Key Figures 1994 Swiss Re Group in millions of Swiss francs
Gross premiums Profit on ordinary activities Total result Ordinary result per share Dividend per share Capital funds Return on Equity (in percent) Number of employees * subject to approval by the General Meeting
Swiss Re Shares 78 Global Presence 80 Subsidiaries and Affiliated Companies 82 Publications 92 Glossary of Technical Terms 95
With a price increase of 282.2% since 1 January 1986, Swiss Re's registered shares have performed substantially better than the overall stock market (+68.4%). In 1995 the price of Swiss Re registered shares has risen by 55.9% up to 13 October, while the market as a whole has advanced by 15.4%.
An investor who bought 10 Swiss Re registered shares at the end of 1985 at a price of CHF 57,800.- and reinvested all subsequent dividends and share rights, without investing any new funds, held a position with a market value of CHF 257,523.- on 13 October 1995.The total performance amounts to 345.5% or an average of 16.5% per year.
An investment of CHF 57,800.- in the overall Swiss market at the end of 1985 would have increased in value to CHF 126,536.- on 13 October 1995 (basis: Rietet index with reinvestment of income). The total performance amounts to 118.9% or 8.3% per year.
Ladies and Gentlemen 1994 was a successful year for Swiss Re. Ordinary Group profit after tax amounted to CHF709 million, representing a 29% increase over the comparable figure from the previous year. We also recorded an extraordinary profit of CHF227million after tax, stemming mainly from the book profit on the sale of our insurance operations.
We changed the strategy of the Swiss Re Croup in 1994. In future we will focus exclusively on the global reinsurance business and related services. As a consequence we sold our majority holdings in insurance companies at the end of September 1994.
Excluding extraordinary events, we currently foresee another sub­ stantial improvement in results in 1995.
We apply EU standards for the first time in presenting the 1994 financial year. This leads to considerably clearer and broader financial reporting. In order to enable comparison with the previous year, the 1993 financial year has also been presented without consolidation of the insurance companies and in accordance with our new accounting principles.
Profit and loss account The Swiss Re Group's ordinary profit before tax consists of the technical result, ie the balance from premium income, claims incurred, commission expenses and the costs of reinsurance operations, plus investment income.
Swiss Re's share of the damage produced by the Kobe earthquake in January 1995 totals CHF 80 million. Half of this claim was incurred at Japanese ceding companies. Since these companies closed their 1994 financial year only at the end of March 1995, this portion of the claims is already included in our 1994 Group accounts.The remaining share will be recorded in the 1995 Group accounts.
Gross premiums in original currencies rose by 1.8% overall. The increase in non-life reinsurance amounted to 4.7%, whereas life reinsurance experienced a decline of 15.3% due to non-recurring premium inflows in the previous year. Net premiums earned totalled CHF 12.145 billion in 1994,1.5% lower than in 1993. But premium volume is an insufficient measure of our operating success in the market. Decisive are the quality and the quantity of the risks transferred to us and thus our results and market position. We want to achieve additional gains in this regard.
After taking into account the balance of other expenses and income of minus CHF 127 million and taxes of CHF 255 million, ordinary profit amounted to CHF 709 million. This represents a 29% increase over the comparable figure from the previous year.
In addition to ordinary profit, we posted an extraordinary profit oi CHF 227 million after tax. The sale of our insurance companies resulted in a book profit of CHF 3.358 billion. Moreover, Swiss Re received CHF 150 million from a court settlement with the Stadtsparkasse Düsseldorf. Thus total extraordinary income amounted to CHF 3.508 billion.
CHF 1 billion of this extraordinary income was allocated to the formation of a precautionary provision for natural catastrophes. Large natural catastrophes, especially earthquakes and storms, can burden the Swiss Re Group with about CHF 1.5 billion per event in extreme cases. The damages caused by natural catastrophes have risen substantially in recent years, whereas the claims triggered by individual events have all remained well below the maximum possible magnitude. We consider it one of our main tasks to support our clients in over­ coming these catastrophic events. This involves not only cover capacities, but also the researching of the risk exposure of various loss scenarios, the communication and realisation of loss prevention measures, and the control of risk accumulation. Swiss Re performs notable research and development work in all of these areas. The formation of a provision which resources flow into or out of from year to year depending on the burden from natural catastrophes allows us to take better precaution in this field.
liability risks, mainly due to the changes in the legal framework surrounding liability issues. Examples of this include the liabilities from asbestos damages and anticipated liability claims for environmental damage in the USA, which stem largely from covers granted in the sixties and seventies. In this area alone, the insurance and reinsurance industries face total claim burdens surpassing USD 100 billion. Even the best possible analysis leaves considerable uncertainty about the ultimate extent of these damages. The Swiss Re Group has set aside exceptionally high provisions for these potential claims. Nevertheless, further additions to provisions may be necessary.
Technical provisions fell by CHF 2 billion due to currency influences. In contrast, there were extraordinary additions of CHF 2.76 billion and further additions of CHF 2.5 billion contained in the ordinary profit. Total technical provisions amounted to CHF 28.6 billion at year-end. The reserve ratio for our non-life business is around 230%. These provisions reflect our expected ultimate claims payments, not discounted, and including anticipated claims inflation up to the time of payment.
