Proposal for Allocation of Profit 64 Report of the Statutory Auditors 65
Swiss Re Shares 66 Environmental and Climate Protection 68 Global Presence 70 Subsidiaries and Affiliated Companies 72 Publications 80 Glossary of Technical Terms 83
With a price increase of 211.0% since 1 January 1987, Swiss Re's registered shares have performed substantially better than the Swiss stock market (+88.8%) and Swiss insurance shares (+69.1%).
Performance of Swiss Re registered shares vs the SBC total market index and the SBC insurance index; 1 January 1987 to 10 October 1996
Gross premiums 12 848 12 950 Profit on ordinary activities 1 092 709 Total result 1 101 932 Ordinary result per share CHF 75 50 Dividend pershare CHF 22.50* is Capital funds 9130 8 019 Return on equity (in percent) 12.7 8.7 Number of employees 6 782 7 373 in reinsurance companies 4173 3 691 in service and othercompanies 2 609 3 682 * subject to approval by the General Meeting 1 Swiss Re Group
The Board of Directors proposes to the General Meeting on 22 November 1996an increase in the dividend payment from CHF 15.— to CHF 22.50 per share. Together with the reduction of the par value of Swiss Re shares by CHF 10.-per share in March of this year, a total of CHF 479 million will flow back to our shareholders in 1996if the proposed dividend pay­ ment is approved.
We have expanded our position in the reinsurance market in the past two years. Our investments in growth areas — especially in Asia, Latin America and eastern Europe, in the life and health reinsurance lines and in our services for solving financial problems — show satisfying results. In the USA, the world's largest reinsurance market, we have created a favourable setting for the expansion of our activities with a new management and by implementing a series of strategic and organisational measures. Also here, we foresee a substantial improvement in results already in the 1996 financial year.
This company, with head office in London, ranks eighth amongst the world's largest reinsurers. With over 1300 employees in 27offices worldwide, the company generated gross premiums of CHF2.4 billion in 1995. Mercantile & General Re has a strong market presence in life and health reinsurance, which accounts for 77 % of its business volume. The acquisition makes Swiss Re the world's leading Group in this strategically attractive market. At the same time, the purchase of Mercantile & General Re strengthens our presence in North America.
The Board of Directors has appointed Walter B. Kielholz to succeed him as the new Chief Executive Officer. Mr Kielholz will assume his new function on 1 January 1997.
Pierre L. Ozendo, Chief Executive Officer of Union Re since 1 January 1996, joined the Executive Board on 1 July 1996.
Eastern Europe Latin America Bernard Gilliand International Business Willy Hersberger Gerhard Holzel' Hans-Kaspar Zulauf
Aviation Schneeberger Run-off Management Heini Bürg! and Risk Services Marine Erwin Zimmermann Erich Steider
Bangkok Beijing Flong Kong Kuala Lumpur Manila Seoul Singapore Taipei Tel Aviv Tokyo
Atlanta Boston Chicago Cleveland Dallas Manchester NewYork Philadelphia Phoenix San Francisco
21 January to 2 February Gale-force storms and uninterrupted rainfall in large areas of Northern Europe wreak havoc and claim many lives.The hardest hit countries are Germany, France, Belgium, the Netherlands and Switzerland. Insured losses amount to CHF746 million, of which Swiss Re carries CHF2 million.
20 March A rush-hour attack onTokyo's subway system in which the nerve gas Sarin is em­ ployed causes 11 deaths and 5500 injuries. Swiss Re has no claims from this event.
27 March to 7 April At the first conference of the treaty partners of the Climate Convention in Berlin, two employees of Swiss Re also participate within the official Swiss delegation. Based on Swiss Re's work on the topic of natural catastrophes, they document the alarming trend of extreme weather damage and suggest possible contributing factors, eg the emission of greenhouse gases.
1 April Swiss Re's management structure is sim­ plified through the consolidation of Group Management and the Executive Board. At the same time, the various divisions are more aligned to clients and markets, with some new responsibilities added and new appointments made.
28 May The northern part of Russia's Sachalin Island is shaken by an earthquake registering 7.6 on the Richter scale. Multi-storey apartment buildings collapse in the settlement of Neftegorsk.The natural catastrophe takes 1825 lives. Due to the sparsely insured property, no reinsurers are affected by the damage.
5 June The Swiss Re Group launches its new cor­ porate design worldwide. With the ex­ ception of Union Re and Bavarian Re, all of Swiss Re's reinsurance Group companies now operate in the market under the uniform name Swiss Re, with the addition of the respective country name.
29 June 500 people are killed and over 900 injured by the collapse of a department store in Seoul, South Korea. Swiss Re pays CHF 0.5 million in claims under life reinsurance contracts.
23 July Employers Re acquires a majority holding in Frankona Re. It was already announced in May that the American reinsurer has bought the majority of Aachener Re.
5 September Swiss Re registered shares exceed the CHF 1000 mark for the first time, closing at a price of CHF 1001. A year earlier, on 5 September 1994, the registered share price was only CHF 552.
12 September The Swiss Re publication series sigma receives the award "Analyst/Researcher of the Year" from the English magazine "The Review". Since 1987 the sigma series reports Swiss Re's economic findings and market analyses six times a year to clients and other interested parties.
26 September Swiss Re opens a contact office in Seoul. This enables Swiss Re to additionally place its know-how at the disposal of South Korea's insurance industry locally. As part of its new strategy for Asia, Swiss Re expects a significant increase in its market share in South Korea.
4 October Swiss Re and CS Holding report on the joint insurance investment fund Securitas Capital Partners Programme. Swiss Re and CS Holding have committed USD 500 mil­ lion to the fund.The foundation of Swiss Re Financial Products, headquartered in NewYork.was already announced in June, and Reinsurance Finance Consultants, Zurich, was established in August.
23 November Swiss Re signs the Statement of Environ­ mental Commitment by the Insurance Industry within the scope of the United Nations Environment Programme in Geneva.This statement forms the basis for comprehensive efforts towards environmental protection in the insurance industry and is subsequently signed by around 60 companies in 18 countries.
24 November The 131st General Meeting of Shareholders approves the introduction of the single class of share and the removal of voting restrictions. Swiss Re now has a modernised capital structure designed to simplify share trading and make it more attractive to foreign investors.
