RO. Box Telephone Telex Telefax Cables CH-8022 Zurich 01 2852121 815 722 srech 01 285 2999 swissre
Underwriting results Non-Life insurance 1 Life insurance i Other income and outgo Investment and other financial income 1 Other income and outgo i including taxes
Board of Directors Term to expire in Walter Diehl* Chairman, Zurich 1991
Ernesto Jutzi * Hans R. Kaufmann Theo Obrist Werner G. Seifert
Auditors Term to expire in Swiss Auditing and Fiduciary Company, Zurich wsiS 1991
Managers G. Cantieni, U. R. Käser, P. Marcionelli, M. Oesterreicher, LT. Pozzi, F. Renggli
Managers H. Arrenbrecht, J. Bleuler, M. Bradley, R. Brändie, M. Bürge, P. Gasser, H. Hefti* T. Lörtscher", W. Meier, B. Nigg, A. Schneeberger, P. Schrenz, J. Spühier
Executive Managers R. Boutin, S. Gourant, E. Deloo, J.-R Vogel, K. Wettenschwiler
Managers Y Burgener, A. Chuffart, J. Forster, H. Fuchs, E. Huber, E. Jean-Mairet, M. Lies, A. Leye, H. Menzi, H. Schellenberg, S. Steiner
General Managers E. Jutzi", H. R. Kaufmann, T. Obrist, W.G. Seifert
' B. H. Letsch, Executive Manager F. E. Rohner, Executive Manager
Managers C. Benz, E. Garu, M. Gürtier, F. Marty, M. Ringll
The titles in this chart are those used by Swiss Re, Zurich, worldwide excluding North America and certain other territories for which the corresponding hierarchical titles are as follows: General Manager Deputy General Manager
Group companies as per 1 November 1991 * until 31 December 1991 ** from 1 January 1992
- The undenwriting profit in Life reinsurance increased from Sw.frs. 40 million to just over Sw.frs. 41 million.
- Taxes fell by almost Sw. frs. 37 million (41.3%) to Sw. frs. 52 million.
These figures enable the business experience to be summarized as follows: 1990 was a year of renewed intense competition. The imminent opening-up and liberalization of the large (and growing) European market has escalated the jockeying for position among insurers. This is demonstrated, on the one hand, by the aggressively low premiums on offer, causing basic business to deteriorate continuously and (to take an extreme example) putting industrial fire business in a state of desolation. Another prominent feature of competition is the increasing trend towards concentration in the insurance industry - larger units are supposed not only to operate more cost-effectively but, thanks to a broader basic spread of risk, also to achieve more balanced results. The 1990 business year was thus characterized by pressure on premiums and concentration; it will, however, be remembered as the year of storms.
In the first quarter of the year under report, eight severe winter storms swept across parts of Europe, leaving in their wake a trail of losses for the insurance industry - and for reinsurers in particular - totalling Sw. frs. 13 billion. This exceptional sequence of catastrophes brought Swiss Re, Zurich, a loss of approx. Sw. frs. 450 million for own account (i.e. after retrocession covers).
Moreover, it became known in the year under report that SWITZERLAND General, a company belonging to the Swiss Re Group, had got into difficulties both in the Credit insurance sector and through over-aggressive geographic and volume-oriented expansion. This necessitated not only a change of management of the SWITZERLAND General and a realignment of company policy but also financial support which imposed a considerable burden on the head office's 1990 accounts.
Finally, the annexation of Kuwait by Iraq and the uncertainty surrounding the threat of war in the Persian Gulf in the second half of the year triggered a worldwide slump on the stock markets: The formerly overvalued Japanese stock market fell by almost 40% against the previous year, while European markets lost some 20%. Moreover, in continental Europe, interest rates were much higher, and bond prices consequently lower, at the end of the year than they had been twelve months earlier. The capital markets, too, were therefore more of a burden than a boon to the 1990 accounts of an institutional investor.
T. Obrist, General Manager, E. Jutzi, General Manager, W.G. Seifert, General Manager, B. Laube, Deputy General Manager, A.W. Saxer, Managing Director, R R Hügle, Deputy General Manager, H. R. Kaufmann, General Manager
- Although the exceptional loss burden marred the 1990 accounts, a substantial part was borne by means of an internal compensation mechanism (contained in the technical reserves). Despite this strain, the technical reserves of Swiss Re, Zurich, were reinforced by some Sw.frs. 300 million in the year under report (the decrease by approximately Sw. frs. 400 million in direct comparison to the 1989 account is exclusively due to the massive effect of foreign exchange rates, to the extent of over Sw. frs. 700 million). The reserve ratio - i. e. the reserves expressed in terms of the net earned premium - was still high, at 201.2%, in the Non-Life sector at the end of the storm year, significantly higher even than in 1987 and earlier years.
The farmer draws with plough and harrow and paints with the colours of crops. He is a land artist unrivalled throughout the world, as this series of aerial views from fourteen countries and six continents shows. The small farmer with his ox-drawn hook plough in the Amhara plateau of Ethiopia is just as much an artist as the large-scale Australian farmer in his air-conditioned tractor. Yet presumably neither of them know it and certainly would not want to be artists.
Truckioads of tomatoes and squash that are unfit for selling rot near Homestead, Florida, USA
Land reclamation by drainage: In 1247 ditches used to drain a swamp produced the "Star of Ensemne", department of Herault, France
Coffee plantation witti Ipe tree in Sao Paulo. Tfie ipe, Brazil's national
In the 1990 business year, as a result of foreign exchange developments, premium income rose by only 0.9%, to Sw.frs. 4,777 million. The underwriting loss in Non­Life reinsurance increased by Sw.frs. 225 million to Sw.frs. 478 million. In Life reinsurance the profit rose by Sw.frs. 1 million to Sw. frs. 41 million.
