Investment and other financial income 1,301 674 2,101 2,062 Other income and outgo, taxes - 504 - 371 - 813 - 745 Profit applicable to minority shareholders - 71 73 - 49
Total investments 57,470 51,371 Technical reserves 49,928 46.180 Group capital funds shown 4,857 3,945 Published hidden surplus after tax 3,603 2,145 1 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. 2 based on capital entitled to dividends 3 CHF 186 million of the Group profit is income not attributable to reinsurance or insurance activity (eg service and holding companies) and from the sale of holdings
(in particular Fidelity and Deposit, Baltimore) 4 adjusted (split 1:5 at end of 1993)
Total dividend 1421 117 per share CHF 10.501 CHF9.602 1 subject to the resolutions of the General Meeting 2 adjusted (split 1:5 at end of 1993)
Christoph Dorschel, Peter Frey, Urs Winter, Wolfgang Gemünd (from 1 April 1994)
U. Bremi, Chairman R. E. Gut, U, Bärlocher, T. W. Bechtler, H. Bühlmann, P. Forstmoser, K. Furgler, B. G. F, Flentsch
L. Muehlemann, Group Chief Executive Officer C. Dorschei, R Frey, W, Gemünd, U. Winter
Financial Planning/Investments, Group Accounting, Corporate Finance, Law and Taxes, Share Register
Members of Senior Management C. Blanc, J. B. R. Lieberman, R. Winzeler
Strategy and Structure, Fluman Resources Management, Personnel Support, Informatics, Business Research, Communication, General Management Support R. Held J. Stoll
Latin America, Spain, Portugal G. Holzel B. Porro Members of Senior Management M. Liés, P. Marcionelli, L. Pozzi, F. Renggli H. Sigrist, A. Solari, J. Wind
Marine E. Stalder W. Meliert Members of Senior Management M.A. Bloesch, F. Stabinger
USA, UK, Financial Reinsurance, Special Risks, ER B. Heyer R. Hunziker Members of Senior Management G. Ayers, M. Bradley, R. Dold, Y. Fok, P Hagnauer, E. Jean-Mairet
Life H. Lüthy J.-P Vogel, S. Courant Members of Senior Management L. Bertolotti, P. Bland, R. Boutin, Y Burgener, A. Chuffart, E, Delcô, M. Fessel, H. Fuchs, P, King, H. Kramreiter, A. Loye, H. Menzi, W.A. Müller, A. Perret, F. Peter, H. Schellenberg, S. Steiner, B. Walther, K. Wettenschwiler
Product Coordination Property/Casualty F. Eugster (Casualty) H. Stettler (Property) R. Martignier (Private client business) E. Baumann (Industrial business) Members of Senior Management M. Albers-Schönberg, W. Meier, N, Müntener, P. Schranz, J. Spühler
Management Services Economic Studies, Information, Organization; Public Affairs, Public Relations, Translation and Terminology
Members of Senior Management T. Hess, M. Klingler, H. von Aesch
Information Services G. Schmidli J. Brun Members of Senior Management A. Ammann, M. Bienz, H. Buff, F. Hauser, T. Jäggi, B. Niethammer
Accounting E. Franci H. Brechot, W. Engler Members of Senior Management M. Benz, R. Böschung, E. Hunold
This year’s annual report will inform you about the 1993 business year.
The report will also summarise the decisions made in Sep­ tember 1994 regarding the Swiss Re Group’s new Group strategy and provide you with an outlook on the 1994 busi­ ness year.
Our Group with worldwide operations can look back upon an overall successful year. The consolidated gross pre­ mium volume rose by 8.3% to CHF 23,749 million. Group profit increased by 15.7% to CHF 325 million. Parallel to improved income, the Group’s financial strength was also reinforced substantially. Thus Group capital funds shown advanced by 23.1% to CHF 4,857 million. A significant improvement of the technical result with maintained income on investments raised Swiss Re, Zurich’s profit by 25.5% to CHF235 million. In view of this gratifying overall result, the Board of Directors proposes to the General Meeting an increase in the gross dividend from CHF 9.60 to CHF 10.50 per share.
Insurance result: Progress in Germany, Italy and Switzer­ land, severe losses in Spain
- Risk intensity is advancing for many different reasons and together with increasing loss frequencies will fur­ ther raise worldwide demand for reinsurance capacity.
- The formation of new insurance carriers - particularly Life insurance companies - and the anticipated priva­ tization of insurance companies in several countries create new or additional demand for reinsurance.
- Finally, new reinsurance products - for example in Financial and Life reinsurance - and the development of derivative products also open up new opportunities.
For our insurance operations, however, we have reached the conclusion that our insurance companies will have better development opportunities in other groups, oper­ ating primarily in insurance business, than in the Swiss Re Group. Accordingly, we have decided to divest our Euro­ pean insurance subsidiaries. With effect from 1 January 1995, the Allianz Group will acquire Swiss Re's majority shareholdings in Vereinte/Magdeburger, Munich/Han­ over, in Lloyd Adriatico, Trieste, and in the ELVIA Group, Zurich. The Winterthur Group will take over SCHWEIZ Seguros, Barcelona, SCHWEIZ Italia, Milan, and the majority shareholding of ELVIA in the La Equitativa Group, Madrid.
Our company’s success centres on the efforts and pro­ fessional skills of our staff at all levels. We wish to thank them for their firm commitment to our objective of making Swiss Re the leading worldwide reinsurer.