16 February Shortly after launch, a Chinese "long march 3B" carrier rocket collides with the US communications satellite Intelsat 708 and explodes. There are insured losses of CHF250 million of which Swiss Re carries CHF3 million.
II April A catastrophic fire at the airport in Düssel­ dorf claims 16 lives and leaves 62 people injured. There are insured losses of CNF 315 million of which Swiss Re carries CHF13 million.
5 May Fire destroys the head office of the major French bank Credit Lyonnais in Paris. Twenty-four people are injured.There are insured losses of CHF 494 million. Swiss Re's share in the losses amounts to CHF 35 million.
5 June Swiss Re's new office in Sao Paulo, Brazil, begins operation.
1 July Pierre L. Ozendo joins Swiss Re's Executive Board. He remains Chief Executive Officer of Union Re, which he became on 1 January 1996.
1 July General Re, the largest reinsurance com­ pany in the United States, takes over National Re. Both companies have their head offices in Stamford, Connecticut.
8 July The Swiss Re Group goes on line on the World Wide Web with its own Internet server. Information can be called up at site 24 July The Swiss Re Group company Western Atlantic Reinsurance Corporation adopts the new name European Reinsurance
Corporation of America.The company, which offers non-traditional reinsurance, has its head office in NewYork.
11 September The Reconstruction and Renewal plan for Lloyd's of London is accepted by 94% of the Names.
10 October The registered share price reaches a daily high of CHF 1370 and so Swiss Re's stock market capitalisation exceeds CHF20 billion for the first time.
Profit and loss account The Swiss Re Group's ordinary profit showed a material improvement in 1995. The 54% increase in earnings to CHF 1092 million is attributable to im­ proved profitability in the non-life business and a substantially higher invest­ ment result. The individual components of ordinary profit show different developments. The underwriting result in 1995 improved substantially from CHF 512 million to CHF 755 million. The key ratio for the assessment of the non-life business, the so-called combined ratio, improved by one point from 109 to 108. The underlying improvement in the claims ratio is mainly due to the lack of large claims and catastrophe claims. The results and key ratios for the non-life business are shown after an increase of CHF 418 million in the provision for future natural catastrophes.
Return on investment The investment result, including allocated investment return, increased by in %
CHF 501 million from the previous year to CHF 2605 million. This is mainly due to the significant increase in invested assets by about CHF 7 billion as a result of the sale of our insurance operations and to the strong positive cash flow. The realised capital gains correspond to our long-term strategy to realise a total investment return which at least matches the yield on fixed income securities. This goal was again achieved in 1995; the return on investment rose by 0.7 per­ centage points to 6.8%.
balance sheet at the end of the year; at market value, they amounted to CHF 44.2 billion.
Technical provisions increased to CHF 29.9 billion. The reserve ratio in the non-life business increased by 14 percentage points to 244%.
Capital funds of the Swiss Re Group were stated at CHF 9.1 billion in the balance sheet at year-end. At market value, they amounted to CHF 11.0 billion. The relationship between ordinary profit and average employed capital funds, 1993 1994 1995 namely the return on equity, rose substantially from 8.7% in the previous year to 12.7% for 1995.
— Extensive projects for improvement of the quality and benefits of intraGroup information technology applications, as well as for reorganisation of our global investment activities according to economic regions instead of legal entities.
— Far-reaching changes in all work processes involved in the preparation of the annual accounts, so that the report on the 1996 financial year will already he available in June 1997.
We are convinced that the numerous measures which have been undertaken have helped to strengthen both structurally and materially the profitability and thus the market standing of the Swiss Re Group.
The insurance industry can look back on a successful 1995 financial year. How­ ever, competitive forces seem to be regaining momentum. Following a notable period in which profit took precedence, companies are again fighting increas­ ingly for additional market share. As a consequence, the consolidation process is accelerated, especially in the developed industrial markets of Europe and the USA, where underlying premium growth is stagnating. For banks and insurers, this is leading to both cooperation and competition.
The Netherlands 8% • Others 24% Additional business opportunities are opened up for insurers in Europe by free movement of services and deregulation, by financing problems within social security systems, by risks related to products, professional and environmental liability and to health, as well as by distribution through banks and direct marketing. New competitors with unconventional products and distribution channels, rapid developments in technology and communication methods, and ongoing consolidation and merger processes create challenges especially for companies with traditional organisations and structures. As a result of the generally favourable claims experience, particularly in property insurance, premium rates for large industrial risks as well as for the cover of natural hazards have already come under renewed strong pressure. The growing pressure of deregulation trends has exposed motor insurance in most countries to extremely intense competition. In some markets, the shift from proportional to non-proportional reinsurance solutions is beginning to gain momentum. 16 Swiss Re Group
In face of the increasing market consolidation, the trend to higher retentions by insurers and the previously mentioned stagnation of direct business, our premium volume fell slightly. Despite a large fire claim (at the SMH watch factory) which placed a burden of CHF 30 million on the property line, the total result may be viewed as satisfactory.
Germany The German market experienced a cyclical high point in 1995: the preceding three years with heavy claims triggered premium adjustments in the motor business, especially in the full and partial vehicle damage areas. Car thefts, mainly responsible for the claims, also declined. This happened on the one hand because expensive new cars are now equipped with reliable security features and on the other because fewer cars were diverted into tbe eastern European markets. Tbe deregulation of motor liability (the elimination of market rates) caused an average price decline of 3% by mid-1996. In the industrial fire business, premium rates for peak risks increased in the course of the past three years.The claims burden in 1995 was clearly below-average.
The total result for the Swiss Re Group was very satisfactory.
Austria In future, the Austrian market will also be unable to escape the pan-European trend to thinner margins. We recorded premium growth and improved results in 1995.
Central and Eastern Europe Following the formation of additional new insurance companies, some countries exhibit overcapacity. Two substantial insolvencies have already occurred in Poland.
In particular, industrial insurance already faces renewed price pressure due to heated competition. The development of premium growth will increasingly depend on demand from the coming economic upswing.
Since September 1996, we have been underwriting facultative property and engineering business in our new office in Paris. This will significantly strengthen our position in these lines.
United Kingdom Insurance companies generated excellent results again in all key lines in 1995. Pressure on premium rates increased due to growing competition. Continuing expansion of direct marketing heightened the competitive situation in the personal business.