Unlike in the two preceding years, the Swiss franc appre­ ciated significantly during the year under report against the major foreign currencies used in reinsurance. Particularly pronounced was the weakening of the U.S. dollar, by almost 17%, while most European currencies ­ with the exception of the stable pound sterling ­ declined by
The restructuring process, especially in the insurance markets of Europe, has brought further mergers and ac­ quisitions and these will continue. In a future deregulated Europe, efficiency­conscious insurers will seek to achieve a broader spread and better penetration of markets and to reduce costs by forming larger economic units. The con­ centration process particularly affects the medium­sized companies that constitute an attractive client segment for the reinsurer. Takeovers deprive reinsurers of entire busi­ ness connections or at least parts thereof.
The following report refers basically to the annual ac­ counts, i.e. the position in Swiss francs; where the effect of foreign currency rates appears significant, it is com­ mented upon. wsiS
In the year under report, the gross premiums rose by only 1.0%. At unchanged foreign currency rates, the growth rate would have been 11.6%.
the premium income. Even without the storm damage, the result would still have been negative, despite the fact that the year under report was only slightly affected by other natural catastrophes and large individual losses. This is a clear indication of the completely unsatisfactory premium level of this class of business and testifies to the need to improve the original policy and reinsurance conditions.
Premium income of ßurg/ary Fidelity and Ailied Lines again rose slightly. ­ Although the positive result is lower than in the previous year, it was still satisfactory.
In Accident reinsurance, the premium increase was just over 4%, with growth stemming mainly from the United States. Premium income in this class of business ema­ nates largely from Workers Compensation business. ­ Business again closed with a loss. Workers Compensation in Belgium, Great Britain and the United States was nega­ tive.
In Marine reinsurance premium income decreased slightly because of the foreign currency development. ­ The un­ derwriting loss rose considerably as against the previous year, emanating mainly from business written in London and France. The consequences of years of overheated competition and the resulting decline in rates are making theirfuil effect felt. In addition, the burden from large losses has increased further and losses caused by the winter storms also affected Marine insurance.
In Aviation reinsurance, premium income again fell by about 20%. Since 1986 irresponsible competition has re­ duced it by almost half. In the year under report, the partial withdrawal from facultative airline business, where the competitive struggle is particularly intense, contributed to the decline in volume. At the moment the worldwide pre­ mium volume is no longer enough to cover the average loss burden expected in a year. ­ The steep rise in the un­ derwriting loss reflects the desolate conditions prevailing in this class of insurance.
Nuclear Energy reinsurance again showed a drop in pre­ mium. The effects of foreign currencies, the lack of new business and a weakening of the premium level have put this line of business in a state of stagnation. ­ The under­ writing result was again positive, there having been no major losses in the year under report.
Premiums in Credit and Surety reinsurance fell by 3%. Growth in Europe must be set against a decline in the Unit­ ed States as a result of remedial measures in the portfolio. ­The recession in the United Kingdom, the United States and Australia has imposed a great burden on the results of Credit reinsurance. In the Surety sector a gratifying result was once again achieved; it was not, however, enough to offset losses from Credit business. Unlike 1989, a loss was therefore shown. wsiS
The net amount of Life reinsurance business in force rose in the year under report by 2% to Sw. frs. 75,400 million. Without the effects of foreign currencies the increase would have been 14%. This growth was achieved thanks to a gratifying volume of new business. In original currency new business was higher than In the previous year, whereas after conversion into Swiss francs, despite con­ siderable foreign currency losses, it amounted to Sw.frs. 16,900 million, or 11% less than the previous year.
The underwriting result of Sw. frs. 41 million was Sw. frs. 1 million more than in the previous year. Claims incurred re­ mained unchanged, while commissions and profit com­ missions as well as allocations to the policy and premium reserve increased. On the other hand, surrenders fell, although not to the extent regarded as desirable.
New Life insurance products are being developed all the time, especially those which give the policyholder more flexibility. This tendency is not without repercussions on the reinsurer, since old covers are often replaced by new ones, which causes an increase of surrenders. Moreover there is an apparent shift in the demand for insurance of the death risk to other covers such as disability and old age welfare or capital prepayments In the event of serious illness.
were also registered in Switzerland e.g. 230 km/h on the Jungfraujoch (3451 metres above sea level).
During this storm period, a succession of gales struck the whole of Holland and Belgium as well as parts of Great Britain, Germany and France for sev­ eral hours at a time. Peak wind speeds often reached 150 km/h over flat areas although In the southeastern corner of Holland they dropped to below 125 km/h. Neither the extent of the affect­ ed area, nor the duration and the peak wind speeds of the individual storms were particularly extreme. The factor which Is exceptional for this century is the accumulation of gale­force storms, repeatedly striking central Europe within a five­week period.
Increased settlement density in storm exposed areas and the resulting expo­ nential increase in loss potential as well as growing insurance density and more extensive coverage acted as aggravating factors.
Estimates based on climatic models predict an increase in air temperature of approx. 3 °C. during the next centu­ ry if we continue to permit a CO2­ intensive form of energy production, fail to halt tropical deforestation and do not set strict limitations on CFC emissions ­ to mention but a few of the main factors. The introduction of such "climate­conscious" measures could help to reduce global warming by a third.
In each of the above­mentioned classes a deductible is carried by the policyholder. The function of the de­ ductible is to exclude minor losses; it does not represent a true coinsurance participation in the loss. Deductibles range from Sw. frs. 100.­ to Sw. frs. 300.­ for damage to dwellings and usually lie in the region of Sw. frs. 1,000.­ to Sw. frs. 3,000.­ for commer­ cial and industrial installations unless special conditions have been agreed. The low level of the deductibles can lead to serious problems since, in the case of a large­scale storm, a tremen­ dous number of small losses are con­ centrated on relatively few insurers and reinsurers. As a result, the final loss burden can be extremely high.
