Swiss Reinsurance Company Mythenquai 50/60, RO. Box, CH-8022 Zurich, Switzerland Telephone 01 208 21 21 Telex 815 722 sre oh Telefax 01 208 29 99 Cables swissre
Notes on the Annual Accounts 22 ; Business Years 1977/78-1986 46
Note on the illustrations In this Annual Report The Illustrations show modern Installations and processes In the food production sector. Here too Insurance and reinsurance have an Important role to play by protecting man and his property. Photos: H.R. Bramaz, Adilswil, Switzerland
Summary of mportant Figures in millions of Swiss francs Swiss Re, Zurich 1986 1985
Sw. frs. 248.Sw. frs. 49.- * subject to the resolutions of the General Meeting
Board of Direotors Term to expire in Walter Diehl* Chairman, Zurich 1987
Rainer E. Gut* Bassersdorf, Chairman of the Board of Directors of Credit Suisse, Zurich 1988
E. Luk Keller Erlenbach, Chairman and Managing Director of Eduard Keller Ltd., Zurich 1987
Franz Luterbacher* Zumikon, Chairman of the Board of Directors (ret.) of BBC Brown Boveri Ltd, Baden 1989
Marcel Odier Cologny, Partner (ret.) in Lombard, Odier & Cie, Bankers, Geneva 1988
Helmut F Rudolf Zumikon, General Manager (ret.) of Swiss Re 1990
Genera/ Managers Paul E. Ctiristen Rolf Gamper Paul-Francis Niquille Flermann Odermatt Flerbert Sctiönenberger
Deputy Genera/ Managers Hans R.Kaufmann Theo Obrist Pierre-Claude Perrenoud Arnold W. Saxer Werner G. Seifert
Near, Middle and Far East, International US business, Bermuda, Caribbean, Latin America, Portugal, Portuguese-speaking Africa, English-speaking Africa H. Haag, Executive Manager G. Bachmann, Executive Manager Executive Managers P Bieri, G. Holzel Managers J. Bleuler, L.I Pozzi, FJ. Wingrove Members of Management R.Maag, K.CIaridge'
Main lines: Accident/Liabiiity, Motor, Fire, Ha//, Burgiary Executive Manager H.-K. Zulauf Managers M. Bradley, F Eugster, B. NIgg, R. Schilling, A. Schneeberger, J. Spühler, P Szöilösy*, H. Volienweider
Reinsurance technique, acquisition, special risks, insurance medicine J.-C. Mayor, Senior Executive Manager H.C.Rutishauser, Executive Manager Executive Managers S. Courant, E.DeIco, R.Eckert, L. D. Kirianoff*, K. Küstahier, FLock, K. Wettenschwiler Managers R. Boutin, Y Burgener, A. Chuffart, H. Fuchs, E. Hirzei *, F Joseph, A. Loya, H.Menzl, Ms. F Schulthess, J.-P Vogel Members of Management M. L. Hetti, J. Doktor, A. Perret
H.W. Kreis, Senior Executive Manager W. Schiegg, Executive Manager Managers J. Brun, P Fürst, R. Held, R. Jeck, K. Münger, B. Niethammer, G. Schmidii Member of Management E. Franciick
Personnel service, training R. Oberie, Executive Manager H. Sporri, Manager Executive Manager J. Niederer
A. Brtigger, Senior Executive Manager D. Söhner, Executive Manager Managers M. Freylinger, A. Suizer
Once again Swiss Re, Zurich, is able to look back on a successful year. In 1986 the net profit rose, as compared with the previous year, by about 16% to Sw. frs. 138.5 mil­ lion. The Board of Directors will propose to the forthcom­ ing General Meeting that a higher dividend be paid on the company capital, which was increased In 1986.
The trends discernible in the accounts of Swiss Re, Zurich, are confirmed in the consolidated accounts of the Swiss Re Group.
moderation as business expands. Although the buildings vary greatly in appearance, they are linked up internally to form a complex which offers members of staff modern workplaces in a motivating environment; at the same time it allows us to receive, advise and entertain guests from all over the world and to manage the widely ramify­ ing Group with efficiency.
For this reason Swiss Re, Zurich, enlarged its capital basis once again during the 1986 business year. This was done in the firm belief that in future the financial strength of the reinsurer - in addition to his know-how and skill will take on even more significance. The capital increases carried out in recent years have considerably boosted the Swiss Re's position in the market. At the end of the year under report, the capital funds shown - subject to approval by the General Meeting of the allocation of the profit - amounted to Sw.frs. 1,794 million, while solvency (capital tunds in relation to net premiums) rose to 52.6%.
Finally in 1986 Swiss Re took into service a newly com­ pleted office building - the so-called "Mythenschloss". This gives the company enough office space at its tra­ ditional location on the Mythenquai to increase its work­ force in the foreseeable future - step by step and in
claims payments, commissions and management ex­ penses) fails accordingly. Basically the following report makes reference to the annual accounts, I.e. the position In Swiss francs; where the effect of foreign-currency rates appears significant, it is commented upon.