Substantial capacity was offered in the reinsurance market. Against the back­ drop of a generally favourable claims experience, premium rates declined in certain key lines, but remained generally unchanged in business with long latent claims.
Italy Impending legal changes affecting public construction contracts will provide substantial impetus in surety, engineering, general liability and decennial liability insurance. We consider the Italian market to be growing, especially by opening up new distribution channels such as telemarketing or sales through bank branches.
We were successful in increasing our portfolio. As in the previous year, our result was positive. In order to better exploit the potential of the Italian market, we opened a representative office in Milan in autumn 1996.
Spain The unfavourable economic situation and extremely tough competition in the insurance sector impede industry growth. A new law in Spain should limit the existing legal uncertainty and arbitrariness in the liability insurance business, especially in motor insurance.
The decline in premium volume in the Asia Pacific region is due in particular to marked currency depreciations. In South East Asia, the focus of our efforts in the region, premiums expressed in US dollars have increased by 25 %.
Japan/Korea In Japan non-life insurance recorded moderate premium growth despite a stagnant economy. As in Korea, additional liberalisation is planned for the insurance industry.
China!Hong Kong!Taiwan The People's Republic of China currently exhibits strong growth, particularly in the insurance sector, whereas the markets in Hong Kong and Taiwan are marked by consolidation and withdrawal tendencies.
Other South East Asian Countries In their build-up and expansion, most South East Asian markets are marked by high price and competitive pressures. National regulatory authorities face the difficult task of carefully directing liberalisation and deregulation on the one hand and development and strengthening of the local market on the other.
We further expanded our presence in the region by establishing a branch office in Kuala Lumpur and a contact office in Bangkok.
India India is a significant yet highly regulated market which is inaccessible to foreign insurers. Continuing economic growth and expected liberalisation, which should also encompass the insurance industry, open up exceptional potential in the market. We have therefore decided to focus more strongly on this market and will soon open a representative office in Mumbai (Bombay). Positive results were recorded again in 1995.
Israel In order to maintain our already significant market position in Israel and be able to more intensively and efficiently conduct our facultative business, we opened a representative office in Tel Aviv.
Arab Countries "We are proceeding very selectively in the Arab markets in view of their different development trends.
Australia and New Zealand Australia and New Zealand were spared from natural catastrophes again in 1995. Despite additional erosion of margins in the Australian market, we recorded another very favourable result. Moreover, we maintained our leading market position. In New Zealand we are on the verge of gaining a leading position.
As a result of a series of strategic, operational and organisational measures, our companies active in the USA are very well-positioned to exploit the oppor­ tunities in the world's largest reinsurance market.
increased the share of non-proportional treaties and financial covers in the portfolio. This will reduce premium volume for the time being, but improve profitability. Swiss Re America is committed to achieving sustained growth while maintaining ambitious profit goals. The emerging results are gratifying.
Canada Risk-based pricing, measures to prevent claims and control costs, and improved investment returns all contributed to the best result for the insurance industry since 1983. Despite the ongoing trend to consolidate, property insurance and accident/liability insurance remain highly competitive businesses. These develop­ ments had a positive effect on the total result of Swiss Re Canada in 1995.
Latin America Unfolding liberalisation, a growing consolidation process in the insurance sector and the current overcapacity in the reinsurance sector are spurring a massive reduction in premium rates. Underwriting results remain favourable due to the lack of catastrophe claims. In the main markets, we will concentrate our capacities and adjust the underwriting policy to the medium-term return targets.
Property 29% Liability 11% Motor 19% Accident/health 9% Other lines 18% Life 14%
Property Due to its short-term nature, property insurance is much more strongly subject to cyclical changes in the supply and demand for reinsurance capacity than third party liability business. Prices fell by up to 15 % in some segments and had subsequent effects on our premium volume.
Natural catastrophe cover prices are highly sensitive to current events. Despite the Great Hanshin earthquake in Japan at the beginning of 1995 and the ex­ ceptionally severe hurricanes in the Caribbean - "Luis" and "Marylin" impacted our result by a total of CHF 53 million - few claims burdened the insurance industry in the financial year.
Liability Our premium income in this line fell significantly compared with the previous year. However the total result improved. Insurers' efforts to gain additional market share also increase the demands on reinsurers. Pricing must be attractive, changes must be introduced in conditions, and innovation must be supported in the design of products.
Motor New products, pricing criteria and distribution methods in primary insurance call for more advice on pricing, including new methods and instruments, and on the formulation of new cover concepts in reinsurance. There is an alarming growth in the costs for bodily injuries worldwide.
Our premium volume was up slightly, while the claims ratio rose in 1995.
Accident/health (including disability) Health insurance gained significance in 1995.This is due to the continuing rise in costs and premiums and the population's growing lack of confidence in existing social security systems. The Swiss Re Group expects this trend to continue unabated in the future, both for its clients and its reinsurance port­ folio.
Marine The positive trend in marine insurance shows signs of an earlier and much stronger reversal than anticipated. We have therefore reduced capacity provided to the market. Together with increased retention by insurers and additional consolidation of providers, this led to a modest decline in volume.
Credit and surety reinsurance recorded weak premium growth due to appre­ ciation of the Swiss franc, but posted a strong total underwriting result. Favourable economic conditions in most key markets, active portfolio manage­ ment and diversification, and underwriting measures all contributed to this outcome. The implementation of credit risk management which uses state-ofthe -art analytical tools will further increase the quality of our portfolio. Despite continuing pressure on premium rates and unfavourable prospects, particularly due to the structural adjustment process in the German economy, we expect steady improvement in the total underwriting result.
The reinsurance operations in the captives segment are experiencing turbulent development at present. These large clients are increasingly becoming the 25 Swiss Re Group
Our underwriting activity in this area is also complemented by special services: the International Risk Management Group advises large industrial clients on the determination of their risk retention and on measures to lower risk; Reinsurance Finance Consultants develops tailor-made risk financing solutions which are unavailable in the insurance markets; the Thomas Howell Group provides services in claims management and claims administration.
Developments in the primary life insurance markets continue to provide a favourable background for reinsurance. In the saturated markets of Europe and North America, although cost pressures are producing some consolidation among longstanding participants, social security reform is leading to increased opportunities. These markets are also attracting new entrants with perceived advantages in their distribution channels and use of technology. In other markets privatisation and deregulation, especially the admission of foreign insurers, help to accelerate the previously sluggish economic growth. This process of structural change is reflected in the changing needs of our clients. Products with healthrelated risks and products which involve a financial component in addition to risk transfer are attracting more demand.