If the deductibles were tripled, for in­ stance, the financial strength of the policyholder would hardly be affected. The situation of the insurer and rein­ surer, on the other hand, is quite dif­ ferent. Through their international ac­ tivities, they participate in most natural loss occurrences and their financial strength could be affected by an in­ crease in the losses incurred through such perils.
These figures very clearly show that an increase in the deductible paid by the policyholder would mean a very signif­ icant relief for insurers and reinsurers.
An important prerequisite for the effec­ tive and satisfactory reinsurance of storm exposures is an adequate share of the original premiums being charged for such exposures. In fire business, the premiums ­ particularly those for industrial risks ­ are contin­ ually forced downwards and in many countries contain inadequate premium components for natural hazards.
In terms of reinsurance technique, storm exposure can be carried by vari­ ous methods. These methods are well developed and function efficiently, if the rating and the allocated capacity take Into account all the risk factors. However, if the frequency and vehe­ mence of gale­force storms increase in recognised storm regions, or if gale occurrence extends to areas which were previously rarely affected, rating and capacity allocation will become very difficult. Insurance protection always applies to an unknown future situation.
As a result of the major storm events of the last four years and particularly the winter storms of 1990, reinsurance capacity has been moderately dimin­ ished and retrocession capacity se­ verely eroded. Despite this tightening of the market, the price for certain forms of cover and for higher layers is still too low. For other areas of storm business, however, premiums were somewhat improved. A further adjust­ ment of conditions will be necessary when treaties come up for renewal.
The reinsurer's principal aim is to structure reinsurance contracts in such a way that an appropriate distribution of the loss burden can be achieved between insurer and reinsurer in the event of a catastrophe. The original premiums must contain a sufficiently high component for covering natural hazards.
After years of expansion, world economic growth slowed down perceptibly In 1990. The signs of economic fatigue were accentuated by the Gulf crisis. Consumers were dis­ concerted by rising oil prices and the consequent im­ pulses given to Inflation. Finally growth came to a halt in the United States, Australia and Great Britain. In Germany and ­ to a lesser extent ­ in continental Europe, growth was maintained by the reunification. Only in Japan did the do­ mestic economy remain buoyant. Real economic growth In the OECD countries rose by only 2.5 to 3%, having been 3 to 4% In the previous year. Inflation was actually kept down by the restrictive monetary policy maintained by the central banks, although it was again unexpectedly stimu­ lated by the Gulf War and the consequent rise in oil prices.
On the money and capital markets Interest rates were con­ sistent with the monetary policy of the country's central bank. Lower rates were quoted on the money and capital markets in the United States and Australia and ­ following entry Into the European Exchange Rate Mechanism ­ in Great Britain. In continental Europe, not just in Germany but in other countries too, the direction of Interest rates was determined by the persistence of the Deutsche Bun­ desbank's restrictive monetary policy. With the exception of France, short and long­term interest rates at the end of the year were generally higher than they had been a year earlier. The same was also true of Japan, where the central bank applied restrictions to the money supply growth with some delay.
After an encouraging start, prices on the stock markets gave way in the course of the year. In North America and Europe, share prices had already surpassed or were approaching former record levels by mid­year but then disappointing corporate profits and the Gulf crisis ushered In the turnaround. At the end of the year, the New York Stock Market was only slightly down on the previous year, whereas the markets of continental Europe lost approxi­ mately 20% and the London Stock Market noted a 13% drop. After the central bank set an end to excess liquidity, the overvalued Japanese stock market suffered a massive price crash and lost almost 40% In the course of the year.
Capital Market Investments and Real Estate Distribution by investment category at balance­sheet values (previous year in parentheses)
In anticipation of rattier lower interest rates, new invest­ ments were centred mainly on fixed­income investments. Despite ttie new investment, ttie balance­sheet value of all fixed­interest investments (bonds, loans and equity­linked securities) declined as a result of foreign currency effects by Sw.frs. 80 million to Sw.frs. 5,222 million. The average life of the bond portfolio was extended. The balance­sheet value of shares fell by Sw. frs. 56 million to Sw. frs. 678 mil­ lion, largely owing to currency developments. Mainly in the first half of the year, sales predominated. A second empha­ sis of new investments was in the real estate sector. The acquisition of the head office building of SWITZERLAND General Insurance Company and the realization of new building projects raised the real estate portfolio by Sw.frs. 143 million to Sw.frs. 1,133 million. yxwvutsrponmlkihgfedcbaWTSRPONMLJIHGEDCBA
The first graphic on page 20 and the following table show the various investment categories at balance-sheet values as a percentage of overall capital market investments and real estate as well as in absolute figures. The second graphic on page 20 shows the breakdown by currency.
Net investment income in the broad sense (i.e. on invest­ ments as set out above, plus money market investments) amounts, after deduction of the interest required for the Life insurance and annuity fund and other technical re­ serves as well as for current­account balances and cash deposits, to Sw. frs. 740 million (previous year, Sw. frs. 731 million). The rise of 1.2% was modest because of the nega­ tive foreign currency development; at unchanged conver­ sion rates the increase would have been 9.1%.
Holdings and loans comprise holdings of Sw.frs. 281 mil­ lion (previous year, Sw. frs. 93 million) and loans to Group companies of Sw.frs. 1,919 million (previous year, Sw.frs. 1,883 million). Overall these investments rose by Sw.frs. 224 million to Sw.frs. 2,200 million, mainly through the acquisition of the claims management company. Gay & Taylor, Inc., Winston­Salem, USA, and by the transfer from the SWITZERLAND General Insurance Company of the SCHWEIZ Compahia Anonima Espahola de Seguros y Reaseguros, Barcelona.
