We have the honour to present to you the 102nd Annual Report and Statement of Accounts of the Company for the business year 1965/66.
Business Experience The result of our 102nd year of operations has been sub­ stantially affected by an accumulation of major losses and by the hurricane "Betsy" catastrophe in the Southern States of the USA in the autumn of 1965. For this reason the outcome in non-Life reinsurance represents a consider­ able decline from the previous year. On the other hand. Life reassurance concludes with a higher surplus. The in­ vestment income has again risen appreciably, while the account for depreciation and for fluctuations in foreign currencies and stock exchange rates approximately bal­ ances out; in the tax account, a reduced expenditure was incurred.
There has been little variation in regard to the geographic­ al sources of business written by us; against a slight de­ cline in premiums from overseas there was a correspond­ ing increase from European ceding companies. No signifi­ cant changes have occurred in the composition of our premium income by branches. Fuller details are given in the table on page 6, which also shows the growth of the premium income for own account to Sw. frs. 1,352 million in the year of report (previous year, Sw. frs. 1,272 million) For the Swiss Re Group the net premium income stands at Sw. frs. 1,832 million (previous year, Sw. frs. 1,719 million).
In American non-Life insurance we must repeatedly reckon with catastrophe losses. The year 1906 and the year under report have both shown what proportions earthquake and windstorm losses can assume when there is a combination of unfortunate circumstances. Understandably, these are precisely the risks against which the direct insurer seeks cover, and international reinsurers have accordingly faced up to their task of helping to meet this need for protection. Probably no other single loss has demonstrated the ne­ cessity for an international spread of risks more strikingly than the "Betsy" catastrophe; indeed, the fact that insurers and reinsurers were able to bear a total loss of approxi­ mately Sw. frs. 3,000 million is a good testimony to the insurance industry as a whole. As one of the leading re­ insurers in the United States we have been hit by this loss to an extent consistent with our position as Fire reinsurers in this market.
The conditions prevailing in international Marine insur­ ance are very unsatisfactory; for us too, therefore, this branch closes once again with a substantial loss. We have already referred earlier to the sources of abnormally high claims incurred in this line of business. These have not been eliminated at all and the adjustment of premiums and conditions is an urgent necessity. In various markets the direct insurers have taken the requisite measures, which should have some impact on the relevant results in the foreseeable future. In other territories, however, there is still a lack of willingness to place the business on a more reasonable basis. In the case of individual markets or in­ dividual companies where we considered the prospects of readjustment to be insufficient, we have found ourselves increasingly obliged to withdraw our cover.
In the Surety, Fidelity and Credit lines we were able to record a surplus.
In Life assurance the gross business in force grew from Sw. frs. 11,000 million to Sw. frs. 13,000 million. Rates of revenue remained stable; thanks to the increase in busi­ ness in force there was a gratifying rise in profits. The new business costs were, as usual, amortized in full and the hidden surplus of our Life portfolio rose correspond­ ingly.
Interest Income and Investments In comparison with the investment income of the previous year, converted to a 12-month basis, the interest in­ come of the year of report experienced an encouraging increase. The expanding volume of business and the re­ sultant growth in the technical reserves led to a renewed rise in the interest-bearing assets. In addition, in most of our important investment countries there was a further increase in interest rates as a result of the general tightness of the money markets. This gave rise to an appreciable im­ provement in the return from fixed-interest investments. Moreover, the New Holding, which administers the greater part of our holdings in European insurance companies, was able to pay not only an ordinary dividend of Sw. frs. 2.5 million (for 15 months) but also a bonus of the same amount.
The composition of our investments may be seen from the table on page 8.
Against the rising interest rates in the year of report there was a sharp decline in stock exchange quotations for bonds as well as for shares. The depreciation in our share port­ folio was largely absorbed, however, by the hidden sur­ plus built up during the years of rising share prices through strict application of the "cost or market" method of enter­ ing the quoted securities in our balance sheet. On the other hand, the exceptional fall in stock exchange quo­ tations led to substantial write-offs in the fixed-interest sector. In the year under review we were able to offset the total amount of depreciation against capital gains realized either from the normal redemption of bonds — which had been purchased below par or written down in earlier years — or, as the more important factor, from the sale of American shares at the very high prices existing until a few months ago. Because of the general fall in the market and the realized capital gains, the hidden surplus on quoted securities has necessarily declined; the decrease is approximately 25 % in relation to the year before. On the other hand, the amortization on fixed-interest invest­ ments has led to balance-sheet valuations which lie far below the redemption value and will accordingly produce considerable capital gains at the time of redemption.
There have been no significant changes in the valuation of the unquoted investments, which consist in the main of the shares of our six overseas subsidiary reinsurance companies and the shares of the New Holding. These shares too appear in the balance sheet on a similar valu­ ation basis to that of the quoted securities.
Of the assets of our Company shown overleaf, Sw. frs. 178,565,000 are held by Trustees appointed by us in over­ seas territories.
The account for Depreciation, Fluctuations in Foreign Cur­ rencies and Stock Exchange Rates almost balances out, showing a net outgo of only Sw. frs. 0.2 million. For the reasons already indicated, a modest profit on securities accrued from fluctuations in stock exchange rates. Owing to the devaluation of certain currencies in which our liabilities outweighed our assets, we likewise record a small balance in our favour under the heading of fluctuations in foreign currencies. These two items combined are al­ most sufficient to absorb the remaining amounts required for depreciation.
The term of office of Mr. E. HUrlimann, Honorary Chair­ man, and Mr. Max Petitpierre has expired by rotation. For reasons of age, Mr. Hiirlimann will not stand for re­ election. Mr. Petitpierre offers his services again and is im­ mediately eligible under the Articles of Association.