Subject to any extraordinary occurrences, the develop­ ment to date gives us reason to expect for the year 1994 another good reinsurance result and a clearly satisfactory insurance result. An exceptional item of income amounting to CHF 150 million arose from the settlement with the Stadtsparkasse Dusseldorf. The annual report 1994 will appear in a new layout and for the first time follow the EU accounting guidelines, which will substantially improve the quality of the content and the clarity of the figures.
In Non-Life reinsurance the consolidated net premiums rose in Swiss francs by 11.7% to CHF 9,968 million. When expressed in original currencies, the growth rate was 15.2% (previous year, 25.4%). The underwriting loss, which had amounted to CHF 928 million in the previous year, reduced significantly to CHF 393 million. This is mainly attributable to improved reinsurance conditions and the conspicuous absence of large and catastrophe losses.
In Life reinsurance premium income rose by 27.7% to CHF 2,207 million. The increase is largely due to the acquisition of a large portfolio. The underwriting result improved marginally to CHF 95 million (previous year, CHF 93 million). The net amount of business in force in­ creased by 2.1 % to CHF 292,000 million.
Investment income rose by 2.1% to CHF 1,301 million. The positive balance from rate fluctuations, depreciation and value adjustments fell from CHF 429 million to CHF 304 million. Management expenses rose by 5.0% to CHF 654 million, and taxes almost doubled to CHF 154 million from CHF78 million in the previous year.
Overall, the Group profit of reinsurance companies total­ ling CHF 499 million was considerably higher (previous year, CHF 167 million).
The results of the individual Group companies com­ mented on below correspond to the figures published in accordance with local accounting regulations.
The European Reinsurance Company of Zurich reported in Non-Life reinsurance a reduction in gross premiums by 8.6% to CHF461.7 million. The underwriting loss rose slightly as against the previous year. - In Life reinsur­ ance the increase of the gross amount of business in force to CHF 67,500 million (previous year, CHF 52,600 million) is mainly due to the conclusion of a major finan­ cial reinsurance treaty. The underwriting result was posi­ tive. -The result from general income and outgo showed distinct improvement. The profit for the year amounted to CHF 13.9 million (previous year, CHF 11.9 million). As in the previous year, a dividend of CHF 10.0 million is to be paid.
Following the previous year’s reduction in volume, the North American Reinsurance Corporation, New York, was able to increase its gross premiums by 7.9% to USD 849.6 million. All lines of business contributed to this growth. The underwriting result showed a substantial im­ provement after having been impaired in the previous year by the losses caused by Flurricanes Andrew and Iniki and by run-off losses in Liability business. The still buoyant state of the capital markets led to an investment result in keeping with that of the previous year. The re­ duced investment income as a result of lower interest rates was offset by higher capital gains. The profit shown amounted to USD 10.7 million (previous year, loss of USD 20.5 million). Because of the previous year’s adverse result, the company did not pay a dividend (previous year, USD 8.5 million).
At the North American Reassurance Company, New York, the Life reinsurance business in force rose by 1.1 % to USD 80,100 million. Investment returns reduced as a result of the lower interest rates. The published profit increased to USD 7.9 million (previous year, USD 4.3 million) be­ cause of the improved experience of personal dis­ ability business. No dividend was paid (previous year, USD 1.5 million).
The Atlantic International Reinsurance Company Lim­ ited, Bridgetown, Barbados, and the Swiss-Am Reassur­ ance Company, New York, transact non-traditional Life reinsurance business with insurers in the USA. In the year under report the activity of these companies produced a profit of USD 0.8 million (previous year, loss of USD 1.6 million). No dividends were paid (previous year, USD 0.3 million).
The consolidated gross premiums of the Swiss Reinsur­ ance Company (UK) Limited, London, and the Palatine Insurance Company Limited, London, rose in Non-Life business by 21.3% to GBP 166.4 million.The growth rates were particularly pronounced in non-proportional and facultative business.The underwriting loss was lower than that of the previous year. - In Life reinsurance the gross amount of business in force rose to GBP 12,900 million (previous year, GBP 11,800 million). The underwriting re­ sult was again satisfactory. - Investment income showed a further increase. Overall, a profit of GBP 0.4 million (pre­ vious year, loss of GBP 0.1 million) was disclosed.The div­ idend was raised to GBP 1.3 million (previous year, GBP 0.3 million).
The gross premiums of the Englewood Reinsurance Company Limited, Hamilton, Bermuda, which is primarily active in the sector of financial reinsurance, rose by 21.4% to USD 61.4 million.The published profit amounted to USD 3.4 million (previous year, USD 3.8 million).The company paid a dividend of USD 1.3 million (previous year, USD 1.2 million).
The European International Reinsurance Company Lim­ ited, Bridgetown, Barbados, continued to show a grati­ fying development. The company, which operates in the sector of financial reinsurance, recorded gross premiums of USD 250.2 million (previous year, USD 290.2 million thanks to an exceptional transaction).The published profit amounted to USD 21.7 million (previous year, USD 19.8 million). The company paid a dividend of USD 1.6 million (previous year, USD 14.4 million).
Reinsurance Insurance Total Reinsurance Insurance Total companies companies companies companies in millions of Swiss francs
The Consolidated net premiums rose in the year under report by 2.6% to CHF 10,283 million. The slightly weaker valuation of the German mark and the significant drop in the Italian lira and Spanish peseta had a restraining effect. Expressed in local currencies the growth rate was 9.5%.