Results Life business achieved premium growth of 16% in Swiss francs or 30% when measured in original currencies.This growth was strongly influenced by the consolidation of a half-year for Alhermij, the Dutch reinsurer acquired on 30 June 1995, and by a change in accounting practice at Union Re. Excluding these special factors, there was zero growth in Swiss francs and 12% in original currencies.
Eor the accident and health business (including disability) written in the life division, premiums grew by 24% in Swiss francs and 36% in original currencies, or by 13% and 24% respectively without the special factors mentioned above. The strong growth in health business is driven mainly by increases in group medical and disability insurance in the USA and by rises in disability business across all European markets.
Structure of investments as at 31.12.1995 100% = CHF41 685 million in%
Our investment policy placed greater emphasis on shares, which thus changed the structure of investments slightly. Fixed income investments continue to account for the bulk of the portfolio. Investment in shares grew substantially during the year and now accounts for about 20 % of the portfolio, reflecting new commitments and higher share prices. Real estate holdings reduced slightly. Investments in unconsolidated subsidiaries and affiliated companies also reduced slightly, as a result of portfolio modifications.
1995 1994 Structure of Investments CHFm % CHFm % B Fixed Income securities 28 406 68 24 089 70 • Shares 8131 20 5 202 15 • Land and buildings 2 953 7 2 977 9 • Investments in unconsolidated sub­
The total investment result rose significantly from CHF 2.1 billion to CHF 2.6 billion, reflecting both an increase in investment volume and favourable capital market conditions. This result represents an investment return of 6.8% (1994: 6.1%).
The most important components which contributed to this investment result are: — Current investment income grew due to the substantial rise in investment volume. — Valuation readjustments and realised gains on investments increased as a result of positive stock market and interest rate trends. — Depreciation needs and realised losses on investments were greater than in the previous year. — Management charges reduced somewhat.
Premiums written Change in the provision for unearned premiums 2. Other technical income 3. Claims incurred -10343 Claims paid Change in the provision for claims outstanding 4. Change in the provision for life, health and disability reinsurance 6. Change in other technical provisions 9. Allocated investment return
Income from land and buildings Dividend, interest and other income from unconsolidated subsidiaries and affiliated companies 170 Dividend income 188 Income from fi^ed income securities, loans and mortgages Income from time deposits and other investments
3. Investment charges - 543 - 443 Investment management charges - 127 - 147 Valuation adjustments on Investments - 252 - 64 Realised losses on sale of Investments - 164 - 232 6. Other Income, Including other valuation readjustments 402 470 7. Other charges. Including other valuation adjustments - 505 - 538
Profit on ordinary activities aftertax 1092 709 5. Extraordinary Income 514 3508 6. Extraordinary charges - 500 - 3160 7. Tax on extraordinary profit - 3 - 121
Profit for the financial year 1101 932 31 Swiss Re Group
II Investments for unit-linked reinsurance policies where policyholders bear the investment risk
Prepayments and accrued income Accrued interest and rent Other prepayments and accrued income
1 Shareholders' capital and reserves 9130 8019 1. Share capital 301 301 2. Share premium account 2 931 2 648 3. Reserve for own shares 708 155 4. Revaluation reserve 1881 1 442 5. Retained earnings brought forward 2 208 2 541 6. Profit for the financial year 1 101 932
III Technical provisions 29606 28307 1. Provisions for unearned premiums 1830 2 179 2. Provisions for life, health and disability reinsurance 4243 3 658 3. Provisions for claims outstanding 22 821 21 555 4. Provisions for bonuses and rebates 600 452 5. Other technical provisions 112 463 iV Technical provisions for unit-linked life reinsurance policies where policyholders bear the investment risk 263 302
Total liabilities and shareholders' capital 45 617 42499 33 Swiss Re Group
Additional information on the Group accounts Gross premiums by country 38 Premiums by line 38 Net technical account by line 39 Investments 40 Investment result 40 Investments by currency 41 Technical provisions 42 Technical provisions by line 42 Technical provisions by currency 42 Capital funds 43
The Group accounts are prepared in accordance with the European Union accounting directives for insurance companies, with Swiss Corporation Law and with the accounting and reporting recommendations issued by the Swiss Foundation for Accounting and Reporting.
Fixed income securities Fixed income securities are valued in accordance with the amortised-cost method and stated at amortised cost.The difference between cost and redemption value is amortised as a premium or discount.This amortisation is included in income from fixed income securities in the profit and loss account. Provisions required for perma­ nent diminution in value are deducted.
Provisions for claims outstanding are based on the full expected amount of the related payments, with the exception of the life business and partly for the accident, health and disability businesses, in which the present value of future income and outgo are set aside as provisions. In financial reinsurance, provisions forclaims out­ standing are also partially accounted for at present value.
Provisions forclaims outstanding are calculated individually or by statistical methods. They also include provisions for claims incurred but not yet reported as well as pro­ visions prescribed by local regulatory authorities for future claim fluctuations and for large and catastrophic losses.The amount of these provisions is disclosed in the notes to the financial statements.
The tax charge disclosed relates to the profit for the financial year. Valuation differ­ ences between the Group and the local accounts are included in the provision for deferred taxation.
In departure from European Union directives, the compensation of the Board of Directors and the Executive Board has not been disclosed.
