November 1990 English translation of original German report; French, Italian and Spanish versions are also available.
Summary of Important Figures in millions of Swiss francs Swiss Re, Zurich 1989 1988
Other income and outgo Investment income Management expenses Rate fluctuations, depreciation, value adjustments
Dividend Total dividend per share per non-voting share 98 ^ Sw. frs. 45.-^ Sw. frs. 9.-''
Profit applicable to minority shareholders Consolidated net profit ' iConsolidated net profit per share Consolidated net profit per non-voting share 277 Sw.frs. 110.Sw. frs. 22.248 Sw. frs. 403.-"' Sw.frs. 80.-^
Spain, Portugal, Greece, Turkey, Japan, Asia, Middle East, Latin America, English- and Portuguese-speaking Africa H. Haag, Senior Executive Manager G. Holzel, Executive Manager Executive Managers G. Bachmann*, R Bieri, J. Steinrisser* Managers U.R. Käser, W.B. Kielholz, R Marcionelli, B. Porro, L.T. Rozzi, F. Renggli, R. Schilling Members of Management J. Hofmann, R. Maag*
Reinsurance technique, acquisition, special risks, insurance medicine J.-C. Mayor, Senior Executive Manager H. 0. Rutishauser, Executive Manager Executive Managers S. Courant, E. Deico, K. Küstahier*, F. Lock, J.-R. Vogei, K. Wettenschwiler Managers R. Boutin, Y. Burgener, A. Chuffart, J. Forster, H. Fuchs, E. Jean-Mairet, F. Joseph, M. Lies, A. Loye, H. Menzi, Ms S. Steiner Members of Management Ms N. Gitzelmann, M. L. Hefti*, H. Liithy, A. Perret
Capital market investments, real estate P. P. Hügle, Senior Executive Manager B. H. Letsch, Executive Manager Executive Managers A. Etecurtlns, E. Locher, B. Renin, J.-P. Preyer, F, E. Rohner Managers E, Caru, M. Gürber, F, Marty, M. RIngll
H. W. Kreis, Senior Executive Manager G. Schmldll, Executive Manager Executive Manager R. Held Managers A. Ammann, J, Brun, K, Münger, B. Niethammer Member of Management E. Franclick
Member of the Executive Committee and Group Management Executive Vice Rresldent Senior Vice President Vice-President Assistant Vice President
B. Laube, Senior Executive Manager E, FrancI, Executive Manager Managers H. Brechet, W, Engler, E, Hunold
Although insurers and reinsurers were hit in the business year, particularly in the Property lines, by a number of large losses involving industrial complexes and by several natu­ ral catastrophes (Hurricane Hugo in the Caribbean and southern United States and the San Francisco earth­ quake) and rising costs exerted pressure on results, there was no let-up in the intensity of competition as demon­ strated by the excessive concessions granted on premium rates and conditions of insurance and reinsurance. Com­ petition was still dictated by the dogged efforts of market participants not to lose established market shares. The ur­ gently needed adjustment of premiums to the rising loss burden was postponed, not least because of favourable conditions on the capital markets. This attitude, blatant in certain insurance markets and branches, produces the familiar cyclical trend in the underwriting results of insurers and especially of reinsurers. The extent of the risk of exag­ geration this practice involves is illustrated by the results of Airline insurance, where the worldwide premium income currently only covers just half of the loss burden.
In Europe especially, there were further mergers and take­ overs of insurance companies in the year under report. Their purpose is to secure an advantageous starting posi­ tion in the imminent single European insurance market. The restructuring and internationalization of hitherto na­ tional insurance markets are transforming the composition of reinsured portfolios, by branch of insurance and by geographic origin, and thus place special demands on reinsurers to control possible accumulation of losses. The cost savings brought about by mergers, rationalisation and the tapping of new distribution channels should lead to premium reductions in the deregulated markets in cer­ tain lines of Personal insurance. In industrial business which demands a type of handling (risk assessment, risk improvement, claims settlement) beyond the possibilities of many smaller companies, higher premiums are needed in view of the risks and costs involved.
The Swiss Re Group is well represented in the countries of the European Community by its insurance and reinsur­ ance companies. Structures and methods are being adapted to the changes taking place in the insurance mar-
kets on the supply and demand side. The two insurance groups in Germany, the "Magdeburger" and "Vereinte", are extending their business activity in cautious stages to the territory of the former East Germany. We only expect a re­ turn, however, after a development phase of several years.
A connection is assumed between the increasing fre­ quency and vehemence of windstorm, hailstorm and floods observed in recent years and climatic changes link­ ed with growing atmospheric pollution from emissions and the subsequent greenhouse effect. This is prompting in­ surers and reinsurers not only to raise their premiums for meteorological risks but also to reconsider traditional in­ surance concepts for natural hazards with a view to the fair distribution of such losses between policyholder, insurer and reinsurer.
The great dynamic force which currently characterizes the international economic and political scene and affects our worldwide activity in a multitude of ways placed great demands on our employees throughout the world. On be­ half of the Board of Directors, I should like to thank all members of staff for their loyalty, their hard work and their achievements. I am convinced that, even at a time of radi­ cal change, we shall together succeed in grasping the many opportunities our branch of the economy has to offer and in ensuring the sound development of the Swiss Re Group.
