Swiss Reinsurance Company, Zurich 50/60 Mythenquai, Zurich, Switzerland P. 0. Box 172, GH-8022 Zurich Telephone 25 88 00 Telex 52201 reas ch Cables reassurance
Management expenses, fluctuations in stock exchange and foreign currency rates, taxes 148
Dividend total, including bonus Dividend per share in Sw. frs. Bonus per share In Sw. frs.
Management expenses, fiuctuations in stock exchange and foreign currency rates, taxes 251 190 163
*Subject to approval by the General Meeting *0n the 11°/o higher share capital
Matheus Klaas* Deputy Chairman, Zcllikcn, General Manager (ret.), Swiss Re 1974
Hans R. Lüthy Küsnacht, Managing Director and General Manager of IBM Switzerland, Zurich 1977
Marcel Odier Cclcgny, Partner in Lombard, Odier & Cie., Bankers, Geneva 1976
Roger Aeberii Kurt AernI Albert Albrecht Erwin E. Arpagaus Eduard Bart Gunnar Benktander* Andreas Brügger Edouard Burnens
Walter Isler Ernst Jutzi Lavre KIrlanoff Werner Künzle Robert Martlgnier* Balthasar Mätzener Roger P. Merkelbach Werner Müller* Samuel Patthey Pierre-Claude Perrenoud
On the income side, the year under report was marked by a substantialiy higher profit from non-Life reinsurance and a considerabiy increased invest­ ment income, in respect of outgo, the weighty factors inciuded write-offs — significantiy higher than those of the preceding year and caused by a price decline unlike any experienced for decades on vir­ tually all of the major bond and share markets — and management expenses, which again increased steeply. The net profit grew by Sw. frs. 11.1 million to Sw. frs. 63.7 million (previous year, a reduction of the net profit by Sw. frs. 0.8 million).
Gross premium income from non-Life reinsurance was increased by Sw. frs. 117 million, or 5.5 °/o (previous year, 3 °/o), to Sw. frs. 2,250 million. After deduction of the retrocessions within and outside the Swiss Re Group, the remaining net premiums amounted to Sw. frs 1,728 million which, in comparison with the preceding year, corresponds to an increase of Sw. frs. 93 million, or 5.7 °/o (pre­ vious year, 0.9 °/o). The relatively modest premium growth is primarily attributable to larger retentions by direct insurers and to cancellation of reinsurance treaties which have proved unsatisfactory. Once again — but to a much smaller degree than in the previous year-—^fluctuations in foreign currency rates of specific countries reduced the premium growth shown after conversion of the premium amounts into Swiss francs.
The net result in non-Life reinsurance was Sw. frs. 57.7 million, prior to deduction of management ex­ penses. Ail of the larger geographical areas in which the Swiss Re and its Group companies are operating contributed to this gratifying result. This would appear to confirm once more that the spread of risks achieved within the portfolio of the Company is large enough to allow negative trends in individual branches or markets to be compensated with positive developments in other areas, as long as extraordinary events do not occur. This spread can also be relied on in the future, although one can increasingly observe certain indications that it may manifest itself less intensively than in the past or perhaps only become evident over a longer period of years. Growing economic interdependence is having the effect that factors with an important influence on reinsurance are being felt worldwide, as shown by nationalistic tendencies in developing countries, which hamper the free business activity of international reinsurers. Other examples are the premium level in Aviation insurance, which is cur­ rently inadequate worldwide, and the spreading idea of self-insurance in individual sectors of the economy. Of far greater importance here, however, are the implications of inflation, which has been accelerating around the globe in recent years. As a general rule, the insured should regularly adjust the sums insured to the level of inflation, if he expects to have sufficient cover in the event of loss. This adjustment is particularly important in indemnity insurance, because these covers are intended to provide the insured, or the injured party, with replace­ ment of property, services or the means of support, ail of which are benefits subject to heavy inflation. Let us take Fire insurance as an example. Here, as in other branches, the most obvious solution of the inflation problem lies in reaching agreement with tho insured periodically, perhaps annually, on an increase of the sum insured. For the insurer — presuming that the insured objects are unchanged and the risk con­ ditions identical — this guarantees a premium ad­ justed to the nominally increased liability for losses. For the insured, on the other hand — and again identical insured objects are assumed — this repre­ sents security that he will not be underinsured and have to accept a reduced indemnity in settlement of a claim. The procedure is both immediately applicable and generally used for major policies, such as those covering industrial plants whose insurance protection must be reviewed annually (new buildings, fluctuations in the amount of goods and materials in stock, etc.). For small and medium-sized risks such as home­ owners policies, however, with relatively modest sums insured and a policy period of several years, cost considerations forbid its use. Precisely for these policies, however, there is a particular urgency in the idea of protection against inflation. Here, the only simple and effective solution obviously consists of regular, automatic adjustment of the sums insured to the pace of inflation. For a number of years, a procedure of this kind has been in use successfully in French Homeowners Fire business, for example, where it has functioned to the