Net cash deposits (i.e. cash deposits with clients from ac­ tive reinsurance after deduction of the deposit reserves due to retrocessionaires from passive reinsurance) fell by Sw.frs. 36 million to Sw.frs. 1,701 million. wsiS
On 20 September 1991, the value of Swiss Re, Zurich, on the Zuricii stock exchange was as foiiows:
With regard to the management of the company, 1990 was a year of transition:
Five members of the Executive Committee retired in the year under report and two new members were appointed. In addition, the top executive position was divided into two functions. With effect from the 1990 General Meeting, the Managing Director has taken over the running of the com­ pany, while the Chairman ­ together with the Board of Directors and its Committee ­ supervises the conduct of business.
A succession of generations and realignment of top man­ agement had been planned and prepared since 1988; they have thus been put into effect smoothly and successfully. zyxwvutsrponmlkjihgfedcbaZYWVUTSRPONMLKJIHGFEDCBA
On 31 December 1990, Messrs Andreas Brüggen Senior Executive Manager, Gottfried Bachmann, Karl Küstahler and Jürg Steinrisser, Executive Managers, Hans Spörri, Manager, and Max L. Hefti and Roland Maag, Members of Management in Advisory Capacity, retired. Messrs Paul Egger and Rubo Schilling, Managers, retired on 30 June 1991. We are deeply indebted to them for their many years of valuable service to our company.
The Board of Directors announced the following promo­ tions which took effect on 1 January 1991:
Executive Managers: Messrs Reynald Boutin, Josef Brun, Bernard Gillland, Willy Hersberger and Walter Klelholz;
Mr Frederic Joseph, Manager, died on 6 July 1991. We are greatly Indebted to him for his many years of valuable ser­ vice.
All items of the balance sheet and profit and loss account in foreign currencies were uniformly converted into Swiss francs using the average foreign currency rates as at 31 December 1990. Differences arising from the conver­ sion of balance­sheet items in foreign currencies are booked via a corresponding reserve; this serves to offset valuation differences of foreign currency items based on exchange rate fluctuations. The currencies which are most important for business activity abroad developed over the previous year as follows:
Securities and holdings are in principle entered at acquisi­ tion cost or, if the stock exchange price is lower on the bal­ ance­sheet date, at the lower value. Non­quoted holdings are, where necessary, entered at the lower intrinsic value. The lower valuation is retained until disposal of the corre­ sponding securities.
Real estate is valued at acquisition cost, less the deprecia­ tion permitted by the tax authorities.
The claims incurred comprise claims paid and the adjust­ ment in the outstanding claims reserve. In the year under report this figure for own account rose by Sw.frs. 318.0 million to Sw.frs. 2,941.7 million.
Gross premiums totalled Sw.frs. 564.4 million, Sw.frs. 8.1 million of which were for annuities purchased. After de­ duction of retrocession premiums of Sw.frs. 27.1 million, the remaining net premiums amounted to Sw.frs. 537.3 million, corresponding to a rise of 0.1 % over the previous year. Without the effect of foreign currency fluctuations, net premiums would have risen by 10.3%.
The commissions and profit commissions calculated for business assumed totalled Sw.frs. 117.3 million. The
retrocessionaires' share of this amount was Sw.frs. 2.1 million, so that Sw.frs. 115.2 million remained for own account.
The surrenders in business assumed amounted to Sw. frs. 63.4 million, of which Sw.frs. 0.8 million was debited to retrocessionaires. A total of Sw.frs. 62.6 million remained for own account.
investments, real estate and holdings amounted to Sw. frs. 106.6 million (previous year, Sw.frs. 280.9 million). The decrease as against the previous year results from lower write­offs on holdings, while in the securities sector, only the write­offs necessary from the valuation point of view were effected in view of the high interest level reached. Other depreciation amounted to Sw. frs. 9.9 million (previ­ ous year, Sw.frs. 21.6 million).
The balance­sheet value of holdings rose by Sw. frs. 187.5 million to Sw. frs. 281.0 million. Loans to Group companies increased by Sw.frs. 36.3 million and amounted on the balance­sheet date to Sw.frs. 1,919.1 million (of. page 21). zyxwvutsrponmlkjihgfedcbaZYWVUTSRPONMLKJIHGFEDCBA
Cash deposits for retrocessions rose, as against the previ­ ous year, by Sw.frs. 1.6 million to Sw.frs. 39.6 million.
The share capital amounted to Sw. frs. 192.0 million, com­ prising 1,750,000 registered and 170,000 bearer shares with a nominal value of Sw. frs. 100.­ each. The non­voting share capital amounted to Sw.frs. 60.2 million divided into 3,010,000 non­voting bearer shares with a nominal value of Sw.frs. 20.­ each, in addition, on 31 December 1990, there was an authorized non­voting share capital of Sw. frs. 2.5 million (125,000 non­voting shares with a nom­ inal value of Sw.frs. 20.­).
For 1990 a total of 1,420,203 registered shares, 154,000 bearer shares and 3,010,000 non­voting shares are en­ titled to dividend. The 329,797 registered shares and 16,000 bearer shares not entitled to dividend were re­ served at the end of 1990 for the free warrants issued in connection with the 1989 capital increase and to secure conversion or option rights from future issues, to acquire holdings or for other business in the company's interest.