In the mid-1980s Swiss Re began expanding its services to the sectors of risk management (risk assessment and loss prevention), claims handling and insurance-related in­ formation services, and a number of service companies were acquired or established. The experience we have since gained in these activities now prompts us to develop the sectors of risk management and claims handling fur­ ther but to cut down our activity in the field of insurancerelated information services.
A roof over their heads is probabiy the oniy thing that the iord of the castle and the campers, the junk-dweiiers and the family clustered in mud huts ali have in common. The images shown here, from seventeen countries, iiiustrate different types of roofing; thatching, adobe and tiies, con­ crete and corrugated iron - the shapes of the roofs are as varied as the iifestyles. Fiat roofs or steep roofs for homes buiit on land or homes built in water on piies or man-made islands. The American suburb is as neat as a microchip; the urban iabyrinth of an Islamic town recails the seeds of a pomegranate. A buiiding can be the resuit of organic growth or synthetic dupiication, the architecture sponta­ neous or custom-designed. Some city iandscapes can be eloquent while others are content to be merely functional. A roof is the common denominator of this wide variety. For man who lives and works under a roof, it is more than just protection from the ravages of weather: it represents the security and comfort of a home.
Children's playground on the roof of a department store in Akishima, Japan
The 1989 business year is characterized by a satisfactory increase of premium income by 6.7% to Sw. frs. 4,734 mil­ lion; this contrasts with a substantial deterioration of the underwriting result in Non-Life reinsurance, where the un­ derwriting loss rose by Sw.frs. 73 million to Sw.frs. 253 million. In Life reinsurance the profit rose by Sw.frs. 2 mil­ lion to Sw.frs. 40 million.
Comprehensive programmes have been developed in re­ cent years for internationally active industrial enterprises to cover their insurance needs worldwide. For the rein­ surer this means a loss of transparency with regard to the geographic composition of his portfolio. This development is additionally compounded by the fact that, as a result of the freedom of services, insurers in the EC are able to write business across borders; It is absolutely essential for a reinsurer to be fully aware of his liabilities with regard to major individual risks and the accumulation of all commit­ ments in zones exposed to natural hazards (storm, flood, earthquake). The increasing frequency in recent years of windstorm, flooding caused by heavy rainfall and earth­ quake make it necessary for reinsurers to keep a constant check on their catastrophe commitments. The insurance premiums charged for the insurance of natural hazards are in many cases inadequate and have to be increased in view of the constantly rising catastrophe potential. Simi­ larly, the future distribution of the loss burden between in­ surers and reinsurers has to be reconsidered. Raising rein­ surance premiums alone is not enough to correct the rela­ tively high burden on reinsurance which calls for new cover concepts and innovative underwriting methods.
The premium income in Fire reinsurance rose by 3%. In this branch, the most important in terms of premium volume, it has for years had a flat growth curve, partly due to struc­ tural changes in reinsurance cessions. Increased reten­ tions and the transformation of predominantly propor­ tionally reinsured business to non-proportional methods offset premium growth from existing and new business connections. Unrelenting competition for market shares in the EC likewise has a braking effect on volume, for it causes premiums for major risks and international insur­ ance programmes to crumble. The premium collapse in American Fire insurance continued in the year under re­ port. - In striking contrast to the previous year, the gross result in 1989 was impaired by a considerable number of large losses involving individual risks and natural catas­ trophes. Insured losses totalling approx. Sw.frs. 10,000 million were caused by frost damage, earthquakes in the United States (California) and Australia and by Hurricane
In Hail reinsurance premium income increased. - Despite a rising loss burden in overseas territories, business closed with a modest profit.
In Accident reinsurance there was a further rise of pre­ mium income by 9%. The increases were especially marked in countries overseas. - Business took a disap­ pointing turn and closed with a loss for the first time in some years. Workers Compensation in Belgium, Great Britain and the United States was particularly negative.
Premium income in Sickness reinsurance increased by 36%. The actual rise is, however, only 13%, the remainder being due to foreign currency effects and a change in the accounting method. - This business, which usually oper­ ates with tight margins, showed a slight loss in the year under report.
The 8% increase in the premium volume of General Third Party Liability reinsurance is largely due to the effects of foreign currencies. Swiss Re still takes a reserved attitude to Liability business that includes risks in the United
States, since the changes hitherto implemented in the laws governing Product Liability and Professional Indem­ nity have not been effective enough. - The underwriting loss fell radically in the year under report, but is still too high. The result was once again burdened by runoff losses (late claims) in the United States while European business showed a favourable trend. It is to be expected that the runoff of business written in recent years will be positive and that the runoff losses in the United States from earlier years will successively decrease.
The increase of premium income in Motor reinsurance was 11%. Foreign currency effects, the increase of original pre­ miums and the growth of reinsurance premiums contribut­ ed in almost equal measure to this development. -The un­ derwriting loss rose slightly following the trend of recent years. In certain European countries the underwriting loss has risen to such an extent that business including attrib­ utable interest is hardly profitable any longer.
Fire, Business Interruption 1,391 1,346 Hail 43 38 Burglary, Fidelity and Allied Lines 98 91
Aviation 129 161 Nuciear Energy 18 21 Credit/Surety 298 244 mated clean-up costs alone of Sw.frs. 2,000 million. The damage caused by explosion and fire in a petrochemical plant in Texas amounted to a further Sw. frs. 2,000 million, which was partly covered by package policies in Marine reinsurance. Finally Flurricane Flugo, which caused devas­ tation in the Caribbean and parts of the southern United States, did not spare Marine insurance. Despite this accu­ mulation of major losses in the past two years there has been no noticeable let-up in competition, which was spurred on by persistent overcapacity.
