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Guri Dam, Venezuela 4 Before test operations began with the installation of the last turbines of the second stage at the Guri dam in Venezuela at the end of 1976, It was decided to Increase production capacity 2,000 MW to almost 10,000 MW by raising the water level some 50 metres. The surface area of the lake is therefore increased from 700 km^ to 4,200 kms. The work lasts some 8 years and Includes raising the concrete gravity dam by 50 m, the construc­ tion of various extension dams and the installation of the first 4 turbines. The sum Insured is approx. Sw. frs. 2,600 million and the constructional plant and equipment has a total value of Sw. frs. 260 million. - The Swiss Re helped work out the Insurance conditions and has a substantial share of the risk.
Management expenses, taxes fluctuations in stock exctiange and foreign currency rates, depreciation
Summary of Important Figures in millions of francs Swiss Re, Zurich 1979 1978/79
* not comparable with previous years foiiowing change In balance-sheet date ** Subject to approval by the General Meeting ** Consolidated figures (of. notes on page 38)
St. Gall, Professor, St.Gall Graduate School of Economics, Business and Public Administration
Secretary to the Board of Directors Ernst A. Kubll, General Secretary
Auditors Term to expire In Swiss Auditing and Fiduciary Company, Zurich 1982
Gerard Lavanchy Arnold Saxer Ralph Ochsenbein Pierre-Claude Perrenoud* Jan 0. Roos
As a result of the change in the balance-sheet date from 30th June to 31st December, the 1979 business year em­ braces, as before, the reinsurance business for the calendar year, 1979, but other income and expenditure only from 1st July until 31st December, 1979.
The efficiency of a worldwide reinsurer depends not only on the size of his technical reserves and the extent to which they retain their real value, but also on his liquidity.
Prompt cash payments of major claims by the reinsurer are an Important element of reinsurance cover. Lately, and with Increasing frequency, the reinsurer's liquidity has been restricted by the legal provision to deposit tech­ nical reserves with the Insurer. What Is more, the splitting up of the reinsurer's Investments which this entails has an unfavourable effect on the Interest which can be earned on these overall very substantial amounts.
In the course of rapid technical and economic develop­ ment, the number and size of Insured risks has Increased greatly. Since at the same time direct Insurers' retention capacity has Increased worldwide and they are able to cover small and medium-sized risks on their own, reInsurers are Increasingly being offered only major and peak risks. This development makes it difficult for the reInsurer to achieve risk balance both In the Industrial nations of the west and the countries of the third world. Not Infrequently direct Insurers In developing countries are urged to cover only major risks In the International market and to reinsure basic business locally or region­ ally. It remains to be seen to what extent the numerous attempts at state-inspired national and regional reinsur­ ance autonomy really do serve the interests of the mar­ kets concerned In the medium and long term.
The threat by natural catastrophes Is also part of the general context. The reinsurer can, however, counter It with appropriate means, provided the direct Insurers agree with the reinsurers on a common cover concept In the exposed countries. If natural catastrophes are to be covered by private insurance, the loss potential has to be capable of assessment to a certain degree and the rating commensurate. These requirements call for close co­ operation between insurers and reinsurers, where ne­ cessary also with the collaboration of the authorities to procure the Information needed. Since natural catas­ trophes occur at Irregular and often lengthy Intervals, In­ surers and reinsurers should be allowed the possibility In catastrophe-free years to place In a reserve exempt of tax the premiums which have not been used for such risks; this Is not possible everywhere.
Legislators and government authorities have to take I nto account possible collisions of Interests when establish­ ing the legal framework forthe Insurance Industry. Policy­ holders expect from the Insurance supervisory authori­ ties that they use their influence In the Interest of con­ sumer protection to ensure the lowest possible premi­ ums, something which In most markets has more re­ cently already been brought about by Intensive competi­ tion. The original and supposedly more Important task of state supervision Is, however, to protect the policyholder against the collapse of Insurance companies. In this double duty performed by supervisory authorities the price control function is In certain cases over-empha­ sized and In so doing less attention Is paid to the longterm stability and financial strength of the companies.
