Dividend — total 40* 36 34 — per share (444,000 shares) in Sw.frs. 90.-*
Investment income 163 158 151 1 Management expenses. Fluctuations in Foreign Currencies and Stock Exchange Rates, Taxes 190 163 124
Horgen, President of the Board of Directors, Adolf Feller AG, Horgen
Berne, Federal Councillor (ret.) 1976 * Members of the Committee of Directors
Deputy Managers Roger Aeberli Kurt Aemi Albert Albrecht Erwin E. Arpagaus Eduard Bart Georges Bassin Hans Brodbeck Andreas Brügger
Edouard Burnens Paul E. Christen Fritz Ehrsam Johann J. Hagedom Ernst A. Kubli Willy Küster Gerard Lavanchy Jean-Claude Mayor
Jan C. Roos H. Conrad Rutishauser Max D. de Sails Hans Salzmann Herbert Schönenberger Peter Schuppli Edward Spargnapani Paul Strickler
Assistant Managers Alfred Bai Emil Baumgartner Cunnar Benktander Fritz Bolliger Edmond Capt Richard R. Doerr Rolf Eckert Leon Cenoud Walter Isler
Ernst Jutzi Hans R. Kaufmann Lavre Kirianoff Albert Kunz Werner Künzle Balthasar Mätzener Roger P. Merkelbach Max Nabholz Samuel Patthey
The business year 1972/73 embraces the reinsurance busi­ ness for the calendar year 1972 and the other income and expenditure from 1st July, 1972 until 30th June, 1973.
The year under report was marked by continuing, world­ wide currency unrest. Since the previous year's balance sheet date, the rate of every foreign currency other than the D-Mark has declined in relation to the Swiss franc. The decline was substantially greater than in the two pre­ ceding years, a development which naturally had to have a negative influence on the result of the business year. That a net profit of Sw.frs. 52.6 million (previous year, Sw. frs. 53.4 million) was nevertheless achieved is due primarily to the favourable result in non-Life rein­ surance.
The result in non-Life reinsurance, which improved again, does not guarantee that the trend will continue. The first months of the current year have already given evidence of certain imfavourable developments in individual lines and markets.
For example, it has proven erroneous to believe that new buildings, designs or equipment are less susceptible to damage. Similarly, surprises are continually cropping up with new products and processes, because they entail harmful side effects, some of which were previously un­ known. However, a reduction of the loss burden would be possible if loss prevention generally received the atten­ tion due it. Our own efforts in this direction are concen­ trated on fire prevention for buildings. During the year rmder review, working conferences on fire prevention, with internationally recognized experts participating, were held both in Switzerland and abroad; some of them, on the international level, were organized in cooperation with other reinsurers. Apart from the fact that fires harm the economy as a whole, many businessmen, unfortunately, are too little aware that the risk of permanently losing part of their clientele or markets is not insured, and cannot be insured.
Inflation continued to accelerate during the year under re­ port, especially in the industrial coimtries. It is forcing pri­ mary insurers and reinsurers to continually adjust their premiums to the loss burden, but such premium increases regularly lag behind the rising level of prices. Wages, re­ pair costs and the cost of medical and hospital care have risen most, and all of these are important cost factors in several principal branches of insurance. This makes evi­ dent that premium increases are not an inflationary push, but rather an inevitable consequence of the inflationary pull.
Reinsurance of the General Third Party Liability and Burglary branches was clearly negative during the year under review. It is characteristic for General Third Party Liability that the insureds are constantly demanding both broader insurance coverage and higher sums insured. Added to this is the worldwide tendency of the courts to apply an extensive interpretation of liability. Liability for environmental damage has taken on new dimensions, which is making it more and more difficult for insurers and reinsurers to assess the loss potential. They are being faced again and again with new coverage requirements for which no statistically reliable loss experience exists.
On the other hand, one can observe that Motor Third Party Liability business, the problem child of earlier years, once again closed with a small overall profit. Never­ theless, given what experience has shown to be the lengthy claim settlement process following serious accidents, one must ask whether this modest profit is enough to offset the claim inflation which must be expected. In any case, the situation forces the reinsurer to follow an extremely cautious policy in reserving for outstanding losses.
Accident 150 147 130 133 129 Sickness 72 68 121 164 131 Third Party Liability 178 161 144 138 131
previous year. Life reassurance, which benefitted in the preceding year from low mortality, showed an adverse loss pattern in the year under review; profit from this class of business declined by Sw. frs. 1.8 million.
Not least, the good aggregate underwriting result is based on the increased share of the technically demanding spe­ cial lines and of individual risk acceptances in the busi­ ness as a whole. These lines and risks require careful handling by specialists. In addition to reinsurance specialists, mathematicians, economists and lawyers, our personnel now includes engineers, technicians, chemists and fire prevention specialists; their numbers are likely to grow.
