Capital funds shown 1-^ 314* 296 273 in millions of francs
Felix W. Schulthess Zurich, Chairman of the Beard of Directors, Swiss Credit Bank, Zurich 1975
Hans Ulrich St. Gall, Professor, St. Gall Graduate School of Economics, Business and Public Administration 1977
Gottfried Bachmann* Alfred Bai Emil Baumgartner Fritz Bolliger Edmond Capt Enzo Deico* Rolf Eckert Erich Etter* Heinz Fischer* Leon Genoud
Richard R. Doerr* Fritz Ehrsam Hans R. Kaufmann* Ernst A. Kubli Albert Kunz* Willy Küster Gerard Lavanchy Jean-Claude Mayor
Max Nabholz* Jan C. Roos H. Conrad Rutishauser Max D. de Balis Peter Schuppli Edward Spargnapani Paul Strickler
Heinrich Pfefferte Willi Rüetschi* Arnold Saxer Otmar Schmidlin Willi Schürpf Jürg Steinrisser* Max Tobler Paul Würsch Hans Wyler
The business year 1973/74 embraces the reinsurance business for the caiendar year 1973 and the other income and expenditure from 1st Juiy, 1973 until 30th June, 1974.
complete satisfaction of both insurers and clients, it was introduced during a period of much more mod­ est inflation rates than those familiar to us at present and was coupled with a number of advantages: This automatic indexing produced substantial cost reduc­ tions in respect of policy handling — cost reductions which benefit the insureds. The unpleasant discus­ sions with clients, unavoidable when underinsurance affects a claim, have become much less frequent, in other European countries, too, some automatically indexed property insurances have been introduced. The reservations raised in this respect refer both to the principle of indexing as such and to the choice of the index, it is a simple matter to refute the fundamental objection — that automatic indexing of sums insured gives additional momentum to the inflationary process — since such indexes ultimately register nothing more than the figures of a price development which has already occurred. The choice of an index, too, should present no insurmountable difficulties. As a rule, reliable indexes of both con­ sumer prices and building costs are available, and they can be combined as required by the scope of the policies.
A small part of the total business is presented to the reinsurer in the form of so-called nonproportional covers. Here, in contradistinction to proportional reinsurance, the reinsurer binds himself to accept
Accident f 165 150 147 130 133 Sickness 71 72 68 121 164 Third Party Liability 159 1 ! 178 161 144 138
Aviation 65 73 101 90 55 Atomic Risks 2 2 2 2 1 Credit, Surety 89 J
those shares of all losses which exceed a certain amount per risk or per event retained by the direct insurer. For this business, the reinsurer does his own premium calculations, so that the results are not tied to those of the relevant branch of direct insurance, in the year under report, nonproportional reinsurance produced a good result despite the increasing pressure of competition.
Proportional and nonproportional reinsurance are not equally well suited to the individual branches. As in the past, the mass of the proportional covers lies in insurances of property, that of nonproportional rein­ surance in General Third Party Liability and Motor Third Party Liability insurance.
The result of an accounting year is not determined solely by the claims — whether paid or reserved — of the year involved, but also by the run-off of the reserves for claims incurred in previous years but still outstanding. In respect of the amount required for these reserves, the reinsurer must base himself initially on the data supplied by his clients. Experience has shown that the accuracy of this data is rather variable, in part for reasons beyond the control of the direct insurer, particularly in cases involving serious bodily injury in the General Third Party Liability and Motor Third Party Liability branches, where the settle­ ment process may be lengthy. Therefore, the loss reserves reported to the Company are checked with constantly refined methods, and strengthened when­ ever this appears necessary. This is done particularly in the knowledge that, under the influence of inflation, the size of claims increases constantly until their finai settlement. To the extent that outstanding claims from previous years were run off during the reporting year, it was evident that these strengthened reserves were correct, in the aggregate.
previous year. The evidence does not allow one to determine conclusively whether the increased efforts of many Fire insurers in the fire prevention area are already reflected in the result of the branch. Larger fluctuations in the result from year to year are not unusual. The Hail reinsurance branch, which is notably subject to extreme fluctuations, was better than in the preceding year. Once again. Burglary reinsurance produced losses from a virtually unchanged premium volume. The losses declined from the previous year, but they continue to originate mainly in European areas. Higher premium rates, more rigorous risk selection and loss deductibles are indispensible in the branch.
In Atomic reinsurance there has been a relatively strong growth of premiums, and there have been no larger losses. In response to the severe loss potential, coupled with a very low loss frequency, virtually the entire premium income from the branch must be set aside as unearned.
