Stock Market Capitalization, Staff 18 Consolidated Profit and Loss Account 38
Profit and Loss Account 20 j Notes on Group Accounts 40
Balance Sheet 21 Key Figures of Group Companies In 1985 44
Notes on the Annual Accounts 22 1 1 Business Years 1976/77-1985 46
Proposal of the Board of Directors 26 i 1 T Addresses of Group Companies i
Note on the illustrations In this Annual Report The Illustrations give Impressions of the widely varying world of work In which Insurance and reinsurance play a significant role by protecting man and his property.
Other income and outgo including taxes Profit applicable to minority shareholders
^Consolidated net profit per share |Consolidated net profit per non-voting share
Marcel Cdier Cologny, Partner (ret.) in Lombard, Cdier & Cie, Bankers, Geneva 1988
Hans Ulricfi St. Gall, Professor Emeritus, St. Gall Graduate School of Economics, Business and Public Administration 1989 * Members of the Committee of Directors
General Managers Paul E. Ctiristen Rolf Gamper Paul-Francis Niquille Hermann Odermatt Herbert Sctiönenberger
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 S.Patthey, R.Rüttimann, J.Steinrisser Managers A. Galtetti, B. Gilliand, M.-L. Musy
Special lines: Engineering, Aviation, Nuclear energy. Marine Executive Managers A. Bai, H. Fischer, W. Künzle, J.W. Youngs Managers M.A. Bloesch, M. Gasche, H. Lüthl, O. Olsson, E. Steider Members ot Management H.E Enzmann, H. Tiedemann
Capital market investments, real estate RR Hügle, Executive Manager B.H. Letsch, Manager Executive Manager F E. Rohner Managers A. Decortins, M. Gürber, E. Locher, B. Rerrin, J.-R Preyer
A. Brügger, Senior Executive Manager D. Söhner, Executive Manager Managers M. Freyllnger, A. Sulzer
In the 1985 business year the net profit of Swiss Re, Zurich, rose, as compared with the previous year, by 18% to Sw.frs. 119.5 miiiion. The Board of Directors will pro­ pose to the forthcoming Generai Meeting that a higher dividend be paid on the company capital, which was in­ creased last year.
This encouraging result is determined by the following main components: the underwriting loss of Non-Life rein­ surance turned out to be approx. Sw.frs. 30 miiiion (or 10%) less; this is remarkable in that the downward trend prevailing since 1979 has been broken; the underwriting profit of Life reinsurance fell by approx. Sw.frs.1 miiiion (or 3%) but is still in the region of the result of recent years; and General Income and Outgo (the financial result less management expenses) not only reached but exceeded somewhat the peak level set last year.
The trends discernible in the accounts of Swiss Re, Zurich, are borne out by the consolidated accounts of the Swiss Re Group.
The encouraging result of 1985 should not be allowed to obscure the fact that further progress is still necessary, especially in the underwriting sector. Despite the im­ provement, there was still an underwriting loss of Sw.frs. 269 miiiion in Non-Life reinsurance. One of our major objectives therefore remains to reduce this loss substan­ tially. The main cause is still American Liability business, a topic we have repeatedly and emphatically commented upon in recent years. Again in the year under report notifi­ cation was received of high, U.S.-reiated Liability claims originating many years in the past. On the basis of our own experience, we have significantly increased the esti­ mates made by our clients for the claims reserves need­ ed. The Swiss Re will not swerve from the course taken and will only accept heavy Liability risks in the United States if these are clearly defined and limited in time and amount and if a commensurate premium is paid. Since competition on the insurance and reinsurance market at last appears to be coming down to earth as a result of high and persistently recurring losses, priority now goes
The fall In the underwriting profit of Life reinsurance re­ flects a development which has left a profound mark on the Group accounts. In conditions of extreme competition American Life business In the Insurance and reinsurance sector Is In a state of upheaval. Together with a fortuitous accumulation of major losses, proflfablllty worsened con­ siderably. In view of the significance of the hitherto reli­ ably stable profit of the Life branch, we Initiated energetic remedial measures without delay. We are confident that these will soon bear fruit.
