Depreciation, amortisation and other non-cash items 886 676 Net realised investment gains/losses –2 106 739 Change in: Technical provisions, net –2 140 –6 434 Funds held by ceding companies and other reinsurance balances 524 –449 Other assets and liabilities, net 2 512 2 436 Income taxes payable/recoverable 910 672 Income from equity-accounted investees, net of dividends received –375 –407 Trading positions, net –10 966 –13 094 Securities purchased /sold under agreement to resell /repurchase, net 7 711 7 935 Net cash provided/used by operating activities 1 516 –3 764
Cash flows from investing activities Fixed income securities: Sales and maturities 59 045 51 584
Net purchase/sale/maturities of short-term investments –4 149 980 Equity securities: Sales 7 873 6 495 Purchases –8 799 –6 244 Cash paid/received for acquisitions/disposals and reinsurance transactions, net –3 506 1 615 Net purchases/sales/maturities of other investments –1 394 –1 761 Net cash provided/used by investing activities 2 965 –868
Total net cash provided/used 7 848 –1 660 Reclassification to short-term investments –2 451 Effect of foreign currency translation –159 –415 Change in cash and cash equivalents 5 238 –2 075 Cash and cash equivalents as of 1 January 8 368 13 606 Cash and cash equivalents as of 31 December 13 606 11 531
The accompanying notes are an integral part of the Group financial statements.
Please refer to Note 18 for a description of the changes in presentation and disclosure.
To reflect the integration of the Financial Services business segment into the Group structure, the way in which certain disclosures are presented in the financial statements has been changed. The main changes include the reclassification of Financial Services assets, liabilities and trading revenues into existing balance sheet and income statement line items. The cash flow statement and the presentation of the business segments has been adjusted accordingly. Please refer to Note 18 for further details of the changes.
The Group’s financial statements include the consolidated financial statements of Swiss Re Zurich and its subsidiaries. Entities which Swiss Re Zurich directly or indirectly controls through holding a majority of the voting rights are consolidated in the Group accounts. The Group also consolidates variable interest entities where Swiss Re is the primary beneficiary. Companies which Swiss Re Zurich does not control, but over which Swiss Re Zurich directly or indirectly exercises significant influence, are accounted for using the equity method and are included in other invested assets. The Swiss Re Group’s share of net profit or loss in investments accounted for under the equity method is included in net investment income. Equity and net income of these companies are adjusted as necessary to be in line with the Group accounting policies. The results of consolidated subsidiaries and investments accounted for using the equity method are included in the financial statements for the period commencing from the date of acquisition.
For consolidation purposes, assets and liabilities of subsidiaries with functional currencies other than Swiss francs are translated from the functional currency to Swiss francs at closing rates. Revenues and expenses are translated at average exchange rates. Translation adjustments are reported in shareholders’ equity.
The costs of fixed income and equity securities are reduced to fair value, with a corresponding charge to realised investment losses if the decline in value, expressed in functional currency terms, is other than temporary. Subsequent recoveries of previously recognised impairments are not recognised.
Interest on fixed income securities is recorded in net investment income when earned and is adjusted for the amortisation of any purchase premium or discount. Dividends on equity se curities are recorded on the basis of the ex-dividend date. Realised gains and losses on sales are included in earnings and are calculated using the specific identification method.
Investment in real estate that the Group intends to hold for the production of income is carried at depreciated cost, net of any write-down for impairment in value. Impairment in value is recognised if the sum of the estimated future undiscounted cash flows from the use of the real estate is lower than its carrying value. Impairment in value, depreciation and other related charges or credits are included in net investment income. Investment in real estate held for
sale is carried at the lower of cost or fair value, less estimated selling costs, and is not depreciated. Reductions in the carrying value of real estate held for sale are included in realised investment losses.
The Group uses a variety of derivative financial instruments including swaps, options, forwards and exchange-traded financial futures for the Group’s trading and hedging strategy in line with the overall risk management strategy. Derivative financial instruments are primarily used as a means of managing exposure to price, foreign currency and/or interest rate risk on planned or anticipated investment purchases, existing assets or liabilities and also to lock in attractive investment conditions for funds which become available in the future. The Group recognises all of its derivative instruments on the balance sheet at fair value. Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings.
Admin Re® blocks of business can be acquired in different legal forms, either through an acquisition of an entity’s share capital or through a reinsurance transaction. The Group’s policy is to treat these transactions consistently regardless of the form of acquisition. Accordingly the Group records the acquired assets and liabilities directly to the balance sheet. Premiums, life and health benefits and other income statement items are not recorded in the income statement on the date of the acquisition.
The resulting asset is amortised on a constant yield basis over the expected revenue recognition period of the business acquired, generally over periods ranging up to 30 years, with the accrual of interest added to the unamortised balance at the earned rate. The carrying value of PVFP is reviewed periodically for indicators of impairment in value. Adjustments to reflect impairment in value are recognised in earnings during the period in which the determination of impairment is made.
Acquired present value of future profits Acquired present value of future profits
Real estate for own use, property, plant and equipment are carried at depreciated cost.
Deferred income tax assets and liabilities are recognised based on the difference between financial statement carrying amounts and the corresponding income tax bases of assets and liabilities using enacted income tax rates and laws. A valuation allowance is recorded against deferred tax assets when it is deemed more likely than not that some or all of the deferred tax asset may not be realised.
is issued or, in the case of contracts acquired by purchase, at the purchase date. The assumptions are based on projections from past experience, making allowance for possible adverse deviation. Interest assumptions for life and health reinsurance benefits liabilities range from 1% to 13%. Assumed mortality rates are generally based on experience multiples applied to the actuarial select and ultimate tables based on industry experience. Liabilities for policy benefits are increased if it is determined that future cash flows, including investment income, are insufficient to cover future benefits and expenses.
Life and health reinsurance premiums for group coverage’s are generally earned over the term of the coverage. For group contracts that allow experience adjustments to premiums, such premiums are recognised as the related experience emerges.
The Group provides reserves for uncollectible amounts on reinsurance balances ceded, based on management’s assessment of the collectibility of the outstanding balances.
The Group has a long-term incentive plan, a fixed option plan, a restricted share plan, and an employee participation plan. These plans are described in more detail in Note 12. The Group accounts for share-based payment transactions with employees using the fair value method. Under the fair value method, the fair value of the awards is recognised in earnings over the vesting period.
