Swiss Reinsurance Company 50/60 Mythenquai, P.O. Box, 8022 Zurich, Switzerland Telephone 01 208 21 21 Telex 59261 reas oh Cables swissre
This Annual Report contains illustrations showing major and special risks, in which the Swiss Re has a share of the reinsurance, together with pictures of our own advisory offices and subsidiary companies.
Deputy Managers Roger Aeberii Fritz Ehrsam Jean-Claude Mayor Paul Strickler Gottfried Bachmann* Peter P. Hügle* Max Nabholz Max A.Tobler Alfred Bai Walter Isler Samuel Patthey Martin Trippel Fritz Bolliger Ernesto Jutzi Willi Rüetschi* Paul Würsch Edouard Burnens Hans R. Kaufmann H.Conrad Rutishauser Hans Wyler Richard R. Doerr Lavre D. Kirianoff Otmar Schmidlin Rolf Eckert Albert Kunz Peter Schuppli
In the 1979 business year, the premium volume in Swiss francs rose by 10 %. Non-Life reinsurance produced a loss which was considerably larger than that of the previous year. The profit shown by Life reassurance was somewhat higher. Together reinsurance business closed with a loss of Sw. frs. 22.9 million as against a profit of Sw. frs. 20.9 million in the previous year. Investment Income which was only for the period from 1st July to 31st December, 1979, totalled Sw. frs. 148.4 million. Including the reserves established In earlier years for changeover purposes. After taking Into account management expenses and taxes, a net profit remained of Sw. frs. 69.6 million as against Sw. frs. 74.4 million the previous year.
The results of worldwide reinsurance activity are affected to a considerable extent by the general context ot condi­ tions In the various markets (e.g. Inflation, exchange rates, changes In legislation and court decisions, supply and demand in Individual markets and political develop­ ments). Numerous conditions, although they cannot be directly Influenced, do have to be taken Into considera­ tion In the corporate decision-making process. Otherfactors can, however, be Influenced to a greater or lesser extent, such as the structure of reinsurance treaties, the regional expansion of activity, the choice of certain branches and risks and of clients, as well as the composi­ tion of services to be offered.
Likewise bordering on the limits of insurability are circum­ stances by which a product (e.g. type of aircraft, medica­ ment, etc.) which has been tested by the state authorities and which tor years has not given cause tor any com­ plaint, suddenly causes catastrophic damage in Third Party Liability. Liability insurance tor environmental im­ pairment should be mentioned here also, since the loss development in this branch depends greatly on how the state controls the enforcement of appropriate laws.
Not infrequently social security prompts people to expect private insurance to provide benefits which go beyond the possibilities of a commercial insurance carrier. Take, tor example, the increasing worsening of loss experience with regard to privately insured disability risks. This is caused to some extent by the lack of costs awareness in generously conceived social security schemes which increase their deficits annually, something which is out of the question in private insurance.
The examples mentioned have one thing in common: in the complex highly-developed social market economy, the state and its authorities, but also the public - the policyholders - are given an increasingly growing and decisive role in the creation and control of insured risks and in loss reduction and prevention. This tact calls tor more intensive contacts between state and private insur­ ance, but also gives opportunities tor increased public work on the part of private insurance.
in recent years governments and international organiza­ tions have formulated rules of conduct for multinational companies. The code of conduct issued in 1976 by the OECD deserves special attention. In addition to general principles it contains essentially ideas on competitive conduct, investment activity, taxes and relations between social partners. The Swiss Re adheres to these principles in its worldwide activity.