Generai income and Outgo has made a substantial con­ tribution to the net profit of the company In past years. Thanks to the favourable Investment conditions prevail­ ing since 1982, excellent results have been achieved. During this period not only was the current Income greatly Increased, but considerable profits were also realized. Today, however. It Is quite plain that this fortunate constel­ lation cannot go on forever. Uncertainty as to future eco­ nomic development and as to Interest rates and share perspectives Is dampening all too high-flying expecfatlons with regard to constantly Increasing financial results and calls for a more cautious outlook. It Is to be expected that this will be reflected In competition In reinsurance be­ coming more and more realistic.
location of the profit, the capital funds shown at the end of the year under report reached the amount of Sw. frs. 1,275 million, and solvency (capital funds In relation to net pre­ miums) rose to 36.5%. In 1986 a fourth step followed, giv­ ing the company further capital of Sw.frs. 459 million, al­ though this will only be Incorporated In the balance sheet for the end of 1986. We have undertaken these capital In­ creases In the conviction that our position In the market will thereby be considerably reinforced, since - In addi­ tion to his know-how and wide variety of services - the fi­ nancial strength of a reinsurer will In future gain even more In significance.
An overhead vaiue analysis has provided an opportunity to scrutinize all the work performed within the company, to reduce to a useful level what was considered exag­ gerated and to eliminate what was superfluous. Unload­ ing unnecessary ballast has enabled Intensified concen­ tration on the essentials and on purposeful, successoriented performance. The results of this analysis at Swiss Re, Zurich, have prompted Group Management to Instruct Group companies to carry out an overhead value analysis of their own.
The expansion of the corporate management undertaken In 1986 has considerably strengthened Group Manage­ ment. From 1987 a new management structure will aid the systematic development of the Insurance sector of the Group.
The Swiss Re's success Is directly dependent on the mo­ tivation and on the personal and technical qualities of Its staff. In the 1985 business year our employees not only had to cope with the usual work load but also with the overhead value analysis and other special projects In ad­ dition. Further, we succeeded In achieving an overall re­ sult which enables the dividends paid to shareholders and the holders of non-voting shares to be Increased. On behalf of the Board of Directors I should like to express to all our staff our sincere thanks for their loyalty, their devo­ tion and their achievement.
In Swiss francs grassprem/umsfell by 1.8%, as compared witfi tfie previous year, and net premiums by 2.2%. Tfiis decline Is primarily due to ffiefacf f hat ffieexcliange rates of many foreign currencies were lower than a year earlier. Had exchange rates remained the same, there would have been an Increase in net premiums of 9.5%.
In the recent past there have been indications that the bit­ ter experience suffered by many insurers and reinsurers as a result of a long series of high and continually increas­ ing underwriting losses is at last having a salutary effect on the market. In 1985 considerable capacity dropped out of the market and consequently there was a noticeable In some cases even drastic - contraction of the reinsur­ ance market and even more so of the unstable retroces­ sion market. The overcapacity tor proportional Property reinsurance and catastrophe covers, and above all tor General Liability business, has shrunk significantly.
This development led to premium increases and -torthe first time since the end of the 1970s - decreasing under­ writing losses. The calamitous downward trend arising out of ruinous competition has therefore been broken for the moment. It remains to be seen, however, whether this is a genuine turning point. Swiss Re's goal is still to re­ duce further the high underwriting losses.
The Swiss Re will consistently and resolutely pursue Its efforts to remedy business in all markets, for we cannot remain passive In the face of the exposure of our Com­ pany to risks unlimited In time and amount and thus ulti­ mately incalculable.
The underwriting resuit in Non-Life reinsurance is a loss of Sw. frs. 268.9 million. Despite the gratifying fact that this is Sw.frs. 29.7 million less than in the previous year, the loss is still disproportionately high, which shows that fur­ ther widespread improvements are necessary in insur­ ance and reinsurance for Non-Life business if this is final­ ly to emerge from the depression it has been in for years. In Fire and Motor reinsurance it was possible to reduce the underwriting losses, in some cases substantially. American Surety business produced a loss, as did Work­ men's Compensation. The situation remained critical in the General Liability sector, where yet again a high loss had to be borne. As before, this is mainly due to late claims emanating from the United States, partly incurred under long-cancelled reinsurance treaties, proving that the unambiguous definition of the risk as regards both content and duration has become a central issue for the reinsurer.