Treasury shares are reported at cost in shareholders’ equity. Treasury shares also include stand-alone derivative instruments indexed to the Group’s shares that meet the requirements for classification in shareholders’ equity as well as embedded derivative instruments indexed to the Group’s shares, which are bifurcated from the host contract and meet the requirements for classification in shareholders’ equity.
In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognised in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted FIN 48 as of 1 January, 2007. The impact of the provisions of FIN 48 is described within Note 10.
In September 2006, the Financial Accounting Standards Board issued SFAS No. 158 “Employers Accounting for Defined Benefit Pension and Other Post Retirement Plans” (SFAS 158). SFAS 158 requires an employer to recognise the over-funded or under-funded status of a defined benefit post-retirement plan as an asset or liability and to recognise changes in that funded status in the year in which the changes occur through comprehensive income. The Group adopted the provisions of FAS 158 for the year ended 31 December 2006 except for the provision to measure plan assets and benefit obligations as of the date of the employer’s fiscal year end statement of financial conditions. The Group will adopt this final provision in the first quarter of 2008.
In February 2007, the Financial Accounting Standards Board issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS 159). SFAS 159 enables entities to elect to measure specified financial assets and liabilities at fair value on an instrumentby -instrument basis and expands the ability to use fair value measurements with financial instruments and certain other items not currently permitted to be measured at fair value. SFAS 159 also provides for financial statement presentation guidance and disclosure requirements. The Group will adopt SFAS 159 in the first quarter of 2008.
Fixed income securities 5 732 7 516 Equity securities 721 888 Policy loans, mortgages and other loans 618 604 Investment real estate 156 221 Short-term investments 355 494 Other current investments 48 577 Equity in earnings of equity-accounted investees 389 410 Cash and cash equivalents 294 351 Deposits with ceding companies 680 777 Gross investment income 8 993 11 838 Investment expenses –404 –612 Interest charged for funds held –598 –534 Net investment income 7 991 10 692
Net investment income includes income on unit-linked business of CHF 670 million and CHF 749 million in 2006 and 2007, respectively, which is credited to unit-linked policyholders.
Proceeds from fixed income securities available-for-sale amounted to CHF 44 356 million in 2007 (2006: CHF 53 720 million) and sales of equity securities available-for-sale amounted to CHF 6 668 million in 2007 (2006: CHF 7 881 million).
Net realised investment gains/losses include income on unit-linked business of CHF 1 319 million and CHF 512 million in 2006 and 2007, respectively, which is credited to unit-linked policyholders.
Mortgage-backed and asset-backed securities 15 280 102 –190 15 192 Fixed income securities available-for-sale 92 151 2 317 –1 341 93 127 Equity securities available-for-sale 8 839 2 268 –262 10 845
Fixed income securities and equity securities classified as trading were as follows: CHF millions 2006 2007
The amortised cost or cost and estimated fair values of investments in fixed income securities by remaining maturity are shown below. Fixed maturity investments are assumed not to be called for redemption prior to the stated maturity date. As of 31 December 2006 and 2007, CHF 5 426 million and CHF 5 169 million, respectively, of fixed income securities were callable.
Due in one year or less 5 768 5 804 6 643 4 149 Due after one year through five years 26 196 26 171 20 156 23 241 Due after five years through ten years 19 224 19 129 17 819 18 075
As of 31 December 2006 and 2007, investments with the carrying value of CHF 1 565 million and CHF 1 438 million, respectively, were on deposit with regulatory agencies in accordance with local requirements.
As of 31 December 2006 and 2007, investments (including cash and cash equivalents) with a carrying value of approximately CHF 14 728 million and CHF 9 262 million, respectively, were placed on deposit or pledged to secure certain reinsurance liabilities.
Maturity of fixed income securities available-for-sale Maturity of fixed income securities available-for-sale
The following table shows the fair value and unrealised losses of the Group’s fixed income securities, aggregated by investment category and length of time that individual securities were in a continuous unrealised loss position, as of 31 December 2006 and 2007. A continuous decline in the value of equity securities available-for-sale for longer than twelve months is considered other-than-temporary and recognised as net realised investment gains/losses in the income statement. Therefore, as of 31 December 2006 and 2007, the gross unrealised loss on equity securities available-for-sale of CHF 262 million and CHF 485 million relates to declines in value for less than 12 months.
Less than 12 months 12 months or more Total As of 31 December 2006 CHF millions Fair value
Debt securities issued by govern- ments and government agencies 20 633 295 13 443 483 34 076 778
Mortgage-backed and asset-backed securities 4 939 51 4 138 139 9 077 190
Mortgage-backed and asset-backed securities 11 044 317 4 573 121 15 617 438
The maximum potential loss assuming non-performance by all counterparties, and based on the market replacement cost as of 31 December 2006 and 2007 approximated CHF 2 220 million and CHF 6 713 million, respectively. These values are net of amounts offset pursuant to rights of set-off and qualifying master netting arrangements with various counterparties. The fair value of derivatives outstanding as of 31 December 2006 and 2007 was as follows: CHF millions Positive fair value Negative fair value
The Group offsets derivative assets and liabilities including certain derivative related collateral contracts in the balance sheet, for which there is a right of offset under master netting agreements.
As of 31 December 2006 and 2007, other accrued expenses and other liabilities included derivative financial instruments with a fair value of CHF 3 167 million and CHF 6 535 million, respectively.
These derivative financial instruments include cash flow hedges with a fair value of CHF 31 million and CHF 21 million as of 31 December 2006 and 2007, respectively.
The purchase price has been allocated based on a preliminary estimate of the fair value of assets acquired and liabilities assumed at the date of acquisition.
The revised estimate resulted in an increase in property and casualty reserves, net of tax, of CHF 333 million, partly offset by other revisions to assets acquired and liabilities assumed, with a net increase in goodwill of CHF 249 million in the second quarter 2007, compared to year end 2006.
Balance as of 1 January 5 393 6 535 5 270 7 550 Deferred 4 161 4 123 Effect of acquisitions /disposals and retrocessions 1 443
Amortisation –4 100 –790 –3 984 –977 Interest accrued on unamortised PVFP 413 382 Effect of foreign currency translation –184 –245 –257 –458 Effect of change in unrealised gains/losses 194 7 Balance as of 31 December 5 270 7 550 5 152 6 769
The amortisation of DAC in 2007 represents CHF 3 784 million and CHF 200 million for the Property & Casualty and Life & Health business segments, respectively.