The Vereinte Versicherungen, Munich, increased its con­ solidated gross premiums, including the non-recurring premium from the reserve for bonuses to policyholders, to DEM 5,977.5 million. The volume had been DEM 5,261.4 million in the previous year, excluding the Magdeburger Lebensversicherung AG. - The gross premiums of the Vereinte Versicherung AG rose by 5.3% to DEM 1,125.0 million. The loss experience continued to deteriorate, especially because of a further increase in losses in Motor collision damage insurance. In addition costs of DEM 28 million were incurred by the merger and had to be borne.The underwriting loss of DEM 96.6 million was more than double that of the previous year. Thanks to excep­ tional results from holdings it was still possible to achieve a profit for the year of DEM 25.6 million (previous year, DEM 12.5 million), which was distributed in full to share­ holders. -The amount of business in force of the Vereinte Lebensversicherung AG grew after merger with the Magdeburger Lebensversicherung AG to DEM 32,600 million (previous year, DEM 31,000 million including the Magdeburger Lebensversicherung AG). After an alloca­ tion of DEM 423.4 million (previous year, DEM 254.5 mil­ lion) to the reserve for bonuses to policyholders, the profit remaining for the year was DEM 7.6 million (previous year, DEM 4.1 million) which was paid out in full as dividend. - The Vereinte Krankenversicherung AG increased its gross premiums, including non-recurring premium from the reserve for bonuses to policyholders, by 12.7% to DEM 3.861.8 million. The amount of benefit payments rose by 4.5% to DEM 2,806.5 million. After an allocation of DEM 347.3 million (previous year, DEM 180.3 million) to the reserve for bonuses to policyholders, the profit for the year was DEM 61.0 million (previous year, DEM 20.5 million). For tax reasons an additional amount of DEM 45.0 million was withdrawn from the revenue reserves. From the bal­ ance-sheet profit of DEM 106.0 million, DEM 9.0 million was allocated to make unpaid into fully paid share capital and DEM 9.2 million (previous year, DEM 8.0 million) was paid as dividend. An additional special payment of DEM 87.8 million was made of which DEM 80.0 million will revert to the company through a capital increase financed as a “distribution and reinvestment” procedure.
in addition to a profit for the year of DEM 14.5 million (pre­ vious year, DEM 20.2 million), which was again paid out in full to shareholders.
The insurance products provided by the Vereinte Ver­ sicherungsgruppe are complemented by building society and banking services. - The mh Bausparkasse AG, Munich, showed at the end of the year under report a port­ folio of savings contracts of DEM 14,400 million (previous year, DEM 13,400 million), corresponding to a growth of 7.4%. From the profit for the year of DEM 7.6 million (pre­ vious year, DEM 9.2 million), a dividend of DEM 5.9 million (previous year, DEM 9.2 million) was paid. - The total assets of the Augsburger Aktienbank AG, Augsburg, which is 50% Group-owned, rose by 56.7% to DEM 956.4 million.The revenue reserves rose to DEM 7.8 million (pre­ vious year, DEM 3.0 million). The company paid out a div­ idend of DEM 5.7 million (previous year, DEM 2.2 million).
The continued pruning of the portfolio of the SCHWEIZ Assicurazione S.p.A. Milan, (formerly Savoia S.p.A.) led to a further drop in gross premiums to ITL 208,600 million. The underwriting result was again unfavourable because of negative run-off results and the strengthening of claims reserves. Despite higher income from capital investments the company reported a loss of ITL9,900 million (previous year, ITL 2,800 million). - The amount of insurance busi­ ness in force of the SCHWEIZ Vita S.p.A., Milan, (formerly Savoia Vita S.p.A.) totalled ITL 1,157,900 million (previous year, ITL 1,124,700 million).The company reported a profit of ITL 100 million (previous year, ITL 200 million).
The Group companies operating in the field of insurance- related services comprise the Audatex Group, Zurich, the International Risk Management Group, Bermuda, the Thomas Howell Group, London, and Gay & Taylor Inc,, Atlanta. In view of the dissimilar character of their activity and their relatively modest impact on the asset and income situation of the Swiss Re Group, these companies are excluded from the scope of consolidation.
The turnover of service companies from fees and royalties amounted in the year under report to CHF412 million (pre­ vious year, CHF415 million).The slight drop is largely due to the absence of losses caused by natural catastrophes which led to a cutback in the revenue of the claims man­ agement companies.
The Audatex Group, Zurich, reported consolidated turnover of CHF 89.3 million (previous year, CHF 91.7 mil­ lion).The drop is principally due to the increased value of the Swiss franc. Profitability continued to improve and the dividend paid to Swiss Re, Zurich, was increased from CHF 3.0 million to CHF 5.0 million.
Gay & Taylor, Inc., Atlanta, which works in close coopera­ tion with the Thomas Howell Group, reported income of USD 70.0 million (previous year, USD 72.3 million). The drop reflects the absence of major windstorms in the USA. The dividend was increased from USD 2.0 million to USD 2.2 million.
The merger of SwissRe Holding Limited with Swiss Re, Zurich, which took effect on 31 December 1993, gave rise at Swiss Re, Zurich, to a book profit of CHF 369.2 million. This was partly allocated to the capital funds and partly booked as extraordinary profit.
In its last business year SwissRe Holding Limited achieved a profit of CHF 277.5 million (previous year, CHF 13.4 million). The increase is due to higher income from holdings and to lower depreciation.
Based on our audit we conclude that the consolidated financial statements are presented in accordance with the consolidation and valuation principles set out in the notes on Group accounts.
Underwriting result from Non-Life insurance - 393 - 641 - 1,034 - 1,117
Total liabilities 64,911 59,698 * The figures in this column do not always amount to the total of the figures in the two preceding columns as figures for holding and other compa­ nies are also included.
The Group accounts were compiled according to the published financial statements as at 31 December 1993 of the companies belonging to the Swiss Re Group. Only the results of the Bavarian Reinsurance Company Limited and the European Reinsurance Company of Zurich had not yet been published at the time of the consolidation.