in a study recently published by the Centre on Trans­ national Corporations, a U.N. committee based in New York, it is noted that international reinsurers tuitii neces­ sary and important functions also in developing coun­ tries. it is pointed out that local or regional insurance companies in these countries - as in industrial nations would not be in a position to beartheir largest risks alone, in this, currency aspects are also of significance. Foreign currency shortages tend to call tor more rather than tor less reinsurance cover since major losses mostly lead to a pronounced increase of imported goods and services. The study draws attention to the tact that the drain on for­ eign currency from reinsurance operations from deveiop-
Fire 992 905 887 1,008 907 Hail 19 19 19 21 20 Burglary/Fidelity and allied lines 69 66 70 80 70
The pictures show: 1 Cellulose and paper factory in the Middle East Processing of reeds and bagasse (sugar cane remains) 2 Urea ferfiliser factory in the Middle East Processing towers each approx. 100 m high and weighing 300 tonnes 3 Ganter bridge on the Brig-Simplon Pass national highway, Switzerland Sliding form construcfion of concrefe piers and canfilever method for bridge decks 4 Brown-Boveri low pressure steam turbine rotor for the Mühiheim-Kärlich nuclear power station, West Germany Capacity 1,300 MWe
The gross prerriium income from non-Life reinsurance, when expressed in Swiss francs, rose by Sw. frs. 281 mil­ lion or 10.6 % over the previous year to Sw. frs. 2,923 mil­ lion. Because of less pronounced foreign-exchange fluc­ tuations, the premium growth in original currencies is only slightly above the premium increase in Swiss francs. A total of 94% of the premium volume was paid in foreign currencies. After deduction of the retrocession within and outside the Swiss ReGroup,the remaining nefprem/ums amounted to Sw. frs. 2,249 million (previous year, Sw. frs. 2,036 million).
For the first time since 1970 the by far most important branch. Fire, registered a considerable loss, despite the fact that the Swiss Re was only affected in the year under report by a single catastrophe loss ("David" hurricane damage in the Dominican Republic costing the company a total of approx. Sw. frs. 20 million). Although medium and major individual losses increased both in terms of number and amount, these alone cannot be held respon­ sible for the bad result. This is rather due to insurance premium rates which in industrial and developing coun­ tries have sunk to a totally inadequate level, and to excessive reinsurance commissions. Improvement calls for energetic measures on the part of insurers and re­ insurers.
Accident reinsurance closed with a loss, the premium in­ come being practically the same as in the previous year. Again U.S. workers' compensation business is respon­ sible for this result.
The net amount of new business is 14% higherthan in the previous year totalling Sw. frs. 8,370 million. Thanks to re­ latively stable exchange rates, the net amount of busi­ ness in force rose by 15% to Sw. frs. 35,470 million.
Because of transfer bookings from previous years and the persistent trend towards risk premium and term reas­ surance, the premium income grew much less strongly than the business in force. The claims incurred were, however, clearly greater than in 1978. In particular, re­
There are subsidiary companies and branch offices in various countries. Most markets are, however, serviced from Head Office by account executives and technical experts. Local offices within easy reach of the client lend support to marketing.
The managers of the branch offices mostly citizens of that particular country - are carefully prepared in Zurich for their work and training is continued by means of meetings held each year at the Head Office. The staff of branch offices is mainly recruited from the local labour market.
mained the same. In the Life branch, the relation between reserves and insurance in force continued to decline, largely reflecting the trend towards pure risk business which calls for less reserves.
Events on the share markets have remained largely un­ influenced by the unfavourable economic environment. The Swiss Re's major markets showed firm or at least well maintained prices. The comparatively low valuation of some shares as well as the renewed importance given to equity thinking were likely decisive factors in this development which ran contrary to all experience.
The emphasis in new investments lay, as already in the previous year, on fixed-interest securities, especially in Switzerland, the intention being to maintain the equilib­ rium between assets and liabilities in the balance-sheet currency. Among the equities the share portfolio dimin­ ished primarily through the sale of securities which promised limited capital gro\A4h. On the other hand, real estate showed a slight increase. The distribution of capital market investments and real estate by balancesheet and market values are shown on the opposite page.
By currencies the capital market investments and real estate at balance-sheet values are structured as follows: 39% (previous year: 36%) in Swiss francs, 36% (38%) in other European currencies, 21% (22%) in U.S. and Canadian dollars and the remaining 4% (4%) in Austra­ lian dollars and Japanese yen. The reduction of overseas investments in favour of investments in Europe is pri­ marily due to the more favourable exchange rate devel­ opment of the European currencies and to a lesser degree to the afore-mentioned policy aimed at increasing the Swiss franc investments.