Senior financial debt 1 917 1 254 Senior operational debt 7 201 10 478 Subordinated financial debt 926 Short-term debt – financial and operational debt 9 118 12 658
Senior financial debt 2 482 1 367 Senior operational debt 6 765 8 074 Subordinated financial debt 5 491 6 330 Subordinated operational debt 7 566 Long-term debt – financial and operational debt 14 738 23 337
Maturity Instrument Issued in Currency Nominal in millions Interest rate Book value in CHF millions 2009 3 EMTN (zero coupon notes) 2004 USD 37 various 41 2009 EMTN 2007 USD 30 3M Libor –15bp 34 2009 EMTN 2007 GBP 100 3M Libor + 2bp 225 2009 EMTN 2007 EUR 150 3M Euribor + 3bp 248 2011 Credit-linked note 2006 USD 735 3M Libor – 95.51bp 832 2012 Credit-linked note 2007 USD 980 3M Libor – 89.87bp 1 110 2016 Credit-linked note 2007 USD 295 3M Libor 335 2017 Credit-linked note 2000 USD 39 various 1 2032 Principal protected structured note 2007 USD 35 zero coupon 40
(amortising)1 2007 GBP 1 584 4.96% 3 569 2057 Subordinated private placement
Further, the Group issued a subordinated private placement of GBP 1 620 million, bearing interest at the rate of 4.96% with forty years maturity.
In June 2007, under the EMTN programme, the Group issued JPY 5 000 million with a twoyear maturity and a coupon of six-month Libor plus 3 basis points, JPY 8 000 million with a two-year maturity and a coupon of 0.32%, and CHF 250 million with a four-year maturity and a coupon of 3.13%. Further, the Group issued a credit linked note of USD 980 million, due in June 2012, bearing interest of three-month Libor minus 89.87 basis points.
In July 2007, the Group issued EUR 150 million under the EMTN programme, with a two-year maturity and a coupon of three-month Euribor plus 3 basis points, GBP 100 million with a two-year maturity and a coupon of three-month Libor plus 2 basis points.
In September 2007, the Group issued a credit linked note of USD 295 million, due in 2016, bearing interest of three-month USD Libor flat.
As additional resources to meet funding requirements, Swiss Re has access to the US commercial paper market through its USD 1.5 billion programme, as well as back-up credit lines and committed repurchase facilities in place with various banks.
The liability for unpaid claims and claim adjustment expenses is analysed as follows: CHF millions 2006 2007
Paid related to: Current year –2 853 –1 767 Prior year –10 538 –12 285 Total paid –13 391 –14 052
Foreign exchange –1 796 –2 567 Effect of acquisitions, disposals, new retroactive reinsurance and other items 19 790
Reinsurance recoverable 7 622 5 041 Deferred expense on retroactive reinsurance 875 723 Balance as of 31 December 80 391 73 171
The Group does not discount liabilities arising from prospective property and casualty insurance and reinsurance contracts, including liabilities which are discounted for US statutory reporting purposes. Liabilities arising from property and casualty insurance and reinsurance contracts acquired in a business combination are initially recognised at fair value in accordance with the purchase method of accounting.
Change in unpaid claims and claim adjustment expenses; life and health benefits, retro –2 128 228 –1 900 –2 859 285 –2 574
Diluted earnings per share Net income assuming debt conversion and exercise of options 4 700 4 305 Weighted average common shares outstanding 375 236 647 383 475 658 Net income per share in CHF 12.53 11.23
Current taxes 581 482 Deferred taxes 715 543 Income tax expense 1 296 1 025
The following table reconciles the expected tax expense at the Swiss statutory tax rate to the actual tax expense in the accompanying income statement: CHF millions 2006 2007
Income tax at the Swiss statutory tax rate of 21.3% and 21.0%, respectively 1 247 1 089 Increase/decrease in the income tax charge resulting from: Foreign income taxed at different rates 421 247 Impact of foreign exchange movements 35 –125 Disallowed expenses 36 75 Tax exempt income/dividends received deduction –262 –141 Change in the valuation allowance –228 –41 Change in statutory tax rates –16 –170 FIN 48 including interest and penalties 0 83
Deferred tax assets Income accrued/deferred 720 667 Technical provisions 1 941 1 849 Pension provisions 348 148 Benefit on loss carryforwards 2 063 2 084 Other 1 410 1 397 Gross deferred tax asset 6 482 6 145
As of 31 December 2007, the Group had CHF 6 526 million foreign net operating tax loss carryforwards, expiring as follows: CHF 56 million in 2008, CHF 30 million in 2009, CHF 36 million in 2010, CHF 48 million in 2011, CHF 27 million in 2012 and CHF 6 329 million after 2012. The Group also had capital loss carryforwards of CHF 337 million, expiring as follows: CHF 6 million in 2008, CHF 279 million in 2009, CHF 8 million in 2010, CHF 26 million in 2011 and CHF 18 million after 2012. Net operating losses of CHF 1 540 million were utilised or expired during 2007.
The 31 December 2007 balance of gross unrecognised tax benefits presented in the table above is greater than the FIN 48 liability reflected in the deferred and other non-current taxes section due to the impact of tax positions which offset loss carryforwards (CHF 375 million) and the removal of interest expense (CHF 240 million). Unrecognised tax benefits which have created certain loss carryforwards are net, whereby the statement of financial position does not reflect a deferred tax asset for the attribute or a liability for the unrecognised tax benefit.
Fair value of plan assets as of 1 January 2 678 2 920 1 191 1 543 Actual return on plan assets 207 275 105 146 Company contribution 115 116 76 410 13 13 Benefits paid –80 –158 –52 –73 –13 –13 Employee contribution 16 1 Acquisitions/disposals 215 10 Effect of foreign currency translation 8 –67 Fair value of plan assets as of 31 December 2 920 3 169 1 543 1 970
Amounts recognised in the balance sheet in 2007 consist of: CHF millions Swiss plan
Expected return on assets –126 –141 –76 –101 Amortisation of: Net gain/loss 37 17 25 28 2 –7 Prior service cost 3 7 1 1 –8 –8 Effect of settlement, curtailment and termination 3 15 -3 –2 Net periodic benefit cost 115 84 102 118 55 33
Net gain/loss –343 –242 –231 –816 Prior service cost/credit Amortisation of: Net gain/loss –17 –28 7 –38 Prior service cost –7 –1 8 Total recognised in other comprehensive income, gross of tax
Projected benefit obligation 2 078 1 096 Accumulated benefit obligation 1 814 981 Fair value of plan assets 1 220 784
Assumptions used to determine net periodic pension costs for the year ended
Discount rate 3.0% 3.2% 5.2% 5.2% 3.7% 3.9% Expected long-term return on plan assets 5.0% 5.0% 6.5% 6.4% Rate of compensation increase 2.3% 2.3% 4.8% 4.5% 4.5% 4.5%
The employer contributions expected to be made in 2008 to the defined benefit pension plans are CHF 213 million and to the post-retirement benefit plan CHF 14 million.