Balances receivable and payable as well as interest and dividend payments between consolidated companies are eliminated on consolidation. Similarly the Group’s consol­ idated figures contain no premiums from the intra-Group exchange of business. The consolidation and valuation principles are the same as in the previous year.
Savoia S.p.A. and Savoia Vita S.p.A., both in Milan, have been renamed and now operate as SCHWEIZ Assicurazione S.p.A. and SCHWEIZ Vita S.p.A. Their field of activity remains unchanged. SWITZERLAND Insurance Company (UK) Limited, London, has changed its name to SR International Business Insurance Company Limited.
Gross premiums as well as all balance sheet and profit and loss account figures from foreign Group companies which are stated in the various local currencies were uni­ formly translated into Swiss francs using the average for­ eign currency rates as at 31 December 1993.
The net assets of foreign companies have been calcu­ lated using the exchange rates at the end of the year. The loss on translation of CHF 61 million (previous year, CHF 22 million) resulting from the revaluation was directly offset against the consolidated capital funds.
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 applied.
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 reserves are included in the Group accounts at the amount calculated according to Generally Accepted Accounting Principles (GAAP).
In Non-Life insurance premiums rose by 6.8% (previous year, 24.0%) to CHF 19,285 million and in Life insurance by 15.4% (previous year, 34.1%) to CHF 4,464 million.
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 CHF 591 million to CHF 14,086 million. Of this amount, CHF 7,709 million was for reinsurance companies and CHF 6,377 million for insurance companies.
The claims incurred comprise payments for Life and Annuity insurance as well as the adjustment in the out­ standing claims reserve. The total outgo for own account rose in the year under report by CHF 98 million to CHF 1,950 million. Of this amount, CHF1.141 million concerned reinsurance companies and CHF 809 million insurance companies.
These items refer to components of the profit and loss account of the mh Bausparkasse AG which, in view of their special nature, are not included under insurance and reinsurance.
This group shows a positive balance of CHF 601 million (previous year, CHF 486 million). Realized capital gains on investments produced a profit of CHF 1,127 million (previous year, CHF 1,205 million), while depreciation on investments amounted to CHF 349 million (previous year, CHF 627 million). Monetary transfers and conversion of foreign currency balances offset each other (previous year, loss of CHF 7 million). For value adjustments and depreciation on assets outside the investment sphere CHF 177 million (previous year, CHF 85 million) was needed. This amount includes the liquidation of reserves at German Group companies in the amount of CHF 40 mil­ lion.
The Consolidated balance-sheet values of capital invest­ ments (incl. non-consolidated holdings) rose by 13.5% to CHF 54,921 million. The new funds were invested mainly in fixed-interest investments. The share portfolio in­ creased marginally. The drop in cash funds and cash deposits has also contributed to the rise in capital invest­ ments.
In the case of fixed-interest securities and shares and the quoted non-consolidated holdings, the difference be­ tween the lower book and higher market value of the indi­ vidual securities, taking into account the estimated tax effects on realization, amounted to CHF 3,603 million, or 7.4% of the balance-sheet value (previous year, CHF2.145 million or 5.0%).
Third party contingent liabilities as at 31 December 1993 totalled CHF 76.7 million. Of this amount guarantees accounted for CHF 60.8 million, sureties CHF11.5 million and pledges and charges CHF 4.3 million. In addition there are five unlimited guarantees. Contingent liabilities arising from insurance and reinsurance business are not included.
Life Insurance Life insurance and annuity fund 4,668 11,010 15,678 14,802
Reserve for profit commission 5 1,384 1,389 1,340 in % of Life insurance in force, net 1.9 25.3 5.3 5.1
Magdeburger Rechtsschutzversicherung AG DEM 100 11,660 109,496 51,387 mh Bausparkasse AG DEM 70.0 74,625 2,425,055 -
CAP Compagnie d’Assurances de Protection Juridique S.A. CHF 100 7,268 59,512 32,014
SCHWEIZ Compaiïia Anönima Espanola de Seguros y Reaseguros ESP 100 5,138,005 2 36,022,793 33,433,606
Investment and other financial income Management and other expenses Rate fluctuations, depreciation, value adjustments Result from general income and outgo Taxes Share of profit applicable to minority shareholders
Balance Sheet Assets Cash in hand, postal bank account, bank balances Current-account balances Cash deposit Fixed-interest investments Shares and real estate Transitory entries and other assets
Vereinte Versicherung AG, Munich Vereinte Krankenversicherung AG, Munich Vereinte Lebensversicherung AG, Munich Vereinte Spezialversicherung AG, Munich
Compagnie Européenne d'Assurances, Neuilly-sur-Seine Compania Europea de Seguros S.A., Madrid Europeesche Verzekeringen, Amsterdam Union Franco-Suisse d’Assurances Vie,
The above-average growth in volume recorded in recent years slowed down somewhat in 1993. Gross premium income amounted to CHF7,510 million, 10.2% more than the previous year. The overseas markets of South East Asia and Latin America again contributed more than pro­ portionately to this increase in volume, whereas the cen­ tral European countries that yield high amounts of pre­ mium stagnated. Non-Life business grew by about twice as much as Life business.
The underwriting loss in Non-Life reinsurance was reduced substantially from CHF 623 million in the pre­ vious year to CHF 235 million. In Life reinsurance, the stable profit situation which has been maintained for many years continued in the year under review with an increase by CHF 3 million to CHF 44 million.