Premium income in Engineering reinsurance was again in­ creased by over 10% as against the previous year, despite unremitting cut-throat competition. - The underwriting re­ sult was unable to keep pace with this development. The pressure on the profit margin that has existed for some time, and which the reinsurer too is unable to escape, led in the year under report to a pronounced drop in profit. The break-even result shown was primarily due to the sig­ nificantly worse trend in certain European markets and a higher claims burden from Machinery Guarantee busi­ ness.
In Aviation reinsurance premium income fell by 20%. The drop is due to a further reduction of original premiums by approx. 30% for airline companies, following a 50% reduc­ tion in the previous year. Aviation insurance is generally in a crisis at the moment because of irresponsible competi­ tion. - Consequently, the underwriting result has slid dras­ tically into the red. In airline business the worldwide pre­ mium income is only 40% of the average annual loss bur­ den. If conditions in this sector do not show any lasting im­ provement, Swiss Re will withdraw from parts of Aviation reinsurance business.
The premium volume in Credit and Surety reinsurance rose by 22%. Increases were registered in the Credit sec­ tor, mainly in Europe, and also in Surety business, primarily in the United States. - A gratifyingly positive result was once again achieved, to which U.S. Surety business also contributed. Certain Credit insurers have started - not least as a reaction to the excellent results in recent years to include certain political hazards in their export risk cov­ ers. So far political risks have rightly been covered by state insurers exclusively, as they are hazards which are not in­ surable by the private insurance industry. Swiss Re exer­ cises extreme caution in this sector.
The net amount of Life reinsurance business in force rose in the year under report by 18% to Sw.frs. 73,885 miiiion. The effects of foreign currencies piayed a reiativeiy minor roie; if exchange rates had remained the same the in­ crease wouid have been 19%. The growth of business in force is above aii a consequence of increased new busi­ ness which, at Sw. frs. 19,095 miiiion, is 31 % higher than in the previous year. The proportion of additional benefits such as accidentai death, disabiiity, sickness and longterm care insurances has risen in recent years at the ex­ pense of pure life risks.
The gross premiums grew by a iittie over 3% to Sw. frs. 565 million. At constant foreign exchange rates, the increase wouid have been even lower. The modest increase is attributabie to the fact that increasingly Swiss Re par­ ticipates oniy in the risk-based business, and not in the savings process.
There were few iarge iosses in the year under report. Aids did not affect the business result to any great extent. Al­ though the claims burden as a result of this iiiness was heavy in a number of African countries, the Life insurance business from these countries is a reiativeiy modest part of Swiss Re's portfolio. An increase in the burden cannot, however, be ruied out in the years to come. Swiss Re is therefore pursuing its policy of providing clients with infor­ mation on Aids and has strengthened the reserve for Aids claims in line with the potential risk.
The actuarial auditor, Mr. Hans-Uirich Gerber, Lausanne, has confirmed in his report that the technicai reserves of the Life reinsurance business at the end of 1989 were caiculated on the bases approved by the Swiss Federai Council.
The worldwide economic boom - the longest in post-war times - that has lasted since 1982 continued in the year under report. The sturdy growth of the world economy was sustained in 1989 by rising exports and consistently vigor­ ous demand for Investment. Europe's Importance on the world economic scene continued to grow. Improved oper­ ating conditions and the prospects of a further liberaliza­ tion of markets within the concept of EC 92 boosted growth on the continent of Europe. In contrast, the econo­ my lost some of Its dynamism in the United States, Canada and Great Britain. Overall, the real growth rates of the OECD countries were relatively high, reaching levels of 3 to 4%. The persistent worldwide boom intensified inflationary tendencies, and signs of an overheating economy ap­ peared in a number of countries. Central banks sought to counter this move by means of a restrictive monetary poli­ cy. Aimed at general stability, the monetary policy led to ris­ ing Interest rates In most countries.
The foreign exchange markets followed the monetary policy of the various central banks. In the first months of the year under report, attractive Interest rates helped the U.S dollar to rise In value. However, it again lost ground after a slight relaxation of monetary policy, and at the end of the year was only 2% above the previous year's level against the Swiss franc. The development of the EMS cur­ rencies was strikingly positive. Favoured by attractive interest rates and supported by growing confidence in the stability of the European Monetary System, they showed an improvement of 6 to 8% against the Swiss franc over the year. The pound sterling and the Japanese yen, how­ ever, both registered sharp drops of 10% against the Swiss franc. In the case of the pound, high interest rates were not enough to offset dwindling confidence in British economic policy and the desire for stable prices. The yen came under pressure because of the comparatively un­ attractive interest rates in Japan.
The balance-sheet value of capital market investments and reai estate of Sw.frs. 7,026 miiiion is Sw.frs. 218 miliion higher than that of the previous year. This increase is mainiy due to the higher valuation of aimost aii major in­ vestment currencies.
The main emphasis ot new investments iay on shares and real estate. In view of the woridwide rise in interest rates maturing bonds and ioans were generaily not reinvested and the average maturity of the bond portfoiio was short­ ened. The balance-sheet value of fixed-interest invest­ ments (bonds, ioans and fixed-interest securities with equity character) rose thanks to positive foreign exchange effects by Sw. frs. 28 million to Sw. frs. 5,302 miiiion. Share investments rose markediy as a resuit of both purchases and sales and also positive foreign currency effects, by Sw.frs. 182 million to Sw.frs. 734 miiiion. The real estate portfolio rose by Sw.frs. 8 million to Sw.frs. 990 million. Growth through new buiiding projects and the acquisition of existing property in Switzerland was practicaiiy offset by sales in Spain.