The Swiss Re operates in over 130 currencies, Swiss business accounting for less than 10% of the overall vol­ ume. The development of foreign exchange rates there­ fore has a considerable effect on the annual accounts, in the 1986 business year, the Swiss franc was once again the world's hardest currency, i.e. ail other currencies weakened against it in the course of the year. The value of the US dollar fell by 21.4% (following a 20% drop in the previous year) and dollar-related currencies and the pound sterling lost value in proportion. Continental Euro­ pean currencies weakened to varying degrees but, on the balance-sheet date, even the German mark, which is generally classed as relatively hard, was - like the Japa­ nese yen - below the previous year's rate (of. table on page 22).
The loss in value of foreign currencies causes a drop in ail income earned abroad (especially premiums and invest­ ment income), once it has been converted into Swiss francs, although the outgo incurred abroad (in particular
in the world's largest insurance market, the United States, there were again substantial, in part precipitous rises in premium in practically ail insurance branches (following drastic increases in the previous year). This applied to Liability insurance as well, where attractive premium growth was used to mask the fundamental problems rooted in extreme ciaims-mindedness and in the legal and court system itself. The Swiss Re looks upon these superficially effective measures as representing no real improvement in the situation and will unwaveringly ad­ here to its previous policy of assuming heavy Liability risks only if the liability is clearly defined in amount and time and a commensurate premium is paid. There was no cause to deviate from this policy in the year under report, nor is there any today; on the one hand, no real progress has been made with the necessary fundamental reforms and, on the other, the contractual limitation of the scope of cover in insurance and reinsurance is proving to be diffi­ cult: only in Professional indemnity insurance has it been possible to introduce suitable clauses, whilst in Products Liability the progress made has been slight. The Swiss Re will consistently pursue the path it has taken - not only in its own interests but also in those of its clients and of the market at large, it would be wrong to slacken the reins now - with recovery from the trough still under way - and to allow unbridled competition to reappear; the insurance industry would not stand another down-turn, especially where reserves are still too limited.
In the year under report there were several losses that caused a burden on the environment in a spectacular way. These occurrences are of concern to the insurance industry not only in connection with the amount of related claims, for they also give rise to questions of insurability and the clear material and temporal definition of insured events and underline once again the significance of the best possible loss prevention. With regard to the defini­ tion of cover, reinsurers expect direct insurers to make a decisive contribution to the clarification of today's often unsatisfactory situation; otherwise it must be expected that reinsurance conditions will be introduced which de­ viate from the original cover.
In the year under report, the gross premiums in the NonLife sector amounted to Sw.frs. 3,767 million; in Swiss francs this is 2.8% less than in the previous year, which it­ self experienced a 1.2% decline. The decrease is within reasonable limits since premium increases and a modest volume of new business partly offset the slowing-down effect of foreign exchange rates. - Expressed in original currencies, premium growth amounted overall to 11% (previous year, 10%); this development can be consid­ ered satisfactory.
brighten up the overall picture. The Swiss Re Is convinced that a further reduction of the underwriting loss In NonLife reinsurance Is necessary and possible.
The premium volume of Burglary, Fidelity and Allied lines Continued to fall; the drop was accentuated In the year under report by the expiry of special business. - An Im­ provement was made to the previous year's balanced re­ sult; this success stemmed from Burglary and Fidelity business, while Water Damage and Livestock reinsur­ ance were practically In balance. Volume and result re­ flect the remedial efforts made but also the Improvement of the basic business.
Fire, Business Interruption 1,391 1,396 Hall 45 44 Burglary, Fidelity and allied lines 89 103
Engineering reinsurance registered a drop in premium income because of reduced building activity in the oilproducing nations and effects of foreign currency rates al­ ready mentioned. - As in many previous years, the under­ writing result was again positive, which is remarkable in that Engineering reinsurance is by nature heterogenous and unbalanced.
In Nuciear Energy reinsurance premium income re­ mained stable. - The year was largely free of claims, which enabled the special reserves needed in this sector to be formed.
In Credit and Surety reinsurance volume has declined, because business in major markets stagnated and the foreign currency development brought losses. - There has been a further clear deterioration in the result. The causes are to be found in American Surety and Mortgage Guaranty business, which once again produced losses. The measures initiated a year earlier with a view to reme­ dying American Surety reinsurance were still without ef­ fect in the year under report. The decay in oil prices abruptly checked economic development in the southern states of the U.S., which caused Mortgage Guaranty in­ surers and their reinsurers substantial losses. The Swiss Re is likewise affected by them; the reserves have there­ fore been strengthened accordingly. Outside the United States Credit and Surety reinsurance is gratifyingly posi­ tive.
The actuarial auditor, Mr. Marc-Henri Amsler, Lausanne, has confirmed in his report that the technical reserves of the Life reinsurance business at the end of 1986 were cal­ culated on the bases approved by the Swiss Federal Council.
The net amount of Life reinsurance business in force on the balance-sheet date totalled Sw.frs. 48,899 million, which was 2.2% less than that of the previous year. New business declined by 3.5% to Sw. frs. 10,237 million. Both decreases are due to the effect of foreign currency rates; in original currencies, the amount of business in force showed an increase of 11.2% over the previous year and new business one of 14.0%.
