Net profit of business year 1 53 S 45 Dividend (per share 1971/72 Sw.frs. 90.-*, 1970/71 Sw.frs. 85.-) i 36* 34 Capital funds shown 1 273* 257 * Subject to approval by the General Meeting 1
Management expenses, depreciation etc., taxes 163 1 124 Consolidated net profit 85 4 73
to the General Meeting of the Shareholders on the 24th November 1972 60 Mythenquai, Zurich
Max E. Eisenring, Chairman Paul Guggenbiihl, Deputy Chairman Matheus Klaas Werner Abegg Walter Berchtold
Max H. Schneebeli Felix W. Schulthess Marcel Odier Max Troendle Hans Ulrich
Deputy Managers Roger Aeberli Kurt Aemi Albert Albrecht Erwin E. Arpagaus* Eduard Bart Georges Bassin
Ernst A. Kubli* Willy Küster Gerard Lavanchy Jean-Claude Mayor* Jan C. Roos* H. Conrad Rutishauser*
Max D. de Balis Hans Salzmann Herbert Schönenberger Peter Schuppli Edward Spargnapani Paul Strickler
Leon Cenoud Georges Huguenin Walter Isler Ernst Jutzi* Hans R. Kaufmann Lavre Kirianoff Albert Kunz
Members of Management in Advisory Capacity Robert P. Brouwer Max L. Hefti Hans von Cunten
We have the honour to present to you the Annual Report and Statement of Accounts of the Company for the busi­ ness year 1971/72. The 108th business year embraces the reinsurance business for the calendar year 1971 and the other income and expenditure from 1st July, 1971 until 30th June. 1972.
Business Experience Summary The overall result was better than that of the previous year. Thanks to the worldwide spread of the risks assumed and the absence of any real catastrophe losses, the nonLife reinsurance branches produced a profit which derived mainly from territories outside Europe, from the special lines and from the reinsurance of single risks. However, on certain important European markets, industrial Fire business showed an adverse development, as did Motor Third Party Liability on several markets and General Third Party Liability and Burglary worldwide. Particularly wor­ thy of emphasis are the growing number of claims from Products Liability, Professional Indemnity and liability for environmental impairment. Life reassurance yielded a higher profit than in the previous year. Once again there was an increase in the investment income, that from abroad having been affected to varying degrees by the parity changes which occurred during the year under re­ view. On the expenditure side, a further increase of man­ agement expenses coupled with a sharp rise in taxes was evident.
Weighty problems faced us iri the year under review in the form of rapid, worldwide inflation, an aggravated risk situation in Property and Liability insurance as well as the rising crime rates in the industrialized countries.
In the Products Liability sector, the very recent official bans on the sale of various chemical, pharmaceutical and cosmetic products shows that, in certain cases, they were brought on the market before having been exhaustively tested. Moreover, motor vehicles and television sets have had to be recalled by the manufacturers because of de­ fects. The loss potential in Products Liability has become considerable and difficult for insurers and reinsurers to estimate. There is a definite need for a restructuring of Products Liability coverage so as to delimit the uninsur­ able commercial risk inherent in the testing of new pro­ ducts from the insurable Products Liability. The familiar types of liability have recently been joined by liability for environmental impairment.
In some countries the direct insurers' years of effort to regain control over the industrial Fire and Motor Third Party Liability business have shown results. Unfortunately, there is an evident tendency on other markets for the claims situation to deteriorate and in many countries the necessary premium adaptations are still pending, as in the Swiss Motor Third Party Liability business.
Result Last year's Annual Report expressed the belief that there would be positive results during this reporting year from the adaptation of conditions and premiums already begun in those branches and markets which had produced heavy losses. This assumption proved right. However, certain negative developments in other branches are intersecting with the said positive trend. If in one country one branch has attained equilibrium, this is lost — or so it would appear — in another. The good aggregate underwriting result is attributable on the one side to the partial success of the efforts made for several years to adapt the technical bases of
insurance to the demands of the constantly changing risk situation and, on the other, to the fact that no catastrophe losses affected the Company.
General Third Party Liability and Motor Third Party Lia­ bility insurances are gaining in importance for every pri­ vate individual and for every business. The resulting port­ folio growth together with the premium increases in direct insurance led to an above average rise in the reinsurance premium volume. In contrast to the previous year, the General Third Party Liability branch closed with a con­ siderable loss. Reference has already been made to some of the main reasons for this development. Although to varying degrees, all geographical areas contributed to the loss. Divided up according to types of reinsurance, the loss derived from proportional and non-proportional treaty business while facultative acceptances produced a profit which, however, was insufficient to balance out the over­ all branch result. In our view, direct insurers and rein­ surers have still not adequately adapted their covers to the present-day loss potential. Adding to this problem are the growing extension of the principle of strict liability to new constituent facts, e. g. liability for impairment of the environment, as well as the constantly increasing de-
mands for conscientious execution of duty. Motor Third Party Liability reinsurance has developed in the opposite direction and closed with a small profit. The business handled by Zurich showed a break-even result while the retrocessions from the overseas subsidiary companies pro­ duced a slight overall profit. Divided up according to types of reinsurance, a considerable loss from the proportional treaties stands opposite profits from non-proportional treaty business and from facultative acceptances which, however, are of little importance.