At the end of the previous year the capital funds shown amounted to Sw. frs. 2,486.5 million; this will rise as a result of the proposed allocation of the profit, provided it is ap­ proved by the General Meeting of Shareholders, to Sw. frs. 2,529.3 million. Up to the end of 1990 203 registered shares had been purchased using the free warrants issued in 1989; the resulting premium of Sw. frs. 0.5 million was allocated to the special reserve.
Registered shares by means of dividend order to the shareholders in the rec­ ords of the share register or to their deposit banks.
As statutory auditors of your company we have examined the accounts for the year ended 31 December 1990 in accordance with the provisions of the law.
the financial position and the results of operations are presented in accordance with the principles of evaluation prescribed by the law and the requirements of the Articles of Association.
C. Helbling P. Bachmann Swiss certified Swiss certified public accountant public accountant wsiS
Balance Sheet Assets Cash in hand, postal bank account, bank balances Current­account balances
Altemate grazing on an oilfield near Wink, Texas, USA. To protect the pastureland, the cattle are moved In tums from one sector to the next
Dry walls from collected stones crisscross the Aran island of Inisheer, Ireland
Plantation of nug, a member of tfie sunflower family wfiich produces a valued edible oil, on tfie filgfilands of Wollo, Ethiopia
Sahara oases in the Souf, Algeria. A river trickies be­ neath the sand irrigating the date paims pianted in hollows wrested from the sand by human hand
Fish­breeding beneath water hyacinths in the Laguna de Bay, Luzon, Philippines
Traces of water sprinklers for potted plants under a synthetic roof near Homestead, Florida, USA
The decision taken in the previous year to redimension the service sector had been accomplished by the autumn ot 1991. All holdings in information service companies have either been sold or liquidated.
The consolidated overall result tell by 22.0% to Sw. trs. 216 million (previous year, increase ot 11.7%). In Non­Lite insur­ ance, the underwriting loss rose by Sw. trs. 303 million to Sw.trs. 717 million (previous year, increase ot Sw.trs. 238 million). In Lite insurance, a profit ot Sw.trs. 93 million is shown (previous year, Sw.trs. 77 million). Overall, the un­ derwriting loss amounted to Sw.trs. 624 million (previous year, Sw.trs. 337 million). The income from capital invest­ ments rose by Sw.trs. 21 million to Sw.trs. 1,670 million (previous year, increase ot Sw. trs. 316 million). Despite the low stock market prices at the end ot the year, rate fluctua­ tions, depreciation and value adjustments gave a positive balance ot Sw. trs. 92 million (previous year, loss ot Sw. trs. 41 million). Management expenses remained stable while taxes tell. The Group's capital funds shown (including Group profit) amounted at the end ot 1990 to Sw. trs. 2,811 million (previous year, Sw.trs. 2,798 million).
The North American Reassurance Company, New York, registered in the year under report an increase of the Life reinsurance business in force by 4.3% to US$ 70,500 mil­ lion. Investment income rose as against the previous year and the company also succeeded in reducing manage­ ment expenses. Realized capital gains were below the previous year's level. Overall, there was a profit of US$ 1.9 million (previous year, US$ 2.0 million). The company re­ sumed payment of a dividend with an amount of US$ 0.8 million.
The gross premiums of the Bavarian Reinsurance Com­ pany Limited, Munich, rose in Non­Life reinsurance by
7.6% to DM 1,935.2 million. The underwriting result was considerably worse than the previous year; this was due to the high loss burden from European storms. ­ In Life rein­ surance, the gross amount of business in force rose to DM 10,800 million (previous year, DM 9,400 million). The un­ derwriting result was again better than that of the previous year. ­ Thanks to increased investment income and the realization of capital gains, the underwriting loss of Non­ Life reinsurance was offset and an increased profit for the year of DM 12.0 million (previous year, DM10.0 million) was shown. The dividend is to be increased to DM 6.0 million (previous year, DM 5.0 million).
The consolidated gross premiums of the Swiss Reinsur­ ance Company (UK) Limited, London, and the Paiatine In­ surance Company Limited, London, rose in Non­Life busi­ ness by 11.5% to £ 63.7 million. This increase was mainly achieved in Fire and CAR reinsurance. The underwriting loss rose considerably as against the previous year, espe­ cially because of the storm losses and a further deteriora­ tion of the result of Marine business. ­ In Life reinsurance the gross amount of business in force again rose sharply to £9,500 million (previous year, £7,300 million) and a satis­ factory result was achieved. ­ The investment income declined slightly as against the previous year. Because of the bad result in Non­Life business, an overall loss of £0.7 million (previous year, profit of £1.6 million) was shown. The company paid an unchanged dividend of £ 0.5 million.
The Englewood Reinsurance Company Limited, Hamilton, Bermuda, was founded in March 1989 to reinsure captive insurance companies. During its first full business year the company wrote premiums of USS 16.7 million. The profit shown was USS 1.8 million, from which the company paid a dividend of USS 0.5 million. zyxwvutsrponmlkjihgfedcbaZYWVUTSRPONMLKJIHGFEDCBA
The underwriting result in Non­Life insurance was nega­ tive as a result of the winter storms in Europe, while the un­ derwriting profit in Life insurance approximated that of the previous year. Investment income rose marginally and also the negative balance from rate fluctuations, depreciation and value adjustments increased slightly as against the previous year. Management expenses likewise rose, while taxes fell. Overall, the Group profit of insurance companies dropped to Sw.frs. 61 million (previous year, Sw.frs. 76 million).
The SWITZERLAND General! nsu ranee Company Limited, Zurich, increased its gross premiums by 6.5% to Sw. frs. 1,029.0 million. Of this amount, 66.4% was for insurance and 33.6% for active reinsurance. Business experience was marked by a series of exceptional features. These in­ cluded the storms at the beginning of the year under report, the drop of the stock exchange and a high loss burden in Credit and Surety insurance. The profit for the year fell to Sw.frs. 0.1 million (previous year, Sw. frs. 8.3 million).
