November 1988 English translation of original German report; French and Spanish versions are also available.
Sw. frs. 291.Sw. frs. 58.- * subject to the resolutions of the General Meeting
Chairman of the Board of Directors of IBM Switzerland, Zurich 1989
Paul R. Jolles Berne, Chairman of the Board of Directors of Nestlö S.A., Vevey 1988
Deputy Generai Managers Hans R. Kaufmann Theo Obrist Pierre-Claude Perrenoud Arnold W. Saxer Werner G. Seifert
Auditors Term to expire in Swiss Auditing and Fiduciary Company, Zurich 1988
M. Nabhoiz, Senior Executive Manager E. Etter, Executive Manager Executive Managers B, Heyer, W, Müller, W. Ruetsctii Managers R Gasser, W. Hersberger, R, Siegrist
French- and Italian-speaking Switzerland, France, Italy, Spain, Belgium, Luxembourg, Greece, French-speaking Africa E.Jutzi, Senior Executive Manager R. Martignier, Executive Manager Executive Managers M.-L. Musy, R. Rüttimann, J. Steinrisser Managers A.Gaifetti, B.Giliiand
Near, Middle and Far East, International US business, Bermuda, Caribbean, Latin America, Portugal, Portuguese-speaking Africa, English-speaking Africa H. Haag, Senior Executive Manager G, Bachmann, Executive Manager Executive Managers P Bieri, G. Holzel Managers J. Bleuler, L.T. PozzI, FJ. Wingrove Member of Management R. Maag
Main lines: Accident/Liability, Motor, Fire, Hall, Burglary Executive Manager H,-K. Zulauf Managers M. Bradley, R Eugster, B. Nigg, R. Schilling, A. Schneeberger, J. Spühler, H. Voilenweider
Reinsurance technique, acquisition, speciai risks, insurance medicine J.-C. Mayor, Senior Executive Manager H.C.Rutishauser, Executive Manager Executive Managers S. Courant, E.Delcö, R.Eckert, K. Küstahler, F Lock, K. Wettenschwiler Managers R. Boutin, Y Burgener, A. Chuffart, H. Fuchs, F Joseph, A. Loye, H.Menzi, Ms F Schulthess, J.-P Vogei Members of Management M. L. Hefti, J. Doktor, A. Perret
Personnel service, training R, Oberie, Senior Executive Manager H. Sporn, Manager Executive Manager J. Niederer
RE. Christen, General Manager H. Odermatt, General Manager T. Obrist, Deputy Genera! Manager
Holdings, planning and control, law and taxes J. B. R. Lieberman, Senior Executive Manager C. Blanc, Executive Manager Executive Manager R.Jeck Managers H. Arrenbrecht, 0. E. Brooks, R Egger, H. H, Frey Members of Management J. D. Arpel, M. Gaal
Swiss Re, Zurich, looks back on a satisfactory year. Com­ pared with the previous year, the net profit rose in 1987 by about 8% to Sw.frs. 149.3 million. The Board of Directors will propose to the forthcoming General Meeting that an unchanged dividend be paid.
The annual resuit is determined by the following principal components: The underwriting loss in Non-Life reinsur­ ance was higher by approximately Sw.frs. 20 million (about 10%); the underwriting profit in Life reinsurance grew slightly, while Generallncome and Outgo (the finan­
In the year of the stock market crash, the financial result deserves our special attention. It is again higher than in the previous year, mainly because capital gains rose while write-offs fell. This is due to the fact that, before the crash occurred, Swiss Re, Zurich, extensively pruned its share portfolio to the lowest level - in relative terms - in over twenty years. A substantial part of the gains could therefore be realized before they were whittled away. A glance at the Group accounts shows, however, that companies with young, rapidly growing share portfolios
The planned establishment of a single European market also has major implications for the Swiss Re Group. The Group's insurance companies that are domiciled within the EC are preparing themselves to seize the opportuni­ ties that the new situation will present. The expected developments in insurance (deregulation, intensified competition, company mergers, restructuring of indus­ trial business within the EC) will also have repercussions on reinsurance.
On behalf of the Board of Directors I should like to thank all members of our staff for their loyalty, their devotion and their achievement. - The future has many challenges in store for us all. I await them confident in the knowledge that, thanks to its financial strength and especially thanks to the diligence and technical competence of its staff, Swiss Re is excellently equipped to meet them.
For some time now, the insurance and reinsurance busi­ ness of industrial nations has shown signs of impending changes that are gradually taking shape. On the supply side they assume the form of altered market structures and the appearance of new market participants and new products. Equally significant on the insurance demand side are changes in the behaviour of policyholders - par­ ticularly industry - in matters of risk handling. Although the growing use of loss retentions and self-financing methods for small and medium-sized losses would appear, on the face of it, to deprive the insurance industry of premiums, they are frequently accompanied by con­ certed efforts on the part of industry to prevent losses and improve risks. If risks are to be improved effectively, the interests and activities of progressive companies in industry and insurance must correspond and embrace the matters that currently concern the general public.