As of 31 December 2007, the projected benefit payments, which reflect expected future service, not adjusted for transfers in and for employees voluntary contributions, are as follows: CHF millions Swiss plans pension benefits Foreign plans pension benefits Other benefits
The Group sponsors a number of defined contribution plans to which employees and the Group make contributions. The accumulated balances are paid as a lump sum at the earlier of retirement, termination, disability or death. The amount expensed in 2006 and in 2007 was CHF 28 million and CHF 48 million, respectively.
Stock option plans include the long-term equity award programme, the fixed-option plan and an additional grant to certain members of executive management.
Under the fixed-option plan, the exercise price of each option is equal to the market price of the shares on the date of the grant. Options issued vest at the end of the fourth year and have a maximum life of ten years.
A summary of the activity of the Group’s stock option plan is as follows: Weighted average exercise price in CHF
Options granted Options exercised 68 –350 273 Options sold 141 –698 525 Options forfeited or expired 111 –69 350
The weighted average fair value of options granted per share was CHF 13 in 2006. No options were granted in 2007.
The following table summarises the status of stock options outstanding as of 31 December 2007: Range of exercise price in CHF
The status of stock options exercisable as of 31 December 2007 is summarised as follows: Range of exercise prices
The Group introduced a restricted-share plan during 2004 to complement the fixed-option plan. No new shares were granted under this plan in 2007. Additionally, restricted bonus shares were issued during 2006 and 2007. 122 070 and 69 770 restricted shares were granted in 2006 and 2007. The shares issued vest at the end of the fourth year.
Non-vested at January 612 732 76 Granted 67 770 108 Forfeited –14 617 87
The weighted average fair value of restricted shares, which equals the market price of the shares on the date of the grant, was CHF 95 and CHF 108 in 2006 and 2007, respectively.
In 2006 and 2007, the Group granted a Long-term Incentive plan (LTI) to selected employees with a three year vesting period. The plan is expected to be settled in cash. The requisite service periods as well the maximum contractual term is 3 years. The method to estimate fair value is based on a risk neutral approach which uses the current share price as an estimate of the share price at the end of the vesting period. In order to determine the fair value the following key performance indicators are also taken into consideration: 3 year average return on equity (ROE) and 3 year earnings per share compounds annual growth rate (EPS CAGR). Fair value is revised at every balance sheet date.
In 2006 the Group has issued 3 million stock appreciation rights as an extraordinary grant following the Insurance Solutions acquisition. The plan will be settled in cash. The requisite service periods is 2 years while the maximum contractual term is 5 years. The fair value of the appreciation rights is estimated at date of grant using a binomial option-pricing model and is revised at every balance sheet date.
The number of shares authorised for the Group’s share-based payments to employees was 806 179 and 1 204 155 as of 31 December 2006 and 2007, respectively.
Article 663bbis of the Swiss Code of Obligations requires disclosure of total compensation paid to members of the Board of Directors and the Executive Committee. Compensation to members of the Board of Directors and the highest paid member of the Executive Committee are shown individually. For a description of the elements of this compensation, please see page 110 of the corporate governance and compensation report.
Total compensation of 13 members of the Board of Directors was as follows: CHF thousands 2007
Individual compensation of members of the Board of Directors is as follows: CHF thousands Honorarium and cash allowances
Total compensation for 8 members of the Executive Committee was as follows: CHF thousands 2007
Incentive and Long-term Incentive please refer to the text in the highest paid member of Executive Committee – Jacques Aigrain (Chief Executive Officer) section and to page 110 of the corporate governance and compensation report.
¹ Includes 25% uplift on nominal value, which will be paid out at vesting after three years, adjusted for change in fair value ² The Long-term Incentive will be paid out after the three-year vesting period. For further details on the Value Alignment
Highest paid member of Executive Committee – Jacques Aigrain (Chief Executive Officer)
Former members of the Executive Committee 530 Former members of the Board of Directors –
The disclosure below follows article 663c para. 3 of the Swiss Code of Obligations which requires disclosure of share ownership, options and related instruments individually for each member of the Board of Directors and Executive Committee, including shares, options and related instruments held by persons closely related to, and by companies controlled by members of the Board of Directors and Executive Committee.
Members of the Executive Committee Function Number of shares held as of 31 December 2007
Compensation to former members of governing bodies Compensation to former members of governing bodies
The following unvested restricted shares were held by members of governing bodies as of
Share price in CHF as of grant date 93 83 Jacques Aigrain Chief Executive Officer 13 750 Andreas Beerli Chief Operating Officer 7 500 7 500 Michel M. Liès Head of Client Markets 3 750 Stefan Lippe Head of (Re)Insurance Products 9 125 Christian Mumenthaler Chief Risk Officer 1 250 5 000 Total 8 750 39 125
The following unvested options were held by members of governing bodies on 31December 2007.
The following vested and privately purchased options were held by members of governing bodies as of 31December 2007.
Members of the Executive Committee Number of options Average strike price in CHF Exercise years
The following loans were granted to members of governing bodies: CHF thousands
Mortgages and loans to members of the Board of Directors Walter B. Kielholz, Vice Chairman 2 000
Total mortgages and loans to 4 members of the Executive Committee 8 585 Highest mortgages and loans to an individual member of the Executive Committee Andreas Beerli, Chief Operating Officer 3 000
Total mortgages and loans not at market conditions to 3 former members of the Executive Committee
All credit is secured against real estate or pledged shares. The terms and conditions of loans and mortgages are the same as those available to all Swiss Re employees in the respective locations. Fixed-rate mortgages have a maturity of five years and interest rates that correspond to the five-year Swiss franc swap rate plus a margin of 10 basis points. Adjustable-rate mortgages have no agreed maturity dates. The basic preferential interest rates are equal to the corresponding interest rates applied by the Zurich Cantonal Bank minus one percentage point.