Net cash deposits arising from reinsurance business in­ creased from Sw. frs. 1,159 million to Sw. frs. 1,245 million. This rise is largely parallel to the increase in premium in­ come.
The investment income, incorporating the reserve established in previous years forthe purpose of changing the closing date of the accounts, totalled Sw. frs. 148 mil­ lion. Of this amount, Sw. frs. 116 million represent recur­ ring income after deduction of the interest required forthe Life assurance and annuity fund and other technical re­ serves. Compared with half of the previous year's cor­ responding figure of Sw. frs. 105 million, a rise in invest­ ment income emerged which is primarily due to the signi­ ficant new investments and the increased rates of return.
The changeover account shows management expenses of Sw. frs. 43.3 million as against Sw. frs. 94.1 million for the previous accounting period which comprised twelve months. The fact that management expenses are less than half of the preceding full year's total Is due to the con­ tributions to the Employees' Welfare Foundation being affected by the changeover. Other personnel costs rose slightly: non-personnel costs showed a more substantial Increase primarily because of higher costs for journeys abroad, the expansion of offices In foreign countries and data processing.
In the period under report, the tax burden fell by Sw. frs. 26.7 million to Sw. frs. 29.3 million. This decrease Is mainly due to the fact that the accounting period, which determines the taxes to be paid In Switzerland, was reduced to six months. Foreign taxes, particularly those paid for overseas branch offices were, however. Included In the account as a full year's amount.
The account for fluctuations In stock exchange and for­ eign currency rates and depreciation closed with a sur­ plus of Sw. frs. 16.6 million (previous year, a loss of Sw. frs. 6.9 million). Market rate differences on Investments contributed a net profit of Sw. frs. 21.7 million (previous year, Sw. frs. 16.1 million) to this result. They are the result of net capital gains In the amount of Sw. frs. 77.6 million (previous year, Sw. frs. 85.6 million) and written down book values on capital Investments In the amount of Sw. frs. 55.9 million (previous year, Sw. frs. 69.5 million).
Assistant Managers: Messrs. Reto Arpagaus, Simon Courant, Hans H. Prey, Brian R. Lacock (In advisory capacity), Bruno Laube, Jörg Niederer, Rudolf Oberle, Alain Perret (In advisory capacity), Luis T. PozzI, Felix E. Rohner and Rubo Schilling.
Proposal regarding the Allocation of the Net Profi cf. Profit and Loss Account (page 22) and Balance Street (page 25)
The Board ot Directors proposes to the General Meeting the following allocation: Sw. trs. Sw. trs.
After distribution of the profit in accordance with the pro­ posal on page 20, the capital and free reserves, Including the balance brought forward, would be raised from Sw. frs. 426 million to Sw. frs. 450 million.
Reinsurances ceded b 1979 Net for own account a-b 1978/79 Net for own account
Fluctuations in stock exchange and foreign currency rates, depreciation - 16,641,749 6,854,059
Balance Profit brought forward from previous year 3,832,072 Net Profit for the Year 69,554,886 73,386,958 77,237,072
For the Board of Directors: W. Diehl, Chairman H. B. Vischer, Deputy Chairman and Managing Director
As the Auditors of your Company we have examined the Annual Statement as at 31st December, 1979, In accor­ dance with the provisions set down by law.
Australian Reinsurance Company Ltd., Melbourne • Swiss-South African Reinsurance Co. Ltd., Johannesburg
Vereinigte Krankenversicherung AG, Munich o mh Bausparkasse AG, Munich o Generai Surety & Guarantee Co. Limited, Wiimsiow, GB
in the Croup as a whole, non-Lite insurance registered a considerably increased underwriting loss, whilst Lite as­ surance showed a higher underwriting profit. - The underwriting business otthe reinsurance companies pro­ duced overall a negative result tor the first time since 1976. in insurance, substantial write-offs on capital in­ vestments ot the German companies in the personal insurance lines meant that the allocation to the reserves tor bonuses was less and the underwriting result, partic­ ularly in Lite, accordingly less burdened; this is, however, contrasted by the mentioned write-offs. The drop in investment income and management expenses is due to the alteration ot the balance-sheet date ot the Swiss Re and the European General from 30th June to 31st De­ cember, the financial income and outgo ot these two companies comprising therefore only halt a year. Simi­ larly, the lower tax burden is also partly due to this change; tor the rest it reflects the tail in the profits ot certain Croup companies. The Group profit tell from Sw. trs. 119 million in the previous year to Sw. trs. 105 million.