In the Swiss Re Group we are paying particular attention to these developments and supporting our clients in designing advanced risk-handling methods. In this way our traditional product, reinsurance, is progressively being expanded into a varied and client-oriented pack­ age that comprises cover and diverse services.
As a result of the loss in value of foreign currencies, all In­ come earned abroad (especially premiums and Invest­ ment Income) Is reduced when It Is converted Into Swiss francs, although the outgo Incurred abroad (In particular claims payments, commissions and management ex­ penses) falls In the same proportion. About a third of Swiss Re's business emanated from the dollar area In 1984. Since then Its leading currency has lost a good 50% of Its value, for which reason Its share has fallen to a quar­ ter. The drops In value of the genuinely weak currencies were even more pronounced. The volume of our business from Latin America has been halved within the space of a few years, while that from Africa has dropped to about a quarter. - This trend was also noticeable In the year under report. The gross premiums of Swiss Re - expressed In Swiss francs - have fallen as against the previous year by 3.4% to Sw.frs. 4,045 million; If exchange rates had re­ mained constant, the growth rate would have been 6.8%.
Swiss Re operates In over 130 currencies, Swiss busi­ ness accounting for less than 10% of the overall volume. The development of foreign exchange rates therefore has a considerable effect on the annual accounts. In the 1987 business year, the Swiss franc once more turned out to be one of the world's hardest currencies. I.e. most other cur­ rencies weakened against It. Interest was again focused on the US dollar which fell by 21.2% In the year under re­ port (following a fall of 21.4% In the preceding year) with dollar-related currencies losing value In proportion. Con­ tinental European currencies weakened to varying de­ grees and even the German mark, which Is generally rat­ ed as relatively hard, was below the previous year's level on the balance-sheet date. The pound sterling proved to be remarkably robust and, thanks particularly to attrac­ tive Interest rates, was able to keep steady, while the flour­ ishing Japanese economy caused the value of the Yen even to rise by 3.4% (cf. table on page 22).
Further successes In Improving ailing branches of Insur­ ance had been achieved In 1986 In a number of markets. At the same time both the number and the size of major losses had been below the average of the past few years. In such an environment. It had been possible to achieve substantially Improved underwriting results In 1986. This led In turn to a pronounced rise In Insurance capacity In 1987, putting renewed pressure on the premiums that had only just been raised. Apart from this basic trend, which was a global phenomenon, a number of specific factors have affected the development of Insurance and reinsurance business In major markets.
In Europe the first effects can be felt of the "EC 1992" pro­ ject: this Is the plan to create in stages by 1992 a Euro­ pean market without frontiers In which the free movement of persons, goods, services and capital Is guaranteed. This vision of a single EC market Is prompting Insurers to seek out the most advantageous starting position In good time In order to Increase or at least to safeguard their existing shares. This applies In particular to Indus­ trial Insurance, which will be the first to be exposed to the so-called freedom of services - the free Interplay of sup­ ply and demand across national boundaries. Since It Is, however, precisely this risk category which has repeat­ edly brought unsatisfactory results for years In both Prop­ erty and Casualty Insurance, Insurers and reinsurers will have to ensure that the expected Intensified competition does not lead to a further erosion of premiums.
In the year under report, the gross premiums in this sector amounted to Sw. trs. 3,596 million, which, in Swiss francs, is 4.5% less than In the previous year, when the volume had already decreased by 2.8%. Expressed in original currencies, premium growth ot6.1% (previous year, 11%) was achieved.
Sickness reinsurance likewise reports an increase of pre­ mium income. - The barely positive results of preceding
Aviation 170 209 Nuclear Energy 18 18 Credit/Surety 215 242 years deteriorated into a loss in the year under report. This is primarily due to the unfavourable experience of Swiss business.
Premium income has fallen severely in Aviation reinsur­ ance. This is attributable on the one hand to massive pre­ mium reductions (a consequence of the below average claims burden in the previous year) and on the other to the above average effect of foreign exchange rates, the dollar being the principal currency in Aviation business. -
The underwriting profit has fallen drastically as compared with the record year of 1986 but may be termed satisfacto­ ry. There are still large amounts of reinsurance on offer, which will lead to further premium reductions.
In Credit and Surety reinsurance premium volume has fallen, mainly because of the foreign currency develop­ ment, since half of the business stems from the United States. - A gratifyingly positive result was achieved in European Credit and Surety reinsurance. In the United States remedial measures in Surety business have shown early effect in that the underwriting loss has been halved in comparison to the previous year, a positive trend that is likely to persist. Mortgage Guaranty busi­ ness has continued to develop unfavourably in the year under report and caused increased claims payments. As pointed out a year ago, the decay in oil prices abruptly checked economic development in the southern states of the U.S. and caused prices in the real estate market to collapse, bringing Mortgage Guaranty insurers and their reinsurers substantial losses. Although there appeared to be a turn for the better towards the end of 1987, re­ serves have once again been strengthened, which should adequately take account of the future claims development.
The net amount of Life reinsurance business in force on the balance-sheet date rose by 5.8% to Sw.frs. 51,712 mil­ lion, despite the braking effect of foreign exchange devel­ opments. This growth is mainly the result of the increase, by 17.9% to Sw.frs. 12,067 million, of new business. In original currencies, business in force increased by 14.6% over the previous year and new business by 29.9%.