In Fire reinsurance premium income increased slightly; contributing to this growth were massive premium ad­ justments in the United States. In the year under report the loss registered was considerably less substantial than that of the previous year, although still not approach­
Premium income in Accident reinsurance fell by a third through a change affecting Special American business. Because of the need to strengthen the claims reserves in American Workmen's Compensation business, this branch, which was otherwise positive outside the U.S., shows a substantial overall loss in the year under report.
In Sickness reinsurance both a slight increase in premium income and a further positive result were registered.
The higher premium income achieved in General Third Party Liability reinsurance is based on various factors. On the one hand a contribution was made by premium ad­ justments in direct insurance, especially in the United States. On the other, it reflects the premium increases un­ der reinsurance covers rated by us and the writing of more facultative risks in conformity with our strict guide­ lines. Unfortunately, the loss remained as high as in the previous year. Further late claims in American business (partly incurred under non-U.S. treaties), higher claims frequencies and individual major losses from European treaties, together with the massive internal loadings ap­ plied to claims reserves in Environmental Impairment and Products Liability are responsible for this unsatisfac­ tory result.
Accident 210 341 Sickness 114 109 General Third Party Liability 377 358
Credit and Surety reinsurance showed a slight decline in premium income. The bad experience of American Sure­ ty business led to a massive loss in the year under report. Our American subsidiary company has introduced effec­ tive remedial measures. Other business - especially Credit reinsurance - again closed successfully.
The actuarial auditor, Mr. Marc-Henri Amsier, has con­ firmed in his report that the technical reserves of the Life reinsurance business at the end of 1985 were calculated on the bases approved by the Swiss Federal Council.
Industry Robot tectinology in tiall 54 of thie Volkswagen works in Wolfsburg, Federal Republic of Germany
Overaii ttie world economy developed favourably In 1985. Alttiough growth In the United States did not continue at the previous year's level, growth In Europe was supported by stronger domestic demand so that this group of coun­ tries - together with Japan - became the mainstay of the continued upswing. Inflation remained largely under con­ trol; In many countries It even declined further. 1985 can therefore be termed a year of solid real growth. Unfortu­ nately, yet again these Improved economlcfundamentals did not lead to any significant reduction of unemployment which, particularly In Europe, persisted at a high level.
Solid economic growth, together with moderate Inflation rates, provided a good foundation for a further positive development of the International capital markets. Thanks to falling Interest rates and expected higher corporate profits, 1985 became primarily a year for shares. The greatest advances took place in Europe, led by the stock markets of Austria, Italy, Germany and Switzerland. In the second half of the year Wall Street excelled with Its most pronounced upward movement since 1975. In such an environment Investment policy was directed at securing a part of the capital gains In markets which advanced the most, thus reducing total Investments In shares. The ex­ cess of market value over book value of the remaining share Investments nevertheless significantly Increased as a result of the considerable rise In prices.
Bonds, certificates of deposit and mortgage bonds 3,546 3,031 Loans (including mortgages). 730 677 Fixed-interest securities with equity character 162 259 Shares 634 790 Real estate 751 664
The structure of total investments at balance-sheet val­ ues Is shown In the following table.
Capital market investments and real estate 5,823 5,421 Holdings and loans 577 558 Cash deposits from reinsurance transactions* 1,261 1,422 * After deduction of deposits from retrocessions.
After deduction of the interest required for the Life insur­ ance and annuity fund and other technical reserves as well as for current-accounf balances and cash deposits, the investment income amounted to Sw.frs. 555 million (previous year, Sw.frs. 528 million). This Increase of 5.1% Is mainly due to the growth of the investment portfolio and to the shift of investment emphasis toward fixed-interest securities. Fluctuations in foreign exchange rates had a braking effect; had currency rates remained stable, there would have been an Increase of 13.5%.
Net cash deposits from reinsurance business, i.e. after deduction of the deposit reserves due to retrocession­ aires, fell - primarily as a result of foreign exchange rafes - by Sw.frs. 161 million to Sw.frs. 1,261 million.
An overhead value analysis was performed In 1985 as pari of our efforts to maintain a high standard at Swiss Re with regard to both organization and working methods. The company was scrutinized by analysis teams drawn from the company's own executive staff, and employees at all levels were called upon to evaluate their perfor­ mance with regard to Its alms and effectiveness and to suggest Ideas for Improvements. This required a high de­ gree of objectivity and a considerable extra work on the part of all concerned. Since many of the measures pro­ posed as a result have meanwhile been Implemented, It can be stated that the overhead value analysis substan­ tially enhanced the transparency of the organization and of many work flows, promoted corporate thinking on the part of all members of staff and Increased the company's efficiency.