Non-Life Reinsurance There were two major losses during the year under report, the Managua earthquake and the November storms along the coasts of the English Channel and the North Sea, which fall under Fire reinsurance. As a whole, however, the branch still produced a small profit, with the results from individual countries varying greatly. Contrary to previous years, the overseas business acquired by the head office showed a loss, which is primarily attributable to the Managua earthquake. Retrocessions from the sub­ sidiary companies yielded a positive result. In Europe, the French Fire business ran at a loss; a number of larger industrial losses and the storms in February were respon­ sible for this.
General Third Party Liability insurance is a growth branch which is expanding rapidly under the influence of new legislation, changing court decisions, and serial losses of hitherto unknown dimensions, thus placing the insurance industry in a constant confrontation with new problems. The Swiss Re began concerning itself intensively with these aspects years ago, particularly in the areas of In­ dustrial, Products and Professional Liability, as well as liability for environmental damage.
Motor Third Party Liability reinsurance produced a profit. The business acquired and managed by Zurich was better than the retrocessions from the subsidiary companies.
During the year under report, the Aviation business suf­ fered under a rate collapse induced by excess capacity on the world market. Furthermore, the loss experience was significantly worse than in the preceding year.
Investments In the year under review, all of the important investment countries found themselves in a pronounced economic boom coupled with alarming rates of inflation. The respec­ tive governments attempted to counteract the depreciation of their currencies with the most varied stabilization measures, some of which were exceedingly rigorous. One of the main instruments in this policy was a tightening of credit and higher interest rates, which led to a down­ turn in bond and share prices. Our portfolios of securities also came under the influence of this unfavourable trend.
Even weightier than the price decline dictated by the market were the losses resulting from the lower foreign currency rates at which all investments abroad - with the exception of those in D-Marks — had to be converted into Swiss francs at the end of the business year.
The imusually high interest rates in many countries pro­ vided a strong incentive to investment in fixed-interest securities. Consequently, their share in the new invest­ ments was increased to over 50 %. The share of real estate in equity investments was increased, at the expense of investments in shares. However, the shifts in the overall investment portfolio remained within narrow limits, as the following table shows:
Net Cash Deposits with Insurance Companies 1,171 1,210 1,204 1,194 1,213
The account for depreciation, fluctuations in stock ex­ change and foreign currency rates closed with a loss of Sw. frs. 15.5 million (previous year, profit of Sw. frs. 0.2 million). This loss is principally attributable to foreign currency rate changes. Additionally, however, the write­ offs required by fluctuations in the investment market were clearly higher than in the two preceding years. That the net effect of these losses and write-offs on the profit and loss account nevertheless remained within narrow limits is due to compensation from substantial trading profits on securities achieved during the first half of the reporting year, when various market prices appeared unrealistically high.
Miss Elisabeth Feller, newly elected to the Board, died unexpectedly on 12th January, 1973. The unfortunately brief contribution of this outstanding businesswoman will long remain in our memory. To our great regret, we also learned on the 22nd July, 1973, of the death of Mr. Max H. Schneebeli. Drawing on his earlier, wide-ranging activity and his subsequent, rich experience in industry, the deceased contributed valuably to our Company since 1959, and we remain very grateful to him.
At this year's General Meeting, the Board of Directors will propose election to the Board of Mr. Hans Liithy, Managing Director and General Manager of IBM Switzerland, Zurich, and of Mr. Heinz B. Vischer, General Manager of our Company. Mr. Vischer will retain his present functions within the General Management of the Swiss Re.
With effect from 1st January, 1974 the Board of Directors has appointed Mr. Walter Diehl as Deputy General Man­ ager.
Proposal regarding the allocation of the net profit and transfer from the Special Reserve Fund to the Statutory Reserve Fund cf. profit and loss account (page 16) and balance sheet (page 19)
The Board of Directors proposes to the General Meeting the following allocation: 1972/73 1971/72
Dividend 39,960,000 36,000,000 Directors' Remuneration 450,000 450,000 Allocation to Special Reserve Fund 8,000,000 8,000,000 Allocation to Reserve Fund for Catastrophe Losses 4,000,000 8,000,000 Donations 500,000 450,000
Dividend If the Board of Directors' proposal is accepted, a dividend per share, again of Sw. frs. 90.—, is to be paid on the in­ creased share capital. Thus, upon presentation of Coupon No. 19 of the registered and bearer shares, an amount of Sw. frs. 63.— after deduction of the Federal Withholding Tax of 30 % will be paid.
