Management expenses, fluctuations in stock exchange and foreign currency rates, taxes
Management expenses, fluctuations in stock exchange j and foreign currency rates, taxes 1 Profit applicable to minority shareholders
*Subject to approval by the General Meeting *Consolidated figures (of. notes on page 32)
Marcel Odier Coicgny, Partner in Lombard, Odier & Cie., Bankers, Geneva 1976
Hans Ulrich St. Gaii, Professor, St. Gall Graduate School of Economics, Business and Public Administration 1977 *Members of the Committee of Directors
Assistant Managers Gottfried Bachmann Christoph Blanc* Edmond Capt Enzo Delcö Erich Etter Heinz Fischer Leon Genoud Willy Honegger*
Edouard Burnens Richard R. Doerr Rolf Eckert* Fritz Ehrsam Walter Isler* Ernesto Jutzi* Hans R. Kaufmann Lavre D. Kirianoff* Albert Kunz
Walter Minoretti* Werner Müller Theodor Christ* Heinrich Pfefferle Egon J. Ritter* Robert Rüesch* Willi Rüetschi Rene Rüttimann*
Willy Küster Balthasar Mätzener* Jean-Claude Mayor Max Nabholz Samuel Patthey* Pierre-Claude Perrenoud* H. Conrad Rutishauser Arnold Saxer* Ctmar Schmidlin*
Peter Schuppli Edward Spargnapani Paul Strickler Max A. Tobler* Martin Trippel* Hans Wyler*
Gross premium income from non-Life reinsurance, when expressed in Swiss francs, rose to Sw. frs. 2,364 million, which corresponds to an increase of Sw. frs. 127 million or 5.7 °/o over the previous year. — The increase of premium volume was again re­ strained by the falling exchange rates of foreign, mainly European, currencies against the Swiss franc, although the effect was somewhat less pronounced than in previous years. Had foreign currency rates remained unchanged since the last balance-sheet date, there would have been an increase of gross premiums of Sw. frs. 374 million or 16.7 7o. — After deduction of the retrocessions within and outside the Swiss Re Group, the remaining net premiums amounted to Sw. frs. 1,822 million, i.e. Sw. frs. 91 mil­ lion or 5.3 °/o more than in the previous year.
Non-Life reinsurance — prior to deduction of man­ agement expenses — produced a ioss of Sw. frs. 11 million in the reporting year (previous year, profit of Sw. frs. 16.1 million). Whereas the business acquired by Swiss Re, Zurich was satisfactory, albeit less so than in the previous year, the business retroceded by the subsidiary reinsurance companies to the parent company produced a high overall loss. This stems mostly from American General Third Party Liability and Mofor business, which in recent years has been subject to exceptional claims inflation. Apart from high rates of inflation, the peculiarities of the Ameri­ can legal system have for some time contributed not inconsiderably to claims increases: lay juries grant large awards to claimants represented by lawyers whose fees are based on a percentage of the award; at times the award only comes many years after the loss event, the very occurrence of which is often unknown to the insurer for a long time. The premium adjustments approved by the insurance supervisory offices therefore constantly lag behind the loss burden.
The high losses in General Third Party Liability and Motor business sustained by the Group company in New York during the year under report are due largely to the strengthening of claims reserves of earlier years, which had proved to be inadequate in the light of the particular developments already outlined and in the course of the lengthy settlement period typical for major losses. American insurers have started relatively late explaining to the public the reasons for repeated premium increases and indicating the devastating consequences which a further escalation of the loss burden would have for the insured. There now appears to be growing recognition among the American public that, unless effective measures are taken, the current system, which only benefits lawyers and relatively few claimants, would sooner or later lead to Liability premiums rising beyond all measure and a general paralysis of initiative and readiness to run such risks. Already doctors are hesitant to perform hazard­ ous operations because they must take into account that a jury would equate lack of success with medical malpractice, which would commit them or their insurers to paying excessive compensation and vast sums of money for pain and suffering.
in tough international competition. Following the recent severe earthquakes and storms, this is again receiving more attention. — We are striving to get a much better grip on these problematic risks than was the case in the past.