With effect from 1st July 1986 Messrs. Hans R. Kaufmann, Theo Christ, Pierre-Claude Perrenoud and Arnold W. Saxer were promoted Deputy General Managers by the Board of Directors.
The Board of Directors appointed Mr. Rolf Camper, Gen­ eral Manager of SwissRe Holding Limited, to be General Manager of Swiss Re, Zurich, with effect from 1st January 1987. Mr. Werner G. Seifert will join our Company on 1st January 1987 as Deputy General Manager.
Claims incurred incl. adjustment in outstanding claims reserve - 249,319,437 - 226,372,066
The 1985 business year comprises both reinsurance business and general income and outgo for the period from 1st January to 31st December, 1985.
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 31st December, 1985. Differences arising from the conver­ sion of balance-sheet items in foreign currencies are booked via a corresponding reserve and therefore re­ main outside the profit and loss account. The currencies which are most important for business activity abroad de­ veloped over the previous year as follows: balance-sheet date, at the lower value. Non-quoted hold­ ings are, where necessary, entered at the lower intrinsic value. The lower valuation is retained until disposal of the corresponding securities.
French franc 27.45 26.93 1.9-F Belgian franc 4.12 4.11 0.2-F Dutch guilder 74.80 73.- 2.5-F U.S. dollar 207.50 259.50 20.0- * rates in Swiss francs for 100 units of currency
cesslonaires' share of this amount was Sw.frs. 1.6 million, so that Sw.frs. 79.8 million remained for own account.
The commissions and profit commissions accounted for gross business totalled Sw.frs. 1,137.4 million. Of this amount, Sw.frs. 218.4 million referred to retrocession­ aires, leaving Sw.frs. 919.0 million for own account.
Cross premiums totalled Sw.frs. 416.5 million, Sw.frs.16.5 million of which were for annuities purchased. After de­ duction of retrocession premiums of Sw.frs. 21.3 million, the remaining net premiums amounted to Sw.frs. 395.2 million, corresponding to a drop of 6.9% over the previous year. Without the effect of foreign currency fluctuations, net premiums would have risen by 3.5%.
Of the total Increase of Sw.frs. 28.8 million, Sw.frs. 18.0 million applied to Life insurance and Sw.frs. 10.8 millionte annuities.
The commissions and profit commissions calculated for business assumed totalled Sw.frs. 81.4 million. The retro-
Management expenses In the year under report showed overall an Increase of Sw. frs. 14.2 million to Sw. frs. 153.6 million, or by 10.2% compared with 8.5% in the previous year. Pure personnel costs rose by 3.1% (previous year, 2.5%). Other costs rose much more sharply, namely by 21.3%. This increase is mainly due to the costs of the two capital increases effected in 1985.
This group of accounts closed with a positive balance of Sw.frs. 16.0 million (previous year, Sw.frs. 26.0 million). Realized capital gains and losses contributed a net profit of Sw.frs. 184.9 million (previous year, Sw.frs. 224.0 mil­ lion); a special allocation to the technical reserves - as in the previous year - has already been deducted. The fluctuations In foreign currency rates had a negative ef­ fect on the result of monetary transfers and the conver­ sion of foreign currency balances, leading to a debit of Sw.frs. 7.2 million (previousyear,Sw.frs.24.2 million).The write-offs on capital market investments and real estate amounted to Sw.frs. 133.2 million (previous year, Sw.frs. 123.7 million). Depreciation outside the sector of invest-
ments amounted to Sw. frs. 28.5 million, ttie major part of wtilchi being attributable to office building and data pro­ cessing installations.
Ttie tax outgo contains botti taxes on profit and on capital as well as indirect taxes. It amounted to Sw.frs. 64.0 mil­ lion, as against Sw.frs. 51.2 million in ttie previous year and comprises current taxes levied abroad together with the outgo expected in Switzerland on the basis of the 1985 result. It also contains the stamp duties payable on the two capital increases in 1985 which explains the signi­ ficant rise.
