The disclosure below is in line with 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.
For the year ended 31 December 2009, no restricted shares were held by members of the Board of Directors. For comparative purposes the following unvested restricted shares were held by members of the Board of Directors as of 31 December 2008: The following unvested restricted shares were held by members of the Executive Committee as of 31 December: Restricted shares
In 2009 the Chairman and the Vice Chairman received half of their fees in the form of a performance share plan with a three-year vesting period. The plan is based on the Swiss Re share price at the date of grant and the number of shares to be released upon vesting can vary between 0% and 150% depending on the relative total relative shareholder return ranking of Swiss Re against a selected peer group. For 2009, shares were granted at a reference price of CHF 36.00 and the number of performance shares outstanding as of 31 December were:
As of 31 December 2009 no unvested options were held by any member of a governing body. All options that were held by members of governing bodies as of 31 December 2008 vested during 2009 and no additional options were granted to members of governing bodies during 2009. For options granted prior to 2009, there was a four-year vesting period, during which there was a risk of forfeiture, and an exercise period of six years. The exchange ratio was 1:1, meaning each option entitled the beneficiary to purchase one share at a non-adjustable strike price. As of 31 December 2008 the following unvested options were held by members of governing bodies: The expiry year for unvested options held by members of governing bodies was 2015 as of 31 December 2008.
Weighted average strike price in CHF as of grant date 93.51 Brian Gray, Chief Underwriting Officer 3 000 Michel M. Liès, Chief Marketing Officer 15 000 George Quinn, Chief Financial Officer 10 000 Jacques Aigrain, Former Chief Executive Officer 100 000
Weighted average strike price in CHF as of grant date 129.72 120.36
John R. Coomber, Chairman of the Finance and Risk Committee 256 000 314 000 Peter Forstmoser, Former Chairman 30 000
The range of expiry years for vested options held by members of governing bodies as of 31 December 2008 and 2009 was 2009 to 2014 and 2010 to 2015, respectively.
Weighted average strike price in CHF as of grant date 114.94 110.44 Stefan Lippe, Chief Executive Officer 112 400 99 000 Brian Gray, Chief Underwriting Officer 16 200 18 200 Michel M. Liès, Chief Marketing Officer 123 000 128 000 George Quinn, Chief Financial Officer 39 600 46 600 Jacques Aigrain, Former Chief Executive Officer 140 000 Andreas Beerli, Former Head of Associated Units and Special Projects 101 200
Raj Singh, Chief Risk Officer 3 647 Andreas Beerli, Former Head of Associated Units and Special Projects 3 000
To secure the technical provisions at the 2009 balance sheet date, securities with a value of CHF 8 456 million (2008: CHF 11 646 million) were deposited in favour of ceding com panies, of which CHF 7 617 million (2008: CHF 7 519 million) refer to Group companies.
As of 31 December 2009, the insurance value of tangible assets, comprising the real estate portfolio and other tangible assets, amounted to CHF 2 515 million (2008: CHF 2 515 million).
Other liabilities include CHF 4 million (2008: CHF 6 million) payable to the employee pension funds.
As of 31 December 2009, the Group held 16 950 852 treasury shares (2008: 16 973 828). In the year under report, 2 143 087 treasury shares (2008: 25 495 057) were purchased at an average price of CHF 27.51 (2008: CHF 77.18) and 2 166 063 treasury shares (2008: 20 855 441) were sold at an average price of CHF 29.53 (2008: CHF 84.03).
Reinsurance result 50 76 Premiums and other receivables from reinsurance 570 902 Funds held by ceding companies 211 133 Funds held under reinsurance treaties 392 302 Reinsurance balances payable 484 811
Premiums and other receivables from reinsurance 3 665 1 455 Funds held by ceding companies 18 035 16 042
The Annual General Meeting, held on 13 March 2009, approved an increase of conditional capital by CHF 16 000 000 in connection with a convertible bond or a similar financial instrument in favour of Berkshire Hathaway Inc. and the creation of authorised capital of CHF 18 000 000 with shareholders‘ subscription rights.