Audit In accordance with Art. 723 of the Swiss Code of Obli­ gations the present Annual Statement has been examined and foimd correct by the independent auditor, Mr. A. Ehr­ bar.
embracing the reinsurance business for the calendar year 1972 and the other income and expenditure for the period from 1st July, 1972 to 30th June, 1973
Zurich, 18th October, 1973 For the Board of Directors: M. E. Eisenring, Chairman
Acting upon our terms of reference, we have checked the Profit and Loss Account for the business year 1972/73 and the Balance Sheet as at 30th June, 1973, against the ac­ counts of the Company, which have been kept in proper form and order, and have found that the figures concord. The assets of the Company and the operating results are presented in accordance with the methods of valuation legally prescribed.
Fire 978 974 956 850 747 HaU 16 17 14 17 17 Burglary/Fidelity and allied lines 79 81 66 70 65
Aviation 85 112 97 62 46 Atomic Risks 2 2 2 2 1 Credit, Surety 100 109 107 92 88
Gross Premiums 3,154 3,176 3,011 2,777 2,414 Retrocessions to companies outside Group 474 414 371 309 263
Net Cash Deposits with Insurance Companies 1,367 1,402 1,392 1,385 1,376
Depreciation, Fluctuations in Stock Exchange and Foreign Currency Rates - 34.4 - 8.7 - 3.4 -27.2 - 3.9*
Liabilities Owed to Parent Company Other Creditors Dividend Share Capital Reserve Fxmd Special Reserve Profit Carried Forward 31/12/72
On the other hand, costs rose by Sw. frs. 3.3 million to Sw. frs. 15.5 million. Together with the slightly higher interest on the funds advanced by the parent company and a greater tax burden, the principal neg­ ative influence on the profit and loss account came from the continuing, worldwide currency devalua­ tions. The losses on foreign currencies, especially from the American, Canadian and South African hold­ ings, could onl^' be partly offset by realized capital gains. - As in the previous year, a dividend of Sw. frs. 2.0 million was paid to the parent company.
Underwriting Result * 4,412,000 2,506,000 Investment Income 6,778,000 6,877,000 Management Expenses - 2,269,000 - 2,024,000 Net Realized Capital Gains/Losses - 469,000 - 252,000 Taxes - 2,053,000 - 2,731,000 * adjusted for changes in commission equity Once again, a good result in the Property branches con­ trasts with sizeable losses in the Casualty lines. Favourable experience in the Bonding business was a primary contrib­ uting factor in the considerable improvement of the underwriting result. The return on investments, as well as taxes, declined due to increased investment in taxexempt bonds. — In 1972, dividends of US $ 900,000 were paid (previous year, US I 500,000).
Underwriting Result Income from Free Investments Management Expenses Net Realized Capital Gains/Losses Taxes
The gross Life business in force increased by C $ 93 mil­ lion to C S 1,253 million. Slightly reduced mortality and absence of the surrenders which burdened the previous year's account led to a significantly higher underwriting profit. Taxes also rose commensurately with the improved earnings position. In 1973, after a one-year interruption, payment of a dividend was resumed in the amount of C $ 75,000 (two years ago, C $ 50,000).
Premium volume and the Life business in force grew during the year under review at the previous pace. Various factors, but particularly the absence of major losses, con­ tributed significantly to the improved underwriting result in non-Life reinsurance. The experience in Life reassur­ ance, too, was satisfactory again. — In 1972, the Company repaid the Swiss Re an additional instalment of A I 150,000 (as in the previous year) on the initial financ­ ing funds advanced earlier.
Swiss Reinsurance Company (U. K.) Ltd. London Share Capital £ 500,000
Underwriting Result 429,000 278,000 Investment Income 490,000 271,000 Management Expenses - 221,000 - 119,000 Taxes - 288,000 - 182,000 ,
The rapid expansion continued during the year under report. Once again non-Life reinsurance brought a satis­ factory underwriting result. The first actuarial valuation of the Life business, required triennially, showed a sur­ plus. — As in the previous year, the net profit for 1972 was used in full to reinforce the reserves.
Underwriting Result 7,484,000 1,925,000 Investment Income 15,128,000 13,726,000 Management Expenses - 7,280,000 - 6,860,000 Depreciation, Fluctuations in Stock
The decline of the gross premiums is due to the changes in foreign currency rates. The favourable underwriting result is attributable to the improved experience in nonLife reinsurance. The write-offs necessitated by fluctuations of the investment market and of currency exchange rates more than doubled. — In 1973, an unchanged dividend of Sw. frs. 2.0 million is to be paid.
United States Branch 1910 All classes axel. Life 245 Park Avenue, New York, N. Y. 10017
Nort/j American Reinsurance Corporation 1940 All classes excl. Life 245 Park Avenue, New York, N. Y. 10017 with Offices in Atlanta, Boston, Chicago, Houston, Los Angeles and San Francisco
Australian Branch 1955 All classes Embank House, 325 Collins Street, Melbourne, Vic. 3000 with an Office in Sydney
Australian Reinsurance Company Ltd. 1962 All classes Embank House, 325 Collins Street, Melbourne, Vic. 3000 with Offices in Sydney and Hong Kong