Of the total amount of current-account balances of Sw. frs. 1,151.8 million, Sw.frs. 958.9 million was for reinsurance and Sw.frs. 167.0 million for retrocession business; Sw.frs. 25.9 million concerned other balances, the most significant part of which comprised reclaimed taxes. The overall increase over the previous year was Sw.frs. 53.5 million.
Cash deposits for retrocessions showed only a slight change at Sw.frs. 109.9 million.
Cash deposits with ceding companies fell against the previous year by Sw.frs. 160.6 million to Sw.frs. 1,371.3 million. More than half of this decrease is due to lower conversion rates for foreign currencies.
The portfolio of capital market investments (fixed-interest securities, loans and shares) and real estate rose by Sw. frs. 402.0 million to Sw. frs. 5,822.7 million. The valua­ tion difference on capital market investments (excluding loans), i.e. the difference between the lower book and higher market value of the individual securities, taking into account the estimated value of taxes due on realiza-
Changes Valuation difference based on exchange rate fluctuations -570.0 -L 367.3 Increase of technical reserves in year under report -L512.4 -L 526.3 Total business in force on baiance-sheet date 7,031.3 7,088.9
Cn the balance-sheet date the technical reserves com­ prised the following: in millions of Swiss francs
On the balance-sheet date the capital comprised the share capital of Sw. frs. Ill 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. 35.5 million (710,000 non-voting shares each with a nominal value of Sw.frs. 50.-).
In addition, on 31st December, 1985, there was an author­ ized non-voting share capital of Sw.frs. 10 million (200,000 non-voting shares with a nominal value of Sw.frs. 50.-). Of this amount Sw.frs. 7.5 million was placed through an International offering in July 1986, giv­ ing the company additional capital funds of Sw.frs. 459 million. This will, however, only be contained in the bal­ ance sheet for the 1986 business year.
This table shows that the non-voting share capital grew as a result of the two capital increases of October and December1985 by Sw.frs.18.5 milllontoSw.frs. 35.5 million. The agio totalling Sw. frs. 413.2 million has been allocated to the statutory reserve fund.
These include, in addition to various accounts payable, in particular the value adjustments on outstanding bal­ ances together with a reserve for foreign-currency risks.
If the proposal of the Board of Directors is accepted, dividends of Sw. frs. 120.- per registered or bearer share (nominal value, Sw.frs. 250.-) and Sw.frs. 24.- per non­ voting share (nominal value Sw.frs. 50.-) will be paid.
After deduction of the Federal Withholding Tax of 35%, the dividends of Sw.frs. 78.- and Sw.frs. 15.60 respectively will be paid after 25th November, 1986, as follows: Registered shares: by means of dividend order to the shareholders in the records of the share register or to their deposit banks.
For the Board of Directors: W. Diehl, Chairman 0. Blanc, Secretary
Based on the result of our examinafion, we recommend that the accounts submitted to you be approved.
• Reinsurance business of the calendar year and general income and outgo for Ihe 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 30th June to 31st December.
Science and research The European Laboratory for Particle Physics (CERN) Geneva, Switzerland
The holding structure of the Swiss Re Group was extend­ ed to include the North American Specialty insurance Company, already mentioned in last year's report, with a new head office in Manchester, New Hampshire. This small company is active in the field of Non-Life insurance and is currently being expanded.
The consolidated gross premiums fell in the year under report by 3.3% to Sw.frs. 11,149 million as a result of the weaker foreign exchange rates. Expressed in original cur­ rencies, there was a growth of 6.3% (previous year 5.9%). Consolidated net premiums rose by 1.4% to Sw.frs 9,956 million, following an increase of the retention ratio by cer­ tain Group companies. Reinsurance business accounts for 64% and Insurance for 36% of the net premiums.
Affected by the fail in U.S., Canadian and Australian dol­ lars and the heavy devaluation of the Rand, the consoli­ dated net premium income in Non-Life reinsurance rose by only 5.2% (previous year, 11.9%) to Sw.frs. 5,403 mil­ lion. Prior to conversion into Swiss francs the rate of in­ crease was 20.5% (previous year, 3.9%). The underwriting loss dropped to Sw.frs. 506 million (previous year, loss of Sw.frs. 530 million), although in American liability busi­ ness the burden for losses from earlier years was again high and American Surety business deteriorated, in the Property lines there are clear signs of an improving result.