The Swiss franc was quoted higher against some 60% of the 150 foreign accounting currencies. The EMS curren­ cies all recorded lower valuations between -0.6% and -18.2%, whereas the US dollar (+2.1%) and the yen (+14.0%) were quoted higher. The large proportion derived from European markets led to a decline in income (premiums and investment income) earned abroad after currency translation into Swiss francs. At the same time, however, expenses arising abroad (claims payments, commissions, management expenses) also declined. The growth of 10.2% in gross premiums shown would have been 13.7% at constant exchange rates.
A favourable development of results was also recorded in other insurance branches which are not primarily affected by natural hazards. The causes for this progress are com­ plex and differ from one country to another. One important aspect in addition to the coincidental absence of large losses in Non-Life reinsurance consists of structural improvements that have taken place in insurance busi­ ness. The declining trend in European motor damage insurance was halted through premium increases and improved conditions. However, the high level of loss bur­ dens caused by theft remained unsatisfactory. Adjust­ ments to prices and insurance conditions cannot and must not be the only means to achieve balanced results. Further steps in cooperation with the automobile industry and possibly with the authorities are unavoidable.
The development of the insurance industry in the Far East is distinctly affected by the question of when deregulation will become effective in Japan and that of free access to the Chinese market. The leading international insurers and reinsurers are growing more attentive to these mar­
kets. There is a substantial hazard that competition might become overheated and thus put even more pressure on premiums which are already inadequate. The market par­ ticipants must be made aware of their huge exposure to natural hazards if a further deterioration of premium rates is to be prevented.
In Hail reinsurance premium income rose by 11%. - The accumulation of heavy hailstorms in North America and Europe led to a higher than average loss ratio. The cur­ rent year is also already fraught with heavy losses. This line of business is therefore currently undergoing detailed analysis.
Premium income in Financial reinsurance again ad­ vanced more than proportionately in the year under review. Compared against traditional reinsurance, the portfolio comprises a reasonably small number of treaties tailored to the customers’ individual needs. Liability busi­ ness contributes the largest share to the total volume. - The technical result was only marginally positive owing to the adverse development of individual treaties. New and increasingly complex forms of coverage need to be developed frequently to accommodate national regula­ tions which are constantly being adjusted to develop­ ments In this specialized field of business in terms of the type of risk transfer and accounting principles.
The premium income in Motor reinsurance stems for by far the greatest part from the German market. Increasing the level of the original premiums would only have a minor impact on the growth of gross premiums because of selective pruning of the portfolio. In the year under report, the overall volume was only slightly more than the pre­ vious year’s premiums, at 3%. - Price increases and planned improvements of conditions in original business led to a substantial lowering of the previous year’s high underwriting loss despite burdens from France as a result of hailstorms. The car theft ratio in West European busi­ ness has now become so high that stringent measures are unavoidable.
A13% increase in premium income was achieved in Engi­ neering reinsurance stemming mainly from the USA and the dynamic growth markets of South East Asia. With few exceptions, the industrialized countries of Europe pro­ duced little new business. - The withdrawal of some com­ petitors from the market and the subsequent reduction of reinsurance capacity have had a favourable impact on profitability. In addition, the economic situation has recov­ ered noticeably in many markets. A positive underwriting result was again achieved following a series of negative years.
The tendency of Aviation reinsurance toward sharp and rather short-term cycles is reflected in the exceptional growth of 44% of the premium volume. The greatest per­ centage increase was that of facultative airline business, while demand for non-proportional covers fell. - The underwriting result improved substantially; the slight loss is a consequence of the negative result of proportional treaty business from the USA which could not be offset by the positive result of the facultative portfolio.
The gross premiums rose by 6%, to CHF 791 million. The acquisition of a large portfolio of old age pensions and additional business from the subsidiary company in Canada contributed to this growth. Increased surrenders following the transfer of portfolios to a risk premium basis caused the net premiums to rise only slightly.
The underwriting result of CHF 44 million was CHF 3 mil­ lion higher than that of the previous year. There was a dis­ tinct fall in reserves in line with the increase of surrenders. As a result the volume of technical interest income also fell.
The outgo for claims incurred including adjustment in outstanding claims reserve was unchanged over the pre­ vious year. In the case of term insurances and additional covers the loss burden has clearly increased in compar­ ison to premium growth. Pure endowment benefits on the other hand, dropped noticeably. The two develop­ ments basically balanced each other out. In some cases disability reserves were significantly increased.
Developments in the analysis of medical risks are being monitored closely and even with some alarm. Genetic testing provides information on an individual's future physical and psychological development which, because of the right of privacy, the individual is entitled to withhold from the insurer when applying for a Life insurance product. This could give rise to anti-selection, leading in turn to higher premium rates. It is to be hoped that
ongoing discussions will lead to a solution with fair allowance for the concerns of both applicant and insurer.
The actuarial auditor, Mr. Hans-Ulrich Gerber, Lausanne, has confirmed in his report that the technical reserves of the Life reinsurance business at the end of 1993 were cal­ culated on the bases approved by the Swiss Federal Council.
The widespread economic lull and low risk of inflation persuaded the central banks in industrialised countries further to relax their monetary policy in the year under review.This opened up the discretionary scope for a con­ tinued reduction of interest rates in the main money and capital markets. The same development was observed with the leader in the economic cycle, the USA, where the Federal Reserve Board saw no reason to change its policy in view of the continued positive inflationary out­ look. The markets responded with a further reduction of interest rates. In Europe, the German Bundesbank deter­ mined the course with its policy of short, rapid steps, thus creating the conditions for a controlled interest rate decline which the other EMS partners were obliged to follow out of exchange rate considerations.The continued
Capital Market Investments and Real Estate Distribution by investment category at balance-sheet values (previous year in parentheses)
The stock markets were also marked by the worldwide decline in interest rates. In the USA, the continued interest rate decline caused share prices to rise by 7% over the previous year. The pronounced interest rate decline throughout most of Europe, accompanied by hopes for an economic recovery and growing company profits, pro­ duced some exceptional price gains.The most favourable results with increases of up to 50% were recorded in Switzerland, Spain, Germany and the Netherlands. Only Japan was unable to keep pace with this development, achieving a modest price gain of 3%.