Investments for unit-linked life reinsurance policies where policyholders bear the investment risk
Valuation adjustments 6 20 ^ 55 1 - 73 - 31 - 174 Realised gains or losses 163 8 43 7 202 150 573 Unrealised gains or losses 24 - 1 23 40 Swiss Re Group
Land and buildings 2 280 459 16 12 186 2 953 Investments in unconsolidated subsidiaries and affiliated companies 192 386 356 34 688 128 1784 Loans to unconsolidated subsidiaries and affiliated companies 38 38 Shares 2 646 1704 390 476 1 177 1 738 8131 Fixed income securities and registered debt instruments 2 855 3 723 1933 1 252 8 297 5 901 23 961 Loans 17 32 2 54 105 Mortgages 330 21 1 203 555 Time deposits 192 72 11 57 260 518 1 110 Other investments 6 71 12 24 113 Deposits with ceding companies 392 443 342 20 212 1 266 2 675 41 Swiss Re Group
Technical provisions Provisions for unearned premiums Provisions for life, health and disability reinsurance Provisions for claims outstanding Provisions for bonuses and rebates Other technical provisions
Technical provisions for unit-linked life reinsurance policies where policyholders bear the investment risk
Key figure* Technical provisions ratio 139 577 218 344 172 244
Effects of exchange rate fluctuations on opening balance sheet figures Dividend by the parent company for the previous year Additional paid-in capital by shareholders Profit for the technical year Change in revaluation reserve Goodwill offset against retained earnings Valuation adjustments
Capital funds including unrealised gains Capital funds on 31 December Unrealised gains on investments less attributable to policyholders Deferred taxes Capital funds on 31 December including unrealised gains, before allocation of profit in%
Key figure* Return on equity * Refer to glossary for definition 43 Swiss Re Group
III Cash flow from financing activities Change in liabilities on debenture loans 983 0 Change in other liabilities - 632 372 Additional paid-in capital by shareholders 283 281 Dividend - 211 142
IV Cash flow (change in cash funds) Cash funds on 31 December (previous year) - 400 - 493 Cash funds on 31 December 355 400 Effect of currency translation 13 21
Scope of consolidation The Dutch Alhermij Group acquired on 30 June 1995 is consolidated for only part of the year in the profit and loss account and the balance sheet. Following the sale of Gay &Taylor, Inc., Atlanta, this company is no longer included in the consolidated accounts. Swiss Re's holding in the Europeesche Verzekering, Amsterdam, was partially sold; the remaining minority holding is carried at cost.
precautionary provision for catastrophe claims provisions for long latent liability claims
Land and buildings Land and buildings with a cost of CFIF 632 million (1994: CFIF 551 million) and a mar­ ket value of CFIF 810 million (1994: CFIF 729 million) are used by Group companies for own purposes. Fair market rent is charged for their use. The total cost of land and buildings is CHF 2.184 billion (1994: CHF 2.172 billion).
Subsidiaries and affiliated companies Referto page 72ff for information on unconsolidated subsidiaries and affiliated com­ panies.
Income from companies stated at Swiss Re's share of their equity 8^ 21
Income from unconsolidated subsidiaries 64 13 Income from other minority holdings 16 34 Income from unconsolidated subsidiaries and affiliated companies 166 135
The amount in the respective balance sheet positions related to unconsolidated sub­ sidiaries is as follows: Fixed income securities 9 10 Loans to unconsolidated subsidiaries and affiliated companies 38 105 Cash deposits (assets) 113 383 Debtors from insurance operations 19 4 Other debtors 43 20 Cash deposits (liabilities) 0 37 Liabilities from insurance operations 31 122 Other liabilities 140 236
Statement of changes: (CHF millions) 1995 Technical provisions, including technical provisions for unit-linked life reinsurance policies where policyholders bearthe investment risk, on 31 December (previous year)
Effect of currency translation Consolidation changes Change in technical provisions in accordance with the ordinary profit and loss account Increase in provisions for claims outstanding included in extraordinary charges Technical provisions, including technical provisions for unit-linked life reinsurance policies where policyholders bearthe investment risk, on 31 December
Provisions for long latent injury claims outstanding on 31 December 1995 reflect the carefully estimated future trend of claims payments and claims settlement charges. Due to the inherent uncertainties and assumptions on which these estimates are based, however, we cannot exclude the need to make further additions to these provi­ sions in the future.
Other provisions contain a provision of CHF 424 million relating to a guarantee in the books of Swiss Re, Zurich.This provision was made in connection with the minority holding in Credit Suisse Financial Products, London.The provision was established at the direction of the Swiss insurance supervisory authority.
Liabilities due after more than five years There are liabilities due after more than five years in the sum of CHF 22 million (1994: CHF 0.3 million).
There are liabilities covered by valuable security in the sum of CHF 22 million (1994: CHF 35 million).
In addition, there are three unlimited guarantees.lt is not expected that any payments will be made underthese guarantees.
We have audited the consolidated financial statements, consisting of the profit and loss account, balance sheet and notes to the financial statements, of the Swiss Reinsurance Group presented by the Board of Directors for the year ended 31 December 1995, as set forth on pages 30 to 48, in accordance with the provisons of the Swiss Code of Obligations. Our audit was conducted in accordance with auditing standards promulgated by the profession and in accordance with the International Standards on Auditing issued by the International Federation of Accountants (IFAC).We confirm that we comply with the legal requirements concerning professional qualification and independence.
In our opinion the consolidated financial statements give a true and fair view of the financial position of the Swiss Reinsurance Group as of 31 December 1995, and of the results of its operations and its cash flows for the year then ended in accordance with the 4th and 7th Directive and the Insurance Directive of the European Union.
Hanspeter Thiel Peter Ochsner Auditors in charge 49 Swiss Re Group
Based on the published figures before the change In accounting principles and Including the Insurance companies sold as of 31.12.1994 or 1.1.1995.