The gross premiums of the North American Reinsurance Corporation, New York, amounted in the year under re­ port to US$ 739.0 million (previous year, US$ 734.6 mil­ lion). Accident and Sickness business registered a drop in premiums which was offset by higher premiums in the
The gross premiums ot the Bavarian Reinsurance Com­ pany Limited, Munich, rose in Non-Lite reinsurance from DM 1,390.7 million in the previous yearto DM 1,435.5 mil­ lion. The underwriting loss prior to equalization reserves could be clearly reduced. The absence ot exceptional burdens - especially the previous year's Munich hail­ storm -, Improved conditions in German Motor business and continued remedial efforts had a positive effect on the result. The allocation to the equalization reserve was greatly increased in comparison to the previous year; the underwriting result nevertheless remained at about the
At the Swiss Reinsurance Company (UK) Limited, Lon­ don, and the Paiatine Insurance Company Limited, Lon­ don, gross premiums in the Non-Life sector fell by 13.6%. This development was due approximately equally to the effect of foreign currency rates and to the continuation of a restrictive underwriting policy. Although new business was concluded at improved conditions, the underwriting result in the Non-Life branches worsened slightly be­ cause of late claims. - In Life business the gross amount of business in force rose further; the result was again sat­ isfactory. - Thanks to a good investment return, the over­ all result in the year under report was just positive at £ 0.1 million (previous year, loss of £ 0.5 million). Following waiver of a dividend payment in the previous year, a pay­ ment of £ 0.2 million was made on the preference shares issued at the end of 1984.
The gross premiums in the Non-Life sector of the SwissSouth African Reinsurance Company Limited, Johannes­ burg, rose by 1.9% to Rand 81.0 million. Improved reinsur­ ance conditions and the absence of major natural catas­ trophes led to a diminished underwriting loss. - In Life reinsurance the gross amount of business in force grew to Rand 7,100 million. The underwriting profit (including Accident and Sickness reinsurance) was higher than in the previous year as a result of the more favourable mor­ tality development. - Better reinsurance results and con­ siderably higher investment income led to an overall prof­ it of Rand 7.1 million (previous year, loss of Rand 0.4 mil­ lion). The company paid a dividend of Rand 2.0 million (previous year, no dividend).
The consolidated net premiums rose in the year under re­ port by 10.7% to Sw.frs. 3,612 million (previous year, Sw.frs. 3,263 million). About 85%ofthis premium volume is produced by the Group companies in Germany. The un­ derwriting result improved overall to Sw.frs. 21 million
(previous year, Sw. frs. 12 million). Non-Life insurance reg­ istered a rise in profit through the absence of major losses and as a result of rate increases in Motor Third Party Liability insurance. The profit in Life insurance dropped slightly. The further rise in investment income and an outstandingly positive balance from realized capi­ tal gains and write-offs contrasted with greatly increased management expenses and taxes. The Group profit from insurance companies attained Sw.frs. 22 million (previ­ ous year, Sw.frs. 29 million).
The gross premiums of the SWiTZERLAND General Insur­ ance Company Limited, Zurich, fell marginally to Sw.frs. 636.8 million (previous year, Sw.frs. 656.0 million) as a re­ sult of the effects of foreign currency rates. Whereas in Switzerland the premium volume increased in accor­ dance with the market average, it declined in many for­ eign markets under the effect of foreign currency rates. Had exchange rates remained the same, there would have been a growth of about 9%. Of the gross premiums 65% were for insurance, 35% for reinsurance business. The gross underwriting result showed a clear improve­ ment in insurance whereas in reinsurance a further dete­ rioration occurred. Investment income again rose. The profit shown increased to Sw.frs. 8.5 million (previous year, Sw.frs. 7.2 million), which enabled a dividend pay­ ment of Sw.frs. 2.25 million (previous year, Sw.frs. 2.0 million).
The mh Bausparkasse AG, Munich, can again look back on a successful year. Savings contracts were produced of DM 1,004.0 million, 13.1% higherthan in the previous year. At the end of the year the portfolio of savings contracts to­ talled DM 3,212.0 million, corresponding to a growth of 38.2% compared with the previous year. The year's profit of DM 2.0 million (previous year, DM 0.1 million) was allo­ cated to the reserves.