The underwriting result has been affected by varying fac­ tors. While claims incurred have risen, as a result of im­ portant individual cases, allocations to the policy and pre­ mium reserve could be decreased (one of the reasons being increased surrender payments); finally commis­ sions and profit commissions paid rose parallel with pre­ mium income. Overall, there was a profit of Sw.frs. 35.4 million, Sw. frs. 1.2 million higher than in the previous year.
The repercussions the disease Aids will have on Sick­ ness, Disability and Life insurance are still difficult to pre­ dict. As yet the claims burden from this illness is slight and has risen only insignificantly during the year under report. However, as it cannot be ruled out that Aids will have adverse effects on future accounts, Swiss Re has further strengthened its reserves as a precautionary mea­ sure.
In some countries - and especially in leading markets the activated political discussion about the taxes on Life insurance companies but also on insureds and beneficia­ ries is causing concern; it has to be expected that the fis­ cal authorities will demand more. Such a development would provoke a clear shift in conditions for the estab­ lishment and investment of savings in favour of the banks - which must cloud the prospects of Life insurers and reinsurers.
The actuarial auditor, Mr Marc-Henri Amsier, Lausanne, has confirmed in his report that the technical reserves of the Life reinsurance business at the end of 1987 were cal­ culated on the bases approved by the Swiss Federal Council.
Against this background, the development of Interest rates was marked by hectic movements up and down. At the start of the year, a liberal monetary policy prompted a further worldwide drop in interest rates. Then in spring, rising raw material prices and growing fears of inflation led to an actual reversal of this trend, prompting a distinct surge in rates on all major markets. Autumn brought a fur­ ther shift of scene: the relaxation of monetary policy after the stock market crash once more caused an appreciable drop in interest rates. Comparison over the year gives an uneven picture: in the United States, Germany and France rates at the end of the year were clearly above the previous year's level, while in all other markets they were the same or even below. - Because of the geographically varied and overall volatile interest rate development, in­ vestment in fixed-Interest securities proved to be difficult; nevertheless, the overall result achieved - comprising in­ vestment income and capital result - may be described as satisfactory.
The balance-sheet value of capital market investments and real estate of Sw. frs. 6,484 million is Sw. frs. 166 mil­ lion higher than that of the previous year. This increase only inadequately reflects the considerable new invest­ ments; it has been checked by the significantly lower val­ uation of 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 by Sw.frs. 184 million to Sw.frs. 5,024 million. In view of the low level of interest rates worldwide, the average maturity of the port­ folio was again shortened. The real estate portfolio rose by Sw.frs. 132 million to Sw.frs. 975 million; this increase is due to the acquisition of existing property as well as to new building projects. The share portfolio was reduced according to plan by Sw.frs. 150 million to Sw.frs. 485 million.
Capital market investments and real estate 6,484 6,318 Holdings and loans 887 738 Net cash deposits from reinsurance transactions 1,199 1,209
Capital Market Investments and Real Estate balance-sheet value in millions of Swiss francs
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 current-account balances and cash deposits, to Sw. frs. 581 million (previous year, Sw. frs. 577 million). This increase in income is modest (0.7% as com­ pared with 4.0% in the previous year); this is due to three reasons: the investment portfolio has shown only moder­ ate growth, while interest rates, although fluctuating over the year, have on balance not risen. Above all, however, exchange rate fluctuations have again had a restraining effect; had currency rates remained stable, there would have been an increase of 7.8% (previous year, 14.3%).
Consequently, Swiss Re has acquired several companies since the beginning of 1987, each well established In its particular field. The funds involved are, however, limited and relatively modest. It is planned to move forward gradually, ensuring the success of these companies, technically and economically, in implementing our service strategy before further expansion of the range of services can be considered.
The General Managers: RE. Christen, R. Gamper, R-F Niquille H. Cdermatt, H. Schönenberger
At this year's General Meeting the three-year term of office of the Swiss Auditing and Fiduciary Company, Zu­ rich branch, expires. The Board of Directors will propose to the shareholders that this mandate be renewed for a further three years.
Claims incurred incl. adjustment in outstanding claims reserve - 240,014,695 - 226,710,314
The accounts are compiled according to Swiss law and the underlying commercial and insurance principles. The principle of caution inherent in these regulations is deter­ mining for the valuation and reserving practice of the Company. In contrast to the previous year, the technical reserve in Marine reinsurance (calculated in accordance with practice using a lump-sum method) is for the first time included to a large extent in the outstanding claims reserve and no longer under unearned premiums (of. technical reserves on page 25).
Gash in hand and credit balances are entered in the bal­ ance sheet at their nominal amounts. This also applies to loans and to mortgages.