The first graphic on page 20 and the foiiowing table show the various Investment categories at balance-sheet values as a percentage of overall capital market investments and reai estate as well as in absolute figures. The second graphic on page 20 shows the breakdown by currency.
Holdings and ioans comprise holdings of Sw. frs. 93 miiiion (previous year, Sw. frs. 71 miiiion) and ioans to Group com­ panies of Sw. frs. 1,883 miiiion (previous year, Sw. frs. 1,818 miiiion). Overall these investments rose by Sw.frs. 87 mil­ lion to Sw.frs. 1,976 miiiion.
The structure of total investments at balance-sheet values is shown in the foiiowing table.
On 21 September 1990, the value of Swiss Re, Zurich, on the Zurich stock exchange was as follows: 1,420,000 registered shares at Sw.frs. 1,970 154,000 bearer shares at Sw.frs. 2,700 3,010,000 non-voting shares at Sw.frs. 469
At the beginning of 1990, the staff of Swiss Re, Zurich, numbered 1,315 employees (previous year, 1,279), 130 of them on a part-time basis. Women accounted for an un­ changed 30% of our work force. I.e. 395 employees. The International nature of our activity means that we have a relatively large number of foreign nationals on our staff. On 1 January 1990 this number was 177, or 13.5% of the total. The proportion of management and middle management showed little change at 32%. The average age of all em­ ployees was 40 years, while the average number of years of service was just under 10 years. The fluctuation rate (total number of departures as a percentage of the Initial number of employees) rose in the year under report to 9.9% (previous year, 8.7%).
' rate at year end 2 rate at 21 September 1990
Having reached retirement age, Mr Helmut F. Rudolf is re­ signing from the Board of Directors at the next General Meeting, after being associated with our company since 1951. He was appointed to the General Management in 1964 and elected to the Board of Directors in 1978. Mr Ru­ dolf has served Swiss Re extremely well and we are greatly indebted to him.
It will also be proposed to the forthcoming General Meet­ ing that Messrs U. Bärlocher, Managing Director of Sandoz Nutrition S.A., Berne, and Peter Forstmoser, Professor at the University of Zurich, be elected to the Board of Direc­ tors for the first time.
The 1989 business year comprises both reinsurance busi­ ness and general income and outgo for the period from 1 January to 31 December 1989.
Securities and holdings are in principle entered at acquisi­ tion cost or, if the stock exchange price is lower on the bal­ ance-sheet date, at the lower value. Non-quoted holdings are, where necessary, entered at the lower intrinsic value. The lower valuation is retained until disposal of the corre­ sponding securities.
Real estate is valued at acquisition cost, less the maximum depreciation permitted by the tax authorities.
These result from the total of the net premiums and the difference in the unearned premium reserve over the last reporting year. At Sw. frs. 3,323.1 million they were Sw. frs. 167.4 million, or 5.3% above the previous year's amount.
Gross premiums totalled Sw.frs. 564.7 million, Sw.frs. 13.8 million of which were for annuities purchased. After deduction of retrocession premiums of Sw.frs. 27.7 mil­ lion, the remaining net premiums amounted to Sw.frs. 537.0 million, corresponding to a rise of 3.8% over the pre­ vious year. Without the effect of foreign currency fluctua­ tions, net premiums would have risen by 2.9%.
cessionaires' share of this amount was Sw.frs. 2.5 million, so that Sw.frs. 108.6 million remained for own account.
Overall management expenses rose in the year under re­ port by Sw.frs. 14.0 million or 7.9% to Sw.frs. 191.2 million (previous year, rise of 15.8%). Personnel costs increased by 10.2% (previous year, 10.5%), while non-personnel costs rose by 5.4%.
Of the total amount of Sw.frs. 1,051.7 million, Sw.frs. 1,049.4 million was for bank balances. A substantial part of these funds is invested short-term in the principal curren­ cies for our business activity and is used to meet current obligations on time.
Of the total amount of current-account balances of Sw. frs. 932.3 million, Sw. frs. 761.0 million was for reinsurance and Sw. frs. 94.2 million for retrocession business; Sw. frs. 77.1 million concerned other balances. The decrease over the previous year was Sw.frs. 132.4 million.
The balance-sheet value of holdings rose by Sw.frs. 22.9 million to Sw.frs. 93.5 million. Loans to Group companies increased by Sw.frs. 64.4 million and amounted on the balance-sheet date to Sw.frs. 1,882.8 million.
Of the current account balances Sw. frs. 808.5 million was for reinsurance and Sw.frs. 65.3 million for retrocession business. Other liabilities totalled Sw.frs. 81.8 million, mainly comprising current accounts run for personnel wel­ fare funds and pool companies.
The bank balances included in this item in the previous year were paid back in full.
Cash deposits for retrocessions rose, as against the previ­ ous year, by Sw.frs. 4.7 million to Sw.frs. 38.0 million.