At the end of 1965 Mr. V. Tisi, Manager, and Mr. V. Philippi, Assistant Manager, entered retirement. Both gentle­ men have contributed materially to the interests of our Company and we are grateful to them for their many years of valuable service.
New Building On the 30th November, 1966 eighteen months will have passed since the construction of our new building was begun. During this time — thanks to the efforts of the con­ tractors and the favourable weather conditions — the piledriving and the concrete containing wall, as well as the subsequent excavation of 65,000 cubic metres of earth, have been successfully completed. — At the present mo­ ment encouraging progress is being made on the foun­ dation layer and on the basement levels. Initial construc­ tion work on the upper storeys should begin this Decem­ ber. Provided that nothing unexpected occurs, the shell construction will probably be finished in the autumn of 1967.
After an allocation of Sw. frs. 5 million from the Fund for Extraordinary Losses, which was augmented the year before in the knowledge of "Betsy" losses, the net profit for the year amounts to Sw. frs. 23.3 million as compared with Sw. frs. 43.5 million in the previous 18-month bus­ iness year. Including the balance brought forward of Sw. frs. 6.1 million, the amount at the disposal of the General Meeting is Sw. frs. 29.4 million. The Board of Directors proposes payment of an unchanged dividend of Sw. frs. 60.— per share, and the allocation of an increased contribution of Sw. frs. 2.5 million to the Staff Life As­ surance and Pension Fund (in view of the growth of its commitments with the rising cost of living) as well as Sw. frs. 300,000 to Donations and Sw. frs. 270,000 to Di­ rectors' Remuneration. Upon acceptance of these proposals by the General Meeting the balance carried forward would be Sw. frs. 2.3 million.
The formal proposal of the Board of Directors thus reads: Additional Dividend Donations to Charity
Sw. frs. Taking into consideration the allocation of Sw. frs. 5 million from the Fund for Extra­ ordinary Losses, the Net Profit for the year is
In addition the Board of Directors proposes that the remainder plus the balance brought forward from 1964/65 should be allocated as follows: Sw. frs.
Capital Funds After approval of the Annual Accounts for the business year 1965/66 the capital and free reserves of the Company amount to Sw. frs. 202,307,086.—.
The actuarial auditor, Mr. W. Saxer, has moreover con­ firmed in his report that the technical reserves of the Life department at the end of 1965 were correctly calculated on the basis approved by the Swiss Federal Council.
embracing the insurance business for the calendar year 1965 and the other income and expenditure for the period from the 1st July, 1965 to the 30th June, 1966
Ail Classes excl. Life Sw. frs. Sw. frs. Sw. frs. Sw. frs.
Zurich, 18th October, 1966 By order of the Board: M. E. Eisenring, Chairman
The securities, or the corresponding deposit certificates, were examined on the 13th and 14th July and on the 21st September, 1966 and found to be in order. A check carried out on the 21st September, 1966 showed that the cash in hand corresponded with the books.
We have pleasure in recommending that the Accounts as at the 30th June, 1966 be approved, that the Adminis­ tration of the Company be given full discharge in this respect with best thanks, and that the proposals of the Board regarding the distribution of the profit be accepted.
Premium Income The first table shows the total premiums actually produced by the Swiss Reinsurance Company and its subsidiaries; thus the inter-company exchange of business has not been taken into account. By deducting retrocessions to companies outside the Group, we obtain the net retained premiums of the Group, as indicated.
Capital and Free Reserves The consolidated capital and free reserves of the Swiss Re Group, after distribution of the profit, attained the figure of Sw. frs. 370 million at the 30th June, 1966, as against Sw. frs. 402 million at the end of the previous business year.
Underwriting Result * (inch Management Expenses) - 8,819,000 - 3,578,000 Investment Income, Net Realized Capital Gains, Taxes 4,761,000 5,222,000 * adjusted for changes in commission equity 1965 was a year of catastrophes for the Corporation; the result for the year was greatly influenced not only by hur­ ricane "Betsy" but once again by belated claims in the Third Party Liability lines. — The dividend was unchanged at S 1.5 million.
Underwriting Result * (incl. Management Expenses) Investment Income and Net Realized Capital Gains
The Company was able to show an unusually sharp rise in its gross premium income, the assumption of a Life portfolio being an important contributory factor. — The South African business proved generally profitable, whereas the results from foreign business were adverse. — The div­ idend remained unchanged at Rand 27,900.
Underwriting Result (incl. Management Expenses) - 650,000 - 111,000 Investment Income, Net Realized Capital Gains, and Taxes 165,000 151,000
At the beginning of 1965 the Life portfolio of our Austral­ ian Branch was transferred to our above subsidiary com­ pany, which helps to explain the considerable rise in net retained premium. The underwriting results in the nonLife branches were again slightly adverse, whilst on the Life side the pre-financing costs for the substantial volume of new business played a predominant part by producing a book deficit which could not be compensated by the net investment income. — No dividend was paid.
United States Branch 1910 All classes excl. Life 161 East 42nd Street, New York, N. Y. 10017 *
North American Reinsurance Corporation 1940 classes excl Life 161 East 42nd Street, New York, N. Y. 10017 * with Offices in Atlanta, Chicago and San Francisco
Canadian Reinsurance Company I953 250 University Avenue, Toronto 1, Ontario with an Office in Montreal
Canadian Reassurance Company I960 250 University Avenue, Toronto 1, Ontario with an Office in Montreal
Australian Reinsurance Company Ltd. 1962 All classes Embank House, 325 Collins Street, Melbourne C. 1 with Offices in Sydney and Hong Kong