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 1987. Differences arising from the conver­ sion of balance-sheet items in foreign currencies are booked via a corresponding reserve; these serve 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: Average Foreign Currency Rates on Balance-sheet Date*
Technical reserves (unearned premiums and outstand­ ing claims) are based in principle on information provid­ ed by clients. Additional reserves are formed on the basis of past experience for losses that are incurred but not reported. All these reserves are entered at the amounts which will presumably have to be paid in future for the underlying liabilities. Annuity liabilities from Non-Life reinsurance and liabilities from Life business are calcu­ lated at actuarially determined present values. The technical reserves of Life reinsurance business are deter­ mined on the bases approved by the Swiss Federal Council.
The commissions and profit commissions accounted for gross business totalled Sw.frs. 988.4 million. Of this amount, Sw.frs. 197.2 million referred to retrocession­ aires, leaving Sw.frs. 791.2 million for own account.
Gross premiums totalled Sw.frs. 449.1 million, Sw.frs. 13.3 million of which were for annuities purchased. After deduction of retrocession premiums of Sw.frs. 25.4 mil­ lion, the remaining net premiums amounted to Sw.frs. 423.7 million, corresponding to a rise of 6.9% over the previous year. Without the effect of foreign currency fluc­ tuations, net premiums would have risen by 13.9%.
Of the total increase of Sw.frs. 47.9 million, Sw.frs. 45.6 million applied to Life insurance and Sw.frs. 2.3 million to annuities.
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 rose in the year under report by Sw.frs. 13.3 million to Sw.frs. 240.0 million.
The total of Sw.frs. 581.4 million is a net amount after deduction of various outgo items, such as the interest on the Life reinsurance and annuity fund and other technical reserves as well as outgo interest for bank and current account balances and cash deposits. Income rose as compared with the previous year by 0.7%. Without the effect of foreign currency fluctuations, an increase of 7.8% would have been registered.
Management expenses in the year under report showed overall a decrease of Sw.frs. 16.3 million, or 9.6%, to Sw.frs. 153.0 million (previous year, increase of 10.3%). Pure personnel costs rose by 5.3% (previous year, 4.6%) corresponding to the development of staff numbers. Other costs have, however, fallen by 27.4%. This is mainly due to the absence of specific non-recurring items (such as stamp duty in connection with the capital increase in 1986).
year, Sw. frs. 154.7 million). Depreciation outside the sec­ tor of investments and holdings amounted to Sw. frs. 16.4 million (previous year, Sw.frs. 71.6 million).
The tax outgo contains both taxes on profit and on capital as well as indirect taxes. It amounted to Sw.frs. 68.2 mil­ lion, as against Sw.frs. 57.4 million in the previous year and comprises current taxes levied abroad together with the outgo expected in Switzerland on the basis of the 1987 result. The increase as against the previous year is primarily due to a distinct rise in taxes incurred abroad. These are payable in the countries of domicile of our sub­ sidiaries and, because of the specific nature of local tax provisions, are subject to sometimes major fluctuations from year to year.
Of the total amount of current-account balances of Sw. frs. 839.9 million, Sw.frs. 771.3 million was for reinsurance and Sw. frs. 40.6 million for retrocession business; Sw. frs. 28.0 million concerned other balances, the most signifi­ cant part of which comprised reclaimed taxes. The overall decrease over the previous year was Sw.frs. 65.0 million and is due to lower conversion rates.
These comprise accrued investment income, i.e. invest­ ment income already earned on the balance-sheet date but not yet received. In addition, it comprises further transitory items and precious metals.
Of these balances Sw.frs. 672.0 million was for reinsur­ ance and Sw.frs. 58.1 million for retrocession business. Other liabilities totalled Sw.frs. 82.6 million, mainly com­ prising current accounts run for personnel welfare funds and pool companies.
Cash deposits for retrocessions fell, as against the previ­ ous year, by Sw.frs. 6.4 million to Sw.frs. 109.2 million.
Technical reserves comprise, in Non-Life reinsurance, the reserves for unearned premiums and outstanding claims and, in Life reinsurance, the policy and claims reserves. The changes in the reporting year and the composition are shown in the following table; the increase of the tech­ nical reserves includes further strengthening in connec­ tion with American reinsurance business of Sw.frs. 110 million, as in the previous year, which was charged to the realized capital gains on securities.
Business in force at end of previous year Non-Life reinsurance Life reinsurance
At the end of the previous year they amounted to Sw. frs. 1,794.4 million which would rise to Sw. frs. 1,865.3 million as a result of the proposed allocation of the profit, pro­ vided it is approved by the General Meeting of Share­ holders. The capital funds would then be composed as follows: The technical reserve for Marine business has hitherto been included, according to practice, in the reserve for unearned premiums. In the year under report it is for the first time included mainly under the outstanding claims reserve, although in part still under unearned premiums, in order to bring it into line with the other classes. On the balance-sheet date the technical reserves comprised the following: in millions of Swiss francs
Share capital 111.0 111.0 Non-voting share capital 43.0 43.0 Reserves and profit carried forward 1,711.3 1,640.4 Total 1,865.3 1,794.4
Contingent liabilities (sureties and guarantees) amount­ ed to Sw.frs. 4,688,372 per 31 December 1987.
Proposal of the Board of Directors The General Meeting to be held in Zurich on 25 Novem­ ber 1988 has at its disposal the following profit (cf. Profit and Loss Account and Balance Sheet, pages 20/21): Sw. frs. Sw. frs.