At the end of the previous year the capital funds shown amounted to Sw. frs. 1,948.8 million; this will rise as a result of the capital increase in 1989 and the proposed allocation of the profit, provided it is approved by the General Meet­ ing of Shareholders, to Sw. frs. 2,486.5 million. As a result of the capital increase the share capital has risen by Sw.frs. 81.0 million to Sw.frs. 192.0 million and the non­ voting share capital by Sw.frs. 17.2 million to Sw.frs. 60.2 million. The premium totalling Sw.frs. 362.8 million was allocated to the reserves shown.
The General Meeting to be held in Zurich on 23 November 1990 has at its disposal the following profit (of. Profit and Loss Account and Balance Sheet, pages 24/25): Sw.frs. Sw.frs.
If the proposal of the Board of Directors is accepted, divi­ dends of Sw.frs. 45 - per share (nominal value Sw.frs. 100.-) and Sw. frs. 9.- per non-voting share (nominal value Sw.frs. 20.-) will be paid.
As statutory auditors of your company we have examined the accounts for the year ended 31 December 1989 in accordance with the provisions of the law.
Current-account and bank balances Cash deposits Technical reserves Non-Life reinsurance Life reinsurance Transitory entries, value adjustments and other liabilities (incl. dividend) Capital Funds Shown (after distribution of profit)
Reed dwellings of the Madan on man-made Islands in the swamp of the Euphrates and Tigris, Iraq
Prime example of fortified constnjction: the town of Neuf-Brisach, Upper Alsace, France, with two octagonal fortifications
Sun City, surrounded by golf courses. In Arizona, USA, a town for senior citizens only
Masterpiece of medieval urban architecture: the old city of Beme, Switzerland
SwissRe Holding (North America) Inc., New York as per November 1990 * not consolidated companies • acquired or founded 1989/90
In the year under report, the following changes took place in the structure of the Swiss Re Group: the majority holding in Union Reinsurance Company, Zurich, acquired in November 1988, was increased through further pur­ chases to 99.9%. Englewood Reinsurance Company Limited, Hamilton (Bermuda), mentioned in the previous year's report, took up its activity in the year under report. In addition, SwissRe Holding (North America) inc.. New York, founded the Atlantic international Reinsurance Company Ltd., Bridgetown (Barbados), which operates in the field of financial covers. Finally, in November 1988, SWITZER­ LAND General Insurance Company, Zurich, established a subsidiary in Greece, SCHWEIZ Life, Athens. All these companies were included in the consolidated account for the first time in the year under report.
In the 1989 Group accounts, the consolidated gross pre­ miums amounted to Sw.frs. 14,697 million, an increase of 19.2% as against the previous year (increase of 18.1%). Part of this increase (5.4%) is due to the companies which are consolidated for the first time. Expressed in original currencies, the companies comprising the former scope of consolidation experienced growth of 9.2% (previous year, 2.9%). The consolidated net premiums rose by 19.1% to Sw.frs. 13,704 million, reinsurance business accounting for 54% and insurance for 46%.
The consolidated overall result rose by 11.7% to Sw.frs. 277 million (previous year, increase of 23.4%). There was varied development in the elements that constitute the Profit and Loss Account. In Non-Life insurance, the trend evident in previous years towards improved underwriting results did not persist; the underwriting loss rose by Sw.frs. 238 million to Sw.frs. 414 million (previous year, drop of Sw. frs. 46 million). In Life insurance, the profit rose by Sw.frs. 28 million to Sw.frs. 77 million after tiaving de­ clined in the previous year. Overall, the underwriting loss amounted to Sw.frs. 337 million (previous year, Sw.frs. 127 million). The income from capital investments rose by Sw.frs. 316 million to Sw.frs. 1,649 million (previous year, increase ofSw. frs. 217 million). Realized capital gains rose more steeply than write-offs so that the loss on financial operations fell to Sw.frs. 41 million (previous year, Sw.frs.
53 million). Management expenses rose while taxes fell. The Group's capital funds shown (including Group profit) amounted at the end of 1989 to Sw.frs. 2,798 million (previous year, Sw.frs. 2,221 million).
The European Genera/ Reinsurance Company of Zurich showed in Non-Life reinsurance an increase of gross pre­ miums by 1.8% to Sw. frs. 635.5 million following a drop of 14.8% in the previous year because of an exceptional transaction in 1987. The underwriting loss again rose. - In Life reinsurance the gross amount of business in force in­ creased to Sw.frs. 57,800 million (previous year, Sw.frs. 49,500 million) and the underwriting result is again posi­ tive. The result from general income and outgo improved. The net profit was Sw. frs. 2.4 million as in the previous year and is again to be used to strengthen the reserves.
The gross premiums of the Union Reinsurance Company, Zurich, rose in Non-Life reinsurance by 24.7% to Sw.frs. 577.7 million, although half of this increase is due to the postponement of the closing date. The underwriting result deteriorated primarily as a result of more large losses. - In Life reinsurance the gross amount of business in force in­ creased by 12.9% to Sw.frs. 8,900 million and the under­ writing profit is higher than in the previous year. - Invest­
The gross premiums of the Canadian Reinsurance Com­ pany, Toronto, rose by 41.2% to Can. $ 152.9 million as a result of sizable financial reinsurance treaties. The turnover of other business remained on balance at the previous year's level, income in Property insurance increasing while premiums in Liability business declined. The underwriting result worsened in accordance with the difficult market conditions. The experience of Motor business was parti­ cularly unsatisfactory. Profits from the other branches were without exception lower than in the previous year. Substantially higher capital gains led to a rise in financial income, although investment income fell. The published result amounted to Can. $ 8.9 million (previous year. Can. $ 6.8 million) from which the company paid a dividend of Can.$ 0.8 million (previous year, Can.$ 1.0 million).
surance rose by 11.7% to Rand 210.0 million. The favour­ able claims experience in almost all branches and the lack of catastrophe losses led to an underwriting profit. - The gross amount of business in force in Life reinsurance rose by 23.3% to Rand 14,300 million. The underwriting result was impaired by severai major individual losses and by a further strengthening of the Aids reserve. - Investment in­ come again rose. The published profit amounted to Rand 17.1 million (previous year. Rand 11.1 million), from which a dividend, increased from Rand 5.0 million to Rand 7.0 mil­ lion, was paid.