By and large the development of the world economy in 1986 was satisfactory - even if not all the expectations placed in the continual fall in interest rates, the correction of the dollar exchange rate and the sustained decline of oil and raw material prices were fulfilled. Although these factors had in part a stimulating effect on the economy, they did at the same time set in motion a penetrating process of adjustment which clearly impeded the further upswing. Overall the growth rate in North America and Europe remained at about the previous year's level, while in Japan it fell by half as a result of the strength of the Yen against the US dollar. The moderate economic develop­ ment led to a further drop in inflation; in industrialized na­ tions 1986 saw the lowest inflation rates since the early 1960s. Other problems, however, remained unsolved: un­ employment, for example, was only modestly reduced, the high international indebtedness remained un­ changed and foreign trade and national budgets showed in part a critical imbalance.
In the foreign currency sector the disequilibrium in the current accounts of major countries caused considerable rate fluctuations and shifts in the course of the year. The value of the US dollar again fell against the Swiss franc in the year under report, this time by 21.4% (after 20% in the previous year). The dollar-related currencies and the pound sterling depreciated to a like extent. Greater stabil­ ity was shown by the currencies of continental Europe and the Yen; yet against the Swiss franc, they too - like all other currencies - lost value.
On the share markets the upward trend of several years' duration was basically sustained, although in the individ­ ual markets the development was neither consistent nor uniform. After considerable fluctuations, the stock mar­ kets of Switzerland and Germany (last year's leaders) showed on balance only slight advances, while in London and in some smaller European markets a substantial up­ swing was registered; the greatest successes were, how­ ever, brought by Japanese and U.S. shares. The invest­ ment policy remained directed at realizing a part of the gains in those markets which advanced the most; as a re­ sult the hidden surplus on equities fell slightly. In more fa­ vourably assessed markets selected positions were built up again. The balance-sheet value of capital market investments and real estate of Sw.frs. 6,318 million is Sw.frs. 495 mil­ lion higher than that of the previous year. This increase is attributable to substantial new investments; it has, how­ ever, been halted by the significantly lower valuation of certain major investment currencies.
The main emphasis of new investments and reinvest­ ments lay on bonds and real estate. The balance-sheet value of all fixed-Interest Investments rose therefore by Sw. frs. 402 million to Sw. frs. 4,840 million, despite a pro­ nounced reduction In convertible bonds. In view of the low level of Interest rates worldwide, the average maturity of the portfolio has again been shortened slightly. The real estate portfolio was Increased by Sw.frs. 92 million to Sw. frs. 843 million; this growth Is due to the acquisition of existing property as well as to building construction. The share portfolio remained on balance practically un­ changed with a balance-sheet value of Sw.frs. 635 mil­ lion.
The first graphic on page 16 and the following table show how capital market investments and real estate at bal­ ance-sheet values are distributed among the various investment categories. The second graphic on page 16 shows the breakdown by currency.
Capital market Investments and real estate 6,318 5,823 Holdings and loans 738 577 Net cash deposits from reinsurance transactions 1,209 1,261
Bonds, certificates of deposit and mortgage bonds 3,791 3,546 Loans (Including mortgages) 968 730 Fixed-Interest securities with equity character 81 162 Shares 635 634 Real estate 843 751
On 15th September, 1987, the value of Swiss Re, Zurich, on the Zurich stock exchange was as follows: 400,000 registered shares at Sw.frs. 7,925 44,000 bearer shares at Sw.frs. 17,850 860,000 non-voting shares at Sw.frs. 3,180
The Swiss Re's head office has been sited on the Mythenquai in Zurich since 1913; at that location it has been able to expand step by step to reach Its current size. The start of the latest expansion phase dates back to 1962, when the Swiss Re acquired the adjacent property, known as the "Mythenschloss". It was, however, not until 1975, when the building was already about 50 years old, that the new owner took possession. A study of the substances of the building and its possibilities of utilization soon revealed that the only way of ensuring a satisfactory long-term so­ lution was to rebuild.
This path proved to be practicable and the goal has been achieved. In late 1986 and early 1987,65 tenants and 500 company employees were able to move Into the new "My­ thenschloss". As a result, the Swiss Re's staff is largely accommodated In the three Mythenqual buildings, while an office building on the Lavaterstrasse has been rented out.
Last year's General Meeting confirmed ttie re-eiection of Mr. Helmut F Rudolf for a furttier four-year term of office.
At ttiis year's General Meeting ttie term of office of Mr. Wai­ ter Dietii expires; ttie Board of Directors will propose to ttie General Meeting ttiat Mr. Diehi, wfio is standing for reeiection, be confirmed for a furttier term.
Having reactied retirement age, Mr. E. Luk Keller is resign­ ing from ttie Board, tiaving been a member since ttie 1977 General Meeting. Ttianks to tiis worldwide business ex­ perience - mainly in international trade, but also in ottier major fields - tie has made an extremely valuable contri­ bution as a Member of the Board. We are deeply indebted to Mr. Keller for his great services to the Swiss Re.
The Board of Directors will propose to this year's General Meeting the election of Mr. Kurt Purgier, retired Federal Councillor, St. Gail.
On 31st December, 1986, Messrs. Rudolf Hedinger and Jan C. Roos, Senior Executive Managers, Max A. Tobier and Paul Würsch, Executive Managers, Simon Menn and Paul Schweizer, Managers, and Oskar Jenni and Hans H. Zollinger, Members ot Management in an Advisory Ca­ pacity, entered retirement. Messrs. Samuel Patthey, Exec­ utive Manager, Max Gasche and Georges Heering, Man­ agers, and Brian R. Lacock, Member of Management in an Advisory Capacity, retired on 30th June, 1987. All these gentlemen have rendered our Company great services for decades and we should like to express our sincere gratitude to them.