Loans to members of governing bodiesLoans to members of governing bodies
As part of its normal business operations, the Group enters into a number of lease agreements. Such agreements, which are operating leases, total the following obligations for the next five years and thereafter: As of 31 December 2007 CHF millions 2012 68 After 2012 711 Total operating lease commitments 1 116
The following schedule shows the composition of total rental expenses for all operating leases as of 31 December (except those with terms of a month or less that were not renewed): CHF millions 2006 2007
Minimum rentals 66 69 Sublease rental income –9 –3 Total 57 66
As a participant in limited investment partnerships, the Group commits itself to making available certain amounts of investment funding, callable by the partnerships for periods of up to 10 years. The total commitments remaining uncalled as of 31 December 2006 and 2007 were CHF 1 212 million and CHF 1 837 million, respectively. The comparative amount of total commitments uncalled as of 31 December 2006 has been revised compared to the number published in the Annual Report 2006.
Net investment income and net realised gains which are attributable to either Property and Casualty or Life and Health are directly allocated to these business segments. This includes income and charges on cedent deposits, reinsurance derivatives, income on unit-linked and with-profit business and other items. These returns are excluded from the Financial Market segment. Net investment income and realised investment gains/losses generated in the Financial Markets segment, including return on fixed income securities, equity securities and alternative investments, are allocated to the Property & Casualty and Life & Health business segments based on tech nical reserves and other information including duration of the underlying liabilities as a key for the allocation.
Revenues Premiums earned 18 999 12 665 31 664 Fee income from policyholders 955 955 Net investment income 4 458 5 441 8 388 236 –7 831 10 692 Net realised investment gains/losses –74 863 –1 181 -209 –138 –739 Other revenues 97 5 125 75 302 Total revenues 23 480 19 929 7 332 102 –7 969 42 874
Expenses Claims and claim adjustment expenses; life and health benefits –12 065 –11 112 –23 177 Interest credited to policyholders –2 120 –2 120 Acquisition costs –3 834 –2 665 –6 499 Other expenses –1 633 –1 313 –626 –505 –4 077 Interest expenses –1 649 –165 –1 814 Total expenses –17 532 –17 210 0 –2 275 –670 –37 687
Expenses Claims and claim adjustment expenses; life and health benefits –6 081 –1 763 –1 750 –9 594 Interest credited to policyholders –569 –2 258 –2 827 Acquisition costs –1 607 –550 –99 –2 256 Other expenses –503 –161 –319 –983
Net investment income – unit-linked 109 561 670 Net realised investment gains/losses – unit-linked 410 909 1 319 Net realised investment gains/losses – non-participating 88 87 –10 165
¹ Operating revenues exclude net investment income and net realised investment gains from unit-linked business as these are passed through to contract holders via interest credited to policyholders and therefore do not have an impact on the operating result.
Expenses Claims and claim adjustment expenses; life and health benefits –6 226 –2 239 –2 647 –11 112 Interest credited to policyholders 255 –2 375 –2 120 Acquisition costs –1 697 –596 –372 –2 665 Other expenses –684 –159 –470 –1 313
Operating result, excluding non-participating net realised investment gains/losses 1 710 612 422 2 744
Revenues Premiums earned Net investment income 5 771 313 –29 6 055 Net realised investment gains/losses –182 904 43 765 Other revenues 201 201 Total revenues 5 790 1 217 14 7 021
e) Net premiums earned and fees income from policyholders by country
France Frasecur Société d‘Investissement à Capital Variable1 97 99.96 f Protegys Assurance 14 34 e
Ireland Swiss Re International Treasury (Ireland) Ltd. 0 100 f Swiss Re Ireland Ltd. 166 100 f Swiss Re Life & Health (Ireland) Ltd. 1 100 f Swiss Reinsurance Ireland Limited2 166 100 f
Malta Swiss Re Finance (Malta) Ltd. 3 173 100 f Swiss Re Treasury (Malta) Limited 828 100 f
Reassurantie Maatschappij Nederland N.V. 12 100 f Swiss Re Life & Health Nederland N.V. 6 100 f Swiss Re Nederland Holding B.V. 1 100 f
Method of consolidation: f full e equity 1 Net asset value instead of share capital 2 From acquisition of GE Insurance Solutions
European Reinsurance Company of Zurich 312 100 f SR Institutional Funds1 12 269 85.93 f Swiss Re Asset Management Funds (Switzerland) AG 1 100 f Swiss Re Partnership Holding AG 0 100 f Tertianum AG 10 23.2 e
Barbados Accra Holdings Corporation 18 100 f Atlantic International Reinsurance Company Ltd. 5 100 f European Finance Reinsurance Company Ltd. 6 100 f European International Holding Company Ltd. 1 466 100 f European International Reinsurance Company Ltd. 1 804 100 f Gasper Funding Corporation 19 100 f Stockwood Reinsurance Company, Ltd. 1 100 f Underwriters Reinsurance Company (Barbados) Ltd. 18 100 f
United States Conning & Company 0 100 f Core Insurance Holdings Inc.2 0 100 f Employers Reinsurance Corporation2 7 100 f Facility Insurance Corporation 1 100 f Facility Insurance Holding Corporation 0 100 f First Specialty Insurance Corporation2 6 100 f Industrial Risk Insurers2 3 100 f Life Re Capital Trust I 4 100 f North American Capacity Insurance Company 5 100 f North American Elite Insurance Company 4 100 f North American Specialty Insurance Company 5 100 f Reassure America Life Insurance Company 6 100 f Southwestern Life Holdings, Inc. 1 100 f SR PA Finance Inc 0 100 f Swiss Re America Holding Corporation 0 100 f Swiss Re Asset Management (Americas) Inc. 0 100 f Swiss Re Atrium Corporation 1 100 f Swiss Re Capital Markets Corporation 0 100 f Swiss Re Financial Products Corporation 0 100 f Swiss Re Financial Services Corporation 0 100 f Swiss Re Solutions Holding Corporation2 10 100 f Swiss Re Life & Health America Holding Company 5 100 f Swiss Re Life & Health America Inc. 5 100 f Swiss Re Management Corporation 1 100 f Swiss Re Partnership Holding, LLC 0 100 f Swiss Re Treasury (US) Corporation 0 100 f Swiss Reinsurance America Corporation 12 100 f Washington International Insurance Company 5 100 f Westport Insurance Corporation2 6 100 f
The following table shows the total assets of and maximum exposure to loss in VIEs in which the Group holds a significant variable interest: As of 31 December CHF millions
In 2007 the Group has charged expenses of CHF 31 million against the provision for Insurance Solution activities and CHF 46 million for the existing Swiss Re activities.