The Englewood Reinsuranoe Company Limited, Hamilton, Bermuda, was established in March 1989 to reinsure cap­ tive insurance companies. In its first year, the company, which primarily operates in Liability business, achieved gross premium income of US$ 7.5 million. The profit shown of LIS$ 0.6 million was used to strengthen the re­ serves.
Despite divergent tendencies in the various companies, the underwriting result In Non-Life insurance is on balance unchanged from the previous year, while the profit In Life Insurance Is higher. The steep Increase of investment in­ come was aided by the full Inclusion of Lloyd Adrlatico for the first time and changes in the recording of consolidated figures. The write-off requirement increased and led to a negative balance from realized capital gains and deprecia­ tion. Management expenses rose while taxes fell. Overall, the Group profit of insurance companies Increased to Sw.frs. 76 million (previous year, Sw.frs. 40 million).
The SWITZERLAND General Insurance Company Limited, Zurich, Increased Its gross premiums by 9.6% to Sw.frs. 966.3 million. Of this amount, 66.9% was for insurance and 33.1% for active reinsurance. Overall, the company achieved a profit for the year of Sw. frs. 8.3 million (previous year, Sw.frs. 8.2 million) and paid an unchanged dividend of Sw.frs. 3.5 million.
The Magdeburger Versicherungsgruppe, Hanover, report­ ed an increase of its consolidated gross premiums, includ­ ing the non-recurring premiums from the reserve for bo­ nuses to policyholders, by 1.6% to DM 1,058.0 million. The gross premiums of the Magdeburger Versicherung AG of DM 742.5 million remained slightly below the previous year's level of DM 747.4 million, as a result of the continued pruning of the portfolio. The underwriting loss again rose somewhat and amounted to DM 2.7 million (as against DM 0.6 million in the previous year and DM 10.3 million in 1987). In contrast, the profit for the year practically doubled from DM 11.5 million to DM 21.1 million as a result of higher financial Income. An unchanged dividend of DM 5.7 million and a bonus of DM 15.3 million (previous year, DM 7.7 million) were paid. - At the Magdeburger Lebens­ versicherung AG the insurance business in force rose by 10.5% to DM 8,400 million. Following the allocation of DM 85.0 million to the reserve for bonuses to policyholders, an Increase of 7.9% as against the previous year, an un­ changed profit for the year remained of DM 0.7 million. This was used to make a contribution of DM 0.25 million to the outstanding paid-up capital as well as to pay a dividend of DM 0.45 million (previous year, DM 0.42 million).
The "Schweiz Allgemeine» Finanz Holding AG, Munich, complements with its subsidiary companies the range provided by the "Magdeburger" and the "Vereinte" groups by offering building society and bank products; it also maintains companies operating In direct marketing and segmented sales systems. - At the end of the year under report, the mh Bausparkasse AG, Munich, had a portfolio of savings contracts totalling DM 7,983.0 million, a growth of 19.7%. The year's profit doubled to DM 3.5 million (previ­ ous year, DM 1.7 million). - Whereas the balance-sheet amount of the Augsburger Aktienbank AG, Augsburg, dropped by 13.2% to DM 423.8 million as a result of the dropping of a business sector, the profit for the year was held at the previous year's level of DM 4.8 million.
The Fidelity and Deposit Company of Maryland, Balti­ more, in which the "Zurich" Insurance Company and Swiss Re each have a 50% shareholding. Is not consoli­ dated In the Group accounts. In its centenary business year, the company only narrowly failed to reach the previ­ ous year's record level of LIS$ 307.8 million with a gross premium volume of US$ 306.5 million. The slight drop is mainly due to the difficult market conditions In commercial business, as also reflected in the slightly worse under-
writing result. In addition, events in U.S. savings institu­ tions and mortgage banks have also impaired the result of Fidelity business. In the year under report the company made substantial investment in new information systems in order to safeguard its advantage over competitors. Investment income, especially capital gains, developed satisfactorily in line with market conditions. The profit shown reached US$ 14.4 million (previous year, US$ 32.2 million). The company paid an unchanged dividend of US$ 14.0 million.
As a result, Swiss Re, Zurich has bought or founded vari­ ous service companies in recent years, which achieved a total turnover of Sw.frs. 227 million (previous year, Sw.frs. 195 million) in the year under report. The companies have, however, not been included in the consolidation of the Swiss Re Group in view of the special nature of the branch and the relatively moderate size of this operation. This practice is to be retained in future.
The SwissRe Holding Limited comprises in principle all majority holdings together with a number of minority hol­ dings in the insurance and reinsurance sector.