The balance-sheet value of capital market investments and real estate increased by CHF 2,645 million over the previous year toCHF11,201 million.This increase is largely due to new investments.
The first graphic on page 44 shows the various invest­ ment categories at balance-sheet values as percentages of overall capital market investments and real estate. The second graphic shows the breakdown by currency. The following table gives the balance-sheet values of the various investment categories.
Capital market investments and real estate 11,201 8,556 Holdings and loans 3,084 2,748 Net cash deposits from reinsurance transactions 2,215 2,280
In May 1994, Mr Arnold W. Saxer resigned from the Board of Directors of Swiss Re and at the end of August 1994 he relinquished his post as Chief Executive Officer, Mr Saxer unstintingly devoted more than 25 years to the company and performed signal services for Swiss Re. The Board of Directors expresses its gratitude to him.
At last year’s General Meeting, Messrs Thomas W. Becht- ler and Bénédict G. F Hentsch were elected to the Board of Directors for the first time.
Heinz Fischer and Karl Münger retired on 31 December 1993, while Miklos Gaal and René Rüttimann retired in the course of 1994. We are deeply indebted to all these gentlemen for their many years of valuable service to our company.
The following promotions to Members of Senior Manage­ ment were announced to take effect on 1 July 1994: René Bolliger, Hanswalter Buff, Richard Dold, Daniel Durst, Yu Chung Fok, Armin Frei, Hansjörg Fricker, Jurgen Heck, Peter Hoppler, Thomas Jäggi, Heinz Kramreiter, Mario Risch, Hans Sigrist, Bruno Walther and Jakob Wind.
In the course of 1994, Martin Albers-Schönberg, Thomas Hess and Hans Mahrla joined the company as members of Senior Management.
Mr Wolfgang Gemünd joined Group Management on 1 April 1994. Mr Gemünd is head of Group Division Insur­ ance.
Cash in hand, postal bank account, bank balances Current-account balances Cash deposits 612,953,753 1,355,709,811 2,274,306,235 1,127,014,307 1,538,034,478 2,343,746,019
Fixed-interest securities Loans (including mortgages) Shares Real estate 7,992,686,647 453,738,536 1,488,871,446 1,265,282,789 5,739,073,973 517,285,663 1,020,552,950 1,279,397,359
Statutory reserve fund Special reserve fund Reserve fund for catastrophe losses 650,000,000 1,912,211,961 1,000,000,000
The 1993 business year comprises both reinsurance business and general income and outgo for the period from 1 January to 31 December 1993.
All items of the balance sheet and profit and loss account in foreign currencies were uniformly translated into Swiss francs using the average foreign currency rates as at 31 December 1993. Differences arising from the translation of balance-sheet items in foreign currencies are booked via a corresponding reserve; this serves to offset valuation differences of foreign currency items based on exchange rate fluctuations. The development of the currencies most important for business activity is shown in the following table.
Securities and holdings are in principle entered at acqui­ sition cost or, if the stock exchange price is lower on the balance-sheet date, at the lower value. Non-quoted hold­ ings are, where necessary, entered at the lower intrinsic value. The lower valuation is retained until disposal of the corresponding securities. The new provision of the Federal Office for Private Insurance prescribing so-called “amortized cost" as upper value for bonds has been observed.
Current-account and bank balances and cash deposits are entered in the balance sheet at their nominal value.
Technical reserves (unearned premiums and outstanding claims) are based in principle on information provided by clients. Additional reserves are formed on the basis of past experience for losses that are incurred but not reported. All these reserves are entered at the amounts which will presumably have to be paid in future for the underlying liabilities. Annuity liabilities from Non-Life rein­ surance and liabilities from Life business are calculated at actuarially determined present values. The technical reserves of Life reinsurance business are determined on the bases approved by the Swiss Federal Council.
The commissions and profit commissions accounted for gross business totalled CHF1.721.5 million (previous year, CHF 1,565.8 million). Of this amount, CHF 204.4 million (previous year, CHF 184.6 million) referred to retro­ cessionaires, leaving CHF 1,517.1 million (previous year, CHF1.381.2 million) for own account.
Claims incurred for own account amounted to CHF 4,488.9 million; of this amount, CHF 3,492.5 million (pre­ vious year, CHF 3,121.2 million) was accounted for by claims paid and CHF 996.4 million (previous year, CHF 1,278.0 million) by the increase in the outstanding claims reserve. Claims incurred for gross business amounted to CHF 5,079.2 million (previous year, CHF 5,060.1 million).
The interest on the life insurance and annuity fund amounted forgross business to CHF60.7 million (previous year, CHF 68.8 million), for own account to CHF 58.5 mil­ lion (previous year, CHF66.8 million).
The commissions and profit commissions calculated for business assumed totalled CHF 146.3 million, (previous year, CHF 148.7 million). The retrocessionaires’ share of this amount was CHF 12.4 million (previous year, CHF 4.0 million), so that CHF 133.9 million (previous year, CHF 144.7million) remained for own account.