In 2007, the Group changed the organisational structure resulting in a more complete integration of Financial Services business within Swiss Re. Following the new structure, the Group presents three operating business segments – Property & Casualty, Life & Health and Financial Markets. Items not allocated to these three business segments are included in the “Group items” column.
The operating segments are determined by the organisational structure and by the way in which management reviews the operating result of the Group.
Group items include certain costs of corporate centre functions not allocated to the business segments, certain foreign exchange items, interest expenses on operating and financial debt (except for directly allocated interest expenses to the segments) and other items not considered for the performance of the operating segments.
As a consequence of the integration of Financial Services within the Group Structure business segment, Financial Services assets and Financial Services liabilities are no longer disclosed separately in the balance sheet. The respective positions have been incorporated within existing balance sheet line items. The information on the funding business is still available (see note 6).
The following table shows the result of the integration as of 31 December 2006: As of 31 December 2006 CHF millions
Assets Fixed income securities, trading 22 622 22 040 44 662
Financial Services liabilities – short-term debt 7 201 –7 201 0 Financial Services liabilities – long-term debt 6 765 –6 765 0
Liabilities not affected by the reclassifications1 211 683 0 211 683
Trading revenues generated from Financial Services assets and liabilities are reported in net investment income, net realised gains/losses and interest expenses lines depending on the nature of the revenue and/or expense.
Trading revenues 654 –654 0 Revenues not affected by the reclassifications2 30 674 0 30 674 Total revenues 40 266 505 40 771
Expenses Interest expenses –521 –505 –1 026 Expenses not affected by the reclassifications2 –33 889 0 –33 889 Total expenses –34 410 –505 –34 915
Financial statements Notes to the Group financial statements 19 Subsequent Event
As Auditors of the Group, we have audited the consolidated financial statements of the Swiss Re Group for the year ended 31 December 2007 (comprising consolidated balance sheet, income statement, statement of shareholders’ equity, statement of comprehensive income, statement of cash flow and notes), set out on pages 129 to 196.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Swiss Re Group, the results of its operations and its cash flows in accordance with accounting principles generally accepted in the United States of America and comply with Swiss law.
The business year was characterised by a substantially improved reinsurance result, mainly due to the increased business volume and benign losses incurred. The investment result decreased mainly due to higher valuation adjustments on investments.
Gross premiums written increased by CHF 3.9 billion to CHF 23.8 billion, benefiting mainly from the acquisition of GE Insurance Solutions in 2006.
The reduction of acquisition costs reflects the non-recurring impact of the change in the valuation methodology for determining the liabilities for life and health policy benefits in 2006.
Investment income remained almost unchanged at CHF 5.4 billion. Investment expenses increased from CHF 2.6 billion in 2006 to CHF 4.2 billion, mainly due to statutory depreciation of CHF 1.5 billion on fixed income and equity securities.
Liabilities rose by CHF 12.3 billion to CHF 86.1 billion. In 2007, Swiss Reinsurance Company, Zurich, issued perpetual subordinated step-up loan notes in connection with the placement of GBP 500 million and AUD 750 million hybrid capital. In addition, loans to subsidiaries and affiliated companies increased due to intragroup financing transactions. The increase in technical provisions, reflected mainly in higher unpaid claims, was predominantly due to increased business volume.
As of 31 December 2006, shareholders’ equity amounted to CHF 18.4 billion before allocation of the profit. After the dividend payment of CHF 1 162 million for 2006, the issuance of new shares and the inclusion of the profit for the 2007 financial year, shareholders’ equity increased to CHF 19.0 billion at the end of 2007.
Other reserves decreased by CHF 0.3 billion to CHF 15.2 billion in 2007, due to the net result of the increase of the reserve for own shares, the allocation of the profit for the 2006 financial year and the issuance of new shares from options being exercised.
The nominal share capital of the company decreased slightly due to the net effect from the cancellation of 4 505 347 shares, based on a 2007 General Meeting resolution, and 451 724 newly issued shares from the conditional capital in connection with employee participation programmes. As of 31 December 2007, the nominal share capital amounted to CHF 37 million.
Claims and claim adjustment expenses –11 210 –13 663 Life and health benefits 1 112 77 Change in equalisation provision –250 –300 Acquisition costs –5 786 –3 949 Other reinsurance result 972 983 Operating costs –1 379 –1 269
Other income and expenses Other interest income 244 348 Other interest expenses –301 –524 Other income 122 226 Other expenses –190 –129 Result from other income and expenses –125 –79
Non-technical provisions Provision for taxation 205 179 Provision for currency fluctuation 905 948 Other provisions 570 518 Total non-technical provisions 1 680 1 645
The following assets are carried at cost, less necessary and legally permissible depreciation: Investment real estate Investments in subsidiaries and affiliated companies Equity securities Fixed income securities Investments in funds Short-term investments Assets in derivative financial instruments
These assets are generally not subject to revaluation. The valuation rules prescribed by the Swiss insurance supervisory authority are observed.
Other current assets are carried at nominal value in the balance sheet, after deduction of known credit risks if applicable.
The provision for currency fluctuation comprises all currency differences arising from the revaluation of the opening balance sheet, the adjustments from application of year-end or average rates and foreign-exchange transactions.
Included in this position are reinsurance contracts or features embedded in reinsurance contracts that fulfil the characteristics of derivative financial instruments. For such contracts, premiums received may be recognised as income prior to contract expiration or settlement in cases, where the recorded commitment has already reached the maximum liability amount potentially payable under the terms of the respective contracts.
Claims and claim adjustment expenses –12 933 1 723 –11 210 –15 453 1 790 –13 663
Other reinsurance income and expenses 150 –69 81 –7 –36 –43
Income from investment real estate 90 93 Income from subsidiaries and affiliated companies 2 234 2 109 Income from equity securities 574 817 Income from fixed income securities, mortgages and other loans 789 905 Income from short-term investments 47 56 Income from investment services 66 88 Realised gains on sale of investments 1 631 1 369
Funds held under reinsurance treaties – 2 574 2 574 403 2 446 2 849 5. Shareholders’ equity
As of 31 December 2007, contingent liabilities, mainly towards Group companies, amounted to CHF 8 608 million (2006: CHF 3 076 million). In addition, there were 43 unlimited guarantees; 41 of these are for obligations of Group companies. No payments are currently expected under these guarantees.
Total off-balance sheet commitments from operating leases for the next five years and thereafter are as follows: CHF millions 2006 2007
To secure the technical provisions on the 2007 balance sheet date, securities with a value of CHF 10 428 million (2006: CHF 11 286 million) were deposited in favour of ceding companies, of which CHF 5 839 million (2006: CHF 6 906 million) was to Group companies.