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 29 November 1988 as follows: Registered shares; by means of dividend order to the shareholders in the records of the share register or to their deposit banks.
We have come to the conclusion that the balance sheet and the profit and loss account are in agreement with the books, the books of account have been properly kept, 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 R Bachmann Swiss certified Swiss certified public accountant public accountant
• Reinsurance business of the calendar year and general income and outgo for the period from 1.7.-31.12.79 •• These figures are not comparable with those of the other years following change in balance-sheet date from 30 June to 31 December.
In the year under report, the following changes took place in the structure of the Swiss Re Group: the North Ameri­ can Reinsurance Corporation, New York, founded the Western Atlantic Reinsurance Corporation, New York, which will specialize in handling broker business and, in addition, the North American Reassurance Company, New York, absorbed the Swiss Re Life Insurance Com­ pany, New York. As mentioned last year, the SWITZER­ LAND General Insurance Company Limited, Zurich, also acquired The Federation Insurance Limited, lYIelbourne. Finally, the "Schweiz Aligemeine" Finanz Fielding AG, Munich, was set up with the purpose of participating in companies in the financial services field.
In the current year, SwissRe Flolding Limited, Zurich, in­ creased its share of the Gotthardfinanz AG, Lugano, thereby acquiring indirectly a majority holding of the Ital­ ian insurance company, Lloyd Adriatico S.p.A., Trieste.
In the course of the expansion of its range of services, SwissRe, Zurich, in both the reporting and the current year, has acquired or founded a number of companies in the fields of information services, risk and claims man­ agement and financial services. These companies are listed under the Group companies (page 33), but, be­ cause of the special nature of their activity, they are not consolidated.
The consolidated overall result rose by 12.3% to Sw. frs. 201 million (previous year, increase of 23.4% to Sw. frs. 179 million). There was varied development in the elements that constitute the Profit and Loss Account. In Non-Life in­ surance the trend, evident in both preceding years, to-
In Non-Life reinsurance the consolidated net premiums rose in local currencies by 8.6% (previous year, 7.9%). However, the continuing weakness of most foreign cur­ rencies led, after conversion into Swiss francs, to a further decline in premium of 3.7% to Sw. frs. 4,838 million (previ­ ous year, decrease of 7.0% to Sw.frs. 5,024 million). Once again there was a distinct fall in the underwriting loss, by Sw.frs. 134 million to Sw.frs. 250 million (previous year, drop of Sw. frs. 122 million), although the settlement of late claims from American Liability business again brought losses in the year under report. Better underwriting results were achieved by Group companies in North America and Germany.
premium rates in insurance, increased retentions by clients and the changeover from proportional to nonproportional covers, particularly in Property business. Special Markets was the only sector where premium in­ come did not decline. The underwriting result was posi­ tive. This improvement was aided by Property business; on the other hand, the result of Casualty reinsurance worsened again after the previous year's recovery. Surety business appears to have reached the bottom of its downward trend. Marine, Engineering and especially Special Markets again performed well. The generally positive development in the American insurance market appears, however, to be short-lived; there are already obvious signs again of a softer market. Investment in­ come rose further, while capital gains no longer reached the previous year's level. The company has published a profit of US$ 32.2 million (previous year, US$ 70.9 mil­ lion). No dividend was paid, as in the previous year.
The European General Reinsurance Company of Zurich showed in Non-Life reinsurance an increase of gross pre­ miums by 13.2% to Sw.frs. 732.6 million (previousyear, re­ duction of the volume because of an exceptional special operation in 1985). The underwriting loss declined somewhat. - In Life reinsurance the gross amount of busi­ ness in force fell to Sw.frs. 39,000 million (previous year, Sw.frs. 52,700 million), while the underwriting loss rose slightly. The result from general income and outgo was re­ duced - especially following increased risk provisions. The net profit was Sw.frs. 2.0 million, as in the previous year, and is again to be used to strengthen the reserves.
The North American Reassurance Company, New York, and the Swiss-Am Reassurance Company, New York, maintained their cautious and selective underwriting policy. Life reinsurance business in force and gross pre­ miums have fallen slightly as a consequence. Investment income also declined, while management expenses re­ mained almost unchanged. Overall, in American termi­ nology, a net loss from operations of US $ 8.7 million (pre­ vious year, loss of US$ 11.1 million) was reported, which could not - in contrast to the previous year - be offset by realized capital gains, so that the overall result was nega­ tive; for this reason no dividend was again paid.
The Canadian Reassurance Company, Toronto, succeed­ ed in increasing its conventional business in force by 10%. The result was, however, impaired by fortuitous large claims. The company reported a profit of Can.$ 3.4 mil­ lion (previous year, Can.$ 7.1 million) and has again paid a dividend of Can.S 0.55 million (previous year, special additional dividend of Can.$ 6.0 million).
