Swiss Re, Zurich (pages 2-20) 1972/73 • a 1971/72 1 1970/71
Premium ineome (all branches) — gross 2,417 -f 2,345 2,151 — net 1,888 1 1,871 1,733
Net Life reassurance in force 21,777 1 18,023 Results: I — Non-Life reinsurance 26 8 - 12 — Life reassurance 19 21 E 18
Management expenses, Fluctuations in Foreign Currencies and Stock Exchange Rates, Taxes 102 79 j 1 57
— per share (400,000 shares) in Sw.frs. 1 90.- j 85.- * Subject to approval by the General Meeting
Consolidated net profit — total 82 85 73 — per share (444,000 shares) in Sw.frs. 184.- — per share (400,000 shares) in Sw.frs. 212.- 182.- j
to the General Meeting of the Shareholders on the 23rd November 1973 50/60 Mythenquai, Zurich
Zurich, Chairman of the Board of Directors, Swiss Credit Bank, Zurich 1975
Deputy General Manager Walter Diehl (with effect from 1st January, 1974)
Pierre-Claude Perrenoud Heinrich Pfefferle Arnold Saxer Otmar Schmidlin Willi Schürpf Max Tobler Paul Würsch Hans Wyler
Multidimensional organization To emphasize the importance of cooperation between market, product and function-oriented departments for the overall success of the Company, Swiss Re's current organizational form is presented as a multidimensional figure which demonstrates the equality of the market, product and function dimensions.
When one attempts to assess the profit potential of the Company in the light of the continuing monetary uncertainty, two observations are indicated: Firstly, this Statement of Accounts reflects fully all of the currency rate changes up to the 30th June, 1973, and secondly, the Com­ pany's competitive position was not affected by these changes, because reinsurance operations are practically always conducted in the original currency.
What is valid for fire prevention also applies to all of the technical devices and safety precautions used to protect both staff and the general public from accidents and the consequences of human failure. Examples of this are envi­ ronmental impairment by harmful emissions, oil spills and leakage of poisonous substances, faulty design of transpor-
tation equipment and erroneous static calculations for bridges and other construction projects.
Of the gross premium income, 67 % came from countries where the exchange rate of the national currency against the Swiss franc fell to some degree during the year under report. The resulting loss of premium income amounted to Sw. frs. 260 million. Despite this, the gross premiums in­ creased by Sw. frs. 72 million to Sw. frs. 2,417 million, or 3 % (previous year, 9 %). Except for Marine, Aviation and Credit/Surety reinsurance, all branches of insurance con­ tributed to the growth.
Net premium income rose by Sw. frs. 17 million to Sw. frs. 1,888 million, or by 0.9 % (previous year, 8 %).
Underwriting result Thanks to the worldwide spread of the accepted risks and to notable improvements in the results of individual branches of the business, non-Life reinsurance produced a result approximately Sw. frs. 18 million better than in the
Fire 775 736 684 650 603 Hail 16 16 13 13 12 Burglary/Fidelity and allied lines 66 62 53 59 57
Aviation 73 101 90 55 44 Atomic Risks 2 2 2 1 1 Credit, Surety 75 78 74 60 57
Ongoing supervision of the risk situation and the com­ pleted adaptations of premiums and policy conditions have been successful in branches and markets which previously produced high losses. The active cooperation of direct insurers contributed substantially to this. Compe­ tition has continued to increase on the reinsurance markets.
Generally speaking, the trend towards major losses is continuing, and the indemnities for business interruption are often higher than the actual fire losses. With increasing frequency, major industrial concerns are de­ manding deductibles in their Fire policies, which frees insurance from small and medium-sized claims. This tendency is fully compatible with the interests of Fire insurers as long as they remain able to obtain adequate premiums in such cases. The general improvement of the industrial Fire insurance results in various industrial countries has again called back numerous insurers and reinsurers who had withdrawn from this area in recent years. The competitive situation has intensified sharply as a result of the greater capacity available.
The Burglary business as a whole still remains unprof­ itable. The greatest losses originate from the highly developed industrial countries. Further major efforts will be required to channel this branch back into the profit zone, since increasing carelessness and criminality would appear to be inevitable attributes of a rising stan­ dard of living.
The Marine branch produced a good result in the year under review. We are concentrating our attention on the rate collapse caused by excess capacity and the worldwide rise of repair costs in Marine Hull insurance, due to in­ flationary developments. These factors suggest that a highly selective underwriting policy is indicated for the near future.
Engineering reinsurance again achieved notable premium growth coupled with a highly gratifying profit.
In the Atomic branch, reinsurance of nuclear power plants is showing slow but steady growth. During the year under review there were no losses of any significance arising from nuclear plants.