The Magdeburger Versicherungsgruppe, Hanover, report­ ed an increase of its consolidated gross premiums, includ­ ing the non­recurring premiums from the reserve for bo­ nuses to policyholders, by 2.8% to DM 1,087.8 million. ­ The gross premiums of the Magdeburger Versicherung AG rose by 0.8% to DM 748.1 million. Underwriting business produced a loss of DM 3.8 million (previous year, DM 2.7 million). Despite storm losses, increased costs from com­ mitments in the new German states and the price decay on the securities market, a profit for the year of DM 18.0 million (previous year, DM 21.1 million) was achieved. From this a dividend of DM 6.2 million (previous year, DM 5.7 mil­ lion) and a bonus of DM 11.8 million (previous year, DM 15.3 million) were paid. ­ At the Magdeburger Lebensver­ sicherung AG the insurance business in force rose by 9.4% to DM 9,200 million. Following an allocation of DM 59.5 million to the reserve for bonuses to policyholders, a profit for the year remained of DM 0.7 million. This was paid out in full as dividend (previous year, dividend of DM 0.45 million and a contribution of DM 0.25 million to the out­ standing paid­up capital).
of business in force of the Vereinte Lebensversicherung AG grew by 8.0% to DM 17,200 million. After an allocation of DM 141.8 million to the reserve for bonuses to policy­ holders, the profit remaining for the year was unchanged at DM 2.9 million. The company again paid a dividend of DM 1.4 million. ­ The Vereinte Krankenversicherung AG reported gross premiums, including non­recurring pre­ miums from the reserve for bonuses to policyholders, of DM 2,819.3 million, a growth rate of 10.3% (previous year, 16.1%). The amount of benefit payments rose by 10.5% to DM 2,202.4 million. After an allocation of DM 51.8 million (previous year, DM 35.2 million) to the reserve for bonuses to policyholders, the profit for the year was DM 12.6 million (previous year, DM 8.8 million). An unchanged dividend of DM 6.3 million was paid.
The «Schweiz Allgemeine» Finanz Holding AG, Munich, complements with its subsidiary companies the range provided by the "Magdeburger" and the "Vereinte" groups by offering building society and bank products; it also maintains companies operating in direct marketing and segmented sales systems. ­ At the mh Bausparkasse AG, Munich, new contracts were produced with a savings amount of DM 2,402.7 million (previous year, DM 1,605.3 million). At the end of the year under report, the company had a portfolio of savings contracts of DM 10,069.6 million (previous year, DM 7,983.0 million), corresponding to a growth of 26.1%. From the year's profit of DM 6.5 million (previous year, DM 3.5 million) DM 3.8 million was paid out as dividend and DM 2.7 million as bonus. ­ The balance­ sheet amount of the Augsburger Aktienbank AG, Augs­ burg, In which the "Schweiz Allgemeine" Finanz Holding AG has a 50% share, grew by 16.6% to DM 494.1 million. The profit for the year of DM 2.9 million (previous year, DM 4.8 million) was paid out in full.
The General Surety & Guarantee Company Limited, Wilmslow, which specializes in Surety business, was able to increase its gross premiums in the year under report by £0.5 million to £6.1 million. The published profit of £408,000 is once again significantly above the previous year's result. The dividend was £150,000, as In the previ­ ous year.
The Fidelity and Deposit Company of Maryland, Balti­ more, in which the "Zurich" Insurance Company and Swiss Re each have a 50% shareholding, is not consolidated in the Group accounts. In the year under report the company was able to raise its gross premiums by 6.6% to US$ 326.8 million. With the exception of Fidelity business, all main classes of business contributed to this growth. Large losses in commercial business and substantial invest­ ments in new information systems caused the underwrit­ ing loss to rise somewhat. Financial income, in particular capital gains, was lower than in the previous year, reflect­ ing the difficult situation on the capital markets at the end of the year. The overall profit reached US$ 9.2 million (pre­ vious year, US$ f4.4 million). The company paid an un­ changed dividend of US$ 14.0 million.
The gross premiums of the North American Specialty in­ surance Company, Manchester, New Hampshire, rose by approx. 65% to US$ 44.9 million. The company, which has been in the process of development as a Non­Life insur­ ance company since 1985, showed a loss of US$ 0.5 mil­ lion (previous year, profit of LIS$ 0.5 million), as a result of the high development costs. zyxwvutsrponmlkjihgfedcbaZYWVUTSRPONMLKJIHGFEDCBA
In the field of claims management, the Swiss Re's Group companies achieved differing results. The Thomas Howell Group, with head office in London, has expanded further its international activity and increased its turnover by 18% to £43.9 million. Ftigh development costs led, however, to a loss of £ 1.2 million. ­ Because of various developments with a negative impact on the company (uncertain eco­ nomic situation in the United States, the Gulf crisis and no major tornadoes), the turnover of Gay & Taylor, inc., Win­ ston­Salem, North Carolina, fell by 5% to US$ 54.5 million, reducing the profit to US$ 1.7 million (previous year, US$ 3.8 million). ­ Audatex AG, Zurich, increased its turnover by 19% to Sw.frs. 25.9 million and produced a profit of Sw.frs. 3.2 million (previous year, Sw.frs. 2.8 million).
As part of its comprehensive service strategy, conceived as a special innovation, Swiss Re started to develop an in­ formation services sector from 1986 onwards. The experi­ ence of the first few years and a critical appraisal carried out in 1989 showed, however, that in this sector ­ even with strict limitation to insurance­related information ser­ vices ­ the prospects of success were slight and that any further investment of funds and manpower was not really justified. The development of information services was therefore halted in 1989 and in 1990 Group Management decided to dismantle this business segment entirely. The redimensioning and withdrawal were swiftly accom­ plished in the year under report, bearing in mind the inter­ ests of clients, staff and shareholders; today ­ as this re­ port is compiled ­ the withdrawal has been completed.