Fire reinsurance closed in the reporting year with a profit, although the number of major fires has risen steeply, particularly in Europe. The largest fire claim paid by the Swiss Re during the year — arson in the "Grand Passage" department store, Geneva — to­ talled Sw. frs. 16 million gross.
Whilst Accident reinsurance closed with a profit. Workmen's Compensation business in the United States produced high losses, resulting in an overall loss for this branch.
Accident 167 : 160 165 150 147 Sickness 70 ? 71 71 72 68 Third Party Liability 168 159 159 178 161
Despite the further increase of medical costs, Sick­ ness reinsurance produced a modest profit.
Earthquake damage in Central America Motor reinsurance yielded a modest profit.
In Marine reinsurance, which closed in the year under report with a slight loss, the pronounced overcapacity on the insurance and reinsurance markets continues to weigh heavily upon premium rates. It was, however, possible to more than offset the premium shrinkage, caused by recession, in the traditional major markets, with new business from other countries. Of the overall business volume, the amount of unsatisfactory Marine Hull business was successfully reduced in favour of more balanced Cargo business.
In Engineering reinsurance, substantial premium growth was evidenced and, despite a further increase of repair costs and relatively high administrative expenditure, a gratifying profit was produced in the year under report. Particularly in the field of Construc­ tion All Risks business for large-scale projects, our engineers work in close conjunction with direct insurers from the risk assessment stage through to any possible loss settlement.
United States and France) in connection witti the revival of the economy.
In the monetary sector, continuation of the unrest which has existed for several years has led to an even higher valuation of the Swiss franc against practically all major foreign currencies.
Management expenses, which had increased in the previous year by Sw. frs. 11.1 million, only rose in the year under report by Sw. frs. 3.1 million to Sw. frs. 84.8 million. This amounts to a fail in the rate of increase from 16 % in the previous year to less than 4 %, due mainly to the slackening of the rate of inflation, but also to measures taken to stabilize the number of employees. Personnel costs at Head Office again represented 73 % of total management expenses.
In accordance with the credit approved by the General Meeting of Shareholders, donations of Sw. frs. 500,000 were made in the year under report. Approximately one quartier of this total amount was allotted to numerous institutions or projects in the field of education and research whilst about a further fifth was spent on each of the foilov/ing: foreign and domestic development aid, humanitarian aid (the Red Gross and catastrophe aid) and other charitable and welfare institutions (charities for the sick, disabled and blind and also for old age and juvenile care). The remaining sixteen percent was used for cultural pur­ poses and miscellaneous donations.
The account for fluctuations in stock exchange and foreign currency rates and depreciation closed with a profit of Sw. frs. 23.3 million (previous year, loss of Sw. frs. 20.2 million). On capital investments, writing down the book values to the lower market values caused an unrealized loss of Sw. frs. 54 million (previous year, Sw. frs. 39.3 mil­ lion). On the other hand, sales and switches in the securities portfolio realized net capital gains amount­ ing to Sw. frs. 55.3 million (previous year, Sw. frs. 34.7 million). The net credit to the Profit and Loss Account from market rate fluctuations on capital investments was Sw. frs. 1.3 million (previous year, debit of Sw. frs. 4.6 million). In contrast to the previous year, foreign currency rate tiuctuations had a positive effect on the Profit and Loss Account for the reporting year. The conversion of the balance-sheet figures at the beginning of the business year, on the basis of the average rates of exchange at the end of the business year, and above ail the exchange rate differences realized in foreign currency transactions, produced a profit of Sw. frs. 31.4 million (previous year, loss of Sw. frs. 13.9 mil­ lion). Although this result is in itself gratifying, it would be unwise to consider it as a change of trend and to expect an annually recurring source of profit from fluctuations in stock exchange and foreign cur­ rency rates. The depreciation from other causes involved a debit of Sw. frs. 9.4 million (previous year, Sw. frs. 1.7 mil­ lion).