The main changes in the holding portfolio concern in­ creases to the majority holdings acquired in 1988. Pur­ chases in the year under report brought the share of the Union Reinsurance Company, Zurich, to 99.9% and the share in the voting share capital of Lloyd Adriatico, S.p.A, Trieste, to 59.5%. Through these and further transactions of lesser significance the funds invested in company holdings increased further. The loan granted by Swiss Re again rose in the year under report and amounts to Sw. frs. 1,638.7 million (previous year, Sw.frs. 1,504.0 million).
Undenwriting result from Non-Life insurance - 422 8 - 414 - 176
Gross premiums Net premiums Adjustment in policy and annuity valuations Interest on Life insurance and annuity fund Commissions and profit commissions Claims incurred incl. adjustment in outstanding claims reserve Surrenders
Taxes Group company profit applicable to minority shareholders * The underwriting resuit figures of reinsurance and insurance companies correspond to the net values in accordance with commercial law (including mutual cessions).
** The figures in this column do not always amount to the total of the figures in the two preceding columns as figures for holdings and other companies are also included.
Technical reserves Non-Life insurance 12,999 8,749 21,748 18,448 Life insurance 4,166 6,194 10,360 8,631
Profit applicable to minority shareholders _ 29 30 25 Capital funds applicable to minority shareholders 1 183 197 191
The scope of consolidation includes all domestic and for­ eign insurance and reinsurance companies in which Swiss Re, Zurich, directly or indirectly maintains a holding of more than 50% in the voting share capital. Each individual item of the profit and loss accounts and the balance sheets of these companies is shown at 100%. The shares of the capital funds and profit applicable to minority share­ holders are shown as separate items in the consolidated balance sheet and profit and loss account.
As in previous years, advisory and service companies are not consolidated in view of their insignificant effect on the Group's funds and income or because of the nature of their activity. The mh Bausparkasse AG, Munich, and the «Schweiz Allgemeine» Finanz-Vertriebs-Service GmbH, Munich, are, however, included in the consolidation.
Included in the consolidation for the first time is the Union Reinsurance Company, Zurich, acquired by SwissRe Holding in November 1988; at the start of the year under report, this was expanded to a 99.9% holding. Also new to the consolidated account are the companies founded in the year under report, Englewood Reinsurance Company Limited, Hamilton (Bermuda), and Atlantic International Reinsurance Company Ltd., Bridgetown (Barbados), as well as the SCHWEIZ Life, Athens, founded in 1988.
The published annual accounts of the various Group com­ panies must be compiled in the relevant local currencies and in accordance with local accounting regulations. For the consolidation, however, uniform valuation rules are ap­ plied.
Real estate is entered at the balance-sheet values of the individual Group companies: these correspond as a rule to the acquisition cost less the maximum depreciation per­ mitted by the tax authorities.
The technical reserves are calculated in principle accord­ ing to the provisions of the supervisory authorities appli­ cable to individual Group companies. However, in the case of the North American Reinsurance Corporation the re­ serves are included in the Group accounts at the amount
The claims incurred comprise claims payments and the adjustment in the outstanding claims reserve. In the year under report this outgo item for own account rose by Sw.frs. 1,367 million to Sw.frs. 8,721 million. Of this amount, Sw. frs. 4,738 million was for reinsurance compa­ nies and Sw.frs. 3,983 million for insurance companies.
Investment income also includes dividend payments of non-consolidated holdings in the amount of Sw. frs. 55 mil­ lion (previous year, Sw.frs. 45 million).
These items refer mainly to components of the profit and loss account of the holding companies and of the mh Bau­ sparkasse AG which, in view of their special nature, are not included under insurance and reinsurance.
The consolidated balance-sheet values of capital invest­ ments (incl. non-consolidated holdings) increased overall by 14.7%, or Sw.frs. 4,200 million, to Sw.frs. 32,751 mil­ lion. The rise amounted, in the case of fixed-interest invest­ ments, to 14.0% (previous year, 19.9%), in the case of shares to 39.4% (previous year, 11.3%) and real estate to 13.3% (previous year, 18.7%). The decrease recorded un­ der non-consolidated holdings is due to sales and to the consolidation of the Union Reinsurance Company for the first time. The item "Non-consolidated holdings" contains holdings of 50 % or less in insurance and reinsurance com­ panies as well as in service companies.
Non-Life Insurance Unearned premiums 1,768 4,649 6,417 5,217 Outstanding claims reserve 11,221 3,649 14,870 12,666 Reserve for profit commission 10 451 461 565 in % of net premiums earned 220.9% 179.7% 202.2% 198.6%
Life Insurance Life insurance and annuity fund 3,579 5,126 8,705 7,257 Outstanding claims reserve 581 43 624 509 Reserve for profit commission 6 1,025 1,031 865
In % of Life Insurance in force, net 1.8% 25.8% 4.1% 4.3%
The consolidation reserve fund results from the difference between the capital funds shown of Group companies and the corresponding book values applied by SwissRe Hold­ ing Limited and Swiss Re, Zurich. In the year under report the consolidation reserve fund rose by Sw.frs. 3 million only to Sw. frs. 111 million (previous year, fall of Sw. frs. 48 million), despite generally higher conversion rates, be­ cause of the inclusion of new Group companies.