At the Swiss-South African Reinsurance Company Limit­ ed, Johannesburg, the gross premiums in Non-Life rein­ surance rose as a result of special covers from Rand 113.2 million to Rand 192.6 million. The flood damage in Natal and other major losses led to an underwriting loss. - The gross amount of business In force in Life reinsurance rose to Rand 10,200 million. The underwriting result has been affected by the setting up of an Aids reserve. - Investment Income increased. Overall a profit of Rand 10.2 million is shown (previous year. Rand 11.4 million) and a higher divi­ dend of Rand 4.0 million (previous year. Rand 3.0 million) was paid.
by 24% to Austr. $ 4,500 million and the underwriting prof­ it was again higher than in the previous year. -The im­ proved reinsurance results and higher investment in­ come led to an overall profit of Austr. $ 9.4 million (previ­ ous year, Austr. $ 7.6 million). The dividend was therefore raised from Austr. $ 1.2 million to Austr. $ 1.4 million.
The consolidated net premiums rose in the year under re­ port by 7.2% to Sw. frs. 4,078 million (previous year, Sw. frs. 3,804 million). Prior to conversion into Swiss francs the increase was 11.6% (previous year, 8.6% ). About 80% of this premium volume stems from the Group companies In Germany. The underwriting results Im­ proved overall to Sw. frs. 53 million (previous year, Sw. frs. 33 million). This increase is partly due to the lower alloca­ tion by Life and Health insurers to the reserve for bonuses to policyholders. Investment income again rose, while the balance from capital gains and write-offs was negative for the first time in years. Finally, higher management ex­ penses but a reduced tax burden were incurred. Overall the Group profit from insurance companies fell to Sw. frs. 32 million (previous year, Sw. frs. 38 million).
The gross premiums of the SWITZERLAND Generallnsurance Company Limited, Zurich, rose by 3.5% to Sw. frs. 711.2 million (previous year, Sw.frs. 687.1 million). Of the premium volume 68.5% was for insurance, 31.5% for ac­ tive reinsurance. While premium growth was above the market average in Swiss business with a rate of 11.8%, there were setbacks in certain foreign markets as a result of exchange rate fluctuations. If exchange rates had re­ mained unchanged, growth would have been 12.6%. An increase of the claims expenditure and higher write-offs on securities led to a lower profit for the year of Sw. frs. 8.0 million (previous year, Sw. frs. 12.4 million). The com­ pany's capital base was increased in 1987 and the divi­ dend thereon amounted to Sw. frs. 3.5 million (previous year, Sw. frs. 2.5 million).
The consolidated gross premiums of the Vereinte Versi­ cherungen, Munich, including the non-recurring pre­ miums from the reserve for bonuses to policyholders, rose by 7.0% to DM 3,572.3 million. The Vereinte Versi-
cherung AG increased its gross premiums by 4.3% to DM 754.1 million (previous year, DM 723.3 million). Be­ cause of ttie unfavourable experience of Motor insurance, there was an underwriting loss of DM 15.8 million (previ­ ous year, DM 0.3 million). In addition, the result from In­ vestment income was less favourable. Overall there was a reduced profit for the year of DM 7.7 million (previous year, DM 19.4 million); of this amount, DM 7.6 million was paid out as dividend (previous year, DM 7.6 million plus an anniversary bonus of DM 3.8 million). - The amount of business in force of the Vereinte Lebensversicherung AG grew by 9.0% to DM 13,600 million (previous year, DM 12,500 million). Increased write-offs burdened the invest­ ment result. After an allocation of DM 136.5 million (previ­ ous year, DM 174.0 million) to the reserve for bonuses to policyholders, a profit for the year remained of DM 2.1 mil­ lion (previous year, DM 3.3 million). As in the previous year, the company paid out a dividend of DM 1.1 million. The Vereinte Krankenversicherung AG failed to achieve any growth in overall premium as a result of a reduction of DM 89.1 million in the non-recurring premiums from the reserve for policyholders' bonuses; the gross premiums amounted to DM 2,132.5 million (previous year, DM 2,147.0 million). There was, however, a further increase in the amount of benefit payments, and write-offs on shares impaired the investment result. Following an allocation of DM 78.4 million (previous year, DM 223.0 million) to the reserve for bonuses to policyholders, a profit for the year remained of DM 14.3 million (previous year, DM 16.9 mil­ lion). Of this amount, a dividend of DM 6.3 million (pre­ vious year, DM 5.9 million) was paid in addition to a con­ tribution of DM 3.0 million to the outstanding paid-up capital.
The General Surety & Guarantee Company Limited, Wiimslow - specializing in Surety business - managed to increase its gross premium income in the year under re­ port by £0.3 million to £3.3 million. The profit of £204,000 was distinctly higher than the previous year's figure of £ 135,000. The dividend was therefore raised to £ 100,000 (previous year, £ 90,000).