For own account there were benefits for term and endow­ ment insurance and for annuities of CHF 405.5 million (previous year, CHF 418.7 million) and an amount of CHF 68.6 million (previous year, CHF 58.8 million) for the adjustment in the outstanding claims reserve. Claims for gross business amounted to CHF 518.8 million (previous year, CHF509.4 million).
The surrenders in business assumed amounted to CHF 139.7 million (previous year, CHF 113.1 million), of which CHF 1.1 million (previous year, CHF 1.0 million) was deb­ ited to retrocessionaires. A total of CHF 138.6 million (pre­ vious year, CHF 112.1 million) remained for own account.
The gross income of CHF999.7 million is a 4.0% increase over the previous year. Overall the outgo items totalled CHF 133.7 million for the interest on the Life reinsurance and annuity fund and other technical reserves as well as for outgo interest and real estate. The remaining net amount of CHF 866.0 million is an increase of 4.6% over the previous year. Without the effect of foreign currency fluctuations, there would have been an increase of 7.2%.
Gross outgo of CHF310.6 million (previous year, CHF287.3 million) contrasted with cost reimbursements of CHF61.2 million (previous year, CFIF 53.5 million), mainly for ser­ vices rendered by Swiss Re, Zurich, on behalf of Group companies. Personnel expenses amounted to CHF219.4 million, corresponding to an increase of CHF17.8 million, or 8.8%, against the previous year; this is attributable to salary adjustments and a further increase in the number of employees as well as to higher costs for staff recruit­ ment and training. Other gross operating costs rose by 6.4%, particularly as a result of increased services ren­ dered on behalf of Group companies; cost reimburse­ ments rose accordingly.
Of the total amount of current-account balances of CHF 1,355.7 million (previous year, CHF 1,538.0 million), CHF 1,107.0 million (previous year, CHF1,029.5 million) was for reinsurance and CHF 81.1 million (previous year, CHF 154.3 million) for retrocession business; CHF167.6 million (previous year CHF 354.2 million) concerned other bal­ ances.The current-account balances vis-à-vis companies of the Swiss Re Group amounted to CHF557.6 million.
The portfolio of capital market investments (fixed-interest securities, loans and shares) and real estate increased by CHF2,644.3 million to CHF11,200.6 million.The valuation difference on capital market investments (excluding loans), i.e. the difference between the lower book and higher market value of the individual securities, taking into account deferred taxes, amounted to CHF 1,369.8 million (previous year CHF 742.5 million), or 14.4% (previous year, 11.0%) of the balance-sheet value of securities. The increase is attributable to the interest-rate related higher valuation of the bond portfolio and to the favourable development on most stock markets.
As a result of the merger of Swiss Re, Zurich, with SwissRe Holding Limited, all holdings are now included in the bal­ ance sheet of Swiss Re, Zurich. The balance-sheet value of holdings rose significantly to CHF 2,599.1 million (pre­ vious year, CHF 895.0 million), whereas loans to Group companies fell to CHF 485.1 million (previous year, CHF 1,853.1 million). The companies of the Swiss Re Group are listed on pages 32/33.
Technical reserves comprise, in Non-Life reinsurance, the reserves for unearned premiums and outstanding claims and, in Life reinsurance, the policy and claims reserves (including unearned premiums). The changes in the year under report and the composition are shown in the fol­ lowing table.
Non-Life Reinsurance Unearned premiums - for gross business 1,503.9 1,391.2 - for own account 1,451.2 1,239.2 Outstanding claims reserve - for gross business 9,494.2 9,178.3 - for own account 9,288.6 8,222.4 Total reserve for own account 10,739.8 9,461.6 in % of earned net premiums 186.1 183.5
Life Reinsurance Policy reserves - for gross business 1,530.2 1,586.5 - for own account 1,469.4 1,533.3 Outstanding claims reserve - for gross business 565.0 503.5 - for own account 538.5 495.4 Total reserve for own account 2,007.9 2,028.7 in % of earned net business in force 1.9 2.0
The merger of Swiss Re, Zurich, with SwissRe Holding Limited effected on 31 December 1993 led to a merger profit totalling CHF369.2 million. Of this amount CHF184.8 million was allocated as extraordinary profit to the profit and loss account of Swiss Re, Zurich and CHF 184.4 mil­ lion allocated directly to the reserves shown.
For 1993 a total of 12,468,742 registered shares and all 1,019,700 bearer shares are entitled to dividend. The 1,554,859 registered shares not entitled to dividend were reserved at the end of 1993 for the exercising of A and B shareholder warrants and to secure conversion or option rights from future issues, to acquire holdings or other busi­ ness in the company's interest.
If the proposal of the Board of Directors is accepted, a dividend of CHF 10.50 per share will be paid.
After deduction of the Federal Withholding Tax of 35%, the net dividend of CHF 6.85 will be paid after 30 November 1994 as follows: Registered shares by means of dividend order to the shareholders in the records of the share register or to their deposit banks.
As statutory auditors of your company we have audited the books of account and the financial statements - consisting of the balance sheet, profit and loss account and the notes on the annual accounts - presented by the Board of Directors for the year ended 31 December 1993 in accordance with the provisions of the Swiss Code of Obligations. Our audit was conducted in accordance with auditing standards promulgated by the profession in Switzerland. We confirm that we comply with the legal requirements concerning professional qualification and independence.