Development aid 18.8 0/0^ Charities, Welfare 21.1 0/0'f Cultural institutions 13.0% 1 Miscellaneous donations 2.8 °/o
At this year's General Meeting, the terms of office of Messrs. Werner Abegg, Max E. Elsenring, Marcel Odier and Hans Schaffner expire. Having reached retirement age, Mr. Abegg is withdrawing from the Board; the other gentlemen are standing for re­ election.
Mr. Abegg was elected to the Board in 1964 and, since 1969, has also been a member of the Com­ mittee. His broad international experience in trade and commerce, together with his many other activ­ ities, particularly in the cultural sector, made Mr. Abegg a valuable advisor. We are extremely grateful to him for his many years of service.
In accordance with further resolutions of the Board of Directors, Mr. Hans Zollinger was appointed Mem­ ber of the Management in Advisory Capacity on 17th May, 1976 and, with effect from 1st January, 1977, Mr. Martin Trippel, Member of the Management in Advisory Capacity, will be authorized to sign as Deputy Manager.
The actuarial auditor, Mr. H. Bühlmann, has moreover confirmed in his report that the technical reserves of the Life Department at the end of 1975 were correctly calculated on the basis approved by the Swiss Federal Council.
embracing the reinsurance business for the calendar year 1975 and the other income and expenditure for the period from 1st July, 1975 to 30th June, 1976
Claims on Death and Maturity 138,263,977 14,536,370 ' ! 123,727,607 118,029,832
Fixed-interest Investments 1,852,315,024 1 1,822,399,314 Shares (excluding Holdings) 473,066,786 | 465,735,645 Real Estate i 283,658,936 1 282,549,631
Outstanding Claims for Own Account All Classes excl. Life (inci. Valuation of Current Annuity indemnities) Life Business
•.nr.: Capital (400,000 registered shares at Sw. frs. 250.— nom.) ( 44,000 bearer shares at Sw. frs. 250.— nom.)
To the General Meeting of the Shareholders of the Swiss Reinsurance Company, Zurich.
Major risk — Engineering; Erection of one of the world's largest single-shaft steam turbine groups (value approx. Sw. frs. 150 million) In an American nuclear power station. (Photo Brown Boveri)
Robert R. Gallagtier, President Paul E. Christen, President North American Reassurance Company North American Reinsurance Corporation
John Fl. Winter, General Manager Werner A. Strieker, Managing Director Australian Reinsurance Company Ltd. Swiss-South African Reinsurance Co. Ltd.
The scope of consolidation extended in last year's Annual Report was unchanged and comprises the Group companies listed in the chart on page 33. Additional notes on the Group accounts are to be found on page 32.
Both growth of and earnings from Life reassurance continued to develop satisfactorily. The financing of new business was considerable, particularly in the case of the European General Reinsurance Company of Zurich, which grants mainly in-Group cover. Because of this. Life reassurance produced a de­ creased profit of Sw. frs. 32 million (previous year, Sw. frs. 49 million).
Thanks to the major importance of Life and Sickness insurance, the companies belonging to the Vereinigte Versicherungsgruppe were able to increase their net premiums by 16% to DM 1,150 million. The net premiums of the Magdeburger Gruppe rose in the year under report by 2 % to DM 400 million. Whereas the companies handling personal insurance devel­ oped gratifyingly in both groups, the premium decline in industrial business and the general economic recession of non-Life insurance during the reporting year brought about not only a stagnation of income but also a clear decline of the underwriting result. An additional factor is that, in the current year, rates in Motor insurance have not been adjusted to the worse loss experience. Whilst the cost escalation is greatly decelerating, the loss burden is increasing more quickly than premium income so that a further profit decrease has to be expected in non-Life insurance.
The General Surety & Guarantee Ltd., Wilmslow, an English company wholly owned by SwissRe [-folding Ltd., developed very gratifyingly in terms of volume and profit during the year under report, despite difficult economic conditions in Great Britain.