Shareholders' capital and reserves stated In the balance sheet Shareholders' capital and reserves at market value, after taxes 50 Swiss Re Group
Profit and loss account Gross premiums 13 462 12 950 12 848
Claims Incurred - 9 486 - 9 505 - 9 580 Change In the provision for life, health and disability reinsurance - 428 132 - 82
Shareholders'capital and reserves stated in the balance sheet 8176 8019 9 130
Lukas Mühiemann*^ Christoph Sievers Otto Kern Waiter B. Kieihoiz*^ Thomas Hess
Departments and Staff Switzerland, Italy, Austria Andreas Beerii Peter Arbenz, Jakob Eugster, Peter Hagnauer, Filippo Raffaele, Sebastiaan Reitsma, Andreas Schraft
Germany, Eastern Europe Willy Hersberger Peter L. Bär, Markus von Escher, Jean-Pierre Koib, Martin Oesterreicher, Rudolf Siegrist, Bernard Tettamanti
Netherlands, Nordic Countries Peter Schmid Stephan Imfeid, Carl Mäder, Kurt Weber
Engineering Richard Giückier Rene Bolliger, Max Bommeli\ Hans Gfeller, Hans Mahrla, Kurt Staub
Marine Erich Steider Marc A. Bioesch, Walter M. Meliert, Fritz Stabinger
Asia, Pacific Hermann Hefti Sigisbert Albln, Jürg Bleuler, Felix Walter Bessert, Glon Duri Cantleni, Manfred Freylinger, Franz-Josef Hahn, Rudolf Oschwald,Tomihiro Segawa
Credit and Surety Adrian Sulzer Charlotte A. Gubler, Peter Hoppler, Jean-Paul Schwei­ zer, HansVoser
Life Herbert Lüthy Luigi Bertolotti, Philip Bland, Reynald Boutin, Yvan Burgener, Jean-Michel Chatagny, Simon Courant, Manfred Fessel, Norbert Hähnel, Peter King, Heinz Kramreiter, Bogomil Marn, Hannes Menzi, Walter A. Müller, Alain Perret, Fritz Peter, Hanspeter Schellenberg, Fredy Schöpflin, Suzanne Steiner, HanspeterTobler, Jean-Pierre Vogel, Bruno Walther, Peter Zutter
Corporate Accounting Helmut Brechet Rudolf Böschung, Guido Emmenegger, Tony Ricken­ bacher, Barbara Trentini-Gut, Rene Winzeler
Group Information Technology Yury Zaytsev Andy Ben-Artzy, Markus Bienz, Josef Brun, Hans­ walter Buff, Erwin Franclick, Fridolin Hauser, Jürgen Heck, Thomas Jäggi, Christoph Locher, Beat W. Niethammer, Markus Vogel
Although around 40 % of the total gross premium income of the Swiss Re Group is attributable to business acquired directly by Swiss Re, Zurich, assessment of our market position must focus primarily on the profitability and financial strength of our consolidated global organisation.
The technical reserves have declined for several reasons. Retrocession from different Group companies ceased or was reduced in 1995 and the correspond­ ing reinsurance portfolios returned. In addition, USD 700 million was transfetted to Swiss Re America from funds allocated in 1994 for the formation of reserves to cover long latent liability claims. The value of the reserves was influenced considerably by the strong Swiss franc; due to currency fluctuations they decreased by CHF 1.1 billion compared with the previous year.
The 1995 financial year was marked by a more favourable trend on the capital markets than in the previous year. However, the strong Swiss franc led to only minor increases in current returns.The realised gains on the sale of investments almost doubled in the year under review in the face of larger valuation readjust­ ments. To a large extent these include legally permitted, precautionary valuation adjustments.
Investments excluding subsidiaries stated in the balance sheet have increased over the previous year. Growth was, however, dampened by valuation adjust­ ments and by lower exchange rates for most investment currencies. Shares were preferred for new investments.
Capital funds amounted to CHF 4.772 billion at year-end 1994 (before profit allocation). In the first half of 1995, 555 088 registered shares were subscribed through the exercise of the B shareholder warrants. Swiss Re received a premium of CHF 283 million (after deduction of issue costs of CHF 11 million) which was allocated to reserves. Including the dividend to be distributed, capital funds equalled CHF 5.345 billion at year-end 1995.
The General Meeting of Swiss Re's shareholders on 24 November 1995 approved the creation of a single class of share and a reduction of the par value by repayment of capital. The existing 1019700 bearer shares of par value CHF 20 were converted into registered shares. Nominal share capital remained unchanged at CHF 300 866 020, comprising 15 043 301 registered shares of par value CHF 20.
A further step was to reduce share capital by CHF 150 433 010 by lowering the par value of Swiss Re's shares from CHF 20 to CHF 10.The reduction of capital became effective through entry in the commercial register on 22 February 1996, and was completed with the repayment of capital to share­ holders on 1 March 1996. As of this date, Swiss Re's nominal capital is valued at CHF 150 433 010.
56 Swiss Re, Zurich 1995 1995 1995 1994 CHF millions Gross Retroceded Net Net
Premiums written 5 458 - 302 5 156 6 681 Change in the provisions for unearned premiums 346 15 331 42 2. Claims incurred - 3955 170 - 3785 - 5084 Claims paid - 5 209 226 - 4983 - 4 543 Change in the provisions for claims outstanding 1254 56 1 198 - 541 3. Change in the provisions for life reinsurance - 57 0 - 57 16 5. Operating expenses - 1586 - 1859 Commissions - 1243 54 - 1 189 - 1486 Administrative expenses - 397 - 373
Income from land and buildings 102 106 Dividend and interest from subsidiaries and affiliated companies 219 233 Dividend income 92 69 Income from fixed income securities, loans and mortgages 674 639 Income from time deposits 39 22 Income from deposits with ceding companies 82 97 Realised gains on investments 724 385 2. Investment charges - 1101 - 713 Investment management charges - 67 - 59 Valuation adjustments on investments - 994 - 558 Realised losses from sale of investments - 40 - 96
III Total result 1. Technical result 707 361 2. Non technical result - 31 - 17 3. Ordinary profit before tax 676 344 4. Tax on ordinary profit - 175 - 52
Profit for the financial year 501 530 57 Swiss Re, Zurich
II Technical provisions 1. Provisions for unearned premiums 2. Provisions for life reinsurance 3. Provisions for claims outstanding 4. Provisions for profit commissions 5. Provision for catastrophe claims
The 1995 financial year comprises the accounting period from 1 January to 31 December 1996. However, due to local convention, reinsurance business from Japan included in the accounts is for the period from 1 April 1995 to 31 March 1996.
The allocated investment return includes the actual investment income which can be directly attributed to the reinsurance business. In the remaining instances, it contains the investment return generated on the investments covering the technical provisions.The interest rate reflects the currency-weighted 5-year average yield on 5-year government bonds.
The investment management charges are allocated to the reinsurance business and the investment business on an imputed basis.These charges include income from land and buildings as well as self-charged rent on properties used for own purposes.
The following items are stated at nominal value in the balance sheet, after deduction of known delcredere risks if applicable: - Loans to subsidiaries and affiliated companies - Mortgages - Time deposits - Deposits with ceding companies - Debtors - Cash at bank and in hand
The technical provisions for life reinsurance business are determined on the basis of actuarially calculated present values. They also include the provisions for unearned premiums of life reinsurance and the deduction of deferred charges.