In the investment sector, the reporting year may be described as the most difficult one of the post-war period. A combination of negative influences contrib­ uted to this. Thus, the signs of a slowdown of economic development increased visibly during the year in all of the more important investment coun­ tries. Despite this, inflation rates in these countries remained alarmingly high, and in some cases, they even rose. In response, central banks throughout the world maintained their policy of tight and expensive money. Moreover, as a consequence of the soaring prices of many raw materials, in particular of oil, these factors were joined by growing concern over the monetary and balance of payments development of the great majority of oil-importing countries. And, towards the end of the year under report, several widely noted bank failures additionally shook the already weakened confidence of international invest­ ment circles. Taken together, these circumstances produced a downward movement of bond and share prices on all important markets.
Monefariiy induced depreciation proved to be both substantially smaller than these market induced set­ backs and far less high than in the previous year's accounts. The loss which nevertheless resulted from conversion of our foreign investments at the ex­ change rates in force at the end of the business year is primarily due to the lower valuation of curren­ cies in which we are obliged, for technical rein­ surance reasons, to maintain securities investments.
Given the high interest rates obtainable in several selected countries, the emphasis in new investment was clearly directed toward the purchase of fixedinterest securities. By contrast, shares were reduced slightly and holdings in real estate raised only to an insignificant extent. The increase of investments amounts to Sw. frs. 196 million. The deliberate restraint in respect of shares somewhat shifted the balance in favor of fixed-interest investments, as displayed on the opposite page.
Of tfie assets shown, Sw. frs. 130 million (previous year, Sw. frs. territories. The pronounced increase is the result ot a transfer of American trust.
The share represented by Head Office personnel costs came to 72 % of the management expenses of the reporting year, whiie the remaining internai costs contributed 16%, those of the fieid organi­ zation 12% to the totai. Three years ago, these figures were 64%, 20% and 16%. The aboveaverage rise of personnei costs is due primariiy to an infiation-paced increase of saiaries and contributions to employee welfare. The number of employees increased during the reporting year by oniy 2.2 %, to 822 (in the two previous years, the increase was 4% and 7.1 %).
On capital investments, writing down the book values to the lower market values caused an unrealized ioss of Sw. frs. 116.6 miiiion (previous year, Sw. frs. 70.0 miiiion). The reasons for this write-off of previously unprecedented size were given in the section on Investments on page 12. As the result of sales and switches in the securities portfolio, on the other hand, net capital gains in the amount of Sw. frs. 56.9 miiiion were realized (previous year, Sw. frs. 59.8 miiiion). The net charge to the Profit and Loss Account from the market-rate fiuctuations on capital investments was Sw. frs. 59.7 miiiion (previous yoar, 10.2 miiiion).
The foreign currency rate changes were far m.ore limited than in the preceding year and produced a positive resuit overall. The conversion of the balancesheet figures at the beginning of the business year, on the basis of the average rates of exchange at the end of the business year, together with the exchange rate differences realized in foreign currency trans­ actions, yielded a profit of Sw. frs. 17.4 miiiion (pre­ vious year, a ioss of Sw. frs. 8.3 miiiion). This shows that the monetarily induced depreciation mentioned in the Investments section could be offset because the investments — as has been mentioned in earlier Annual Reports — are counterbalanced by technical reinsurance liabilities in identical currencies.
The last General Meeting re-elected to the Board of Directors Mr. Max Troendle and Mr. Hans Ulrich for an additional four-year term of office. At the same time, Mr. Hans R. Lüthy and Mr. Heinz B. Vischer were elected to the Board for a first term. The Board, at its subsequent statutory meeting, named Mr. Matheus Klaas as Deputy Chairman to succeed Mr. Paul Guggenbühl.
At this year's General Meeting, the terms of office of Mr. Waiter Berchtoid and Mr. Matheus Klaas are expiring. Having reached retirement age, Mr. Klaas is withdrawing from the Board. Mr. Berchtoid stands for re-election and is immediately eligible under the Articles of Association.
Mr. Werner Müller, Mr. Willi Rüetschi and Mr. JGrg Steinrlsser. Mr. Arno Schütz, Manager, and Deputy Managers Mr. Georges Bassin, Mr. Johann J. Hagedorn and Mr. Hans Salzmann retired on 31st December, 1973. We should like to express our sincere gratitude to them for their many years of valuable service to our Company.
cf. profit and loss account (page 18) and balance sheet (page 21)
If the Board of Directors' proposal Is accepted, an unchanged dividend of Sw. frs. 90.— and a bonus of Sw. frs. 10.— per share are to be paid. Thus, upon presentation of Coupon No. 20 of the registered and bearer shares, a gross amount of Sw. frs. 100.— or, after deduction of the Federal Withholding Tax of 30°/o, Sw. frs. 70.— will be paid.
After distribution of the profit in accordance with the proposal on page 16, the capitai and free reserves, inciuding the balance brought forward, would be raised from Sw. frs. 296 miliion to Sw. frs. 314 miliion.
In accordance with Art. 723 of the Swiss Code of the Life Department at the end of 1973 were correctly Obligations the present Annuai Statement has been caiculated on the basis approved by the Swiss examined and found correct by the independent Federal Council, auditor, Mr. A. Ehrbar.