Gross premiums and gross Life business in force, by continent (consolidated — in % of Group total)
SwissRe Holding Ltd. has been particularly suscep­ tible to the exchange rate fiuctuations of recent years, being as it is a holding company investing its assets for the most part in foreign currencies but compiling its balance sheet in Swiss francs. From 1973 to 1975 alone, foreign currency rates caused write-offs on the holding portfolio of about Sw. frs. 100 million. Whilst it was possible to offset the losses of the two previous years by non-recurring book profits in connection with the restructuring of the German group of insurance companies, the write-offs in the year under report were partly compensated by the revaluation of a share­ holding, which in the books was well below original cost. — The capitai structure of the company remained unchanged; however, the current account credit granted by the parent company was increased by Sw. frs. 25 million to Sw. frs. 284 million. The net profit was Sw. frs. 1.9 million (previous year, Sw. frs. 2 million) and, together with the profit carried forward, enabled an unchanged dividend payment to the Swiss Re, Zurich of Sw. frs. 2 million.
Premium Income (consolidated) in millions of francs ~1975^ 1 1974* 1973 1972 1971
Fire 1,378 1 1 1,293 1,048 978 974 Accident/Sickness 1,107 1 1 1,032 378 363 374 Third Party Liability/Motor 1,218 1,245 754 727 713 Marine 310 298 257 249 238 Other branches 522 478 384 364 393 Life 840 806 540 473 484 Gross Premiums 5,375 : ; 5,152 3,361 3,154 3,176 Retrocessions to companies outside Group 466 508 480 474 414 Net Premiums 1 O) o o>
Result from all Classes excl. Life — 60 — 5 — 65
Premium Income 2,800 1,301 4,101 3,875 Adjustment in Unearned Premiums — 188 — 60 — 248 — 216
Investment Income (less Interest on Life and Sickness Assurance and Annuity Fund and other Technical Reserves) , 264
All Olasses excl. Life (incl. Valuation of Ourrent Annuity Indemnities) 2,934
Profit applicable to Minority Shareholders 1 7 ! 8 8 Capital Funds applicable to Minority Shareholders 7 31 1 38 31 56 Special Reserve Fund 90 82 Reserve Fund for Oatastrophe Losses
The Group accounts are based on the published balance sheets of the individual Group companies as at 31st December, 1975, but for Swiss Re, Zurich and the European General of Zurich as at 30th June, 1976. The balance sheet of Bavarian Reinsurance Company Ltd. had not been published at the time of consolidation.
Investments — except for fixed-interest investments of both Life reassurance companies in North Amer­ ica— were valued at the lower of cost or market. The hidden surplus on the entire investment portfolio rose by Sw. frs. 232 million to Sw. frs. 561 million, thereby totalling 8.7 % of the present balance-sheet value (previous year, 5.5%).
Outgo and income from in-Group transactions and balances from transfers of capital and dividend pay­ ments among consolidated companies were elimi­ nated.
Swiss Reinsurance Company 50/60 Mythenquai, 8022 Zurich with offices in New York, Toronto and Melbourne
Swiss Reinsurance Company (U.K.) Ltd. 108 Cannon Street, London EC4N 6HE with an office in Hong Kong fylagdeburger Feuerversicherungs-Gesellschaft
General Surety & Guarantee Company Ltd. Beech Lane, Wilmslow, Cheshire, SK9 5ET, England
Canadian Reinsurance Company 95 St. Clair Avenue West, Toronto M4V 1N9, Ontario with an office in Montreal Far East, Latin America
Advisory Offices SwissRe Advisers (Singapore) Private Ltd. Die Building, 5 Shenton Way, Singapore 1
OF AT EC Mexico S.A. de C.V. Liverpool 88-401, Mexico 6 DP
Major risk — industrial Fire: Production piant (value approx. Sw. frs. 60 million) for styrene, primary product of the plastics industry, in a West German chemical works. (Photo BASF)