Life Reassurance The lower foreign currency exchange rates also influenced the Life business strongly during the year under report. Calculations show that the net new business in terms of sums insured (Sw. frs. 5,902 million) would have been 10 % higher if no changes in currency rates had occurred between mid-1972 and mid-1973. Due to intensive acqui­ sition activity, production nevertheless rose by 8 % over that of the preceding year. Net business in force at the end of 1972 amounted to Sw. frs. 21,777 million; because of foreign exchange losses it increased by only Sw. frs. 1,206 million over the previous year.
Unlike the previous year, the reporting year was marked by increased mortality. Consequently, profit declined from Sw. frs. 21.1 million to Sw. frs. 19.3 million.
Comparison with the previous year's figures shows the effects of both influences clearly: Despite new investments of Sw. frs. 200 million, the balance sheet value of invest­ ments slipped back by Sw. frs. 26 million to Sw. frs. 2,432 million. There was also a pronounced decline of the hidden surplus on securities, by Sw. frs. 87 million to Sw. frs. 344 million; at the end of the accounting year this surplus still amounted to 15.2 % (previous year, 19.2 %) of the balance sheet value of the investments in securities.
A certain impairment of the investment results also arose as the result of measures taken by several hard currency countries to prevent undesirable inflows of capital from abroad. In certain of these countries there were invest­ ment restrictions, or we were forced by the threat of nega­ tive interest to incur additional costs by transferring bank balances required to meet normal reinsurance payments in and out of a given currency.
Due to this threefold burden — declining prices for se­ curities, changes of foreign currency rates, and investment restrictions — the overall result of our investment activity during the year under report failed to come up to expec­ tations, but in the light of the extraordinary circumstances, it can be described as satisfactory. The current investment income, after inclusion of interest on the Life assurance and annuity funds and other technical reserves, rose by Sw. frs, 6.6 million to Sw. frs. 109.4 million.
At Balance Sheet Values: Fixed-interest investments (including convertibles) 66.5% (67.6 %)
Bonds and Preference Shares of Banks, Public Utilities, Industrial and other Companies 496 522 647 600 664
Management Expenses In the year under review, management expenses rose by Sw. frs. 8.7 million, or 17 %, to Sw. frs. 58.7 million. The previous year's increase amounted to 20 %. Apart from the greater outgo in salaries for the still growing number of personnel, above average additional expenses for social security resulted from higher employer's contributions to the Swiss social security scheme and an allocation to the Employees Welfare Foundation, again larger than the preceding one. Data processing costs also rose sharply due to the rental of a significantly larger computer. On the other hand, the currency rate changes allowed savings to be made on travel expenses and the cost of advisory offices abroad.
Taxes The tax burden eased during the year under report by Sw. frs. 1.0 million to Sw. frs. 28.1 million. There were increases in indirect taxes and the direct taxes in Switzer­ land and Australia, but substantial reductions in direct taxes in both Canada and the United States, where the good profitability of reinsurance operations made in­ creased investment in tax-exempt bonds appear advan­ tageous.
When one considers the total scope of the changes in currency rates which have occurred within the space of the year, it could appear surprising that they did not place a far greater strain on the profit and loss account. The main reason for this — as was mentioned in earlier Annual Reports — is to be found in our extensive reinsurance liabilities, which counterweight our assets in identical currency. Nevertheless, mention should be made of the fact that once again significant currency losses were sustained in the hidden surplus and in the figures of the SwissRe Holding. Although these losses do not find ex­ pression in the profit and loss account of the Swiss Re, they still represent a loss of equity.
The last General Meeting re-elected to the Board of Direc­ tors Mr. Max E. Eisenring, Mr. Werner Ahegg and Mr. Marcel Odier for an additional four-year term of office. At the same time, Miss Elisabeth Feller and Mr. Hans Schaffner were elected to the Board for a first term.
Additionally, the General Meeting of 1972 confirmed Mr. Peter G. Syz, Mr. Hans Homberger and Mr. Rudolf HuberRiibel as Auditors, and Mr. Max Honegger and Mr. Hans Karrer as Substitutes. Their re-election was for a threeyear term of office, as stipulated in the revised Articles of Association.
At this year's General Meeting, the terms of office of Mr. Paul Guggenbiihl, Mr. Max Troendle and Mr. Hans Ulrich are expiring. Having reached retirement age, Mr. Guggenbiihl is withdrawing from the Board; the other two gentlemen stand for re-election and are immediately eligible under the Articles of Association.
Mr. Guggenbiihl can look back on 49 years of service in our Company, 16 of these years as General Manager, and 7 as Member of the Board, in which he has held the office of Deputy Chairman since 1970. Through his style, which is factual, purposeful, and marked by extensive pro­ fessional knowledge, Mr. Guggenbiihl achieved lasting success in furthering the growth, strength and reputation of our Company. All of his present and former colleagues owe him a debt of gratitude.