The General Managers: RE. Christen, R. Camper, P-F Niquiiie, H. Cdermatt, H. Schönenberger
Claims incurred incl. adjustment in outstanding claims reserve - 226,710,314 - 249,319,437
Cast! in tiand, postal bank account, bank balances Current-account balances Casti deposits
Statutory reserve fund Special reserve fund Reserve fund tor catastrophe losses
The 1986 business year comprises both reinsurance business and general income and outgo for the period from 1st January to 31st December, 1986.
Current-account balances and cash deposits are entered in the balance sheet at their nominal value.
Technical reserves (unearned premiums and outstand­ ing claims) are based in principle on information provid­ ed by ceding companies. Additional reserves are formed on fhe basis of past experience for losses that are In­ curred but not reported. In Marine reinsurance technical reserves are calculated in accordance with practice using a lump-sum method. All these reserves are entered at the amounts which will presumably have to be paid in future for the underlying liabilities. Annuity liabilities from NonLife reinsurance and liabilities from Life business are calculated at actuarially determined present values. The technical reserves of Life reinsurance business are deter­ mined on the bases approved by the Swiss Federal Council.
Gross premiums in the year under report totalled Sw.frs. 3,766.7 million. After deduction of retrocession premiums of Sw.frs 750.0 million, the net premiums amounted to Sw.frs. 3,016.7 million, which corresponds to a drop of 2.6% when compared with the previous year. Without the effect of foreign currency fluctuations, net premiums would have risen by 12.1%.
cessionaires' share of this amount was Sw. frs. 3.8 million, so that Sw.frs. 77.9 miilion remained for own account.
Claims comprise benefits for term and endowment insur­ ance, paid annuities and the adjustment in the outstand­ ing claims reserve. The total figure for own account fell in the year under report by Sw.frs. 22.6 million to Sw.frs. 226.7 million. Although claims payments rose, the out­ standing claims reserve grew less than in the previous year.
The commissions and profit commissions calculated for business assumed totalled Sw.frs. 81.7 million. The retro-
The total of Sw. frs. 577.1 million is a net amount after de­ duction of various outgo items, such as the interest on the Life reinsurance and annuity fund and other technical re­ serves as well as outgo interest for bank and current ac­ count balances and cash deposits. Income rose as com­ pared with the previous year by 4.0%. Without the effect of foreign currency fluctuations, an increase of 14.3% would have been registered.
This group of accounts closed with a negative baiance of Sw.frs. 50.8 miliion (previous year, positive balance of Sw. frs. 16.0 million). Realized capital gains and losses on investments contributed a net profit of Sw.frs. 168.1 mil­ lion (previous year, Sw.frs. 184.9 million); an unchanged special allocation to the technical reserves has already been deducted. The fluctuations in foreign currency rates had a positive effect on the result of monetary transfers and the conversion of foreign currency balances, leading to a profit of Sw.frs. 7.4 million (previous year, debit of 7.2
million). The write-offs on capital market investments and real estate amounted to Sw.frs. 154.7 million (previous year, Sw.frs. 133.2 million). Depreciation outside the sec­ tor of investments amounted to Sw.frs. 71.6 million, this includes, as in previous years, a further value adjustment for outstanding claims.
The tax outgo contains both taxes on profit and on capital as well as indirect taxes. It amounted to Sw.frs. 57.4 mil­ lion, as against Sw.frs. 64.0 million in the previous year and comprises current taxes levied abroad together with the outgo expected in Switzerland on the basis of the 1986 result. It also contains the stamp duty payable on the capital increase in 1986. The fall in the final total is the re­ sult of lower taxation abroad and the reduced tax rate applicable because of higher capital funds.
Of the total amount of Sw.frs. 862.2 million, Sw.frs. 861.4 million was for bank balances. The major part of this amount is invested short-term in the principal currencies for our business activity and is used to meet current obli­ gations on time. The increase of liquid assets by Sw.frs. 261.7 million, as compared with the previous year, is due to higher time deposits.
Cf the total amount of current-account balances of Sw. frs. 904.9 million, Sw.frs. 820.4 million was for reinsurance and Sw. frs. 65.5 million for retrocession business; Sw. frs. 19.0 million concerned other balances, the most signifi­ cant part of which comprised reclaimed taxes. The overall decrease overthe previous year was Sw.frs. 247.0 million and is largely due to lower conversion rates.
The portfolio of capital market investments (fixed-interest securities, loans and shares) and real estate rose by Sw.frs. 495.6 million to Sw.frs. 6,318.3 million. The valua­ tion difference on capital market investments (excluding
On the balance-sheet date the technical reserves com­ prised the following: in millions of Swiss francs
Non-Life Reinsurance Unearned premiums Outstanding claims reserve (incl. valuation of current annuity indemnities)
Life Reinsurance Policy reserves Outstanding claims reserve in % of insurance in force, net 3.1 % 3.0%
On the balance-sheet date the capital comprised the share capital of Sw.frs. 111.0 million (400,000 registered and 44,000 bearer shares each with a nominal value of Sw.frs. 250.-) and a non-voting share capital of Sw.frs. 43.0 million (860,000 non-voting shares each with a nominal value of Sw.frs. 50.-).