As reinsurance, by far the greatest part of the business in the non-Life branches is accepted on a proportional basis, in this, the reinsurer participates with a fixed percentage in the risks of the direct insurer — and thus in the premiums and the losses. Consequently, in this area the parallelism of the results of the direct insurer and the reinsurer is also most evident, though never complete, given that usually only risks from a certain size upwards are reinsured. Decisive for the business success of the reinsurer, therefore, are direct insurance premiums commen­ surate with the risk, and especially so when large risks are involved, in preceding years, inadequate tariff rates in the Fire, Motor and Marine branches had been a heavy burden on the reinsurance results. The premium adjustments since effected in individual countries have contributed substantially to the year's good results.
Fire 835 775 736 684 650 Hail 18 16 16 13 13 Burglary/Fidelity and allied lines 65 66 62 53 59
As against the previous year, the number of major losses rose again. Only one large natural disaster (spring storms in Holland) had to be absorbed; it entailed an outlay of Sw. frs. 13 million, which has been booked under the Fire branch.
Due to premium rate increases and the somewhat smaller number of major fire losses, Fire reinsurance closed with a substantially better result than in the
The distribution by branch and continent is virtuaiiy unchanged fro n the previous year.
A profit remained from the increased premium vol­ ume in Accident reinsurance. Sickness reinsurance, too, produced a positive result, while premiums de­ clined slightly. General Third Party Liability reinsurance showed a loss of premium, following abandonment of treaties which had run unfavorably, but in contrast to the preceding year, it yielded a modest profit. This branch continues to demand our close attention, as it entails a pronounced major loss potential and is particularly endangered by inflation. Experience has shown that premium adjustments in direct insurance are difficult to attain even when the severity of the risks is obviously heightened by new legislation or more stringent court decisions. Motor reinsurance produced a profit which must be described as adequate in the light of the heavy losses of preceding years. In the year under report. Marine reinsurance brought a good result. It is a known fact that in Marine Hull insurance the run-off of losses from previous years has a large measure of influence on the result of the accounting year, so that the establishment of reserves for outstanding claims attains decisive significance. This factor was also given due attention in the current year. Engineering reinsurance repeated its good result, with satisfactory premium growth.
The past two years in Aviation insurance have been marked by a sharp decline in premium rate levels. The very modest profit achieved in the reporting year must be regarded as inadequate, given the major and catastrophe risks covered in the branch.
The Credit and Surety branches displayed good premium gains, but only a modest profit, since the slowdown in specific economic sectors led to liquidity problems.
The gross amount of new business, in terms of sums reassured, was Sw.frs. 7,459 million in the year under report. The net amount was Sw. frs. 6,542 million, which is equivalent to an increase of 11% over 1972. At Sw. frs. 24,436 million, the net business in force was 12% higher than a year ago.
With normal overall claims experience — better than that of the previous year in Europe, but significantly less favorable in severai overseas territories — the profit rose by Sw. frs. 2.1 million to Sw. frs. 21.4 mil­ lion, thus attaining the result achieved two years ago, although the latter was produced on an amount of net business in force which was approximately Sw. frs. 4,000 million less.
This was not without repercussions on our inter­ nationally invested, extensive securities portfolio. The hidden surpius on the portfolio suffered a consider­ able reduction, declining from Sw. frs. 344 million at the end of the previous year to Sw. frs. 180 million on the balance-sheet date. Thus, there is a surplus of 7.6 °/o of the present balance-sheet value of in­ vestments in securities still remaining (previous year, 15.2%). Furthermore, extensive write-offs, by far larger than the realized capital gains, were required in order to bring the balance-sheet values of the portfolio down to the decreased market values.