The role of insurance becomes difficult when the state or public expects it to tuitii duties alien to the nature of in­ surance, such as in connection with damage caused by riots, during the course of which the state or police is not In a position to protect the property of its citizens. Such risks can indeed be covered, but special regulations are necessary in view of the almost total lack of reliable material on which to assess the risk, in order to protect the insurer from being overburdened (particularly as a result of anti-selection through tew policies being taken out tor particularly exposed risks) and the insureds from too heavy a premium load.
ing countries is of relatively little importance and links witti thie international reinsurers are also sougtit for rea­ sons of underwriting assistance and training aid. Tfie results of this study differ gratifyingly from the re­ peated attacks by representatives of other international organizations who make propaganda in the third world against professional reinsurers and praise extreme na­ tionally or regionally orientated reinsurance concepts. Even the best possible general conditions lead to un­ satisfactory results if common inferests are not placed in the foreground of relations between reinsurers and their clients. Genuine partnership presupposes long-term business relations. Unfortunately in recent times there has been a noticeable trend towards elements that prefer short-term advantages to a partnership over many years. The community of interest between insurer and reinsurer must not be invoked only in times of crisis. Therefore, when assessing business relations which are making a loss, the Swiss Re repeatedly asks the question whether a result which has been unsatisfactory for years is due to abuse of the partnership or to genuine problems of its clients. Should the latter apply, it will do everything in its power to provide the necessary aid.
Accident 157 155 156 188 167 Sickness 111 110 86 87 70 Third Party Liability 265 220 211 213 168
The engineering section of the Tech­ nical and Special Lines department performs services for insurance com­ panies in connection with the pre­ mium calculation for major projects, loss prevention, claims settlement and the training of experfs for fhe fol­ lowing types of risk: civil engineering projecfs of all kinds such as roads, tunnels, bridges, harbours, pipelines residential, office and indusfriai buildings machinery breakdown and business " inferrupfion computer and low voltage installations
Non-Life reinsurance showed a loss of Sw. frs. 48.8 mil­ lion as against a loss of Sw. frs. 3.1 million in the previous year. With tew exceptions (among them Switzerland), all major markets contributed to this pronounced worsening of results. The retrocessions of the subsidiary company in the United States produced a substantially lower loss than in previous years.
The profit shown by Haii reinsurance was slightly lower in the reporting year than in the previous year. Viewed over a longer period of time, the experience of this relatively small portfolio remains satisfactory.
In the not very important field of Burglary, Fidelity and allied lines, the growing worldwide crime trend is re­ flected in the worst result for years. Because of restrained underwriting practice the premium volume in these branches has remained unchanged for years.
The premium volume of General Third Party Liability re­ insurance showed an above average increase; the loss is less than in the two preceding years.
After the series of loss years in Marine reinsurance had been interrupted in 1978 by a year of profit, 1979 again produced a loss which was even higher than that of 1977. The trade press terms the reporting year as the worst one for Marine insurance in times of peace. The renewed deterioration is mainly due to the unfavourable trend in marine hull business, since the rate of total losses has in­ creased worldwide. The net premium rates have never­ theless fallen further. Thanks to the restrained underwrit­ ing practice in the case of aging fleets, supertankers and drilling platforms, the loss was not even higher. Cargo insurance continued to be marked by totally inadequate premium rates.
Premium growth in Engineering reinsurance has slowed down somewhat, although the profit over the previous year has more than doubled. This improvement of the re­ sult is due to the absence of major losses from the port­ folio of the Swiss Re and to the highly selective underwrit­ ing practice, particularly in those European industrial countries where premium rates have fallen to a level which is hardly justifiable any more.
In Aviation reinsurance the loss increased over the pre­ vious year. The premium volume continued to grow somewhat despite consequent pruning measures. Pre­ mium rates remain unsatisfactory, particularly in fleet business, and the year under report was hit by a higher than average loss burden. The market appears to be only slowly correcting itself with its persistent overcapacity.
Premium income in Nuclear reinsurance business in­ creased somewhat; a loss was registered for the first time, due to the incident at the Three Mile Island nuclear power station near Harrisburg (USA). The final loss amount is still not yet known.
The premium income in Credit and Surety reinsurance increased at a slightly above average rate, the result being considerably better than in the previous year; a loss from European countries is offset by a profit from overseas territories.
serves for outstanding disability benefits which had for­ merly been partly included in the Life assurance and an­ nuity reserve had to be strengthened. They were allo­ cated to the claims reserves thereby producing an excep­ tional increase in the reserves.
Life Reassurance in Force for Own Account at Year's End (excluding Annuities)
Over 90% of the premium income of Swiss Re, Zurich, originates abroad. The market presence of the company is secured in a number of ways.
The technical reserves rose in the year under report by Sw. frs. 431 million to Sw. frs. 4,969 million. Of this total, Sw. frs. 3,687 million was for non-Life reinsurance and Sw. frs. 1,282 million for Life reassurance. In the non-Life sector, the ratio of reserves to net premium volume re­
During the shortened reporting period for investments, comprising only the second half of 1979, the economic situation became more uncertain. To this have con­ tributed the earlier price increases for crude oil, the resultant stronger inflationary pressure and the intensi­ fied monetary restrictions necessitated in a number of countries as a counter-measure. The result was - above all in North America - a drastic increase in interest rates; this initiated a slowing down of economic activity which has subsequently begun to spread to Europe and Japan.