The Swiss Re Group is one of the few leading global players in this market. We believe three main factors will be decisive for long-term success: — The high professionalism and quality of our consultancy services and solutions in insurance markets the world over. Foremost, this requires us to understand the needs of our clients by gaining the best possible knowledge of their situa­ tion. Fiere we offer a broad spectrum of services in the fields of risk manage­ ment, damage prevention and loss limitation. And for the development of efficient, tailor-made solutions, we employ a comprehensive range of reinsur­ ance, financial reinsurance and, through our joint ventures with CS Flolding, combined bank/reinsurance products.
Our measures to bolster our Croup's position in the USA are showing initial results. The expansion of our business in Asia is advancing according to plan.
The successful development of our organisation rests on the commitment and capability of our staff at all levels and on all continents. We thank them for their vital contribution to the realisation of our goal to make Swiss Re the leading reinsurer worldwide.
Board of Directors, Executive Board and Auditors as at November 1995
The Board of Directors proposes to the General Meeting that Ernesto Jutzi be elected to the Board for the first time. Mr Jutzi continues as a member of the Executive Board until the end of 1995. He joined Swiss Re in 1958.
Peter Prey retired as co-head of the Reinsurance Division at the end of March 1995, while Wolfgang Gemünd, head of the Insurance Division, left Swiss Re in mid-1995. The Board of Directors thanks Mr Prey and Mr Gemünd for their valuable and successful service.
Secretary to the Board of Directors and Group Media Konrad Häuptli
We will be happy to send you a copy of all our advertisements in English on request.
We show the daunting, but also fasci­ nating challenges facing a globally active reinsurer, comment on conflicts and new developments, and try to raise public awareness about the risks that form part of life and living together in an increasingly changing world.
17January A severe earthquake in the Los Angeles area causes 63 deaths, 9,000 Injuries and over 25,000 evacuations.The insured losses amount to around USD 12.5 billion. For Swiss Re, the Northridge earthquake results in a total charge of CHF125 million. Swiss Re later publishes a short brochure on the catastrophe and losses entitled "Northridge Earthquake, Los Angeles".
1 September Lukas Mühlemann succeeds Arnold W. Saxer as Chief Executive Officer.
2 September The press announces that General Re will acquire a majority holding in Cologne Re. General Re and Cologne Re each under­ wrote net premiums of USD2.5 billion in 1993. This joining of the two companies cre­ ates the world's third largest reinsurance Group based on premium volume.
28 September The Baltic ferry "Estonia" sinks, claiming over 900 lives. Insured property damage is around USD 60 million, and liability claims amount to USD75 million. Swiss Re Group pays property claims of approxi­ mately USD1 million.
30 September Swiss Re sells its majority-held primary insurance companies to the Allianz Group and to the Winterthur Group for about CHE 5.5 billion.The sale proceeds will be used to boost the capital base and steadily expand the reinsurance business.
15 December Strategic collaboration with CS Holding. Swiss Re acquires 20% of Credit Suisse Financial Products, a company active in the derivatives business. As part of the joint development of derivative instruments for reinsurance, three joint ventures are launched with companies of CS Holding.
16 December Swiss Re receives permission from Taiwan's Ministry of Finance to open a contact office inTaipei.
19 December Swiss Re buys Villa Bodmer in Rüschlikon. Following its renovation, this property will serve as a guest house and conference centre.
31 December The Swiss Re Global Fund, Swiss Re's invest­ ment fund, receives the 1994 Micropal Award as the best balanced fund based on a comparison of five-year returns.
17January A severe earthquake hits the Industrial Kobe region In Japan.The tragic consequence Is over 5,000 dead and 300,000 homeless. There are Insured losses of about JPY 300 billion. Swiss Re Group pays about JPY 6 billion or about CHF80 million. Shortly following this natural catastrophe, Swiss Re published a brochure titled "The Great Hanshin Earthquake;Trlal, Error,Success".
28 May The northern part of Russia's Sachalin Island Is shaken by an earthquake registering 7.6 on the Richter scale. Multi-storey apartment buildings collapse In the settlement of Neftegorst.The natural catastrophe takes 1,825 lives. Due to the sparsely insured property, no reinsurers are affected by the damage.
5 June Swiss Re launches Its new corporate design worldwide. With the exception of Union Re and Bavarian Re, all of Swiss Re's reinsur­ ance Group companies now operate In the market under the uniform name Swiss Re, with the addition of the respective country name.
29 June 500 people are killed and over 900 Injured by the collapse of a department store in Seoul, South Korea. Swiss Re pays CFIF 0.5 million In obligations arising from life reinsurance contracts.
30 June Swiss Re acquires the Alhermlj Group, Amstelveen.Thls company operates primar­ ily In the Dutch life reinsurance market. It posted 1994 gross premiums of CFIF 390 mil­ lion and an operating profit of CFIF 39 mil­ lion aftertax.
4July Swiss Re decides to open a branch In Kuala Lumpur. This Is expected to become opera­ tive In spring 1996.
The ability to innovate, above-average risk assessment, risk selection and claims handling, low costs relative to client benefits, and the targeted use of modern technology are increasingly important prerequisites in the face of heightening competition.
Swiss Re offers a comprehensive range of services in these markets, but our primary focus is on technical consulting and support, on the training of insurance specialists and on assistance in the development of new insurance products and in the build-up of infrastructures. In order to provide these services efficiently, we are gradually bolstering our presence in these markets.
The shift of an ever greater share of reinsurance volume to a few large and globally active reinsurers is mainly a consequence of the growing requirements placed on the services provided by the reinsurer and on the reinsurer's ability to diversify risks globally. Moreover, the reinsurer's financial strength is an in­ creasingly important criterion.