Equity securities of CHF 5 681 million (2006: CHF 5 789 million) and fixed income securities of CHF 5 333 million (2006: CHF 4 607 million) were held in investment funds, which are fully owned by Swiss Re Group companies and the Swiss Re Pension Fund. The securities in these funds and their revenues are reported in the corresponding asset category.
As of 31 December 2007, the insurance value of tangible assets, comprising the real estate portfolio and other tangible assets, amounted to CHF 2 508 million (2006: CHF 2 364 million).
A provision of CHF 37 million was established as of 31 December 2006 for transitional obligations concerning the change in the pension plan structure from a defined benefit scheme to a defined contribution scheme effective as of 1 January 2007. This provision was fully released in 2007.
As of 31 December 2007, the Group held 12 334 212 treasury shares (2006: 287 624). In the year under report, 25 277 897 treasury shares (2006: 2 262 854) were purchased at an average price of CHF 101.41 (2006: CHF 95.21) and 13 231 309 treasury shares (2006: 2 181 679) were sold at an average price of CHF 99.19 (2006: CHF 94.50).
Premiums and other receivables from reinsurance 2 569 3 353 Funds held by ceding companies 13 714 13 830
As of 31 December 2007, Swiss Reinsurance Company‘s total conditional capital outstanding amounted to CHF 3 208 316 (2006: CHF 4 649 560). CHF 2 603 928 was reserved for the exercise of conversion rights and warrants granted in connection with bonds and similar instruments and CHF 604 388 for employee participation purposes.
In addition, authorised capital with shareholders’ subscription rights amounted to CHF 1 105 337 at the end of 2007.
The Extraordinary General Meeting, held on 27 February 2006, approved the creation of authorised capital of CHF 9 000 000 and an increase of conditional capital by CHF 2 000 000.
As of 31 December 2006, CHF 900 000 was reserved for the exercise of conversion rights and warrants granted in connection with bonds and similar instruments for General Electric Company, that was fully exercised in 2007.
In the year under report, no net undisclosed reserves on investments and on provisions were released (2006: net decrease of CHF 159 million).
In connection with the integration of GE Insurance Solutions, restructuring charges of CHF 59 million were recognised in 2006. As of 31 December 2007, a respective restructuring provision of CHF 4 million (2006: CHF 34 million) remained on the Company’s books.
In 2007, management expenses of CHF 152 million (2006: CHF 170 million) were recharged to Group companies and reported net under operating costs and investment expenses.
The valuation methodology for determining the liabilities for life and health policy benefits was modified in 2006 to ensure consistency of the Company’s liabilities and thus to improve accuracy and comparability of valuations among different lines. The transition impact of CHF 92 million is included in the 2006 income statement.
Change of accounting policy for liabilities for life and health policy benefits Change of accounting policy for liabilities for life and health policy benefits
In 2007, the Company implemented a new system for technical accounting and financial reporting of life and health business, which is aligned to the existing application landscape of the property and casualty segment. Consequently, the disclosure of estimates in the balance sheet has changed.
In the previous years, estimates of written premiums, claims and commissions were reported net under receivables from reinsurance or reinsurance balances payable. As of 2007, estimates for expected claims and profit commissions are reported under provisions for claims incurred but not reported and provisions for profit commissions, respectively. This led to an increase of unpaid claims by CHF 734 million, of provisions for profit commissions by CHF 105 million, and to a corresponding increase in the sum of receivables from reinsurance and reinsurance balances payable of CHF 839 million. Estimates for written premiums and fixed commissions accounted continue to be reported under receivables from reinsurance or reinsurance balances payable.
Life and health application landscape alignment Life and health application landscape alignment
For the financial year 2007: – eligible for dividend 346 665 966 34 666 596 – not eligible for dividend 23 720 789 2 372 079 Total shares issued 370 386 755 37 038 675
¹ The number of registered shares eligible for dividend at the dividend payment date decreased since the proposal for allocation of profit, dated 1 March 2007, due to the net effect from the share buy-back of General Electric 16 650 479 shares and the issuance of 279 119 new registered shares from options being exercised. This resulted in a lower dividend of CHF 55 662 625 compared to the Board of Directors’ proposal, and in higher retained earnings brought forward from the previous year by the same amount.
² Board of Directors’ proposal to the Annual General Meeting of 18 April 2008, subject to the actual number of shares outstanding and eligible for dividend.
If the Board of Directors’ proposal for allocation of profit is accepted, a dividend of CHF 4.00 per share will be paid.
After deduction of Federal Withholding Tax of 35%, the dividend will be paid from 23 April 2008 by means of dividend order to shareholders recorded in the Share Register or to their deposit banks.
As Statutory Auditors, we have audited the accounting records and the financial statements (income statement, balance sheet and notes/pages 201 to 213) of Swiss Reinsurance Company for the year ended 31 December 2007.
Amortisation of goodwill –91 –211 –310 –368 –350 –315 –277 Other operating costs and expenses –2 698 –2 785 –3 074 –3 384 –3 240 –2 942 –2 940 –3 081 –4 616 –5 891
Income/loss before income tax expense 2 808 3 229 3 655 –104 36 2 336 3 367 2 559 5 856 5 187 Income tax expense –647 –783 –689 –61 –127 –634 –892 –255 –1 296 –1 025 Net income/loss on ordinary activities 2 161 2 446 2 966 –165 –91 1 702 2 475 2 304 4 560 4 162 Extraordinary income 450 Extraordinary charges –450
Earnings/losses per share in CHF 7.35* 8.55* 10.39* –0.57 –0.29 5.48 8.00 7.44 13.49 11.95 * Adjusted by 20-for-1 share split 1 Numbers are based on the Group’s previous accounting standards 2 Trading revenues are included in net investment income; long-term debt also includes debt positions from Financial Markets
Certain statements and illustrations contained herein are forward-looking. These statements and illustrations provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to a historical fact or current fact. Forward-looking statements typically are identified by words or phrases such as “anticipate“, “assume“, “believe“, “continue“, “estimate“, “expect“, “foresee“, “intend“, “may increase“ and “may fluctuate“ and similar expressions or by future or conditional verbs such as “will“, “should“, “would“ and “could“. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause Swiss Re‘s actual results, performance, achievements or prospects to be materially different from any future results, performance, achievements or prospects expressed or implied by such statements. Such factors include, among others: changes in global economic conditions and the risk of a global economic downturn; direct and indirect impact of continuing deterioration in the credit markets, and further adverse rating actions by credit rating agencies in respect of structured credit products or other credit-related exposures and of monoline insurance companies; the occurrence of other unanticipated market developments or trends; the ability to maintain sufficient liquidity and access to capital markets; the cyclicality of the reinsurance industry; uncertainties in estimating reserves; the effect of market conditions, including the global equity and credit markets, and the level and volatility of equity prices, interest rates, currency values and other market indices; expected changes in our investment results as a result of the changed composition of our investment assets or changes in our investment policy; the frequency, severity and development of insured claim events; acts of terrorism and acts of war; mortality and morbidity experience; policy renewal and lapse rates; changes in rating agency policies or practices; the lowering or loss of one of the financial or claims-paying ratings of one or more of our subsidiaries; political risks in the countries in which we operate or in which we insure risks; extraordinary events affecting our clients and other counterparties, such as bankruptcies, liquidations and other credit-related events; risks associated with implementing our business strategies; the impact of current, pending and future legislation, regulation and regulatory and legal actions; the impact of significant investments, acquisitions or dispositions, and any delays, unexpected costs or other issues experienced in connection with any such transactions, including, in the case of acquisitions, issues arising in connection with integrating acquired operations; changing levels of competition; and operational factors, including the efficacy of risk management and other internal procedures in managing the foregoing risks.