On the other hand, the - in some areas - massive rise in interest rates did not remain without effect on the bond markets. The market values of fixed-interest securities fell significantly, again reducing the appreciation that had arisen in previous years. Where price declines exceeded this appreciation, write-offs had to be carried out. Overall, however, the burden placed on the investment results by write-offs arising from interest-rafe changes remained within acceptable bounds.
The baiance-sheet vaiue of capital market investments and real estate of Sw. frs. 3,323 million exceeds that of the preceding year by Sw. frs. 207 million. Since the deprecia­ tion due to the conversion of foreign investments re­ mained modest as a consequence of the stabilized cur­ rency markets, this increase in the balance-sheet value essentially reflects the growth in new investments, which attained significant proportions despite the shortened re­ porting period.
The hidden surplus on capital market investments (ex­ cluding loans), i.e. the difference between book and market value of the individual securities, declined by Sw. frs. 28 million to 404 million. Expressed as a percentage of its balance-sheet value, this still amounts to 15.0% (previous year, 16.3%). Besides the already mentioned rise in interest rates which caused the hidden surplus on bonds to dwindle, the fact that bonds were constantly called for early redemption at prices above balancesheet value played a role in that hidden surplus was consequently realised and shown as profit.
The holdings rose by Sw. frs. 18 million to Sw. frs. 430 mil­ lion, essentially as the result of new and supplementary investments.
Net cash deposits with insurance companies 1,245 1,159 1,124 1,244 1,091
Investments in the amount of Sw. frs. 43 million (previous year, Sw. appointed by us in overseas territories.
Foreign currency rate fluctuations merely caused a debit of Sw. frs. 0.7 million to the annual result (compared with Sw. frs 15.4 million a year earlier), even though most of the 136 currencies In which reinsurance business Is carried out showed lower exchange rates. Flowever, the decline stayed largely within quite narrow limits and a few, but rather Important, European currencies even registered a slight Improvement against the Swiss franc.
Direct and Indirect depreciation outside the sector of In­ vestment and holdings Involved a debit of Sw. frs. 4.4 mil­ lion (previous year, Sw. frs. 7.6 million). This amount Is due, on the one hand, to the planned Increase of the re­ serve for outstanding balances In foreign currencies and, on the other, to costs for rebuilding and renovating own business property.
The last General Meeting elected Mr. Walter DIehl to the Board of Directors for the first time. At the subsequent statutory meeting the Board of Directors appointed Mr. DIehl as Its new Chairman and Mr. Max E. Elsenring as Honorary Chairman of the Company.
At this year's General Meeting the terms of office of Messrs. Hans Bühlmann, Max E. Elsenring, Marcel Odier and Hans Schaffner expire; all four gentlemen are stand­ ing for re-election.
Mr. Heinz B.VIscher wishes to relinquish his duties as Managing Director and Member of Top Management at the end of 1980. Fortunately, however, he Is prepared to continue as Deputy Chairman and keep his vast expe­ rience and great knowledge at the disposal of the Board of Directors, for which the Board Is extremely grateful.
The Board of Directors would also like to thank here all members of staff at home and abroad for their great ef­ forts during the business year.
Mr. Albert Albrecht, Deputy Manager, retired on 31st De­ cember, 1979, having reached retirement age. We should like to express our sincere gratitude to him for more than 30 years of service to our Company.
In accordance with the resolution of the last General Meeting, the functions of Auditors have been transferred for the next three years. I.e. until the 1982 General Meeting, to the Swiss Auditing and Fiduciary Company, Zurich.
The Board of Directors has made the following appoint­ ments with effect from 1st January, 1981: General Managers: Messrs. Paul E.Christen and PaulFrancis Nlqullle; Manager: Mr. Pierre-Claude Perrenoud; Deputy Managers: Messrs. Gottfried Bachmann, Peter P. HQgle and Willi Rüetschl;
Dividend Itttre Board ot Directors' proposal is accepteö, a dividend ot 8w. trs. too.- per stiare is to be paid. Ttrus, upon pre­ sentation ot Coupon No. 26 ot ttie registered and bearer stiares, a gross amount ot Sw. trs. 100.- or, attar deduc­ tion ot the Federal Withholding Tax ot 35%, Sw. trs. 65.will be paid.