The Swiss Re Group is adapting to this trend through the concentration of all its resources on the reinsurance business, through the steady expansion of its services and global presence, and through a solid financial basis.
As a result of the lower frequency of large claims in property insurance com­ pared with previous years and the marked absence of larger natural catastrophes, which place a disproportionate burden on reinsurers, overall results have recovered somewhat. On the other hand, we still view the basic premium level in the industrial segment as inadequate on the whole despite selective improve­ ments. Legal developments in liability and motor liability insurance required some notable increases in provisions in several countries.
The demands on the reinsurance market have risen strongly as a result of the movements in the primary insurance market. A growing need for reinsurance stems from small and medium-sized companies that can globally diversify part of their insurance portfolio with the help of the reinsurer and thus optimise their employment of capital. On the supply side, the consolidation process has continued thtough the acquisition of Cologne Re and Frankona Re by American reinsurance companies. We expect competition to intensify, but at a high qualita­ tive level.
France In France non-life insurance premium growth has slowed further in view of a gradually recovering economy. On the other hand, underwriting losses could be lowered markedly. Nevertheless, unfavourable conditions in the investment sector made it impossible to achieve a satisfactory total result. In this environ­ ment we aimed our efforts first on improving conditions in proportional reinsurance and on reorganising the industrial fire business.
In departure from a decades-old practice, insurers and reinsurers managed to introduce a quantative limit on liability per event in industrial and commercial liability insurance.
Through establishment of a branch in Paris, Swiss Re has bolstered its presence in one of its key markets. The local service functions, such as underwriting of complex risks in life insurance, claims handling and engineering support in engineering and decennial business, are being brought together under one roof. Moreover, an underwriting office for facultative reinsurance will be integrated.
Belgium In Belgium a long-delayed project for dealing wirb the consequences of natural catastrophes has been taken up once more. A concept has been prepared which is broadly based on private insurance with certain government guarantees and which attempts to provide a practical solution according to the model of the French system of natural catastrophe insurance.
United Kingdom 1994 was a year of recovery for the insurance industry in the UK. Most com­ panies reported substantially improved profitability, especially in personal lines. Takeovers, withdrawals, restructurings and portfolio transfers continue to dominate the market. Rumours and conjecture about tbe future and survival of Lloyd's persist and could threaten the current position of the London market. Insurers' and reinsurers' efforts to limit the amount of liability covers were also successful in the UK. Only limited cover amounts are now being insured in employers' liability.
Italy In Italy the latest legal developments are also spurring a trend to increased com­ pensation norms in motor liability insurance. Impending legal changes are ex­ pected to provide substantial impetus in surety, engineering, general liability and decennial liability insurance. The flood losses in Piedmont in November 1994 placed only a minor burden on reinsurers. Premium income fell sharply in the financial year, partly due to the weak Italian currency.
Spain The highly fragmented insurance market in Spain is still struggling with prob­ lems arising from deregulation, and results from the main lines remain cor­ respondingly unsatisfactory. The unchecked growth of competition in the property business now also includes medium-sized industrial and commercial risks in addition to the previously highly contested large risks. In motor insurance a slightly falling gross loss ratio is unfortunately delaying rate adjust­ ments.
Gross premiums by region 1994:100% = CHF 1.345 billion In %
South East Asia The steady expansion of our business in Asia is a major component of Swiss Re's strategy. In coming months we expect to add offices in Kuala Lumpur, Beijing, Shanghai and Bangkok to our existing offices in Tokyo, Hong Kong, Manila, Singapore, Taipei and Seoul. In order to prepare local staff for increased future responsibilities, we have developed a new training programme that lasts two to three years and in which a large number of new employees will be prepared for assignment in Asia through courses and in the Group's European and North American companies.
Africa The opening of insurance markets in some African countries, where to some extent state insurance companies still prevail, is progressing rather slowly. The management of the portfolio and the corresponding client relationships in the sub-Saharan markets will be transferred to our company in South Africa, Swiss Re Southern Africa. It will be responsible for the further development in the individual markets and the targeted expansion of business.
The negative operating result in South Africa reflects the difficult market conditions. The market is characterised by an exceptional number of large losses, many the result of suspected arson. Motor damage insurance suffers from increasing crime levels. Further political and economic developments in this country will also be decisive for the insurance industry.
Gross premiums by region 1994: 100% = CHF 3.671 billion in%
USA The reinsurance market in the USA grew substantially faster than the primary insurance market in 1994 and continued this trend in the first half of 1995. The reasons for this include the growing significance of small and medium-sized specialist insurers who rely heavily on reinsurance, as well as the ongoing rise in demand for catastrophe and accident/liability covers. Despite growing demand, the price level is unsatisfactory in many lines.
Changes are underway in American tort reform at state and national levels. Some departure from the present exceptionally broad interpretation of indem­ nity and compensation claims is of great interest to the insurance industry.
Canada The Canadian market contracted in the wake of weak total results and continued mergers, acquisitions and reorganisation of insurance companies. Underwriting results showed improvement against the previous year, despite the worst winter in 15 years and the worst crop hail loss in 48 years. Swiss Re Canada's strategy is to initiate, huild-up and foster long-term client relationships.
Latin America In most Latin American countries, markets began to stabilise once more following recent deregulation. The currency crisis in Mexico at the end of 1994 also had far-reaching consequences for insurance companies, many of which are part of larger financial and industrial groups. With few exceptions, the Swiss Re Group holds the leading market position among foreign reinsurers.