Reinsurance Companies in the year under report the consolidated net premium income in non-Life reinsurance rose by 10.6%, inflation rates remaining high in various markets. The worldwide glut ot reinsurance capacity and the resultant heavy com­ petition have intensified even more in these branches. The underwriting account closed with a greatly increased loss ot Sw. trs. 64 million, compared with one ot Sw. trs. 9 million a year earlier. Persistently insufficient premiums in major branches and high claims inflation in Liability busi­ ness have led to this deterioration.
The three North American subsidiary companies which operate exclusively in Lite reassurance. North American Reassurance Company, New York, Canadian Reassur-
The Swiss-South African Reinsurance Company Ltd., Johannesburg, registered a drop in the underwriting result of non-Life reinsurance; this was mainly due to the overcapacity dominating the market. The profit of Life re­ assurance was reduced by strengthening the reserves for disability business as well as by high financing re­ quirements. A similarly unfavourable market trend in nonLife reinsurance impaired the underwriting result of the Australian Reinsurance Company Ltd., Melbourne; the result of Life reassurance was curtailed by higher profit commissions. In the investment sector both companies achieved very good results.
The gross premiums of the «SWITZERLAND» General Group rose by 15 % to Sw. frs. 392 million. - The business year of the «SWITZERLAND» General, Zurich, was marked by the continued strong development of Acci­ dent, Liability, Motor and Sickness Daily Benefits busi­ ness which had been taken up a year earlier, an un­ favourable result in direct insurance business, an overall satisfactory reinsurance result and higer investment in­ come. The subsidiary company in London continued to expand its business with satisfactory profit. The result of the SWITZERLAND General, New York, was negatively affected by natural catastrophes and major losses in the Property branch and in special lines.
The premium growth of the German insurance groups, the Vereinigte Versicherungsgruppe and the Magdebur­ ger Versicherungsgruppe, was gratifying at 10.2%. The gross premiums of the Vereinigte Versicherungsgruppe rose by 11 % to DM 2,011 million, those of the Magdebur­ ger Versicherungsgruppe by 10 % to DM 771 million. The overall premiums of these two groups broke down as fol­ lows: non-Life insurance 40%, Life assurance 12% and Sickness insurance 48%. Compared with the previous year, there was a slight swing from Sickness to non-Life insurance. Thanks to above average growth it was pos­ sible to increase slightly the market share in Life assur­ ance. in the remaining branches the market share re­ mained unchanged.
The gross premiums of the General Surety & Guarantee Co. Ltd., Wilmslow, increased by 12% to £ 2.6 million. Profit continued to be good.
America) Inc., Swiss-South African Reinsurance Com­ pany, the European General, the Canadian Reassurance Company and the Australian Reinsurance Company.
The capital structure of the company remained unchanged. The current-account credit granted by the parent company rose by Sw. frs. 27.0 million to Sw. frs. 385.5 million. This increase mainly involves the addi­ tional investment in the Transatlantic Reinsurance Com­ pany, New York, and the acquisition of 18 % of the capital of Trade Indemnity Company Ltd., London.
5 Processing facultative business at ttie Los Angeles branch office of North American Reinsurance Corporation 6, 7 Members of executive staff at the Los Angeles and Chicago branch offices of the North American Reassurance Corporation 8 Chicago, location of branch offices of the North American Reassurance Company and the North American Reinsurance Corporation
Result from all classes excl. Life - 64 8 - 56 - 5
Claims on deatti and maturity and annuities paid 249 53 302 288
Adjustment in policy and annuity valuations - 45 -178 -223 -251
Cash in hand, Postal bank account, Bank balances 195 71 266 304
All classes excl. Life (Incl. valuation of Sickness Insurance) Life business (policy and annuity valuations)
All classes excl. Life (Incl. valuation of current annuity Indemnities) 4,315 1,177 5,492 4,722
The Group accounts were compiled according to the same principles as in previous years based on the published individual statements of the Group companies as at 31st December, 1979. The only exception was the Bavarian Reinsurance Company Ltd. whose balance sheet had not yet been published at the time of the consolidation. Last year's decision to move the balancesheet date of Swiss Re, Zurich, and the European General from 30th June to 31st December means that, for the first time, all companies of the Swiss Re Group share a uni­ form closing date.