The capital funds shown in the consolidated balance sheet (sum of share and non-voting share capital, reserves shown, consolidation reserve fund and Group profit) cor­ respond to the book value of the funds invested in the en­ tire Group by shareholders and non-voting shareholders of Swiss Re, Zurich. In the year under report Group capital funds rose by Sw.frs. 577 million to Sw.frs. 2,798 million. Of this growth, Sw. frs. 461 million was due to the capital in­ crease carried out by Swiss Re, Zurich, at the end of 1989.
Capital funds at end of previous year 2,221 2,151 Effects of exchange rate fluctuations on opening balance-sheet figures 45 93 Raid-out profits for previous year - 85 - 78 Increase of Swiss Re's share and non-voting share capital 461 -
European General Reinsurance Company of Zurich Sw.frs. 100 86,113 2,702,792 879,838
Swiss Reinsurance Company (UK) Limited ^ e 100 36,959 280,707 125,704
Holdings Currency Holding funds shown Balance-sheet amount Gross premiums 1 SwissRe Holding Limited Sw. frs. 100 160,303 1,828,359 -
Switzerland Swiss Reinsurance Company Mythenquai 50/60, CH-8022 Zurich with branch offices in Melbourne, New York und Toronto
North American Reinsurance Corporation 237 Park Avenue, New York, NY 10017 with branch offices in Atlanta, Boston, Chicago, Dallas, Los Angeles, Philadelphia and San Francisco
Canadian Reinsurance Company 99 Yorkville Avenue, Suite 300 Toronto, Cntario M5R3K5 with branch offices in Montreal and Vancouver
Barbados Atlantic International Reinsurance Company Limited c/o Continental Risk Services (Barbados), Ltd. IGB Building Upper Roebuck Street Bridgetown, Barbados
Bermuda Englewood Reinsurance Company Limited Belvedere Building, Pitts Bay Road Hamilton HM CX, Bermuda
North American International Reinsurance Company Limited Clarendon House, Church Street Hamilton HM DX, Bermuda with a branch office in Westport, CT (USA)
Argentina Sociedad Anäiisis de Riesgos S.A. Aisina 756, Piso 6, 1087 Buenos Aires
Mexico OFATEC (Mexico) S.A. de CV. Viena 71, Piso 5 Coi. dei Carmen Coyoacän 04100 Mexico, D.F.
Hong Kong SwissRe Advisers Limited 2902 Great Eagle Centre 23 Flarbour Road, Hong Kong
Japan Swiss Reinsurance Company Representative Office Tokyo Sansfio Building 7 F, 2-9 Nihonbasfil 3-chome, Chuo-ku, Tokyo 103
United States SwissRe Holding (North America) Inc. 237 Park Avenue, New York, NY 10017
Germany «Schweiz Allgemeine» Finanz Holding AG Leopoidstrasse 4, D-W-8000 Munich 40
Magdeburger Versicherungsgruppe Kirchhorster Strasse 2 D-W-3000 Hanover 51 mh Bausparkasse AG Wotanstrasse 88 D-W-8000 Munich 19
SCHWEIZ Compahia Anönima Espahola de Seguros y Reaseguros Via Augusta 153-157 E-08021 Barcelona
CAPSCO/PALLM Group Contact address USA CPS CAPSCO PALLM Systems, Inc. 4040 VIncennes Circle Indianapolls, IN 46268
CAPSCO Software Canada Ltd. 5925 Airport Road Airway Centre Business Park MIsslssauga, Ontario L4V 1W1
Insurance Software and Systems Ltd. 0vre Slottsgate 8 N-0157 Oslo 1
Insurance Software and Systems, Inc. 120 White Plains Road Tarrytown, NY 10591 (USA)
Gay & Taylor, Inc. 3334 Healy Drive WInston-Salem, NO 27103 (USA)
Surety Support Services, Inc. 1333 Butterfield Road, Suite 130 Downers Grove, IL 60515 (USA)
Cession: Insurance that is reinsured; passing on of the insurer's ^ risks to the reinsurer against payment of a premium.
- Claims handling: The work in connection with the in­ vestigation, settlement and payment of claims from the time of their occurrence until settlement.
- Earned premium: Part of the premium (including -» unearned premium of the previous year) applicable to the expired part of a reinsurance period continuing after the balance-sheet date (cf. unearned premium).
- Gross premium: Insurance premium before deduction of the ceded premium (-^ cession) or reinsurance pre­ mium before deduction of the retroceded premium (-^ retrocession).
- Reinsurance premium: Premium paid to the ̂ rein­ surer by the ^ insurer for the risk accepted.
- Facultative reinsurance: Reinsurance of the ̂ insur­ er's ^ risks on an individual basis.
- Non-proportional reinsurance (also excess of loss reinsurance): Form of reinsurance in which the ̂ rein­ surer assumes that part of the insurer's losses that ex­ ceed a certain amount against payment of a specially calculated ^ premium.
- Proportional reinsurance: Form of reinsurance in which the ̂ premiums and losses of the ̂ insurer are shared proportionally by the ̂ insurer and ̂ reinsurer.
- Surpius reinsurance: Form of ̂ proportional reinsur­ ance, in which risks are reinsured over a specified amount.
- Treaty reinsurance: Participation of the ̂ reinsurer in certain sections of the insurer's business as agreed by treaty.
Retention: The amount of a ^ risk which the ^ insurer does not reinsure but keeps for own account.
- Risk spread: Stabilization of the claims experience by as large a number of similar risks as possible.
- Death and Maturity Benefits: Life insurance in which the benefits take the form of a contractually determined amount payable upon death or on survival to a specified age (cf. Annuity insurance).