Provisions for claims outstanding are determined on the basis of information provided by clients. If necessary, cautious adjustments are made to these reserves based on past experience. Additional provisions are formed for claims that are incurred but not yet reported. Unpaid insurance obligations are set aside at the full expected amount of future payment. At the direction of the Swiss insurance supervisory authority, a provision for catastrophe claims is being established. Annuity liabilities are calculated at actuarially determined present values.
Provisions for profit commissions are based on contractual agreements with clients and depend on the results of reinsurance treaties.
All items in the balance sheet and the profit and loss account denominated in foreign currencies were uniformly translated into Swiss francs at the currency exchange rates applicable on the balance sheet date. Differences arising from the recalculation of the opening balance sheet are booked via a corresponding provision and have no impact on the profit and loss account.
The currency exchange rates applicable for key currencies are shown on page 37.
Technical provisions Provisions for unearned premiums 898 - 27 871 1 352 ^ - 41 1 311 Provisions for life reinsurance 1 425 - 46 1379 1447 - 48 1 399 Provisions for claims outstanding 9 398 - 143 9 255 11 813 - 207 11 606 Provisions for profit commissions 16 - 2 14 24 - 3 21 Provision for catastrophe claims 1238 - 1 238 1 000 - 1 000
Deposits with ceding companies Debtors Deposits retained from ceded reinsurance business Other creditors
The current account obligations towards employee pension funds amounted to CHF 29 million on the 1995 balance sheet date (1994: CHF 49 million).
Other provisions This item consists mainly of provisions for currency fluctuations and a provision relating to a guarantee provided in connection with the minority holding in Credit Suisse Financial Products, London.
Details on the Swiss Re Group's subsidiaries and affiliated companies are to be found on pages 72 to 79.
Own shares held on 1 January 1995 at cost Purchases in 1995 Sales in 1995 Realised gains Own shares held on 31 December 1995 at cost Own shares held on 31 December 1995 at market value
As of year-end 1995, Swiss Re Group also held options for209 550 Swiss Re registered shares.These options, combined with a portion of own shares, serve as a guarantee for obligations arising from the Convertible Bonds and Bull Spread Warrants issued by SwissRe Finance (Bermuda) Ltd.
Major shareholders Based on the Information at our disposal, CS Holding Group owned 1 359 690 regis­ tered shares of Swiss Reinsurance Company on 10 October 1996, representing 9.04% of the total share capital.
Actuarial audit The Independent actuary, Hans-Ulrlch Gerber, Lausanne, has confirmed In his report that the balance sheet provisions for the life reinsurance business stated at year-end 1995 have been calculated In accordance with European Union guidelines.
The General Meeting to be held in Zurich on 22 November 1996 has at its disposal the following balance sheet profit (cf. Profit and Loss Account and Balance Sheet, pages 56 to 58): Retained earnings brought forward from previous year 9155 871 4743136 Profit for the financial year 500 907 070 530 388 830
Share structure For the 1995 financial year - eligible for dividend 14620161 292 403 220 - not eligible for dividend 423140 8 462 800
The Board of Directors proposes to the General Meeting to allocate this profit as follows: Dividend 328953623 210976095 Allocation to reserves 172000000 315000000 Balance carried forward 9109318 9 155871
If the proposal of the Board of Directors is accepted, a dividend of CHF 22.50 per share will be paid.
After deduction of the Federal Withholding Tax of 35%, the dividend will be paid from 27 November 1996 by means of dividend order to shareholders in the records of the share register or to their deposit banks.
To the General Meeting of the Shareholders of the Swiss Reinsurance Company, Zurich
As statutory auditors of your company, we have audited the books of account and the financial statements, consisting of the profit and loss account, the balance sheet and the notes to the financial statements, presented by the Board of Directors for the year ended 31 December 1995 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 Switzer­ land. We confirm that we comply with the legal requirements concerning professional qualification and independence.
1991 1992 1993 1994 1995 1996 Number of registered shares Issued 1750 000 1 892 266 14023601 14 023 601 15043301 15 043 301 of which reserved for warrant exercise 151 144 151144 1 138 011 561 380 - reserved for other corporate purposes 176000 T76000 416 848 416 848 423140 423140
Number of registered shares entitled to dividend 1422 856 1 565 142 12 468 742 13045373 14 620161 14620161 Par value CHF 100 100 20 20 20 10 Parent-company ordinary profit per registered share CHF 75 77 36 21 34 Dividend paid per registered share CHF 48 10.50 ^5 22.50 Adjusted ordinary Group profit per registered share CHF 22 22 41 50 75 Adjusted Group capital per registered share CHF 442^ 472 752 640 751 Adjusted stock exchange prices per registered share^
Average daily trading volume® CHF millions 4.6 7.8 17.2 44.7 75.1 103.3 Stock market capitalisation^
high CHF millions 5 846 6 539 10 338 11 406 19 664 19 825 low CHF millions 4 02^1 5000 6 290 7 296 10 527 17 106 year-end® CHF millions 4 720 6342 9 960 11 098 19 620 19810
^ Figures from 1993 onward not comparable with previous years 2 Per share entitled to dividend 3 Includes published unrealised capital gains, ie based on market value * Closing rates - Source: Datastream ® 1996: price on 10 October 1996 ® On the stock exchanges of Zurich, Basle and Geneva or the Swiss Stock Exchange ^ Based on shares entitled to dividend, in CHF millions 66 Swiss Re, Zurich
I Year-end price High for the year Low for the year • 10 October 1996
Corporate environmental protection in Zurich Since the beginning of the 1990s, our Logistics, Investment, Human Resources and Information Technology departments in Zurich have concentrated their ecological efforts in three main areas: reducing energy consumption in company premises and investment-owned properties, ecological measures for travelling to work, and in the purchase of office furniture and materials. Our corporate energy policy and the subsequent energy management project lay out the possibilities for potential savings within our premises; objectives are set for the renovation of existing buildings and the planning of new ones, and the necessary measures taken. The ecological programme introduced in 1994 by Human Resources created new incentives for employees to use public transport instead of cars to travel to and from work. The bonus travel card issued by the public transport executive in Zurich is valid for one calendar year throughout the whole of the Canton of Zurich. This is offered to all employees at a subsidised price. Since April 1995, an environmental specialist has been engaged at Swiss Re in Zurich to deal with all issues related to operational environmental protection.