Share capital 111.0 111.0 Non-voting share capital 43,0 35.5 Reserves and profit carried forward 1,640.4 1,128.8 Total 1,794.4 1,275.3
This table shows that the non-voting share capital grew as a result of the capital increases of July 1986 by Sw.frs. 7.5 million to Sw.frs. 43.0 million. The agio totalling Sw.frs. 451.5 million has been allocated to the statutory reserve fund.
Contingent liabilities (sureties and guarantees) amount­ ed to Sw.frs. 8,825,619 per 31st December, 1986.
After deduction of the Federal Withholding Tax of 35%, the dividends of Sw.frs. 81.25 and Sw.frs. 16.25 respectively will be paid after 24th November, 1987, as follows: Registered shares: by means of dividend order to the shareholders In the records of the share register or to their deposit banks.
Life Reinsurance Life reinsurance in force for own account Net premiums
Balance Sheet Assets Cashi in hiand, postal bank account, bank balances Current-account balances Casfr deposits
Fidelity and Deposit Company ot Maryland, -Baltimore •• * ' •- !•. '<3
Magdeburger Versicherungsgruppe Magdeburger Feuerversicherungs-AG, Hanover Magdeburger Lebensversicherungs-AG, Hanover Magdeburger Hageiversicherungs AG, Hanover Magdeburger Rechtsschutzversicherungs-AG, Hanover
Vereinte Versicherungen Vereinte Versicherung AG, Munich Vereinte Lebensversicherung AG, Munich Vereinte Krankenversicherung AG, Munich Saar-Rhein Allgemeine VersIcherungs-AG, Saarbrücken 'TM
The company names of three of the companies belong­ ing to the Vereinigte Versicherungsgruppe, Munich, have been modified with effect from 1st October 1987: Vereinte Versicherung AG (formerly: Vereinigte Aachen-Berli­ nische Versicherung AG), Vereinte Lebensversicherung AG (formerly: Vereinigte Eos-Isar Lebensversicherung AG) and Vereinte Krankenversicherung AG (formerly: Ver­ einigte Krankenversicherung AG); the narpe of the SaarRhein Allgemeine Versicherungs-AG remains un­ changed. - In future the group will be known as Vereinte Versicherungen (of. page 37).
In Life reinsurance profitability improved, especially that of the American subsidiary companies. The measures Implemented in the technical and administrative sectors are beginning to take effect, combined with the fact that there were fewer major claims of a fortuitous nature. The underwriting profit reached Sw.frs. 25 million (previous year, Sw.frs. 19 million). The net amount of business in force declined to Sw.frs. 154,000 million (previous year, Sw.frs. 158,000 million) as a result of foreign exchange rate fluctuations.
The European General Reinsurance Company of Zurich showed in Non-Life reinsurance a decrease of gross pre­ miums by approximately 32% to Sw.frs. 647.3 million (previous year, 80% increase to Sw. frs. 950.2 million). The previous year's exceptional growth was due to a special operation (reinsurance of Mortgage insurance business in the United States). In the year under report the pre­ miums from this business fell as agreed in the treaty con­ ditions. The underwriting loss remained at the same level as in the previous year. - In Life reinsurance the gross
amount of business In force fell to Sw.frs. 52,700 million (previous year, Sw. frs. 72,400 million). The lower loss bur­ den brought about a reduction of the underwriting loss. Investment income was increased, whereas the positive result from rate fluctuations and write-offs has shrunk. The net profit was Sw.frs. 2.0 million, as in the previous year, and is again to be used to strengthen the reserves.
Fire 1,892 417 2,309 1,897 426 2,323 Accident / Sickness 347 2,087 2,434 472 2,069 2,541 Third Party Llablllty/Motor 1,593 885 2,478 1,559 807 2,366 Marine 260 141 401 331 126 457 Other branches 1,127 220 1,347 1,482 196 1,678 Life 1,109 587 1,696 1,227 557 1,784 Gross premiums 6,328 4,337 10,665 6,968 4,181 11,149 Premiums ceded 414 533 947 624 569 1,193 Net premiums 5,914 3,804 9,718 6,344 3,612 9,956
The Bavarian Reinsurance Company Limited, Munich, showed in Non-Life reinsurance an increase of gross pre­ miums of 7.1% to DM 1,537.4 million (previous year, DM 1,435.5 million). Thanks to improved results in most branches the underwriting loss prior to equalization reserves has clearly been reduced. - In Life reinsurance the gross amount of business in force grew to DM 5,700 million (previous year, DM 5,500 million). The result remained negative; it has mainly been impaired by pro­ fessional disability claims. - Capital investment income declined. Overall an increased profit for the year of DM 10.0 million (previous year, DM 8.0 million) was shown. To mark its 75th anniversary the company ex­ pects to pay out a bonus of DM 1.0 million in addition to the existing dividend of DM 4.0 million.