On the other hand, current investment income de­ veloped well. After deduction of interest on the Life assurance and annuity fund and other technical reserves, it increased substantially by Sw. frs. 23.6 million to Sw. frs. 133.0 million. This corresponds to a growth of approximately 20 %.
po/e/|| 30/6/73 30/6/72 30/6/71 30/6/70 Government and Government-guaranteed Bonds L 1,05E 856 864 696 682
Bonds and Preference Shares of Banks, Public Utilities, Industrial and other Companies 510 496 522 647 600
Net Cash Deposits with Insurance Companies 1,172 1,171 1,210 1,204 1,194
67 million) are held by trustees appointed by us in overseas the Head Office investments in the United States into Swiss Re's
Real Estate (at balance-sheet values) 9.Ij'/o^ oZ (8.8%) Shares ' ^ (excluding (Permanent Holdings) 23.2%
Costs of advisory offices abroad also rose sharpiy. They refiect our efforts to offer our ciients better ser­ vice through local representatives, and thus to strengthen and expand our business relations.
The tax burden rose during the year under report by Sw. frs. 3.4 miiiion to Sw. frs. 31.5 miiiion. This increase is due soieiy to higher direct taxes in Switzeriand. Contributing to the greater burden were the higher net taxable profit, higher tax rates in the Canton and City of Zurich, and a higher Swiss Federal income tax rate.
The account for fiuctuations in stock exchange and foreign currency rates and depreciation closed with a ioss of Sw. frs. 46.3 miiiion (previous year, Sw. frs. 15.5 miiiion).
Mr. Klaas has been active in the service of the Com­ pany for more than 45 years, in the course of his 10 years as General Manager, he contributed sub­ stantially to the expansion of our business in North America and the Far East, and to the related Group structure. In 1966 he was elected to the Board and its Committee. His broad knowledge of all aspects of international reinsurance business and his open mind towards all new developments have been ex­ ceedingly valuable to us. We are greatly indebted to Mr. Klaas.
At this year's General Meeting, the Board of Directors will propose election to the Board of Mr. Edwin Stop­ per, Zurich, former President of the Swiss National Bank.
The Board of Directors proposes to the General Meeting the following allocation: Dividend Sw. frs. 90.— per share
The report of the Auditors appointed by the ShareThe actuariai auditor, Mr. H. Bühlmann, has moreover holders appears on page 22. confirmed in his report that the technical reserves of
embracing the reinsurance business for the calendar year 1973 and the other income and expenditure for the period from 1st July, 1973 to 30th June, 1974 •
Adjustment in Annuity Vaiuations — 183,723 — 2,886,067 Interest on Life Assurance and Annuity Fund 38,100,993 36,326,088
To the General Meeting of the Shareholders of the Swiss Reinsurance Company, Zurich,
The business year of the SwissRe Holding and the foreign subsidiary companies corresponds to the calendar year, while the Swiss Re and the European General do not close their books until the end of June. The conversion rates were those applied by the Swiss Re, Zurich, in balancing its accounts, i. e. the average rates as at 30th June of the year fol­ lowing the foreign subsidiary companies' closing of their books.
The tables and graphs on pages 26—28 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.
Accident 296 283 298 297 269 Sickness 82 80 76 124 167 Third Party Liability 221 237 228 203 181
Gross Premiums 3,361 3,154 3,176 3,011 2,777 Retrocessions to companies outside Group 480 474 414 371 309
Income-producing Assets by category (consolidated according to cost or market method) Previous year in parentheses
Profit and Loss Account in millions of francs 1973 " TSl 1972 Income Dividends and Interest from Subsidiary Companies and other Holdings Extraordinary Dividend of the Canadian Reinsurance Company
Outgo Interest to Parent Company Management Expenses Depreciation, Fluctuations in Stock Exchange and Foreign Currency Rates Taxes
Balance Sheet (after approved allocation of profit) in millions of francs 31/12/73 31/12/72
Despite a renewed drop in foreign currency rates from the previous year, income from dividends and interest in 1973 rose by Sw. frs. 1.7 million to Sw. frs. 19.3 million. In addition, an extraordinary dividend in the value of Sw. frs. 2.0 million was received from the Canadian Reinsurance Company. The SwissSouth African Reinsurance Company Ltd. and the Canadian Reassurance Company have resumed divi­ dend payments in 1973, and several other companies in which shareholdings are maintained, particularly in Germany, distributed larger profits.