The Engineering business also showed a high rate of growth. Underwriting in this branch again produced a remarkably positive result in which losses from certain European areas and from the retrocessions of the overseas subsidiary companies were more than offset by profits from other areas. Careful underwriting by well-trained specialists is bearing fruit. However, in spite of its sub­ stantial volume, the business is susceptible to unforesee­ able fluctuations.
The Aviation business has expanded further and produced a very good result.
The Credit and Surety branches have continued to de­ velop favourably as regards both premiums and results.
The premium income, including annuity contributions, continued to expand with a gross increase of Sw. frs. 10.8 million to Sw. frs. 266.7 million despite continued conver­ sions of reassurance from a co-insurance basis to a risk premium basis.
Investments During the year under review, no major changes occurred in respect of the fixed-interest investments: a slight overall decrease in interest rates was accompanied by a minor improvement of bond prices. By contrast, there was lively movement on the more important stock markets, primarily induced by the developments in the monetary sector. The formal suspension of the dollar's convertibility at the be­ ginning of the year and the subsequent collapse of the existing monetary system had considerable repercussions on our international share portfolio. The announcement in Washington on 18th December, 1971, of the agreement to devalue the dollar and simultaneously to revalue several other important currencies, fed hopes that a new, lasting structure of fixed parities would emerge and a worldwide recovery of market prices began towards the middle of the business year. By the end of the year under report, the monetary system, scarcely re-established, proved to be en­ dangered again when Great Britain floated the pound and several other countries, Switzerland included, were forced to protect themselves against an undesirable inflow of cur­ rency from abroad. The concomitant set-back on the stock markets cancelled out, in the last few days of the business year, part of the earlier price recoveries.
Shares (excluding Permanent Holdings) 23.6 % (19.9 %) Real Estate 8.8 % ( 8.7 %) Shares and Real Estate 32.4 % (28.6 %)
The devaluation of several currencies important for us had, as in the previous year, a retarding influence on the growth of our current investment income. Nevertheless, after inclusion of interest on the Life assurance and an­ nuity funds and other technical reserves, the income rose by Sw. frs. 7.1 million (previous year, Sw. frs. 5.4 million) to Sw. frs. 102.8 million, exclusively because of the afore­ mentioned sharp increase in the income-producing assets both in this and the previous year.
Since the Swiss Re closes its accounts as at 30th June, the parity changes of the calendar year 1971 fell within two different business years. Therefore the effects of the re­ valuation of the Swiss franc on 9th May, 1971 were dis­ cussed in detail on page 10 of last year's Annual Report. The consequences for the Swiss Re of the widespread parity changes following the monetary conference in Washington on 18th December, 1971 as well as the de facto devaluation of the pound sterling in June, 1972 were even somewhat greater than those of the previous year, in respect of both foreign exchange gains and losses. Once again, however, the profit and loss account was not burdened.
On the other hand, the parity changes will—as mentioned last year — have certain lasting effects on the profit and loss account, in that profits from reinsurance and invest­ ment income earned in the currencies devalued in re­ lation to the Swiss franc will contribute less to the overall profit than would have been the case if no parity changes had occurred. Certain opposite effects on the items of ex­ penditure «management expenses» and «taxes» also ensue if they are incurred in devalued currencies. On balance, the long-term consequences of the parity changes introduced over the past 18 months remain within bearable limits.
The net worth of the Company was again affected, espe­ cially as regards holdings, by the changes in parities. However, a book loss was incurred only by SwissRe Hold­ ing (cf. page 23).
The last General Meeting re-elected to the Board of Di­ rectors Mr. Max H. Schneebeli and Mr. Felix W. Schulthess for an additional term of office. Mr. Hans Karrer was elected new substitute auditor.
At this year's General Meeting, the Board of Directors will propose election to the Board of Miss Elisabeth Feller, President of the Board of Directors, Adolf Feller AG, Horgen, and of Mr. Haws Schaffner, former Federal Councillor, Berne.
The Board of Directors proposes to the General Meeting the following allocation: 1971/72 1970/71
Dividend If the Board of Directors' proposal is accepted, a dividend of Sw.frs. 90— (previous year, Sw. frs. 85.—) will be paid; thus upon presentation of Coupon No. 17 an amount of Sw. frs. 63.—, after deduction of the Federal Withholding Tax of 30 %, will be paid.
Capital Funds After distribution of the profit in accordance with the pro­ posal on page 12, the capital and free reserves, including the balance brought forward, would be increased from Sw. frs. 257 million to Sw. frs. 273 million.
The actuarial auditor, Mr. H. Bühlmann, has moreover confirmed in his report that the technical reserves of the Life department at the end of 1971 were correctly calcu­ lated on the basis approved by the Swiss Federal Coimcil.
Reinsurances Reinsurances Own Own Assumed Ceded Account Account a b a — b
Zurich, 18th October, 1972 For the Board of Directors: M. E. Eisenring, Chairman
Auditors' Report To the General Meeting of the Shareholders of the Swiss Reinsurance Company, Zurich.