Switzerland Swiss Reinsurance Company Mythenquai 50/60, CH-8022 Zurich with branch offices in Melbourne, New York and Toronto
Bermuda Englewood Reinsurance Company Limited Belvedere Building, Pitts Bay Road Hamilton HM CXNorth American Reinsurance
European Reinsurance Company of Zurich Mythenquai 50/60, CH-8022 Zurich with a branch office in Madrid
Union Reinsurance Company Genferstrasse 27, CH-8027 Zurich with branch offices in Montreal
Canada Canadian Reassurance Company 99 Yorkville Avenue, Third Floor Toronto, Ontario M5R 3K5 with a branch office in Montreal
United Kingdom Swiss Reinsurance Company (UK) Limited 71-77 Leadenhall Street London EC3A 2PQ with a branch office in Hong Kong
Canadian Reinsurance Company 99 Yorkville Avenue, Third Floor Toronto, Ontario M5R 3K5 with branch offices in Montreal and Vancouver
Hong Kong SwissRe Advisers Limited 2902 Great Eagle Centro 23 Harbour Road, Hong Kong
Japan Swiss Reinsurance Company Representative Office Tokyo Sansho Building 7F, 2-9 Nihonbashi 3-chome, Chuo-ku,Tokyo 103
Mexico OFATEC (México) S.A. de C.V. Viena 71, Piso 5 Col. del Carmen Coyoacân Apartado postal 12-747 Oficina de correos No. 12 03020 México, D.F.
Venezuela OFATEC Venezuela C.A. EdificioTorre La Noria, Piso 8-Norte Paseo Enrique Eraso Urb. Las Mercedes, Apartado No. 6633, Carmelitas Caracas 1060
SCPIWEIZ Compahfa Andnima Espanola de Seguros y Reaseguros Via Augusta 153-157 E-08021 Barcelona
ELVIA Travel Insurance Company Tödistrasse 65 CH-8039 Zurich with branch offices in Amsterdam, Brussels, Madrid, Milan, Munich, Paris and Vienna
Union Franco-Suisse d’Assurances Vie 29, rue des Poissonniers F-92522 Neuilly-sur-Seine Cedex
United States North American Specialty Insurance Company 650 Elm Street, 6th Floor Manchester, NH 03101-2524 with branch offices in Cleveland and Sarasota
Spain Companfa Europea de Seguros, S.A. C/Serrano, 213-Infanta M.a Teresa, 23 E-28016 Madrid
Contact address Belvedere Building, Pitts Bay Road Hamilton HM CX, Bermuda
Gay & Taylor, Inc. Six Concourse Parkway Suite 3300 Atlanta, GA 30328
Accumulation: Concentration of -*■ risks which may be affected by the same loss event or concentration of shares in the same risk through -*■ reinsurance treaties.
- Claims handling: The work in connection with the investigation, settlement and payment of claims from the time of their occurrence until settlement.
- Claims incurred: All claims payments plus the adjust­ ment in the -> outstanding claims reserve of a business year.
Co-insurance basis: System of Life reinsurance under which the -» reinsurer assumes a share of the -*■ risk (pre­ miums, benefits, setting-up of reserves, etc.) at the same terms as the reinsurer’s client (cf. risk premium basis).
Insurance company: Enterprise which accepts ->• risks in return for payment of a -> premium.
- Insurer (also direct/primary insurer): Insurance com­ pany in a direct contractual relationship with the -* policyholder.
- Net amount: Life insurance in force of the -> insurer after deduction of the -*■ cessions or Life business of the -> reinsurer after deduction of ->■ retrocessions.
Policyholder: The -+ insurer’s contractual partner who receives -*■ cover in return for payment of a -> premium.
Portfolio: The totality of -* risks assumed by an -» insurer or -» reinsurer; also the totality of investments of a com­ pany.
- Gross premium: Insurance premium before deduc­ tion of the ceded premium (-> cession) or reinsurance premium before deduction of the retroceded premium (-*■ retrocession).
- Net premium: Insurance premium after deduction of the ceded premium (-+ cession) or reinsurance pre­ mium after deduction of the retroceded premium (-*• retrocession).
- Reinsurance premium: Premium paid to the ->• rein­ surer by the -» insurer for the -*■ risk accepted.
- Retrocession premium: Premium paid to the retro­ cessionaire for the part of the ->■ risk accepted.
Net amount: -> Life insurance in force - 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.
- Quota-share reinsurance: Form of -+ proportional reinsurance, providing that the -> reinsurer accepts a specified share of each -*■ risk of an -+ insurer in a specified class of business.
- Surplus 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 premium basis: System of Life business under which the -» reinsurer only participates in the death risk in so far as it exceeds the -*■ policy reserves (-*• co-insurance basis).
Technical reserves: In the Non-Life sector: Reserves for -*• unearned premiums and -* outstanding claims; in the Life sector: the -* policy and claims reserves.
Underwriting result: In the Non-Life sector: Total of -*• earned premiums, less -*• commissions, -» profit commis­ sions and -* claims incurred. In the Life sector: -* net pre­ miums, plus technical interest on Life insurance and annuity fund minus adjustment in -> policy reserve -> com­ missions, -*■ profit commissions and -*• claims incurred.
- Accident insurance: Insurance of individuals (per­ sonal accident) or of groups (group accident) against the economic -*■ risks in the event of death or tempo­ rary or permanent disability.
- Disability insurance: -> Sickness insurance -*■ Life in­ surance - Employers Liability insurance: Insurance by employers in respect of employees for injuries arising out of their employment.
- Marine insurance: Insurance against damage or loss of ships and cargoes; also includes uff-sliuie diilliny platforms and oil rigs.
Nuclear Energy insurance: Insurance against prop­ erty damage, liability and accident in connection with the operation of nuclear energy installations.
- Property insurance: Collective term for Fire and Busi­ ness interruption insurance as well as Burglary, Fidelity and Allied lines.
- Annuity insurance: Life insurance in which the bene­ fits consist of a regular income payment for a specified period of time.