The global decline of foreign currency rates in 1973 required substantial write-offs on the overseas share­ holdings. These write-offs were extensively, but not fully offset by extraordinary capital gains. The account for depreciation shows a negative balance which is Sw. frs. 2.9 million higher than in the preceding year. The higher tax burden can be basically explained by the increase of withholding taxes on dividends re­ ceived. —The dividend paid to the Swiss Re remained unchanged at Sw. frs. 2.0 million.
Underwriting Result* 1 Investment Income i Management Expenses Net Realized Capital Gains/Losses Taxes *adiusted for changes in commission equity
Production of new business sufficed only to com­ pensate the premiums lost through cancellation of business which had caused losses. Due to the ab­ sence of catastrophe losses, the result of the Prop­ erty business was satisfactory once again. On the other hand, the Casualty lines and, for the first time, the Marine branch showed substantial losses. As the result of the stagnating volume of business and the continued switch of investments into tax-exempt bonds, investment income only Increased insignifi­ cantly. Management expenses rose by about 30 %, while the tax burden declined by approximately half. — In 1973, dividends of US $ 1,200,000 were paid (previous year, US $ 900,000).
The gross Life business in force rose by US I 211 million to US I 5,884 million. Low mortality and renewed satisfactory experience in the Accident and Sickness branches produced a very good under­ writing result. The tax burden was correspondingly higher. The sharp increase of management expenses is attributable to higher personnel costs. — In 1973, the amount of dividends paid remained unchanged at US I 400,000.
Net Profit 1^ 332,000 1,397,000 'adjusted for ctianges in commission equity
The premium losses resulting from numerous alter­ ations of the treaty business were virtually com­ pensated by new business acquired during the reporting year. Corresponding to the negative devel­ opments on the direct Canadian insurance market, there was a more or less pronounced decline of earnings in all branches. Taxes, in line with the unsatisfactory business experience, fell substantially. — The dividend paid in 1974 amounted to C $ 250,000 (previous year, an ordinary dividend of C $ 250,000 and an extraordinary dividend of C $ 700,000).
Canadian Reassurance Company, Toronto Share Capital C$ 1,000,000 1 C ^ C$ Gross Premiums Net Premiums
come from free investments. For 1973, the company is able to reclaim some of the taxes paid in the preceding year. — No dividend was paid in 1974 (previous year, C $ 75,000).
Rand 1 Rand Gross Premiums ' 27,763,000 23,697,000 ^ Net Premiums 13,954,000 11,851,000
Underwriting Result 511,000 ^ 656,000 Investment Income 599,000 422,000 Management Expenses — 987,000 — 799,000 Net Realized Capital Gains/Losses 856,000 121,000 Taxes — 245,000 5,000
Swiss Reinsurance Company (U. K.) Ltd., London Share Capital £ 750,000
The rapid expansion of the initial years following establishment was clearly slowed down during the reporting year. There was a repetition of the good underwriting result, which includes only the non-Life reinsurance business, as the Life business is valuated in three-year periods. Because of significant realized capital losses, it was impossible to attain the previous year's profit. — As in preceding years, the net profit for 1973 was used to reinforce the reserves.
Underwriting Result Investment Income Management Expenses Fluctuations in Stock Exchange and Foreign Currency Rates, Depreciation Taxes
With only a slight change in premium income, the underwriting result in both non-Life and Life business was somewhat lower than in the previous year. Earn­ ings from investments increased, but on the other hand, management expenses and taxes also rose. The net profit improved over the preceding year.
United States of America United States Branch 245 Park Avenue, New/York, N. Y. 10017
Canadian Branch 95 St. Clair Avenue West, Toronto M4V 1N9, Ontario
Republic of South Africa Swiss-South African Reinsurance Company Ltd. Swiss House, 86 Main Street, Johannesburg with Offices in Cape Town and Pretoria
Great Britain Swiss Reinsurance Company (U. K.) Ltd. 108 Cannon Street, London EC4N SHE with an Office in Hong Kong
SwissRe Advisers Ltd. Rooms 2306—2309 Connaught Centre, Hong Kong with an Office in Tokyo