These factors are not exhaustive. We operate in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on forwardlooking statements. We undertake no obligation to publicly revise or update any forwardlooking statements, whether as a result of new information, future events or otherwise.
Risk that arises when a large number of individual risks are correlated such that a single event will affect many or all of these risks.
Management of a business in a way that coordinates decisions on assets and liabilities. Specifically, the ongoing process of formulating, implementing, monitoring and revising strategies related to assets and liabilities in an attempt to achieve financial objectives for a given set of risk tolerances and constraints.
Index-linked catastrophe contracts with a dual trigger that require a minimum industry loss to occur before the coverage responds to the individual company loss.
Directors’ and officers’ liability insurance (D&O) Directors’ and officers’ liability insurance (D&O)
Bonds for which the payment of interest and/or principal depends on the occurrence or severity of an insurance event. The underlying risk of the bond is a peak or volume insurance risk.
Insurance for damages that a policyholder is obliged to pay because of bodily injury or property damage caused to another person or entity based on negligence, strict liability or contractual liability.
Receivables related to deposit accounting contracts (contracts which do not meet risk transfer requirements) less payables related to deposit contracts.
Form of reinsurance in which the premiums and claims of the insurer are shared proportionally by the insurer and reinsurer.
Insurance which lowers the risk carried by primary insurance companies. Reinsurance includes various forms such as facultative, financial, non-proportional, proportional, quota-share, surplus and treaty reinsurance.
Investment result as a percentage of average invested assets. Invested assets include investments, funds held by ceding companies, net cash equivalents and net reinsurance assets. Average invested assets are calculated as opening balance plus one half of the net asset turnover.
Life and health business operating result (operating income excluding non-participating realised gains and losses) as a percentage of operating revenue (premiums earned, net investment income and participating realised gains and losses) plus other revenues.
Condition in which there is a possibility of loss; also used by insurance practitioners to indicate the property insured or the peril insured against.
Participation of the reinsurer in certain sections of the insurer’s business as agreed by treaty, as opposed to single risks.
A Albert, Luc Anderson, William Andrews, Kathleen Antal, Peter Arbenz, Peter Arnold, Neal Attey, John
Hess, Thomas Hess, Todd Hett, Annabelle Higginbotham, Russell Hill, Anthony Hodkinson, Bruce Hohl, Andreas Holliday, Susan Horber, Felix Howe, Robert William Huber, Paul Philip Huber, Thomas Huff, John Hux, Ivo Hyatte, Thomas
K Kärle, Adrian Kälin, Oskar Kapur, Rishi Kaufmann, Manfred Kaufmann, Marcel Kehl, Guido Kelner, Steven Kinnaird, Donna Kirr, Martin Kleiner, Hans Ulrich Kleiterp, Fred Koch, Luigi Koch Medina, Pablo Kräuchi, Markus
L Léger, Thierry Lipowsky, Ursula Lippe-Holst, Gabriela Locher, Christoph Lörtscher, Thomas Luning, Thomas Lüthi, Beat Lyons, Michael Patrick
F Flunger, Rudolf Flury, Benno Frazer, William Froehlich, Theresa Fürer, Guido
H Hahn, Franz-Josef Halter, Adrian Hammesfahr, Robert W. Hansen, Matthew Haynes, Frederick Heck, Jürgen Heiser, Glenn Held, Eduard Henchoz, Jean-Jacques Herzog, Christian Hess, Jürg
T Thomas, Daniela Thomsen, Torben Thornton, Craig James Triantafilidis, Steve Tröber, Serge Trüb, Jürg Turra, René
W Wahrenberger, Daniel Weber, Andreas Weber, Matthias Weihs, Christopher Wiest, Robert Wild, Walter Witting, Thomas Wyatt, Robyn
Z Zahnd, Craig Zank, Günther Zaugg, Bernhard Zen-Ruffinen, Dominique Zingg, Martin Zutter, Peter Zwyssig, Markus
Swiss Re received a broad range of awards in 2007. They are a confirmation of the Group’s best-in-class customer service as well as its ambition to develop innovative solutions for clients.
“This year saw Swiss Re celebrate its 51st year of physical presence in Asia-Pacific. (…) The company continued to demonstrate its in-depth knowledge of market needs. (…) When it comes to innovation, leadership and education in the life reinsurance sector, the Swiss reinsurer once again leads the field.” (Asia Insurance Review, November 2007)
“In a little over a year, as part of a multi-billion dollar acquisition financing package, the re insurer conducted four hybrid benchmarks in textbook fashion. Furthermore, it reopened the US hybrid market, for which it deserves kudos as it was considered a brave move by market participants at the time.” (Euromoney, June 2007)
Swiss Re maintains more than 75 office locations in over 25 countries. For a full list of office locations and service offerings, please visit our website at: www.swissre.com
Head Office Swiss Reinsurance Company Mythenquai 50/60 P.O. Box 8022 Zurich Switzerland
This report is printed on sustainably produced paper. The wood used comes from forests certified to 100 per cent by the Forest Stewardship Council (FSC).
The web version of the 2007 Annual Report is available at: www.swissre.com/annualreport