Each year, we publish a report on our activities relating to the environment and climate, which is also available via the Internet (Homepage: Additional information can be found in the report entitled "Environmental and climate protection at Swiss Re 1996". Orders may be faxed to +4l 1285 40 98.
Gross premiums for Swiss Re Group 1995 (percentage share by country/region)
Union Reinsurance Company Genferstrasse 27 Postfach 678 8027Zurich with branch offices in Singapore and Sydney
France Suisse de Reassurances (France) 5 rue de Logelbach 75847 Paris Cedex17 72 Swiss Re Group
United Kingdom Credit Suisse Financial Products One Cabot Square London E14 4QJ
SR International Business Insurance Company Ltd. 71-77 Leadenhall Street London EC3A2PQ
Swiss Reinsurance Company UK Limited 71-77 Leadenhall Street London EC3A2Pa with a branch office in Hong Kong
TNG Holding Limited^ 42Trinity Square London EC3N4TH with 57 subsidiaries and affiliated companies in 25 countries
Bermuda Harrington International Insurance Ltd. 69 Pitts Bay Road Hamilton HMCX
Swiss Re Atrium Corporation 12 East 49th Street NewYork, NY1GG17 1GG USD 2.2
Swiss Re Financial Products 12 East 49th Street NewYork, NY1GG17 1GG
Swiss Reinsurance America Corporation 237 Park Avenue NewYork, NY 1GG17 with branch offices in Atlanta, Boston, Chicago, Dallas, Philadelphia, Phoenix and San Francisco
Argentina Suiza de Reaseguros S.A. Bouchard 547, Piso 19 1106 Buenos Aires
Colombia Compania Suiza de Reaseguros Oficina de Aseson'a Tecnica Calle72, No.12-65,Pisa9 Apartado aereo 057293 Santa Fe de Bogota, D.C.
Hong Kong Swiss Reinsurance Company • 100 Hong Kong Branch 6107-08 Central Plaza 18 Harbour Road Hong Kong
Singapore SwissRe Advisers (Singapore) Pte. Ltd. • 100 1 Raffles Place # 60-00 UOB Centre Singapore 048616 77 Swiss Re Group
Swiss Re Australia Ltd. 31 Queen Street Melbourne, Vic. 3000 with branch offices in Sydney, and in Auckland and Wellington, New Zealand
South Africa Swiss Re Southern Africa Limited 10 Queens Road Parktown 2193 Johannesburg 2000 with branch offices in Capetown, Durban, Harare (Zimbabwe), Pretoria and representatives in Port Elizabeth 79 Swiss Re Group
Floods and landslides are on the increase: investigation and analysis of the causes, taking as an example the severe storms which affected the Alps in 1987. (88-05; languages E, F, G, I)
An urgent warning that current loss prevention methods are inadequate to cope with petrochemical risks. (91-18; languages E,F, G,l)
This is no pardonable crime as is clear from the very serious conse­ quences: insurance fraud and how it can be combatted. (93-27; languages E,F,G,I,S)
The recipe for successful insurance of machines and technical installa­ tions. How risks can be assessed and managed. (89-19; languages E,F, S)
Recent catastrophes due to extreme weather conditions show how un­ predictable climate can be. It is a risk factor with far-reaching conse­ quences. (94-01; languages E,F,G,I,S)
How to deal with emergencies caused by accidents or breakdowns: how intervention can break the chain of events before they reach catastrophic dimension. (90-14; languages E, F, G, I)
Answers to frequently asked ques­ tions about one of the earliest forms of insurance: marine insurance. The most important standard clauses are listed in the appendix. (89-52; language E)
Cross-border product liability: a representation of the different legal implications in Europe. (96-68; language E)
Products liability in the USA as a risk for exporters, and how this risk can be calculated and minimised. (92-43; languages E,F, 8)
Addresses methods to make com­ munications in aviation even safermethods which can be appiied to other areas of life. (94-46; languages E,G)
Volcanic eruptions (e.g. Mount Pinatubo, Mount Unzen) and their consequences: How can one insure against them? Who carries the liability? (93-07; languages E,F, 1,8)
A specialised publication which reports regularly on economic trends and changes, and their conse­ quences for the insurance market. (95-65; languages E,F,G,I,8)
Enables the proper recognition of income and outgo attributable to the financial year.
Concentration of risks which may be affected by the same claim event or concentra­ tion of shares in the same risk or same event through reinsurance treaties.
The return on investments relating to the flow of funds from reinsurance operations is debited to the non technical account and credited to the technical account as allocated investment return.This accounting transfer is calculated as the interest on the average level of reserves.
The excess of cost of an acquired company over the fair value of the company's separately identifiable net tangible assets.
Annuity insurance: life insurance in which the benefits consist of a regular income payment for a specified period of time.
Life or endowment insurance: life insurance in which the benefits take the form of a contractually determined amount payable upon death or on survival to a specified age.
Credit insurance: Insurance against financial losses sustained through the failure for commercial reasons of policyholders' customers to pay for goods or services supplied to them.
Employers' liability insurance: Insurance by employers covering employees for injuries arising out of their employment.
Nuclear energy insurance: \r\surar\ce against property damage, liability and accident in connection with the operation of nuclear energy installations.
Professional and directors'and officers' liability: Insurance of liabilities arising from the performance of professional or official company duties.
The totality of risks assumed by an insurer or reinsurer; also the totality of invest­ ments of a company.
Quota-share reinsurance: Form of proportional reinsurance in which risks are reinsured over a specified amount.
Treaty re/nsorance; Participation of the reinsurer in certain sections of the insurer's business as agreed by treaty.
Acquisition cost of shares in Swiss Re, Zurich, held by Group companies.This amount is stated separately as part of the shareholders' capital and reserves.
The difference between the market value and cost of shares and premises is stated separately as part of the shareholders' capital and reserves after deduction of all due taxes.
Risk management: Management tool for the comprehensive identification and assess­ ment of risks based on knowledge and experience in the fields of natural sciences, technology, economics and statistics.
Premiums received for future financial years and carried over to the next year's financial statements.
Share Register Karl Haas Telephone (411)285 32 94 Telefax (411)285 34 80
Important Dates 22 November 1996 132nd Ordinary General Meeting 27 November 1996 Payment of dividend 20 May 1997 Results for 1996 published 27 June 1997 133rd Ordinary General Meeting 2 July 1997 Payment of dividend