The Fidelity and Deposit Company of Maryland, Balti­ more, in which the "Zurich" Insurance Company and the Swiss Re - through SwissRe Holding (North America) Inc. - each have a 50% shareholding, is not consolidated in the Group Accounts. In 1987 the premium income rose by 20.8% to US$ 295.6 million. This is primarily due to in­ creased premium rates in one of the company's main classes of business, Fidelity insurance, although pre-
Gross premiums 4,811 3,860 8,671 8,969 Premiums ceded 27 - 524 - 497 - 714 Net premiums 4,838 3,336 8,174 8,255 Adjustment in unearned premiums - 42 - 265 - 307 - 457 Earned premiums 4,796 3,071 7,867 7,798 Interest on Sickness insurance fund - 253 253 256 Commissions, profit commissions, expenses -1,243 - 826 -2,069 -2,191 Claims incurred -3,803 -2,470 -6,273 -6,232
Underwriting result from Non-Life insurance - 250 28 - 222 - 369
Gross premiums 1,008 755 1,763 1,696 Premiums ceded - 83 - 13 - 96 - 233 Net premiums 925 742 1,667 1,463 Adjustment in policy and annuity valuations - 176 - 420 - 596 - 488 Interest on Life insurance and annuity fund 112 333 445 427 Commissions and profit commissions - 229 - 357 - 586 - 586 Claims incurred incl. adjustment in outstanding claims reserve - 495 - 212 - 707 - 683 Surrenders - 104 - 61 - 165 - 90
' 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.
Tecfinical reserves Non-Life insurance , 9,333 5,665 14,998 14,669 Life insurance 2,818 4,359 7,177 7,032
Share and non-voting share capital 154 154 Reserves shown 1,640 1,580 Consolidation reserve fund 156 191 Group Profit 201 179 *The figures in this column do not always amount to the total of the figures in the two preceding columns as figures tor holding and other companies are also included.
The SwissRe Life Insurance Company, New York, was ab­ sorbed by the North American Reassurance Company, New York, at the end of September 1987 and therefore no longer appears among Group companies.
The figures shown in the Group accounts are based on consolidation and valuation principles which are basi­ cally uniform for all Group companies. Individual excep­ tions are of minor importance and are mentioned sepa­ rately.
Balances receivable and payable as well as interest and dividend payments between consolidated companies are eliminated. Similarly the Group's consolidated figures contain no premiums from the infra-Group exchange of business. The consolidation and valuation principles are the same as in the previous year.
The scope of consolidation includes all domestic and for­ eign insurance and reinsurance companies in which Swiss Re, Zurich, directly or indirectly maintains a holding of more than 50%. Each individual item of the profit and loss accounts and the balance sheets of these compa­ nies is shown at 100%. The shares of the capital funds and profit applicable to minority shareholders are shown as separate items in the consolidated balance sheet and profit and loss account.
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 31 December 1987.
The net assets of foreign companies have been calculat­ ed using the exchange rates at the end of the year. The conversion loss of Sw.frs. 90 million (previous year, loss of Sw.frs. 96 million) resulting from the revaluation at in­ variably lower foreign exchange rates was directly debit­ ed to the consolidated capital funds.
ties. Non-quoted participations are entered at acquisition cost taking into consideration any necessary deprecia­ tion.
The technical reserves are calculated in principle accord­ ing to the provisions of the supervisory authorities applic­ able 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 consolidated gross premiums fell in all classes by 2.2% to Sw. frs. 10,434 million, although in original curren­ cies a growth rate of 7.0% was achieved. The reason for the decrease in premium income when converted into Swiss francs lies in the pronounced drop in the exchange rate of the US dollar and dollar-related currencies.
In Non-Life insurance premiums fell by 3.3% to Sw.frs. 8,671 million (previous year, fall of 4.2%) while in Life insur­ ance they rose by 3.9% to Sw.frs. 1,763 million (previous year, drop of 4.9%).
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. 41 million to Sw. frs. 6,273 million. Of this amount, Sw.frs. 3,803 million was for reinsurance companies and Sw.frs. 2,470 million for insurance companies.
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 rose in the year under report by Sw. frs. 24 million to Sw. frs. 707 million. Of this amount, Sw.frs. 495 million concerned reinsurance companies and Sw. frs. 212 million insurance companies.
The income from the Group's capital investments rose by 3.0% (previous year, 2.8%) and (before the crediting of in­ terest in Life and Sickness business) reached a total of Sw.frs. 1,814 million (previous year, Sw.frs. 1,761 million). Of this amount, the interest on the Life insurance and An­ nuity fund accounted for Sw.frs. 445 million (previous year, Sw.frs. 427 million); in the Non-Life classes it includ­ ed a credit of Sw.frs. 253 million (previous year, Sw.frs. 256 million) to Sickness business.
Investment income also includes dividend payments of non-consolidated holdings in the amount of Sw.frs. 43 million (previous year, Sw.frs. 36 million).
In the case of fixed-interest securities and shares (without non-consolidated holdings), the difference between the lower book and higher market value of the Individual se­ curities, taking into account the estimated value of taxes due on realization, amounted to Sw.frs. 932 million, or 4.4% of the balance-sheet value (previous year, Sw.frs. 1,737 million or 8.5%).
Non-Life Insurance Unearned premiums 1,295 3,088 4,383 4,523 Outstanding claims reserve 8,032 2,047 10,079 9,533 Reserve for profit commission 6 530 536 613
The consolidation reserve fund results from the differ­ ence between the capital funds shown of Group com­ panies and the corresponding book values applied by SwissRe Holding Limited and Swiss Re, Zurich. As a re­ sult of the further weakening of all major foreign currency rates, the consolidation reserve fund fell by Sw.frs. 35 million to Sw.frs. 156 million (previous year, fall of Sw.frs. 41 million).