Property 31% Liability 14% Motor 18% Accident/health 9% Other lines 16% Life 12%
Despite the total charge of CHF 125 million from the earthquake in January 1994 in Northridge, Los Angeles, the underwriting result improved.This cata­ strophe caused record-high total damage of USD 12.5 billion. The tremendous economic losses caused by the earthquake that struck the region known as Great Hanshin in Japan precisely a year later are largely uninsured and place a total burden of CHF 80 million on Swiss Re, of which the estimated maximum liabili­ ty for the property lines is CHF 70 million.
Liability !Accident! Health There are virtually no capacity problems at present in accident/liability insurance. Premium rates are trending slightly lower but barely moving. Expansion of cover amounts and terms are taking place at favourable conditions. The reinsur­ ance market has begun to curtail the former extremely generous provision of unlimited cover in terms of both loss amount and loss frequency. Up to now the measures have focused on workers' compensation, employers' liability and general liability insurance, but an extension to other lines is inevitable.
Premium income in general liability also declined slightly in terms of Swiss francs compared with the previous year. The underwriting loss was sharply reduced. This line focuses on mastering risks of environmental, product and professional liability. In the USA and other industrialised countries, the general public is becoming increasingly sensitive to losses from environmental damage, and demands for damage compensation are growing. Environmental damages caused gradually are now increasingly excluded from traditional covers and are channelled into special insurance solutions, including pools. In product liability, non-European legislatures are increasingly adopting the EU framework, with its no-fault responsibility. The EU directive on product safety, although it sets no new liability norms, holds producers increasingly responsible for the safety of their products over the entire product life. In professional and institutional liability, demand is rising for reinsurance covers and services regarding product development and pricing.
Motor In motor insurance the ceded premium volume moved in line with the strong increase in original business, with a positive result. Deregulation is creating new conditions for primary insurers and reinsurers in that both sides must make great efforts in some instances to fundamentally rework their products and pricing structures. Sinking margins as a result of intensified competition coupled with considerable loss momentum should lead to increased demand for traditional and new reinsurance covers and reinsurance-related services in view of the great significance of the motor business in many primary insurance portfolios.
of the Great Hanshin earthquake remained smaller than initially believed. The efforts of marine insurers to improve the quality of the ships and crews through corresponding policy conditions should have a positive impact on the future earnings situation. As a consequence, however, we anticipate a rise in the world­ wide insurance capacity and a resulting swift increase in competition.
Aviation The premium increase in aviation is attributable to two main factors: to the return to the airline segment on a facultative basis and to higher premium rates in the original business. 1994 was an absolutely catastrophic year for the world­ wide aviation insurance industry, with a total loss of more than USD 2 billion for the airlines alone. This is reflected by our underwriting result, which was negative in the financial year after a series of positive years. The two largest avia­ tion catastrophes, in Japan (China Airlines in Nagoya) and the USA (USAir in Pittsburgh), led to a claim of more than CHF 42 million for our share. There is a general trend to increasingly higher compensation of the surviving dependants of airline accident victims. Large losses have been absent so far in 1995, which triggers very swift reaction in the extremely volatile aviation market. Although market capacity is unlikely to rise disproportionately, we expect a slight drop in premium rates. In order to offset this trend we continue to follow our policy of providing tailored solutions to selected airlines.
Engineering! Other lines Premium growth in engineering reinsurance stems mainly from individual European markets, the USA, Israel and the rapidly growing economic regions of South East Asia. Engineering insurance is highly dependent on the general economic trend of the markets, while infrastructure projects also play a major role in this line. An exceptional number of natural catastrophes, and isolated but significant provision increases due to claims in the previous year weighed strongly on the underwriting result. Worthy of note are the flooding of a fresh water reservoir under construction in the Libyan desert and typhoon damage to a steel factory in Taiwan. The worldwide trend to increased performance and 27 Swiss Re Group
rationalisation pressure on businesses often manifests itself through reduced construction quality, neglected safety measures and a correspondingly higher loss frequency. For large risks with internationally composed work groups, these problems are intensified by the multicultural influences and the different appli­ cation of fundamental insurance principles.
Given the increasing sophistication of products and growing competition, we have decided to strengthen our resources. In order to extend and round out our product range in financial reinsurance, Swiss Re has entered two joint ventures with CS Holding, Zurich: — Swiss Re Financial Products, founded in mid-1995 and headquartered in
- Securitas Capital Partners Programme, founded in mid-1995 in Bermuda, offers capital financing to insurance companies worldwide, especially for those undergoing reorganisation or in growth markets. Capital financing should normally be combined with reinsurance solutions. Swiss Re and CS Holding have committed USD 500 million to the fund, of which USD 300 million from Swiss Re. Above-average growth was recorded again in 1994 in the risk transfer market with large industrial and service companies or their captives. This is attributable to the growing attractiveness of captive solutions and tailor-made covers. As a result, already about a third of risk transfer costs in the USA flow from compa­ nies to captives. Europe is experiencing the strongest increase in newly founded captives.
company-specific risks that cannot be coveted in the insurance market. These needs reveal future market opportunities that Swiss Re and CS Holding intend to target within the scope of an additional joint venture: Reinsurance Finance Consultants. Headquartered in Zurich, this company began operations in May 1995 and provides industrial and service companies with combined reinsurance and bank products designed to finance and offset risk. We are meeting with strong market demand.
The International Risk Management Group (IRMG) and the Thomas Howell Group (THG) provide services in risk management, claims handling and the management of captives. In the 1994 financial year, IRMG posted a satisfactory result, while THG was just barely profitable. The claims handling companies in the USA are presently reorganising in an attempr ro restore profitability.