The gross premiums of the Swiss Reinsurance Company (UK) Limited, London, and the Palatine Insurance Compa­ ny Limited, London, remained practically unchanged as against the previous year in Non-Life business. The un­ derwriting result showed clear improvement after several years of efforts to remedy the portfolio. - In Life business the gross amount of business In force grew to £ 3,200 mil­ lion (previous year, £2,700 million), whereas the premium volume fell. This development is due to fluctuations In single premium business; conventional reinsurance, on the other hand, also continued to rise in terms of pre­ miums. A satisfactory result has again been achieved. Thanks to another good investment return, the overall re­ sult was a profit of £ 2.0 million (previous year, £ 0.1 mil­ lion). An unchanged dividend of £ 0.2 million was paid on the preference shares.
At the Australian Reinsurance Company Limited, Mel­ bourne, the gross premiums in the Non-Life sector rose by 16.4% to Austr. $ 97.1 million. As a result of a worse claims experience the underwriting loss was higher than in the previous year. - In Life business the gross amount of business in force rose by19.4%to Austr. $3,700 million. The underwriting profit (Including Accident and Sickness reinsurance) was significantly higherthan in the previous year. - The improved result in the Life sector and the
The consolidated gross premiums of the Vereinte Versi­ cherungen, Munich, rose by 3.2% to DM 3,339.1 million. The Vereinte Versicherung AG increased its gross pre­ miums by 10.4% to DM 723.2 million (previous year, DM 655.0 million). The underwriting result deteriorated, main­ ly because of the unfavourable experience of Motor insur­ ance. Increased investment income and a clearly lower
tax burden led to a rise of ttie profit for the year to DM 19.4 miiiion (previousyear, DM 8.9 miiiion). in additiontoadividend of DM 7.6 miiiion (previous year, DM 6.1 miiiion), a bonus of DM 3.8 miiiion was paid. - The business year of fhe Vereinte Lebensversicherung AG was safisfacfory. The amounf of insurance in force grew by 5.1% to DM 12,500 miiiion (previous year, DM 11,800 miiiion). Ben­ efit payments increased further. Overall a profit for the year remained of DM 3.3 miiiion (previous year, DM 2.1 miiiion). As in fhe previous year, a dividend of DM 1.1 mii­ iion was paid. -The premium growth ofthe Vereinte Kran­ kenversicherung AG was marginal at 0.1%. The gross premiums totalled DM 2,147.2 miiiion (previous year, DM 2,144.6 miiiion). There was an increase in the amount of benefit payments. The investment result showed fur­ ther improvement. Following an allocation of DM 223.0 miiiion (a reduction of DM 1.1 miiiion) to the reserve for bo­ nuses to policyholders, a profit for the year remained of DM 16.9 miiiion (previous year, DM 16.5 miiiion). Of this amount a dividend of DM 5.9 miiiion (previous year, DM 5.5 miiiion) was paid and, as in the previous year, DM 3.0 miiiion contributed to the outstanding paid-up capital.
The SwissRe Holding Limited comprises ail majority holdings whose figures have been consolidated - with the exception of Swiss Re, Zurich, and the North Ameri­ can Specialty insurance Company, Manchester, New Hampshire - together with a number of minority holdings.
The structure ofthe holding portfolio underwent no major changes during the year under report. The loan granted by the Swiss Re fell, as a result of partial repayment, by Sw. frs. 15.1 miiiion to Sw. frs. 500.3 miiiion.
The net profit in 1986 amounted to Sw. frs. 14.9 miiiion (previous year, Sw. frs. 10.7 miiiion). The increase was mainly due fo higher dividend payments from company holdings for fhe 1985 business year; in addition there was a slight reduction of the net outgo. The further improve­ ment in the result enabled the payment of a dividend of Sw. frs. 9.0 miiiion (previous year, Sw. frs. 7.0 miiiion).
The mh Bausparkasse AG, IVIunich, was able to continue the successful course of business registered in past years. Contracts were produced with a savings amount of DM 1,158.0 miiiion, 15.4% higherfhan in fhe previous year. At the end of the year the portfolio of savings contracts to­ talled DM 4,205.0 miiiion (growth of 30.9%). The year's profif was DM 2.0 miiiion, as in the previous year. For the first time a dividend of DM 0.8 miiiion was paid.
The General Surety & Guarantee Company Limited, Wlimslow - specializing in Surety business - showed unchanged gross premium income of £ 3.0 miiiion. The profit of £ 135,000 was slightly higher than the previous year's figure of £ 119,000. The dividend was unchanged at £ 90,000.
The Fidelity and Deposit Company of IVIaryland, Balti­ more, in which the «Zurich» insurance Company and the Swiss Re each have a 50% shareholding, is not consoli­ dated in the Group accounts, in 1986 the gross premiums rose by 16.7% to US $ 244.6 miiiion. The situation in Sure­ ty business has stabilized, and the company's underwrit­ ing result has improved. The investment result developed well in accordance with prevailing market conditions. The year's profit fofaiied US $ 22.2 miiiion (previous year, US $ 1.6 miiiion); fhe company paid a dividend of US$10.0 mii­ iion.