Zurich, 17th October, 1974 For the Board of Directors: M. E. Eisenring, Chairman
All classes excl. Life Commissions and Profit Commissions 675,618,953 152,655,716 522,963,237 476,137,844
Fluctuations in Stock Exchange and Foreign Currency Rates, Depreciation 46,255,390 15,517,238
Outstanding Claims for Own Account p* 1 All classes excl. Life (incl. Valuation of Current Annuity Indemnities) Life Business
Capital (400,000 registered shares at Sw. frs. 250.— nom.) ( 44,000 bearer shares at Sw. frs. 250.— nom.) ^ 111 ,000,000 111,000,000
Reserve Fund for Catastrophe Losses K" 56,000,000 52,000,000 Balance Profit Carried Forward from Previous Year 1,079,017 Net Profit for the Year 63,725,161 b 64,804,178 53,989,017
Acting upon our terms of reference, we have checked the Profit and Loss Account for the business year 1973/74 and the Balance Sheet as at 30th June, 1974, against the accounts of the Company, which have been kept In proper form and order, and have found that the figures concord. The assets of the Company and the operating results are presented In accor­ dance with the methods of valuation legally prescri­ bed.
The Swiss Re Group, in the narrower sense, com­ prises — in addition to the Swiss Re, Zurich, and its rating, ciaims and advisory offices abroad — the SwissRe Holding Ltd., Zurich, and its foliowing fuilyowned companies : SwissRe Holding (North America) Inc., New York
Premium growth in the original currencies was some­ what lower for most of the subsidiary reinsurance companies, while acquisition — in terms of sums insured — of Life reassurance was higher than the average of previous years. Once again, each of the subsidiary companies produced a positive annual result, although the earnings development varied. The U.S. Life company, the South African company and the European General achieved higher profits than in the preceding year. Realized capital losses on securities lowered the net profit of the British and the Australian company. For all of the subsidiary companies, the worldwide drop of bond and share prices caused a decline of the hidden surplus on securities.
The consolidated net profit of these subsidiary com­ panies, converted into Swiss francs, was approxi­ mately 25% lower in 1973 than in the preceding year. The reasons for this decline of profits are mentioned for the individual companies (pages 30—33). Parity changes of the currencies in which the overseas subsidiary companies operate remained within narrow limits, so that their effect on the con­ solidated figures in Swiss francs was insignificant.
Two companies have increased their share capital — the British company from £ 500,000 to £ 750,000, and the European General from Sw. frs. 10.0 million to Sw. frs. 15.0 million.
Fire 1,048 978 i 974 956 850 Hail 19 16 17 14 17 Burglary/Fidelity and allied lines 77 79 81 66 70
Aviation 75 85 112 97 62 Atomic Risks 3 2 2 2 2 Credit, Surety 116 100 109 107 92
Income-producing Assets (consolidated according to cost or market method) in millions of francs 1973/74 1972/73 1971/72 1970/71 —I
73 i Net Cash Deposits with insurance Companies 1,393 1,367 1,402 1,392
1973/74 1972/73 1971/72 1970/71 1969/70 ; Fluctuations in Stock Exchange and Foreign Currency Rates, Depreciation — 66.6 — 34.4 — 8.7 — 3.4 —27.2 i
Underwriting Result Income from Free Investments Management Expenses Net Realized Capital Gains/Losses Taxes 1
The gross Life business in force increased by C $ 223 million to C $ 1,476 million. The cost of claims increased, leading to a sharply reduced underwriting result. Larger capital losses counteracted higher in­
Due to increased retentions by ceding companies and other factors, the growth of premium volume in non-Life reinsurance slowed down when compared with the previous year. In the absence of major losses, the underwriting result once again proved satisfactory. There was substantial growth of produc­ tion in Life business, with a corresponding increase of the financing requirement. — The dividend paid in 1974 was raised from Rand 100,000 to Rand 150,000.
European General Reinsurance Company of Zurich Share Capital 8w. frs. 15,000,000 1973/74 SÄ 1972/73
because the negative balance in the account for fluctuations in stock exchange and foreign currency rates and depreciation was somewhat lower, due to a positive balance from currency differences. — In 1974, a dividend increased to Sw. frs. 2.3 million is to be paid (previous year, Sw. frs. 2.0 million).
North American Reinsurance Corporation 245 Park Avenue, New York, N.Y. 10017 with Offices in Atlanta, Boston, Chicago, Houston, Los Angeles and San Francisco North American Reassurance Company 245 Park Avenue, New York, N.Y. 10017 with Offices in Aurora (Denver), Chicago, Dallas and Hartford
Canadian Reinsurance Company 95 St. Clair Avenue West, Toronto M4V 1N9, Ontario with an Office in Monfreal