Profitand Loss Account for the Business Year1979 embracing the reinsurance business for the calendar year 1979 and the other income and expenditure for the period from 1st July, 1979 to 31st December, 1979
Investment and otfier financial income (less interest on Life assurance and annuity fund and other technical reserves) 148,413,585 210,492,225
Capital (400,000 registered shares at Sw.frs.250.- nom.) ( 44,000 bearer shares at Sw.frs.250.- nom.) 111,000,000 111,000,000
The General Management: H. Cdermatt, H. Schönenberger P.E. Christen, P.-F. Niquille
Based on the results of our examination, we recommend that the present Annual Statement be approved. Further­ more, we confirm that the proposal of the Board of Direc­ tors regarding allocation of the profit compiles with the law and the Articles of Association.
Direct and indirect share of SwissRe Holding Ltd.: over 95 t between 55% and 95% O
The SwissRe Life insurance Company, which is wholly owned by SwissRe Holding Ltd., began business in De­ cember, 1979, and grants special covers in Lite reas­ surance. The business written up to year-end was con­ solidated. The Tudor Insurance Company, a subsidiary company ot SwissRe Holding (North America) inc., specializes in excess and surplus lines business. The mh Bausparkasse AG handles the sale ot building so­ ciety plans and considerably broadens the range ot prod­ ucts ottered by the field service ot our German insurance companies. The majority holding ot the mh Bauspar­ kasse AC is shared by two companies ot the Swiss Re Croup in Germany; minority shares are held equally by the Swiss Lite insurance and Pension Company and the "Winterthur" Swiss insurance Company. The Tudor insur­ ance Company and the mh Bausparkasse AC will be in­ cluded in the next Croup account, since they only began business after the closing date.
The consolidated net premiums ot the Croup increased in the reporting year by 11.4 % to Sw. trs. 6,492 million (pre­ vious year, 5.9%), ot which Sw. trs. 2,466 million or 38% was contributed by direct insurance.
The Croup's capital fund shown, including Croup profit, amounted to Sw. trs. 665 million (previous year, Sw. trs. 622 million).
in Life reassurance, growth was satisfactory and the result good. With a net amount ot business in force ot Sw. trs. 64,000 million, a slightly lower profit ot Sw. trs. 50 mil­ lion (previous year, Sw. trs. 53 million) was achieved.
Thanks to rising interest rates in leading markets and to additional investments, investment income rose signi­ ficantly in the year under report, although the higher in­ terest rates did also lead to considerable write-offs on fixed-interest securities, which substantially reduced the overall result. The investment income and management expenses shown in the Croup account have fallen as a result ot the change in the balance-sheet date ot the Swiss Re and the European General.
The underwriting profit ot the North American Reinsur­ ance Corporation, New York, has fallen considerably over that ot the previous year. Whereas the profit situation in Property insurance worsened, primarily as a conse­ quence ot an accumulation ot major losses, a further improvement was achieved in various Liability branches. Unabatingiy tough competition and the high inflation rate make it appear doubtful whether the generally gratifying development ot recent years will continue.
Following an unfavourable profit position in the previous year, the Canadian Reinsurance Company, Toronto, registered overall an improved result, although the un­ derwriting result remained at the unsatisfactory level ot the previous year. Inadequate premium rates, overcapa­ city and hard competition tor market shares continue to dominate the scene in Canadian non-Lite insurance.
ance Company, Toronto, and SwissRe Life Insurance Company, Delaware, founded in 1979, achieved gratify­ ing results. The North American Reassurance Company was not able to repeat the good result of the previous year which had been partly favoured by non-recurring trans­ actions. High financing requirements and an unfavour­ able loss experience in disability business impaired the underwriting result in the reporting year. The Canadian subsidiary company's disability business did not do as well as in the previous year.
The Bavarian Reinsurance Company Ltd., Munich, showed a higher underwriting loss than in the previous 'year, stemming mainly from the Liability, Fire and Marine branches. Since the development in the financial sector was also less favourable, the year's profit was reduced by DM 2 million.
The overall profit shown by the Swiss Reinsurance Com­ pany (UK) Ltd., London, is considerably below that of the previous year. This is mainly due to the bad result in the Liability branch. The London market continues to be marked by a pronounced glut of reinsurance capacity.
in spring 1980 it was decided to merge the Aachen-Leip­ ziger Versicherungs-AG, Aachen, with the Berlinische Feuer-Versicherungs-Anstait, Munich; the new company bears the name Vereinigte Aachen-Berlinische Versicherungs -AG, Munich.