The parity changes which occurred during the year under review were the cause of the decline in the profits of the SwissRe Holding. They also diminished the growth in premiums and profits — consolidated in Swiss francs — of the subsidiary reinsurance companies abroad. Overall, these companies once again showed better results than in the previous year. However, the South African company's closing figures were still unsatisfactory, while the negative result shown by the Canadian Reassurance Company was ascribable to the exceptional circumstances mentioned on page 25.
Fire 974 956 850 747 733 Hail 17 14 17 17 11 Burglary/Fidelity and allied lines 81 66 70 65 60
Aviation 112 97 62 46 32 Atomic Risks 2 2 2 1 1 Credit, Surety 109 107 92 88 90
Net Cash Deposits with Insurance Companies 1,402 1,392 1,385 1,376 1,263
1971/72 1970/71 1969/70 1968/69 1967/68 * axel, sale of holding in Company Ltd., London
Outgo Interest to Parent Company 6.5 3.3 Management Expenses 0.3 0.2 Depreciation, Fluctuations in Stock Exchange and Foreign Currency Rates 3.8 2.6
Bank Balances 5.9 0.0 Debtors 4.3 0.4 Mortgage Loans 5.0 6.0 Holdings 315.7 314.8
Liabilities Creditors 193.3 181.2 Dividend 2.0 4.0 Share Capital 5.0 5.0 Reserve Fimd 10.0 10.0 Special Reserve 120.0 120.0 Profit Carried Forward 0.6 1.0
For the first time, the Holding received the dividends of the overseas subsidiary reinsurance companies, taken over from the Swiss Re on 30th June, 1970; at the new, lower rates of exchange, these totalled Sw. frs. 4.6 million. Higher dividends from the remaining shareholdings raised the income by a further Sw. frs. 1.4 million. On the other hand, however, lower dividends, especially from the holdings in German companies, and the very noticeable effects of a shift in the accounting period, combined to reduce the income by Sw. frs. 3.4 million with the result that the total income from holdings rose by only Sw. frs. 2.6 million to Sw. frs. 13.7 million.
Costs rose more rapidly. For the first time a full year's interest had to be paid on the sum owed the parent company from the afore-mentioned transferal and caused an additional expenditure of Sw. frs. 3.2 million. Furthermore, the parity changes effected by a number of countries during the past year necessitated a sizeable write-off, primarily in respect of holdings outside the Continent, which could only be offset in part by realized capital gains. Consequently, the Holding released hidden currency reserves in the amount of Sw. frs. 3.5 million which allowed payment of a dividend of Sw. frs. 2.0 million (previous year, Sw. frs. 4.0 million) to the parent company.
North American Reinsurance Corporation, New York Share Capital US S 6,000,000
North American Reassurance Company, New York Share Capital US $ 3,000,000
The gross Life business in force increased by US $ 512 million to US $ 5,112 million. Exceptionally low mortality as well as satisfactory experience in the Accident and Sick­ ness branches led to a favourable imderwriting result. — In 1971, the dividend payments were raised to a total of US $ 360,000 (previous year, US $ 200,000).
Underwriting Result * 846,000 545,000 Investment Income 1,381,000 1,168,000 Management Expenses - 736,000 - 668,000 Net Realized Capital Gains/Losses 84,000 - 132,000 Taxes - 691,000 - 63,000 * adjusted for changes in commission equity The portfolio withdrawals and restructuring effected dur­ ing the year under review were not fully compensated by the new business and caused a slight decrease in the gross premium income. In spite of this, the underwriting result improved, as did the investment income. On the other hand, the tax burden increased sharply with the result that the net profit was only slightly higher than in the previous year. — In 1971, the dividend remained un­ changed atC$ 187,500;in 1972 it was raised toC| 225,000.
A further substantial increase in the gross premium in­ come was achieved. Although still negative, the under­ writing result in non-Life reinsurance showed a slight improvement compared with the previous year; industrial Fire business is still the main problem. The development of Life reassurance was again satisfactory. — In 1972, as in the previous year, no dividend was paid.
In Great Britain it is usual to perform a valuation of the Life assurance business in three-year periods, and for this reason the above figures relate to non-Life business only. The rapid expansion of business continued during the year under review. The underwriting results are satisfactory. The investment income and the management expenses show increases in line with the expansion of business. — The net profits for 1970 and 1971 were used in full to reinforce the reserves.
The gross premimns have stagnated largely due to the widespread parity changes which especially affected the reinsurance ceded in dollar currencies. The experience both in non-Life reinsurance and Life business was sub­ stantially better than in the previous year. On the other hand, there was a pronounced increase in management expenses and in the write-off necessitated by exchange rate fluctuations. — In 1971, an unchanged dividend of Sw. frs. 1,500,000 was paid; for 1972, the dividend is to be raised to Sw. frs. 2,000,000.
North American Reinsurance Corporation 1940 All classes excl. Life 245 Park Avenue, New York, N. Y. 10017 with Offices in Atlanta, Boston, Chicago, Houston, Los Angeles and San Francisco
SwissRe Corporation 1948 245 Park Avenue, New York, N. Y. 10017