As of 31 December 2009, Swiss Reinsurance Company Ltd‘s total conditional capital outstanding amounted to CHF 17 441 974 (2008: CHF 2 160 487). CHF 16 000 000 was reserved for the exercise of conversion rights granted in connection with a convertible bond or a similar financial instrument in favour of Berkshire Hathaway Inc., CHF 839 479 for the exercise of conversion rights and warrants granted in connection with bonds and similar instruments and CHF 602 495 for employee participation purposes.
As of 31 December 2009, authorised capital outstanding with shareholders’ subscription rights amounted to CHF 18 000 000 (2008: CHF nil).
In the year under report, undisclosed reserves on investments and on provisions were released by a net amount of CHF 590 million (2008: no net release).
As of 31 December 2009, there were five shareholders with participation exceeding the 3% threshold of Swiss Reinsurance Company Ltd’s share capital.
b. Dodge & Cox, 555 California Street, 40th Floor, San Francisco, CA 94104, USA, notified Swiss Reinsurance Company Ltd on 31 October 2008 that it held on behalf of the Dodge & Cox International Stock Fund, through an acquisition, 10 766 995 registered Swiss Re shares, representing 3.05% of the voting rights of Swiss Reinsurance Company Ltd which can be exercised autonomously of the beneficial owners.
c. Berkshire Hathaway Inc., 3555 Farnam Street, Omaha, NE 68131, USA, notified Swiss Reinsurance Company Ltd on 26 March 2009 that it held as of 24 March 2009, through its subsidiary National Indemnity Company, 3024 Harney Street, Omaha, NE 68131, USA, 11 262 000 registered Swiss Re shares or 3.10% of the voting rights of Swiss Reinsurance Company Ltd.
d. Franklin Resources, Inc., 500 E. Broward Blvd., Ft. Lauderdale, FL 33394, USA, known as Franklin Templeton Investments, notified Swiss Re on 6 December 2008 that it held as of 4 December 2008, through an acquisition by a number of its group companies, in the capacity of investment manager for mutual funds and clients, 10 970 364 registered Swiss Re shares, representing 3.11% of the voting rights of Swiss Reinsurance Company Ltd which can be exercised autonomously of the beneficial owners.
In the year under report, the Company revised its accounting policy for modified coinsurance agreements. In the previous years, the portion of policy assets and reserves retained by the ceding company was reported net under life and health policy benefits. As of 2009, such transactions are presented on a gross basis with the separate disclosure of the funds withheld and the life and health policy benefits on the balance sheet.
The following table shows the modified coinsurance business related balances as of 31 December 2008 and 2009: Assets CHF millions
Liabilities for life and health policy benefits –122 591 469 935 –853 82 Funds held under reinsurance treaties – – – – 1 522 1 522
In 2009, the conversion of the in force treaties and the inception of new treaties were recorded through the income statement: Reinsurance result CHF millions
After deduction of Federal Withholding Tax of 35%, the dividend will be paid from 12 April 2010 by means of dividend order to shareholders recorded in the Share Register or to their deposit banks.
Report of the statutory auditor to the General Meeting of Swiss Reinsurance Company Ltd Zurich
Report of the statutory auditor on the Financial Statements As statutory auditor, we have audited the financial statements of Swiss Reinsurance Company Ltd, which comprise the income statement, balance sheet and notes (pages 227 to 249), for the year ended 31 December 2009.
We further confirm that the proposal for allocation of disposable profit complies with Swiss law and the company’s articles of incorporation. We recommend that the financial statements submitted to you be approved.
Net realised investment gains/losses 4 275 2 665 –730 376 1 116 3 474 2 106 –739 –9 482 733
Amortisation of goodwill –310 –368 –350 –315 –277 Other operating costs and expenses –3 074 –3 384 –3 240 –2 942 –2 940 –3 081 –4 616 –5 891 –4 712 –4 292
Earnings/losses per share in CHF 10.39* –0.57 –0.29 5.48 8.00 7.44 13.49 11.95 –2.61 1.49 * 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 former Financial Markets. 3 Reflects correction of reclassification discussed in Note 6 to the Group financial statements.