The capital funds shown in the consolidated balance sheet (sum of share and non-voting share capital, re­ serves shown, consolidation reserve fund and Group profit) correspond to the book value of the funds invested in the entire Group by shareholders and non-voting shareholders of Swiss Re, Zurich. In the year under report Group capital funds rose by Sw.frs. 47 million to Sw.frs. 2,151 million.
Capital funds at end ot previous year 2,104 1,605 Effects of exchange rate fluctuations on opening balance-sheet figures - 90 - 96 Pald-out profits for previous year - 78 - 72 Issue of non-voting share capital of Swiss Re, Zurich - 459 Group profit 201 179 Other movements 14 29
Fidelity and Deposit Company of Maryland* US $ 50 164,804 402,606 295,631
Current-account balances Cash deposits Technical reserves Non-Life insurance Life insurance Transitory entries, value adjustments and other provisions (incl. share of minority shareholders and building society deposits) Group Capital Funds Shown (incl. Group profit)
Zurich, and European General. ••• Including the employees of service companies acquired during the reporting year.
Switzerland Swiss Reinsurance Company Mythenqual 50/60, CH-8022 Zurich with branch offices In Melbourne, New York and Toronto
European General Reinsurance Company of Zurich Mythenqual 50/60, CH-8022 Zurich with a branch office in Madrid
United Kingdom Swiss Reinsurance Company (UK) Limited 7f-77 Leadenhall Street London EC3A 2Pa with a branch office in Hong Kong
Western Atlantic Reinsurance Corporation 237 Park Avenue, New York, NY 10017
Canadian Reinsurance Company 99 Yorkvllle Avenue, Suite 300 Toronto, Ontario M5R3K5 with branch offices In Montreal und Vancouver
United States SwissRe Advisers, Inc. 200 Park Avenue, New York, NV 10166
Argentina Sociedad Anäiisis de Riesgos S.A. Aisina 756, Piso 6,1087 Buenos Aires
Japan Swiss Reinsurance Company Representative Office Tokyo Sansho Building 7E 2-9 Nifionbashi 3-chiome, Chiuo-ku, Tokyo 103
Philippines SwissRe Advisers Limited Dona Narcisa Building, Room 703 8751 Paseo de Roxas Makati, Metro Manila
Magdeburger Versicherungsgruppe Kirch horster Strasse 2 D-3000 Hanover 51 mh Bausparkasse AG Wotanstrasse 88 D-8000 Munich 19
United Kingdom General Surety & Guarantee Co. Limited Hawthorn Hall, Hall Road Wilmslow, Cheshire SK9 5BZ
Capsco Sottware Europe Ltd. 3 Bury Street Guildford, Surrey GU2 SAW (UK)
Capsco PALLM Systems, Inc. 4040 Vincennes Circle Indianapolis, IN 46268 (USA)
PALLM Property & Casualty, Inc. 4040 Vincennes Circle Indianapolis, IN 46268 (USA)
Contact address International Risk Management Group Ltd. Belvedere Building Hamilton, Bermuda HM CX
Thomas Howell, Seife Group Commercial Union House Martineau Square Birmingham B2 4UT (UK)
Broker: Insurance or reinsurance intermediary with no contractual connection to a particular insurer or re­ insurer.
Business interruption/Loss of profits/Business in­ come protection insurance: Insurance against financial effects of a loss on a company's income. The insurance covers overhead costs (interest, salaries, etc.) and lost profit.
Co-insurance: Where a number of ^ insurers and/or -• reinsurers each share part of a ^ risk.
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.
Facultative reinsurance: Reinsurance of ^ risks on an individual basis (of. treaty reinsurance) in which the -• reinsurer is free to accept or reject the offer.
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.
Net premiums: ->• Reinsurance premium of a business year less ->• retrocession premiums.
Outstanding claims reserve: Reserve for claims which have been incurred but which have not yet been finally settled.
Proportional reinsurance: Form of reinsurance in which the premiums and losses of the -• insurer are shared proportionally by the -• insurer and -• 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.
Reinsurance premiums: -• Premiums paid to the -• rein­ surer by the ->• insurer for fhe -• proportional or -• nonproportional cover granted by the -• reinsurer.
Profit commission: Contractually agreed commission paid by the -• insurer or reinsurer in proportion to his profit on a particular piece of insurance or reinsurance business.
Retrocession: Passing on by the -• reinsurer of the ^ risk accepted in reinsurance to other companies (of. retrocessionaire).
Retrocession premiums: Premiums paid to the -• retro­ cessionaire for the part of the -• risk accepted.
Risk management: Management tool for the compre­ hensive identification and assessment of risks with the purpose of assessing them (acceptance), containing them (loss prevention) and transferring them (insurance) based on knowledge and experience in the fields of natural sciences, technology, economics and statistics.
Underwriting result: Result of underwriting i.e. total of earned premiums, less-»commissions,-»profit commis­ sions and -» claims incurred.