Gross premiums 5,219 3,750 8,969 9,365 Premiums ceded - 195 - 519 - 714 - 893 Net premiums 5,024 3,231 8,255 8,472 Adjustment in unearned premiums - 83 - 374 - 457 - 656 Earned premiums 4,941 2,857 7,798 7,816 Interest on Sickness insurance fund - 256 256 239 Commissions, profit commissions, expenses -1,339 - 852 -2,191 -2,281 Claims incurred -3,986 -2,246 -6,232 -6,267
Underwriting result from Non-Lite insurance - 384 15 - 369 - 493
Investment income 876 161 1,078 1,068 Other financial income - - 15 12 Management expenses - 381 - 122 - 526 - 521 Rate fluctuations, depreciation. value adjustments 71 27 104 218 Other outgo - - - 9 8
Taxes Group company profit applicable to minority shareholders * The figures in this column do not always amount to the total ot the figures in the two preceding columns as figures tor holdings and other companies are also included.
Fixed-interest investments 9,011 8,567 18,159 17,252 Shares 1,321 914 2,235 1,847 Real estate 1,159 616 1,780 1,636 Non-consolidated holdings 63 34 424 387
Current-account balances 840 808 1,795 1,606 Cash deposits 295 161 456 490
Technical reserves Non-Lite insurance 9,406 5,263 14,669 14,501 Lite insurance 2,883 4,149 7,032 6,773
Building society deposits - - 459 340 Transitory entries, value adjustments and other provisions 1,312 340 1,697 1,404
Profit applicable to minority shareholders - 10 11 10 Capital funds applicable to minority shareholders - 43 47 42
Share and non-voting share capital 154 147 Reserves shown 1,580 1,081 Consolidation reserve fund 191 232 Group Profit 179 145
The Group accounts were compiled according to the published financiai statements as at 31st December, 1986, of the companies belonging to the Swiss Re Group. Only the results of the Bavarian Reinsurance Company Limited and the European General Reinsurance Com­ pany of Zurich had not yet been published at the time of the consolidation.
In the year under report the SWITZERLAND General Insur­ ance Company Ltd. took overtwo Spanish companies. La Constancia Compafiia Andnima de Seguros and El Porvenir Sociedad Andnima de Seguros, both in Barcelona. The figures of both companies were consolidated pro rata temporis from the time of the takeover. Comparison with the previous year is not materially affected by includ­ ing these two small companies in the consolidated Group accounts for the first time.
Gross premiums as well as all balance sheet and profit and loss account figures from foreign Group companies which are shown in the various local currencies were uni­ formly converted into Swiss francs using the average foreign currency rates as at 31st December, 1986.
The foreign currencies used in the Group accounts weak­ ened without exception in the wake of the continued loss of value of the US dollar as compared with the previous year (cf. table on page 22).
In Non-Life insurance premiums fell by 4.2% to Sw.frs. 8,969 million (previous year, increase of 2.8%) and in Life insurance by 4.9% to Sw. frs. 1,696 million (previous year, drop of 26.3%).
These items comprise a positive balance from realized capital gains and depreciation on investments of Sw.frs. 209 million (previous year, Sw.frs. 256 million), from foreign currency losses of Sw. frs. 3 million (previous year, gain of Sw.frs. 4 million) as well as from value adjusfments and depreciation on assets outside the invest­ ment sphere of Sw.frs. 102 million (previous year, Sw.frs. 42 million).
The claims incurred comprise payments for Life and An­ nuity insurance as well as the adjustment in the outstand­ ing claims reserve. The total outgo for own account fell in the year under report by Sw.frs. 36 million to Sw.frs. 683 million. Of this amount, Sw.frs. 508 million concerned reinsurance companies and Sw. frs. 175 million insurance companies.
The consolidated balance-sheet values of capital invest­ ments (incl. non-consolidated holdings) increased over­ all by about 7%, or Sw. frs. 1,476 million, to Sw. frs. 22,598 million. This affected all investment categories, fixedinterest investments rising by 5% (previous year, 11%), shares by 21 % (previous year, drop ot 2%) and real estate by 9% (previous year, 7%). The item "Non-consolidated holdings" contains holdings of 50% or less in insurance and reinsurance companies.
In the case of fixed-interest securities and shares (without non-consolidated holdings) the difference between the lower book and higher market value otthe individual se­ curities, taking into account the estimated value of taxes due on realization, amounted to Sw.frs. 1,737 million, or 8.5% otthe balance-sheet value (previous year, 8.8%).
Life Insurance Life insurance and annuity fund 2,457 3,194 5,651 5,476 Outstanding claims reserve 421 20 441 480 Reserve for profit commission 5 935 940 817 in % of Life insurance in force, net 1.9% 26.8% 4.2% 3.9%
Capital funds at end of previous year 1,605 1,172 Effects of exchange rate fluctuations on opening balance-sheet figures - 96 - 81 Paid-out profits for previous year - 72 - 60 Issue of non-voting share capital of Swiss Re, Zurich 459 432 Group profit 179 145 Other movements 29 - 3
The profits and capital funds applicable to third party shareholders correspond to the percentage shares of non-Group shareholders in the capital funds or in the results of the relevant Group companies. The capital funds applicable to minority shareholders rose In the reporting year by Sw.frs. 5 million to Sw.frs. 47 million, applicable profit by Sw.frs. 1 million to Sw.frs. 11 million. These increases are respectively due to the higher capi­ tal funds and to the higher reported earnings.