The outgo of the Profit and Loss Account comprises mainly the interest of Sw. frs. 12.5 million (previous year, Sw. frs. 11.5 million) on the current-account credit granted by the Swiss Re, Zurich, taxes of Sw. frs. 3.4 million (pre­ vious year, Sw. frs. 3.2 million), depreciation and fluctua­ tions in stock exchange and foreign currency rates in the amount of Sw. frs. 7.6 million (previous year, Sw. frs. 5.6 million). On Group company holdings, no book value adjustments for foreign currency reasons were carried out unless the market values in Swiss francs were less than the balance-sheet values on the closing date.
The net profit was Sw. frs. 2.4 million (previous year, Sw. frs. 0.1 million) and - following the waiver of dividend in the previous year - enabled one of Sw. frs. 2 million to be again paid to Swiss Re, Zurich.
In certain major Insurance markets ttie Swiss Re is represented by its own subsidiary companies. In ttie United States it owns one Insurance and ttiree reinsurance eompanies. Deserving special mention are North American Reassurance Company, dealing with Life reassurance, and the North American Reinsurance Corpora­ tion operating in the field of non-Life reinsurance. Both companies have their head office in New York, the North American Reinsurance Corpora­ tion in particular having a relatively dense network of branch offices throughout the country.
1 San Francisco branch office of the North American Reinsurance Corporation 2 Management discussion at SwissRe Holding (North America) Inc., New York 3 Filing section at the head office of the North American Reassurance Company 4 New York, head office of the North American Reassurance Company, North American Reinsurance Corporation, SwissRe Advisers Inc. and SwIssRe Holding (North America) Inc.
Fluctuations in stock exctiange and foreign currency rates, depreciation 27 32 59 8
Interest on Life assurance and annuify fund 60 93 153 148
Investment and otfier financial income (less inferesf on Life and Sickness assurance and annuity fund and öftrer fecfrnical reserves) 313 88 401 440
All companies in which Swiss Re, Zurich, directly or in­ directly maintains a majority holding were included in the consolidation, with the exception of the Tudor Insurance Company and the mh Bausparkasse AG, both of which only began business after 31st December, 1979. The degree of holding with all Group companies is between 55% and 100%. Assets and liabilities and outgo and in­ come of the companies included in the consolidation are shown at 100%; the share applicable to minority share­ holders was deducted from the capital funds and profit and shown as separate items.
All figures from foreign Group companies were converted into Swiss francs using the average foreign currency rates as at 31st December, 1979. Of the foreign curren­ cies used in the Group accounts, the U.S. dollar, Cana­ dian dollar, Australian dollar, rand and pound sterling showed lower exchange rates than those on the previous closing date of 30th June, 1979, whereas the German mark was valued slightly higher (cf. table on page 18). The foreign currency loss of Sw. frs. 2.6 million (previous year, Sw. frs. 13.2 million) was, as before, debited to the con­ solidation reserve fund.
"Non-consolidated holdings" refers to holdings of less than 50% in insurance and reinsurance companies.
Paid-out profits for previous year - 45 - 45 Group profit 105 119
Fluctuations in stock excfiange and foreign currency rates, depreciation - 59* - 8 7 27 67
Gash in hand, postal bank account, bank balances 266 304 374 264 241
Swiss Reinsurance Company 50/60 Mythenquai, 8022 Zurich with branch offices in New York, Toronto and Melbourne
European General Reinsurance Company of Zurich 50/60 Mythenquai, 8022 Zurich with a branch office in Madrid
Swiss Reinsurance Company (UK) Ltd. 108 Cannon Street, London EC4N 6HE with a branch office in Hong Kong
Audatex Deutschland Datenverarbeitungs-GmbH Kuhlenstrasse 15, 4950 Minden mh Bausparkasse AG Wotanstrasse 88, 8000 Munich 19
North American Reassurance Company 245 Park Avenue, New York, N.Y. 10167 with branch offices in Chicago, Dallas and Lakewood (Colorado)
Canadian Reassurance Company 95 St. Clair Avenue West, Toronto M4V 1N6, Ontario with a branch office in Montreal
Tudor Insurance Company, Ramsey, N.H. 245 Park Avenue, New York, N.Y. 10167
SwissRe Holding (North America) Inc. 245 Park Avenue, New York, N.Y. 10167
SwissRe Advisers Ltd. 2306-2309 Connaught Centre, Hong Kong with offices in Tokyo and Manila: 2-9, Nihonbashi 3-chome, Chuo-ku Sansho Building, Tokyo 103 Doha Narcisa Building 8751 Paseo de Roxas, Makati, Metro Manila
Life Individual and Croup assurance: Endowment/Term assurance Annuity assurance Supplementary assurance (Accident, Disability, etc.) Catastrophe cover