The net profit in 1990 amounted to Sw. frs. 15.3 million (previous year, Sw.frs. 15.1 million). While dividend pay­ ments clearly rose, the surplus of realized capital gains over write­offs and value adjustments fell. The interest payment remained the same. An unchanged dividend of Sw.frs. 9.0 million was paid from the slightly higher result for the year.
At the request of the Executive Committee and Group Management, we have examined the Consolidated Bal­ ance Sheet of the Swiss Reinsurance Company per31 De­ cember 1990 and the Consolidated Profit and Loss Account for the 1990 business year.
Our examination was conducted in accordance with gen­ erally accepted auditing standards and included those audit tests which we considered necessary in the given circumstances.
Adjustment in policy and annuity valuations ­ 283 ­ 506 ­ 789 ­ 826
Interest on Life Insurance and annuity fund 143 417 560 619
As in previous years, advisory and service companies as well as a few other small companies are not consolidated In view of their Insignificant effect on the Group's funds and income or because of the nature of their activity. The mh Bausparkasse AG, Munich, is, however, included in the consolidation.
The two insurance companies founded in Trieste in the year under report, Giuliana Assicurazioni S.p.A. and Giuliana Vita S.p.A., are included in the consolidation for the first time.
The foreign currencies used in the Group accounts in­ variably weakened as compared with the previous year. The drop was particularly pronounced in the case of the US dollar and other overseas currencies. With the excep­ tion of the stable pound, European currencies weakened to a lesser extent.
Fixed­interest investments are In principle entered at ac­ quisition cost or, if they are quoted and the stock exchange price is lower on the balance­sheet date, at the lower val­ ue. The lower valuation is retained until disposal of the cor­ responding securities. Special treatment Is given only to registered debt Instruments owned by Group companies in Germany which, in accordance with German practice, are shown at nominal value and Incorporated in the Group accounts unchanged.
Shares and non­consolidated hoidings are valued accord­ ing to the same principles as fixed­interest securities. Non­ quoted participations are entered at acquisition cost tak­ ing into consideration any necessary depreciation.
Real estate is entered at the balance­sheet values of the Individual Group companies; these correspond as a rule to the acquisition cost less the depreciation permitted by the tax authorities.
The technical reserves are calculated In principle accord­ ing to the provisions of the supervisory authorities appli­ cable to individual Group companies. However, in the case of the North American Reinsurance Corporation the re­ serves are included in the Group accounts at the amount calculated according to Generally Accepted Accounting Principles (GAAP).
The valuation of all other items of the Group balance sheet plays a subordinate role. Foreseeable risks of loss are taken Into consideration by means of value adjustments by the individual Group companies.
The consolidated gross premiums rose because of the lower conversion rates of most foreign currencies by a mere 1.2% to Sw.frs. 14,881 million (previous year, in­ crease of 19.2%). In original currencies the growth was
These items refer mainly to components of the profit and loss account of the mh Bausparkasse AG which, in view of their special nature, are not included under insurance and
The claims incurred comprise claims payments and the adjustment in the outstanding claims reserve. In the year under report this outgo item for own account rose by Sw. frs. 630 million to Sw. frs. 9,351 million. Of this amount, Sw.frs. 5,121 million was for reinsurance companies and Sw.frs. 4,230 million for insurance companies.
The income from the Group's capital investments fell by 2.0% (previous year, rise of 22.5%) and (before the credit­ ing of interest in Life and Sickness business) reached a to­ tal of Sw.frs. 2,530 million (previous year, Sw.frs. 2,582 million). Of this amount, the interest on the Life insurance and Annuity fund accounted for Sw. frs. 560 million (previ­ ous year, Sw.frs. 619 million); in the Non­Life classes it in­ cluded a credit of Sw.frs. 300 million (previous year, Sw.frs. 314 million) to Sickness business.
In the case of fixed­interest securities and shares and the quoted non­consolidated holdings, the difference be­ tween the lower book and higher market value of the indi­ vidual securities, taking into account the estimated value of taxes due on realization, amounted to Sw. frs. 1,554 mil­ lion, or 5.1% of the balance­sheet value (previous year, Sw.frs. 2,526 million or 8.4%).
The capital funds shown in the consolidated balance sheet (sum of share and non­voting share capital, reserves shown, consolidation reserve fund and Group profit) cor­ respond to the book value of the funds invested in the entire Group by shareholders and non­voting share­ holders of Swiss Re, Zurich. In the year under report Group capital funds rose by Sw. frs. 13 million to Sw. frs. 2,811 mil­ lion. The negative effect from the conversion of foreign cur­ rencies amounted to Sw.frs. 166 million (previous year, positive effect of Sw.frs. 45 million).