Mr. Georges Huguenin, Assistant Manager, retired on 31st December, 1972. We should like to express our sincere gratitude to him for his many years of valuable service to our Company.
Capital Funds After distribution of the profit in accordance with the pro­ posal on page 14, the capital and free reserves, including the balance brought forward, would be raised from Sw. frs. 273 million to Sw. frs. 296 million,, partially due to the increase of the share capital last year.
The actuarial auditor, Mr. H. Bühlmann, has moreover confirmed in his report that the technical reserves of the Life department at the end of 1972 were correctly calcu­ lated on the basis approved by the Swiss Federal Council.
The report of the Auditors appointed by the Shareholders appears on page 20.
Outstanding Claims for Own Accormt All classes excl. Life (incl. Valuation of Current Annuity Indemnities)
Capital (400,000 registered shares at Sw. frs. 250.— nom.) (44,000 bearer shares at Sw. frs. 250.— nom.)
Balance Profit Carried Forward from Previous Year 1,372,494 Net Profit 1972/73 52,616,523
Auditors' Roport To the Generai Meeting of the Shareholders of the Swiss Reinsurance Company, Zurich.
Apart from the Swiss Re, Zurich, the Swiss Re Group in the narrower sense comprises its fully-owned subsidiary companies.
The tables and graphs on pages 24—26 give a general picture of the development of the most important income components and the consolidated net profit of the Swiss Re Group in the narrower sense. The, in some cases mas­ sive, devaluations of the local currencies of subsidiary companies abroad produced — when expressed in Swiss francs — a reduction of the consolidated premium volume as well as of the income-producing assets and the net profit.
The business year of the SwissRe Holding (page 27) and the foreign subsidiary companies (pages 28—31) corre­ sponds to the calendar year, while the Swiss Re and the European General (page 31) close their books, as at the end of June. The conversion rates used were those applied by the Swiss Re, Zurich, in balancing its accounts, i.e. the average rates as at 30th June of the year following the foreign subsidiary companies' closing of their books.
Accident 283 298 297 269 192 Sickness 80 76 124 167 135 Third Party Liability 237 228 203 181 150
Real Estate r-'' ^ ^='»1 1972/73 ; 1971/72 1970/71 1969/70 1968/69
excl. sale of holding in Mercantile and General Reinsurance Company Ltd., London
Outgo Interest to Parent Company 6.7 6.5 Management Expenses 0.3 0.3 Depreciation, Fluctuations in Stock Exchange and Foreign Currency Rates 6.5 3.8
Despite lower foreign currency rates than in the preceding year, income from dividends and interest in­ creased by Sw. frs. 3.9 million to Sw. frs. 17.6 million. Approximately half of the increase was produced by the subsidiary companies, which significantly raised their dividend payments, on the whole. An additional contributing factor was that the German companies in which shareholdings are maintained were able to distribute larger profits, after having reduced their dividends in the previous year.
North American Reassurance Company, New York Share Capital US S 3,000,000
Underwriting Result * 1,347,000 846,000 Investment Income 1,627,000 1,381,000 Management Expenses - 928,000 - 736,000 Net Realized Capital Gains/Losses - 8,000 84,000 Taxes - 641,000 - 691,000 adjusted for changes in commission equity The premium income lost in the preceding year was more than regained during the year under report. The Casualty lines contributed decisively to the notable improvement of the underwriting profit. — The ordinary dividend in 1973 was raised to C | 250,000 (previous year, C $ 225,000). Moreover, the favourable operating result of the year, together with a substantial growth of equity, permitted payment of an extraordinary dividend of C | 700,000.
Rand Rand : The pronounced increase in premium volume is a direci consequence of remedial efforts at the primary insurance level. The underwriting loss in non-Life reinsurance was reduced again. The growth and profitability of the Life business were good. The increase in the number of per­ sonnel produced a sharp rise of the management expenses. — In 1973, after a two-year interruption, payment of a divi­ dend was resumed in the amount of Rand 100,000 (in 1970 the dividend amounted to Rand 55,800).
European Generai Reinsurance Company of Zurich Share Capital Sw.frs. 10,000,000 1972/73 1971/72
Exchange and Foreign Currency Rates - 11,314,000 - 4,691,000 Taxes - 997,000 - 1,214,000
Canadian Reassurance Company 1960 Life 95 St. Clair Avenue West, Toronto 195, Ontario with an Office in Montreal
SwissRe Advisers Inc. 1970 245 Park Avenue, New York, N. Y. 10017