Although the overall operating result is little changed from last year, there are some significant performance variations in the different lines. Thus together with other US companies, we incurred a significant loss in the individual disability business.
In the US and to a lesser extent in other markets, disability insurance has underperformed our profit expectations for some years now. The worsening of the claims experience is partly attributable to the recession of the early nineties. Yet it is also clear that the covers offered in this line must be reevaluated, particularly in terms of premium guarantees, policy conditions and earnings replacement ratios. The corresponding measures have already been initiated. Given these changes and in view of the ever growing demand for this product line, we are confident about the future.
Outlook We have strengthened our position in the global life reinsurance industry in recent months through several actions.
The acquisition of the Alhermij Group has greatly added to our presence in the Dutch and other European markets. It has also brought into the Group a highly professional team, with specialist knowledge including the bancassurance and employee benefits fields. As part of the targeted expansion of our activities in France, we have opened a branch in Paris.
Rising interest rates and inflation expectations also led to uncertainty on the equity markets, which spurred lower prices in Europe and on the South East Asian markets. Only the stock markets in the USA, Canada and Japan managed to escape this trend and post gains.
This turmoil also affected the currency markets. The US dollar continued to weaken over the course of the year relative to the European currencies and reached a record low against the Yen. Within the EMS, the weaker currencies of southern Europe and the British pound came under renewed devaluation pressure. The Swiss franc generally gained value.
The investment result, composed of investment income, valuation readjust­ ments, realised gains and losses, unrealised income on investments for unit31 Swiss Re Group
linked life reinsurance and the investment management charges, remained stable at CHF 2.1 billion despite unfavourable market conditions. Nevertheless, there were significant shifts within the individual components: - Investment income (excluding valuation readjustments and realised gains)
- Transmission and expansion of management ability and team capability; - Provision of an attractive workplace and employment conditions for male and female employees. A number of projects are underway to address these tasks. While their com­
pletion will bring us closer to the goal of improved personnel performance, we will not yet reach this objective. We therefore must and will do more, including the following three examples: Intensification of training and ongoing education A broad range of specialist and management training in all companies under­ scores the Swiss Re Group's commitment to offer clients the best reinsurance solutions in the industry. Our teams of outstanding staff are the key to this. Reinforced efforts in internal and external management training serve the pur­ pose of being able to swiftly and accurately react as a learning organisation to changes in market conditions.
New Group-wide training programme In order to foster information, integration and identification within the entire Group, the groundwork has been laid for Swiss Re's Group training. Starting in 1996, this tri-level programme will periodically bring together our specialists and managers worldwide under the leadership of experienced members of Group senior management.
The performance- and results-based assessment will be based on annual, indi­ vidually determined objectives of both qualitative and quantative nature. The result of the Group as well as of the respective company will receive appropriate consideration.
Personnel Swiss Re employed a staff of 7373 worldwide on 31 December 1994. 3691 em­ ployees worked for the reinsurance companies, 3682 for the service and other companies.
Activities of the Swiss Insurance Training Centre (SITC) The Swiss Insurance Training Centre trained 100 participants in 1994, this time from 62 countries, again in two English courses and one Spanish course. There is increased interest from eastern Europe, while demand from Asia is also strong. Advanced courses are particularly requested. The SITC will double the current number of spaces available in its courses in order to better meet the needs of its clients.
In North America, the largest insur­ ance market in the world, the "Wall Street Journal" is the ieading daily economic newspaper, it aiso publish­ es European and Asian editions, ensuring its presence around the globe. Total circulation; 1.8 million.
Income from land and buildings Dividend, interest and other income from unconsolidated subsidiaries and affiliated companies Dividend income Income from fixed income securities, loans and mortgages Income from time deposits and other investments Income from deposits with ceding companies Valuation readjustments Realised gains on sale of investments 2. Unrealised income on investments for unit-linked life reinsurance
3. Investment charges Investment management charges Valuation adjustments on investments Realised losses on sale of investments
Profit on ordinary activities after tax 5. Extraordinary income 6. Extraordinary charges 7. Tax on extraordinary profit
IV Other asssets 1. Fixed assets 2. Cash at bank and in hand 3. Other
V Prepayments and accrued income 1. Accrued interest and rent 2. Other prepayments and accrued income
VII Creditors 2761 2518 1. Creditors arising out of reinsurance operations 1702 1 685 2. Debenture loans 170 188 3. Amounts owed to banks 325 19 4. Other creditors 564 626
Total liabilities and shareholders' capital 42499 37 762 41 Swiss Re Group
Companies in which Swiss Re, Zurich, directly or indirectly holds a voting majority are consolidated in the Group accounts in terms of assets, liabilities, income and expenses. Companies in which Swiss Re maintains a holding of between 20% and 50% and has a significant but not controlling interest are valued at Swiss Re's share of their equity. Swiss Re's share of net income or loss is accounted for in dividend, interest and other income from affiliated companies in the profit and loss account. Equity and net income of these companies is adjusted to be in line with the Group accounting policies.
Interests in companies that are not consolidated due to their minor significance and other minority holdings are carried at the lower of cost or market value.
Share capital and the share premium account are disclosed separately.The retained earnings brought forward show the cumulative retained earnings on the balance sheet date. The revaluation reserve is the difference between cost and market value of land and buildings and shares, after provision for deferred taxes. The reserve for own shares corresponds to the cost value of shares in Swiss Re, Zurich, held by Group companies.