The net profit in 1985 increased from Sw. frs. 6.6 million in the previous year to Sw.frs. 10.7 million. The improvement of the profit is the result of higher dividend payments from company holdings for the 1984 business year and a slight reduction of the net outgo. The gratifying result for the year enabled the payment of a dividend of Sw. frs. 7.0 mil­ lion (previous year, Sw.frs. 3.5 million) and an allocation to the special reserve fund of Sw. frs. 4.0 million (previous year, Sw.frs. 2.5 million).
Gross premiums 5,741 3,624 9,365 9,113 Premiums ceded - 338 - 555 - 893 -1,221 Net premiums 5,403 3,069 8,472 7,892 Adjustment in unearned premiums - 292 - 364 - 656 - 327 Earned premiums 5,111 2,705 7,816 7,565 Interest on Sickness insurance fund - 239 239 205 Commissions, profit commissions, expenses -1,491 - 790 -2,281 -2,108 Claims incurred -4,126 -2,141 -6,267 -6,190
' The figures in this column do not always amount to the total of the figures In the two preceding columns as figures for holdings and other companies are also Included.
Fixed-interest investments 8,919 7,959 17,252 15,484 Shares 1,273 574 1,847 1,894 Real estate 1,043 590 1,636 1,528 Non-consolidated holdings 52 31 387 394
Technical reserves Non-Life insurance 9,649 4,852 14,501 13,864 Life insurance 3,022 3,751 6,773 6,712
Profit applicable to minority shareholders - 9 10 9 Capital funds applicable to minority shareholders - 38 42 33
Share and non-voting share capital 147 128 Reserves shown 1,081 627 Consolidation reserve fund 232 297 Group Profit 145 120 *The figures in this column do not always amount to the total of the figures in the two preceding columns as figures for holding and other companies are also included.
As in previous years, advisory and service companies are not consolidated in view of their Insignificant effect on the Group's funds and income. The only exception Is the mh Bausparkasse AG In Munich.
In the year under report the scope of consolidation was extended to Include two new companies: the North Ame­ rican Specialty Insurance Company, Manchester, New Hampshire, acquired by Swiss Re, and the Finasyr Seguros y Reaseguros S.A., Barcelona, taken over by SWITZERLAND General Insurance Company. Compari­ son with the previous year Is not materially affected by Including 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, 1985.
The net assets of foreign companies have been adjusted In accordance with the altered exchange rates at the end ofthe business year. The conversion lossof Sw.trs.81 mil­ lion (previous year, profit of Sw.frs. 66 million) resulting from the revaluation was directly debited to the consoli­ dated capital funds.
The published annual accounts of the various Group companies must be compiled in the relevant local curren­ cies and In accordance with local accounting regulations. For the consolidation, however, uniform valuation rules are applied.
The technloal reserves are calculated In principle accord­ ing to the provisions ofthe 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).
Investment income also includes dividend payments of non-consolidated holdings in the amount of Sw.frs. 25 million (previous year, Sw.frs. 22 million).
These Items comprise a positive balance from realized capital gains and depreciation on Investments of Sw.frs. 256 million (previous year, Sw.frs. 238 million), from foreign currency gains of Sw.frs. 4 million (previous year, loss of Sw.frs. 23 million) as well as from value adjust­ ments and depreciation on assets outside the Invest­ ment sphere of Sw.frs. 42 million (previous year, Sw.frs. 49 million).
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. 77 million to Sw. frs. 6,267 million. Of this amount, Sw.frs. 4,126 million was for reinsurance companies and Sw.frs. 2,141 million for Insurance companies.
The consolidated balance-sheet values of capital invest­ ments (incl. non-consolidated holdings) increased over­ all by 9%, or Sw.frs. 1,822 million, to Sw.frs. 21,122 million. Whereas the balance-sheet value of shares fell by 2% (previous year, increase of 4%), as a result of foreign cur­ rency fluctuations, fixed-interest investments rose by 11% (previous year, 20%) and real estate by 7% (previous year, 15%). 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 of the individual se­ curities, taking into account the estimated value of taxes due on realization, amounted to Sw.frs. 1,677 million, or 8.8% of the balance-sheet value (previous year, 6.7%).