These factors are not exhaustive. Swiss Re operates in a continually changing environment and new risks emerge continually. Readers are cautioned not to place undue reliance on forward-looking statements. Swiss Re undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.
Market risk Volatility and disruption in the global financial markets can expose the Group to significant financial and capital markets risk, including changes in interest rates, credit spreads, equity prices and foreign currency exchange rates, which may adversely impact the Group’s financial condition, results of operations and liquidity. The Group’s exposure to interest rate risk is primarily related to the market price and cash flow variability associated with changes in interest rates. Exposure to credit spreads primarily relates to market price and cash flow variability associated with changes in credit spreads. When credit spreads widen, the net unrealised loss position of the Group’s investment portfolio can increase, as could other-than-temporary impairments. With respect to equity prices, the Group is exposed to changes in the level and volatility of equity prices, as they affect the value of equity securities themselves as well as the value of securities or instruments that derive their value from a particular equity security, a basket of equity securities or a stock index. The Group is also subject to equity price risk to the extent that the value of life-related benefits under certain life contracts, most notably variable annuity business, are tied to financial market values; to the extent market values fall, the financial exposure on guarantees related to these contracts would increase to the extent this exposure is not hedged. While the Group has an extensive hedging programme for variable annuities, certain risks cannot be hedged, including actuarial risks, basis risk and correlation risk. Exposure to foreign exchange risk arises from exposures to changes in spot prices, forward prices and volatile movements in exchange rates.
These risks can have a significant effect on investment returns, which in turn may affect both the Group’s results of operations and financial condition. The Group is focused on asset-liability management for its investment portfolio, but pursuing even this strategy has its risks, including possible mismatch, that in turn can lead to reinvestment risk. The Group seeks to manage the risks inherent in its investment portfolio by repositioning the portfolio from time to time, as needed, and to reduce risk and fluctuations through the use of hedges and other risk management tools. The Group has moved to reduce risk to the portfolio by repositioning the components of the portfolio and, as a result, profitability will potentially be impacted, and unless offset by underwriting returns, will be reduced.
Credit risk Like other financial institutions, the Group was adversely impacted by the deterioration in the credit markets beginning in 2007. During this period, the unprecedented and severe ratings downgrades that the Group and others experienced, and the absence of a liquid market for credit-related and other securities, resulted in a significant and material reduction in the value of the underlying assets. Although the Group has taken significant steps to de-risk its portfolio and reposition its assets, if the credit markets were again to deteriorate, the Group could experience further losses.
The Group manages liquidity and funding risks by focusing on the liquidity stress that is likely to result from extreme capital markets scenarios or from extreme insurance events or combinations of the two. Generally, the ability to meet liquidity needs could be adversely impacted by factors that the Group cannot control, such as market dislocations or interruptions, the economic downturn, continued severe disruption in the financial and worldwide credit markets and the related increased constraints on the availability of credit, changes in interest rates and credit spreads, or by perceptions among market participants of the extent of the Group’s liquidity needs.
As claims paying and financial strength ratings are key factors in establishing the competitive position of reinsurers, a decline in ratings alone could make reinsurance provided by the Group less attractive to clients relative to reinsurance from competitors with similar or stronger ratings. A decline in ratings could also cause the loss of clients who are required by either policy or regulation to purchase reinsurance only from reinsurers with certain ratings. A further decline in ratings could also impact the availability of unsecured financing and obligate the Group to provide collateral or other guarantees in the course of its reinsurance business or trigger early termination of funding arrangements.
Any rating downgrades could also have a material adverse impact on the Group’s costs of borrowing and limit its access to the capital markets. Further negative ratings action could also impact reinsurance contracts.