Technical investment return is allocated to the reinsurance result. It reflects the investment return generated on the investments covering the technical provisions. In addition, income from investments relating to unit-linked life reinsurance are also part of the allocated investment return.
Foreign currency translation All items in the balance sheet and the profit and loss account denominated in foreign currencies are translated at the currency exchange rates applicable on the balance sheet date.The currency translation adjustment from the recalculation of the opening balance sheet is netted against retained earnings.
Others 549 4.2 439 3.3 North and South America 28.3 32.7 1994 1993 in millions of Swiss francs Gross Retroceded Net Gross Retroceded Net
SubAccident, Other total in millions of Swiss francs Property Liability Motor health lines Non-Life Life Total
Key figures* Claims ratio 69 105 85 95 75 81 Expense ratio 32 24 24 27 30 28 Combined ratio 101 129 109 122 105 109 Operating ratio 94 104 96 101 95 97 * Refer to glossary for definition 47 Swiss Re Group
Investments Land and buildings Investments in unconsolidated subsidiaries and affiliated companies Loans to unconsolidated subsidiaries and affiliated companies Shares Fixed income securities Loans Mortgages Time deposits Other investments Deposits with ceding companies
Investments for unit-linked life reinsurance policies where policyholders bear the investment risk 271 49 Swiss Re Group
Technical provisions by currency, net 3748 4353 1885 2375 10102 6146 28609 50 Swiss Re Group
Source of capital funds From paid-in capital by shareholders From allocation of profit Capital funds on 31 December
II Cash flow from Investment activities Purchase of holdings in unconsolidated subsidiaries and affiliated companies - 1 259 Sale of holdings in unconsolidated subsidiaries and affiliated companies 1 129 Net increase in other investments - 3 558 Change in fixed assets 8 Cash flow from investment activities - 3 680
During the 1994 financial year, the Swiss Re Group recorded CHF 1.760 billion of ex­ traordinary additions to the provisions for claims outstanding due to claims incurred in previous years, mainly for liability risks.
These items refer mainly to charges and income of the service companies active in the fields of loss adjustment and risk management.They also include currency differences and other charges and income not attributable to the technical account or to investments.
Additional book profits of about CHF 540 million will be received in 1995 from the sale of the insurance companies.
Income from unconsolidated subsidiaries and affiliated companies in millions of Swiss francs
Income from loans to unconsolidated subsidiaries Income from cash deposits with unconsolidated subsidiaries 8^ 15"
Fixed income securities Loans to unconsolidated subsidiaries and affiliated companies Cash deposits (assets) Debtors from insurance operations Other debtors Cash deposits (liabilities) Liabilities from insurance operations Other liabilities
The amount in the respective balance sheet positions related to affiliated companies is as follows: Shares in millions of Swiss francs
Provisions for claims outstanding The provisions for claims outstanding include provisions of CHF 1.388 billion (1993: CHF324 million) prescribed by local regulatory authorities forfuture claim fluctuations and for large and catastrophic losses.The change in provisions for claims outstanding includes an increase in these provisions of CHF 68 million (1993: CHF 148 million). CHF 1.000 billion were added from extraordinary profit.
The Swiss Re Group has obligations for claims payments and claims settlement charges for reported claims as well as for claims incurred but not yet reported, mainly in the fields of asbestos and environmental liability. The policies on which these claims payments arise generally date back 10 years or more. The following table shows the payments made by the Swiss Re Group and the estimated, nondiscounted obligations as a result of these claims: Paid insurance obligations Cumulative through December 1994 Payments in 1994 Payments in 1993 Payments in 1992
Other provisions contain a provision of CHF 400 million relating to a guarantee in the books of Swiss Re, Zurich, charged to the extraordinary profit.This provision was made in connection with the acquisition of a minority holding in Credit Suisse Financial Products, London. The provision was established at the direction of the Swiss insurance supervisory authority.
There are liabilities covered by valuable security in the sum of CHF 35 million (1993: CHF 11 million).
In our opinion the consolidated financial statements give a true and fair view of the financial position of the Swiss Reinsurance Group as of 31 December 1994, and of the results of its operations and its cash flows for the year then ended in accordance with the 4th and 7th Directive and the Insurance Directive of the European Union.
Based on our audit we conclude that the consolidated financial statements are in accordance with the provisions of the law and with the consolidation and valuation principles described in the notes to the consolidated financial state­ ments. The annual report on the business year is consistent with the consolidated financial statements.
Based on the published figures before the change in accounting principles and including the insurance companies sold as of 31.12.1994 and 1.1.1995.