Non-Life Insurance Unearned premiums 1,852 2,537 4,389 3,893 Outstanding claims reserve 7,784 1,720 9,504 9,361 Reserve for profit commission 13 595 608 610 in % of net premiums earned 188.8% 179.4% 185.5% 183.3%
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 significant weakening of most major foreign currency rates, the consolidated reserve fund fell by Sw.frs. 65 million to Sw.frs. 232 miliion (previous year, largely currency-related increase of Sw.frs. 91 million).
European General Reinsurance Company of Zuricti Sw.frs. 100 77,678 2,165,735 1,187,955
General Surety & Guarantee Co. Limited £ 100 1,212 6,130 2,962
SwissRe Holding (North America) Inc. US $ 100 183,718 240,910 -
Investment and other financial income Management and other expenses Rate fluctuations, depreciation, value adjustments Result from general income and outgo Taxes Share of profit applicable to minority shareholders Group Profit
• Insurance business of the calendar year 1979 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 as a result of the change of the balance-sheet date from 30th June to 31st December of Swiss Re,
United States North American Reassurance Company 237 Park Avenue, New York, NY 10017 with branch offices in Dalias, Lakewood (CO) and Schaumburg (IL) 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
Canada Canadian Reassurance Company 95 St. Clair Avenue West, Toronto, Ontario M4V 1N6 with a branch office in Montreal Canadian Reinsurance Company 95 St. Clair Avenue West, Toronto, Ontario M4V 1N9 with branch offices in Montreal and Vancouver
United Kingdom General Surety & Guarantee Co. Limited Hawthorn Hall, Hall Road, Wilmslow, Cheshire, SK9 5BZ Palatine Insurance Company Limited 108 Cannon Street, London, EC4N 6HE
Switzerland Audatex AG Gotthardstrasse 35, CH-8022 Zurich Prudentia Services Ltd. Mythenquai 50/60, CH-8022 Zurich
Germany Audatex Deutschland Datenverarbeitungs-GmbH Kuhlenstrasse 15, D-4950 Minden mh Bausparkasse AG Wotanstrasse 88, D-8000 Munich 19
United States SwissRe Corporation 237 Park Avenue, New York, NY10017 SwissRe Advisers, Inc. 237 Park Avenue, New York, NY10017 Atrium Corporation 237 Park Avenue, New York, NY10017 with branch offices in Memphis and Westport Surety Support Services, Inc. Woodland Corporate Tower, Suite 130 1333 Butterfield Road Downers Grove, IL 60515 with a branch office in San Diego
Mexico OFATEC (Mexico) S.A. de CV Viena 71, Piso 5, Col. del Carmen Coyoacan, 04100 Mexico, D. E
Accident insurance: Insurance providing payment In the event of death, temporary or permanent disability and/or for medical costs as a result of an accident, of individuals (personal accident) or groups (group accident insur­ ance).
Annuity: Contract under which the benefits consist of a regular Income payment for a specified period of time (cf. death and maturity benefits).
Broker: Insurance or reinsurance Intermediary with no contractual connection to a particular ^ Insurer or ^ re­ insurer.
Burglary, fidelity and allied lines: Insurance against burglary, breaking and entering, robbery, embezzlement; also includes water damage, glass breakage, damage to and loss of jewellery or damage or losses in connection with the keeping of animals.
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.
Engineering insurance: Insurance of construction and erection objects during the construction or erection pe­ riod and the insurance of machinery in operating plants (Incl. EDP installations).
Facultative reinsurance: Reinsurance of ^ risks on an individual basis (cf. treaty reinsurance) in which the ^ reinsurer is free to accept or reject the offer.
General third party liability: Insurance of Industrial, commercial, employers, products, professional or private liability to third parties.
Gross premiums: Reinsurance premiums of a business year before deduction of ^ retrocession premiums.
Hail insurance: Insurance of crops in open fields or of greenhouses and their contents against hail, storm and other natural hazards.
Life reinsurance in force: All reinsured Life business in tfie ^ portfolio of the ^ reinsurer.
Policy reserve: Reserve fund needed to cover future claims under Life insurance and ^ annuity contracts.
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.
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 premium: ^ Premium 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).
Surety insurance: Sureties and guarantees issued to third parties for the fulfilment of contractual liabilities (executing construction projects, providing services, etc.).