Effects of exchange rate fluctuations on opening balance­sheet figures ­166 45
Swiss Reinsurance Company (UK) Limited ^ £ 100 26,162 271,294 140,336
Fidelity and Deposit Company of Maryland ^ US$ 50 187,437 472,983 326,831 1
General Surety & Guarantee Go. Limited £ 100 2,503 12,101 6,057
1 North American Specialty Insurance Company US $ 100 26,147 52,861 44,935
SWIIZER1_AND Insurance Company UK Limited £ 100 10,672 37,900 28,605 1
SwissRe Holding (North America) Inc. US $ 100 325,773 450,571 ­
Assets Cash in hand, postal bank account, bank balances Current­account balances Cash deposits Fixed­interest investments Shares and real estate Transitory entries and other assets
Liabilities Current­account and bank balances Cash deposits Technical reserves Non­Life insurance Life insurance Transitory entries, value adjustments and other liabilities (incl. share of minority shareholders and building society deposits) Group Capital Funds Shown (incl. Group profit)
North American Reinsurance Corporation 237 Park Avenue, New York, NY 10017
with branch offices in Durban, Cape Town and Pretoria and in Harare, Zimbabwe
Sociedad Anälisis de Riesgos S.A. Aisina 756, Piso 6, 1087 Buenos Aires
SwissRe Advisers Limited 2902 Great Eagle Centre 23 Flarbour Road, Hong Kong
SwissRe Advisers (Singapore) Pte. Ltd. 24 Raffles Place No. 25­06A Clifford Centre, Singapore 0104
with branch offices in Athens, Brentwood, Brussels, Copenhagen, Genoa, Hamburg, Istanbul, Milan, Munich, Paris, Thessaloniki, Vienna, Hong Kong, Jakarta, Manila, Montreal, Sydney and Taipei
SCHWEIZ Compania Andnima Espanola de Seguros y Reaseguros Via Augusta 153­157 E­08021 Barcelona
Glossary of Technioal Terms and Classes of Business For readers who are not familiar with insurance and reinsurance, the following glossary briefly defines various technical terms and classes of business as used in the Annual Report. wvutsrponmlkihgfedcaZTSRNLIEDCBA
­ Retrocession: Passing on by the ̂ reinsurer of the ̂ risk accepted in reinsurance to other companies ret­ rocessionaire).
­ Claims incurred: All claims payments plus the adjust­ ment in the ̂ outstanding claims reserve of a business year.
­ Equalization fund: Reserve set up to smooth out ex­ ceptionally high fluctuations in claims experience.
Co­insurance: Where a number of ̂ insurers and/or^ reinsurers each share part of a ^ risk.
Co­insurance basis: System of Life reinsurance under which the^ reinsurer assumes a share of the ̂ risk (pre­ miums, benefits, setting­up of reserves, etc.) at the same terms as the reinsurer's client (cf. risk premium basis).
Commission: Remuneration paid by the insurer to his agents, ^ brokers or other commercial intermediaries or by the reinsurer (reinsurance commission) to the ̂ in­ surer for their costs in connection with the acquisition and administration of insurance business.
­ Insurer (also direct/primary insurer): Insurance com­ pany in a direct contractual relationship with the ̂ poli­ cyholder.
­ Net amount: Life insurance in force of the­» insurer af­ ter deduction of the ̂ cessions or Life business of the ^ reinsurer after deduction of ­» retrocessions.
Premium: Amount paid by the ̂ policyholder to the ̂ in­ surer in the business year in return for insurance ̂ cover.
­ Gross premium: Insurance premium before deduction of the ceded premium (­^ cession) or reinsurance pre­ mium before deduction of the retroceded premium (­^ retrocession).
­ Single premium: A single payment of Life insurance premium as opposed to annual premium payment.
­ Facultative reinsurance: Reinsurance of the ̂ insur­ er's ^ risks on an individual basis.
­ Quota­share reinsurance: Form of ^ proportional reinsurance, providing that the ^ reinsurer accepts a specified share of each ̂ risk of an ̂ insurer in a speci­ fied class of business.
­ Surplus reinsurance: Form of ̂ proportional reinsur­ ance, in which ­> risks are reinsured over a specified amount.
­ Risk category: Grouping together of risks with similar hazard characteristics.
­ Risk management: Management tool for the compre­ hensive identification and assessment of risks based on knowledge and experience in the fields of natural sciences, technology, economics and statistics.
Risk premium basis: System of Life business under which the reinsurer only participates in the death risk in so far as it exceeds the ­> policy reserves (­^ co­insurance basis).
Technical reserves: In the Non­Life sector: Reserves for ^ unearned premiums and outstanding claims; in the Life sector: the ^ policy and claims reserves.
Underwriting result: In the Non­Life sector: Total of ^ earned premiums, less ̂ commissions, ̂ profit commis­ sions and ̂ claims incurred. In the Life sector: ̂ net pre­ miums, plus adjustment in ̂ policy reserves, less ̂ com­ missions, ^ profit commissions and ^ claims incurred.
Non­Life Insurance: All classes of insurance business with the exception of ^ Life.
­ Aviation Insurance: Insurance of accident and liability risks, as well as hull damage, in connection with the operation of aircraft.
­ Business Interruption/Loss of Profits/Business In­ come Protection Insurance: insurance against finan­ cial effects of a loss on a company's income. The insur­ ance covers overhead costs (interest, salaries, etc.) and lost profit. This business is mostly included in the corre­ sponding insurance class (principally Fire and Engineer­ ing insurance).
­ Employers Liability Insurance: Insurance by employ­ ers in respect of employees for injuries arising out of their employment.
­ Engineering Insurance: Insurance of construction and erection objects during the construction or erection period and the insurance of machinery in operating plants (inci. EDP installations).
­ Fire Insurance: Insurance against fire, lightning, explo­ sion and damage caused by failing aircraft; it can also embrace insurance against windstorm, earthquake, flood, other natural hazards and political risks (riot, strike, etc.).
­ Nuclear Energy Insurance: Insurance against prop­ erty damage, liability and accident in connection with the operation of nuclear energy installations.
­ Products Liability Insurance: Insurance of the liability of the manufacturer or supplier of goods for damage caused by their products.
­ Occupational Incapacity Insurance: Insurance against the incapacity to exercise a profession as a re­ sult of sickness or other infirmity.
­ Sickness Insurance: Insurance against sickness or disability as a result of sickness.