Plaintiff filed an opposition to that motion on September 25, to which Swiss Re submitted a reply brief on October 9. The parties await a date for oral argument and/or the Court’s decision on the motion to dismiss. The Group cannot predict whether it could be subject to further claims arising out of the market turmoil.
The Group’s results may be impacted by changes in standards, or changes in the interpretation of standards, in respect of fair value accounting or impairments. Its results may also be impacted if regulatory authorities take issue with any conclusions the Group may reach on fair value accounting or other accounting matters.
The Group uses non-GAAP financial measures in its external reporting, including in this report. These measures are not prepared in accordance with U.S. GAAP or any other comprehensive set of accounting rules or principles, and should not be viewed as a substitute for measures prepared in accordance with U.S. GAAP. Moreover, these may be different from or otherwise inconsistent with non-GAAP financial measures used by other companies. These measures have inherent limitations, are not required to be uniformly applied and are not audited.
That portion of an insurance premium which represents the cost of obtaining the insurance business: it includes the intermediaries’ commission, the company’s sales expense and other related expenses.
Sum of the claims paid and claim adjustment expenses in relation to premiums earned, both of which are net of unit-linked and with-profit business.
Insurance that is reinsured: the passing of the insurer’s risks to the reinsurer against payment of a premium. The insurer is referred to as the ceding company or cedent.
Portion of a company's profit allocated to each outstanding share of common stock. Earnings per share is calculated by dividing net income by the weighted average number of common shares outstanding during the period.
Bond that has a compulsory conversion or redemption feature. Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying stock.
Financial transaction, in which future cash flows from assets (or insurable risks) are pooled, converted into tradable securities and transferred to capital market investors. The assets are commonly sold to a special-purpose entity, which purchases them with cash raised through the issuance of beneficial interests (usually debt instruments) to third-party investors.
New regulatory framework for EU (re)insurance solvency rules scheduled to replace the current Solvency I regime by the end of 2012. Introducing a comprehensive, economic and risk-based regulation, Solvency II includes prudential requirements on solvency capital, risk modelling, supervisory control and disclosure.
Part of written premium (paid or owed) which relates to future coverage and for which services have not yet been provided; this is carried in an unearned premium reserve and may be refundable if the contract is cancelled before expiry.
Hong Kong 61 / F Central Plaza 18 Harbour Road G.P.O. Box 2221 Wanchai, HK
Swiss Re maintains over 60 office locations in over 20 countries. For a full list of office locations and service offerings, please visit our website at www.swissre.com.
Head Office Swiss Reinsurance Company Ltd Mythenquai 50/60 P.O. Box 8022 Zurich Switzerland
Photographs: Angelo Cavalli/Getty Images (cover, back cover) Marc Wetli (pgs 3, 26 – 27, 28), Brand New Images/ Getty Images (Background, pg 28), DOTI/Matthias Ibeler (pgs 6 – 7), Marvin E. Newman/Getty Images (pgs 8 – 9), Yann Layma/Getty Images (pgs 10 – 11), Lester Lefkowitz/Getty Images (pg 14, top), David Woolley/Getty Images (pg 14, middle, pg 56), Rene Spalek/Keystone (pg 14, bottom), Leo Meier/Corbis, Kevin Philips/Getty Images (pg 18, left to right), Travek Ink/Getty Images (pg 19) Israel Leal/Keystone (pgs 20 – 21), Rene Spalek/ Keystone, Jon Riley/Getty Images (pg 22, left to right), Khantipol Kasemsant/Getty Images (pg 23), Swiss Re (pg 25), Panoramic Images/Getty Images (pg 30), Clinton Global Initiative, Swiss Re (pg 32, left to right), Alain Camenzind/Swiss Re (pg 33), Helvetas (pg 34), Swiss Re (pg 35), Jan-Peter Boening/Zenit/laif/Keystone, Swiss Re, Hollandse Hoogte/laif (pg 36, left to right), Masterfile (pg 44), ChinaFotoPress/Getty Images (pgs 50 – 51)