European General Reinsurance Company of Zuricti Sw. frs. 100 79,656 1,930,617 833,862
Nortti American Specialty Insurance Company US $ 100 15,468 16,877 4,604
SWITZERLAND General Insurance Company Limited Sw. frs. 99.9 95,538 1,111,709 687,132
SWITZERLAND Insurance Company UK Limited £ 100 6,140 24,453 3,253 *not consolidated
Number of Employees Reinsurance companies Insurance companies Holding and other companies
United Kingdom Swiss Reinsurance Company (UK) Limited 108 Cannon Street, London, EC4N 6HE with a branch office in Hong Kong
United States North American Reassurance Company 237 Park Avenue, New York, NY 10017 with a branch office in Dallas Swiss-Am Reassurance Company 237 Park Avenue, New York, NY 10017 SwissRe Life Insurance Company 237 Park Avenue, New York, NY 10017 North American Reinsurance Corporation 237 Park Avenue, New York, NY 10017 with branch offices in Atlanta, Boston, Chicago, Dallas, Los Angeles, Philadelphia and San Francisco
South Africa Swiss-South African Reinsurance Company Limited Swiss Park, 10 Queens Road, Parkfown 2193, Johannesburg with branch offices in Cape Town and Pretoria
Magdeburger Feuerversicherungs-AG Magdeburger Lebensversicherungs-AG Magdeburger Hagelversicherungs AG Magdeburger Rechtsschutzversicherungs-AG Kirchhorster Strasse 2, D-3000 Hanover 51
Vereinte Versicherung AG Vereinte Lebensversicherung AG Vereinte Krankenversicherung AG Fritz-Schätter-Strasse 9, D-8000 Munich 83 Saar-Rhein Allgemeine Versicherungs-AG Sulzbachstrasse 16-18, D-6600 Saarbrücken 3
United States Fidelity and Deposit Company ot Maryland Charles and Lexington Streets, Baltimore, MD 21203 North American Specialty Insurance Company 650 Elm Street, Ottice Suite 600 Manchester, NH 03101
Switzerland Audatex AG Gotthardstrasse 35, GH-8022 Zurich Prudentia Services Ltd, Mythenquai 50/60, CH-8022 Zurich
United States S\A/issRe Corporation 237 Park Avenue, New York, NY10017 SwissRe Advisers, Inc. 200 Park Avenue, New York, NY10166 Atrium Corporation 200 Park Avenue, New York, NY10166 with branch offices in Memphis and Westport Surety Support Services, Inc. Woodland Corporate Tower, Suite 130 1333 Butterfieid Road Downers Grove, IL 60515 with a branch office in San Diego
Argentina Sociedad Analisis de Riesgos S.A. Alsina 756, 6° Piso, 1087 Buenos Aires
Annuity insurance: Life insurance in which the benefits consist of a regular income payment for a specified pe­ riod of time (of. death and maturity benefits).
Business interruption / Loss of profits insurance: In­ surance against financial effects of a loss on a company's income. The insurance covers overhead costs (interest, salaries, etc.) and lost profit.
Claims incurred: All claims payments plus the adjust­ ment in the ^ outstanding claims reserve of a business year.
Fire insurance: Insurance against fire, lightning, explo­ sion and damage caused by falling aircraft; can also embrace insurance against windstorm, earthquake, flood, other natural hazards, political risks (strike, riot, etc.).
Co-insurance basis: System of Life reinsurance under which the ̂ reinsurer assumes a share of the ^ risk (i.e. premiums and benefits) as well as setting-up of reserves at the same terms as the ceding company.
incurred but not reported losses (IBNR): Provision for losses which have occurred but which have not yet been reported to the ̂ insurer or ^ reinsurer on the balancesheet date.
Life reinsurance in force: All reinsured Life business in the ^ portfolio of the ^ reinsurer.
Quota share reinsurance: Form of ^ proportional rein­ surance providing that the reinsurer accepts a speci­ fied share of each risk of an ̂ insurer in a specific class of business.
Reinsurance commission: Amount paid by the ^ rein­ surer, to the -> insurer for costs in connection with the ac­ quisition and administration of insurance business.
Net premiums: ^ Reinsurance premium of a business year less ^ retrocession premiums.
Non-Life insurance: All classes of insurance business with the exception of ^ Life.
Reinsurance premiums: Premiums paid to the ̂ rein­ surer by the insurer for the proportional or nonproportional cover granted by the ^ reinsurer.
Retrocession: Passing on by the ^ reinsurer of the ^ risk accepted in reinsurance to other companies (cf. retrocessionaire).
Non-proportionai reinsurance: Form of insurance in which the reinsurer decides on the amount he is willing to retain for his own account and buys reinsurance, at a specially calculated premium, for fhose loss amounts which exceed the retention.
Nuciear energy insurance: Insurance against property damage, liability and accident in connection with the operation of nuclear energy installations.
Premium: Amount paid by the policyholder to the • surer in return for insurance cover.
Products iiabiiity insurance: Insurance of the liability of the manufacturer or supplier of goods for damage caused by their products.
Risk of change: Fluctuation of acfual from statistically anticipated claims experience as a result of technical, social, commercial or political changes.
Risk premium basis: System of Life reinsurance under which the-> reinsurer only participates in the death risk in so far as it exceeds the ^ policy reserves (cf. co-insur­ ance basis).
Sickness insurance: Insurance against sickness or dis­ ability as a result of sickness.
Underwriting resuit: Result of underwriting i.e. total of-> earned premiums, less^commissions,^profit commis­ sions and ^ claims incurred.