Earned premiums Claims incurred v^iaii I la 11 II./U 11 cu
Shareholders' capital and reserves stated in the balance sheet Shareholders' capital and reserves at market value, after taxes ln%
Key figures* Combined ratio Non-Life Operating ratio Non-Life Investment yield Technical provision ratio Non-Life Return on Equity • Refer to glossary for definition 59 Swiss Re Group
Planning and Controlling Christoph Sievers Marie-Louise Gänger, Max Klingler, Hans Werner Kreis
Germany, Eastern Europe Willy Hersberger Jean-Pierre Kolb, Martin Oesterreicher, Rudolf Siegrist
Engineering Richard Glückler Rene Bolliger, Max Bommeli, Hans Gfeller, Hans Mahria, Kurt Staub
France, Belgium, Luxembourg Pierre Bieri Jean-Pierre Bugnon, Daniel Corbaz, Gerhard Felder, Peter Gasser, Christian Herzog, Peter Neuwirth
Spain, Portugal, Latin America Gerhard Hölzel Michel Lies, Pietro Marcionelli, Luigi Pozzi, Franco Renggli, Hans Sigrist, Antonio Solari, Jakob Wind
Near and Middle East, Africa, Greece Bernard Gilliand Theodore Dritsas, Urs Rudolf Kaeser
Financiai Reinsurance; USA, UK, Special Risks Balz Heyer Graeme Ayers, Michael Bradley, Ruurd de Fluiter, Richard DQld,Yu Chung Fok, Peter Hagnauer, Rolf Hunzlker, Eduardo Jean-Malret, Jürg Stoil
International Business Hans-Kaspar Zulauf Hannes L. Arrenbrecht, Christian Cottl, Hansjörg Fricker, Hans HeftI, Werner Schiäpfer, Johann Thinnhof, Richard H. Vögeil
Life Herbert Lüthy Lulgl BertolottI, Philip Bland, Reynald Boutin, Yvan Burgener, Jean-Michel Chatagny, Andre Chuffart, Simon Courant, Manfred Fessel, Norbert Hähnel, Ernst Huber, Peter King, Heinz Kramrelter, Bogomll Marn, Hannes Menzi, Waiter A. Müller, Alain Perret, Hanspeter Scheilenberg, Suzanne Stelner, HanspeterTohler, Jean-Pierre Vogei, Bruno Waither, Kurt Wettenschwiler
Human Resources Carol Franklin Engier Jean-Jacques BertschI, Josef Elmlger, Peter Eugster, Erich Giger, Peter G. Meier, Jörg Niederer, Rudolf Oherie
Investments Bruno H. Letsch Caspar Benz, Enrico Caru, Adolf Decurtlns, Marcel Gürher, Ferdinand Marty, Bernard Perrin, Jean-Pierre Preyer, Fredy Riedle, Max RIngil
Member of the Committee of the Executive Board until end of 1995 as ofJanuary 1996 63 Swiss Re, Zurich
Swiss Re, Zurich, performs a dual role within the Swiss Re Group: it is simulta­ neously a reinsurance and a holding company. Although around 40% of the total gross premium income of the Swiss Re Group is attributable to business acquired directly by Swiss Re, Zurich, assessment of our market position must focus primarily on the profitability and financial strength of our consolidated global organisation.
The following commentary on the 1994 financial year of the parent company therefore complements the review of the financial year of the Swiss Re Group and is intentionally kept short.
The accounting principles are new. They follow EU directives on accounting for insurance companies, while still giving priority to the requirements of Swiss Corporation Law. This results in a new and detailed presentation of the balance sheet, the profit and loss account and the notes. The figures for the previous year have been restated accordingly.
The financial year was marked by a less favourable trend on the capital markets than in the previous year. The increased gross income was offset by substantially higher charges. In addition to realised capital losses, these include mainly neces­ sary and larger precautionary valuation adjustments.
Investments stated in the balance sheet rose from the previous year, but the growth was dampened by valuation adjustments and by lower exchange rates for most investment currencies. New investments were placed two thirds in fixed income securities and one third in equities.
Swiss Re received most of the proceeds from the sale of the primary insurance companies only in 1995. This amount is therefore contained under debtors, not under investments.
Shareholders' capital and reserves amounted to CHF 4.102 billion at year-end 1993 (before profit allocation). A total of 576,631 registered shares were sub­ scribed in 1994 through the exercise of shareholder warrants A and B. Swiss Re consequently received a premium of CHF 281 million in 1994 (after deduction of issue costs of CHF 11 million) which was allocated to reserves. Including the dividend to be distributed, shareholders' capital and reserves equalled CHF 4.772 billion at year-end 1994.
In order to improve the financial structure and attract new types of investors, SwissRe Finance (Bermuda) Ltd., a wholly owned subsidiary of Swiss Re, placed a convertible bond issue and issued bull spread warrants on 29 June 1995. The convertible bonds, in the nominal amount of USD 500 million and matur­ ing in five years, can be converted into a total of 485,000 registered shares of Swiss Re. The simultaneously issued bull spread warrants are securities which give the investor the opportunity to benefit from the appreciation potential of Swiss Re registered shares within a range and to limit the risk of loss. These warrants were issued on 500,000 Swiss Re registered shares. They expire after three years. In order to secure conversion and option rights, no new securities were issued.
III Total result 1. Technical result 361 268 2. Non technical result - 17 312 3. Ordinary profit before tax 344 580 4. Tax on ordinary profit - 52 - 92
Ordinary profit aftertax 292 488 5. Extraordinary income 3888 185 6. Extraordinary charges - 3548 - 480 7. Tax on extraordinary profit - 102 42
Profit for the financial year 530 235 67 Swiss Re, Zurich
Liabilities in miilions of Swiss francs 1994 1993 1 Investments 17949 17 000 1. Land and buildings 1 249 1 265 2. Investments in subsidiaries and affiliated companies 1955 2 599 3. Loans to subsidiaries and affiliated companies 1 195 523 4. Shares 1 827 1489 5. Fixed income securities 8 256 7 993 6. Loans 69 85 7. Mortgages 295 300 8. Time deposits 975 472 9. Deposits with ceding companies 2128 2 274
II Debtors 5762 1246 1. Debtors from reinsurance operations 928 1 078 2. Other debtors 4 834 168
III Other assets 158 172 1. Fixed and other assets 12 13 2. Cash at bank and in hand 146 159
IV Accruals 352 382 1. Accrued interest and rent 311 309 2. Other accruals 41 73 1 Shareholders'capital and reserves 4772 4102 1. Share capital 301 301 2. Legal reserve 650 650 3. Reserve for own shares 155 -
III Provisions for other risks and charges 798 407 1. Provisions for taxation 151 35 2. Other provisions 647 372
Total liabilities and shareholders' capital 24221 18800 68 Swiss Re, Zurich
With the exception of property, fixed assets are stated at cost as of the 1994 financial year, less individually scheduled straight-line depreciation over their useful lives. Items of minor value and all purchase costs prior to 1994 are not disclosed.