The capital funds applicable to minority shareholders correspond to the percentage of the relevant Group com­ pany's capital funds which is held by non-Group share­ holders. These funds rose in the year under report by Sw. frs. 5 million to Sw. frs. 32 million. The reason was the increase of the capital funds shown as a result of the higher profit in the previous year; a contribution was also made by the higher valuation of the German mark.
The items "Capital", "Statutory reserve fund", "Special reserve fund" and "Reserve fund for catastrophe losses" correspond to the capital funds at book value of the Swiss Re, as parent company.
The consolidation reserve fund results from the differ­ ence between the capital funds shown of Group compa­ nies and the corresponding book values applied by SwissRe Holding Ltd. and Swiss Re, Zurich. The increase of the consolidation reserve fund by Sw. frs. 29 million is due to the increase of the capital funds of various Group companies which occurred in the previous year.
Investments (except for real estate) were valued at the lower of cost or market. As a result of rising interest rates, the hidden surplus on the entire investment portfolio fell by Sw. frs. 48 million to Sw. frs. 636 million, still totalling 7.0% of its present balance-sheet value (previous year, 10.4%).
Effects of exchange rate fluctuations on opening balance-sheet figures - 3 - 13
Group profit applicable to minority sfiarehiolders - 3 - 6 - 5 - 9 - 8
Group Balance Sheet in millions of francs 31/12/79 30/6/79 30/6/78 30/6/77 30/6/76
Other liabilities (incl. share applicable to minority shareholders) 409 436 462 531 378
Oapital funds (prior to distribution of profit) 665 622 550 555 488
^ not comparable with previous years foiiowing change in balance-sheet date of Swiss Re, Zurich and European General 39
«SWITZERLAND» General Insurance Company Ltd. 43 Gotthardstrasse, 8022 Zurich with branch offices in Barcelona, Brussels, Genoa, Hamburg, Melbourne and Montreal
SWITZERLAND General Insurance Company (London) Ltd. Tower House, 38 Trinity Square, London EC3N 4HR
Magdeburger Union Rechtsschutz Versicherungs-AG Kirchhorster Strasse 2, 3000 Hanover 51 Union und Rhein Versicherungs-AG Wotanstrasse 88, 8000 Munich 19
Vereinigte Aachen-Berlinische Versicherungs-AG Nymphenburger Strasse 112, 8000 Munich 19 Eos Lebensversicherung AG Königinstrasse 19, 8000 Munich 22 Saar-Rhein Allgemeine Versicherungs-AG Sulzbachstrasse 16-18, 6600 Saarbrücken 3 Salus Krankenhauskosten-Versicherungs-AG Schleissheimer Strasse 124, 8000 Munich 40 Vereinigte Krankenversicherung AG Leopoidstrasse 24, 8000 Munich 40
SwissRe Life Insurance Company, Delaware 245 Park Avenue, New York, N.Y. 10167
Canadian Reinsurance Company 95 St. Clair Avenue West, Toronto M4V1N9, Ontario with branch offices in Montreal and Vancouver
OFATEC (Mexico) S.A. de C. V. Comunal 80 Bis, Piso 5 Col. del Valle, Mexico 12, D. F.
OFATEC Venezuela C.A. Edif. Seg. Adriatica, Piso 7 Of. 72, Avda. Fco. de Miranda con Don Bosco, Oaracas
Reinsurance and Insurance Branches The reinsurance and insurance companies of the Swiss Re Group mainly deal with the following classes of business: Fire Fire/Lightning/Explosion/Falling aircraft Loss of Profits Windstorm Earthquake Flooding Riot/Strike