The technical provisions are valued in accordance with the following principles: Premiums written relating to future periods are stated as provisions for unearned premiums and are calculated individually or by statistical methods.
The technical provisions ior life reinsurance business are determined on the basis of actuarially calculated present values. They also Include the provisions for unearned premiums of life reinsurance and the deduction of deferred charges.
All Items In the balance sheet and the profit and loss account denominated In foreign currencies were uniformly translated Into Swiss francs at the currency exchange rates applicable on the balance sheet date. Differences arising from the recalculation of the opening balance sheet are booked via a corresponding provision and have no Impact on the profit and loss account.
The currency exchange rates applicable for key currencies are shown on page 45.
1994 1993 in millions of Swiss francs Gross Retroceded Net Gross Retroceded Net
Technical provisions Provisions for unearned premiums 1352 - 41 1 311 1 480 - 53 1 427 Provisions for life reinsurance 1447 - 48 1 399 1 513 - 59 1 454 Provisions for claims outstanding 11 813 - 207 11 606 10 059 - 232 9 827 Provisions for profit commissions 24 - 3 21 42 - 2 40 Provision for catastrophe claims 1 000 - 1 000 - - -
Change in capital funds Capital funds on 31 December of previous year 4102 3210
Dividend paid for the previous year - 141 - 117 Increase of share capital (nominal) - 24 Share premium 281 566 Extraordinary allocation - 184 Profit for the financial year 530 235
Contingent liabilities Contingent liabilities amounted on 31 December 1994 to CHF 617 million (1993: CHF 247 million). In addition there were four unlimited guarantees. No pay­ ments are expected under these guarantees.
Fire insurance value of tangible assets The insurance value of tangible assets, comprising the real estate portfolio and other tangible assets, amounted on 31 December 1994 to CHF 1.730 billion (1993: CHF 1.723 billion).
The item other debtors, amounting to CHF 4.834 billion, consists mainly of claims arising from the sale of the insurance companies since the majority of the sale proceeds was only received in 1995.
Personnel Information Swiss Re, Zurich, employed a staff of 1666 on the balance sheet date (1993:1558). Personnel expenses for the 1994 financial year amounted to CHF 241 million (1993: CHF 219 million).
Extraordinary profit An extraordinary book profit of CHF 3.738 billion resulted In the financial year from the sale of Swiss Re's Insurance companies. Moreover, CHF 150 million was received through a court settlement with the Stadtsparkasse Düsseldorf In connection with earlier financial guaranty transactions of Switzerland Insurance. Against this, technical provisions for liability risks were Increased by CHF 1.760 billion and a provision for catastrophe claims was established In the amount of CHF 1.000 billion. In addition, provisions for other risks and charges and precautionary write-downs on Investments totalled CHF 788 million. The overall result was an extraordinary profit of CHF 340 million before tax and CHF 238 million after tax.
Share structure For the 1994 financial year - eligible for dividend - not eligible for dividend
Reduction of capital The Board of Directors will further propose to the General Meeting a reduction of the par value of Swiss Re shares from CHF 20.- to CHF 10.- per share. This repayment of capital to the shareholders is planned to take place on 1 March 1996. As of this date, Swiss Re's registered shares will have a parvalue of CHF10.-.
Union Reinsurance Company Genferstrasse 27 Postfach 678 8027 Zu rich with branch offices in Singapore and Sydney
SR International Business Insurance Company Limited 71-77 Leadenhall Street London EC3A2PQ
Swiss Reinsurance Company UK Limited 71-77 Leadenhall Street London EC3A2PQ with a branch office in Hong Kong
THG Holding Limited^ 42Trinity Square London EC3N 4TH with 57 subsidiary and affiliated companies in 25 countries 83 Swiss Re Group
International Risk Management (Dublin) Ltd. Carlsfort Centre Lower Leeson Street Dublin 2
Suiza de Reaseguros (Iberica) Agenda de Reaseguros S.A. Paseo de la Castellana 135 28046 Madrid 84 Swiss Re Group
Barbados Atlantic International Reinsurance • 100 f USD 0.5 5.6 Company Limited ICS Building, Upper Roebuck Street Bridgetown
Bermuda Englewood Reinsurance • 100 f USD 3.4 23.1 Company Limited 69 Pitts Bay Road Hamilton HMCX
SwissRe Investments O 100 _ _ _ _ (Bermuda) Limited' 41 Cedar Avenue Hamilton HM 12 85 Swfiss Re Group
Swiss Reinsurance Company Canada 99 Yorkville Avenue Toronto, Ontario M5R3K5 with branch offices in Montreal and Vancouver
USA American Risk Group Inc. 6480 Rockside Woods Blvd. S. Cleveland, OH 44131-2206 with 12 branch offices in different States
North American Capacity Insurance Company 650 Elm Street Manchester, NH 03101-2524
Swiss-Am Reassurance Company • 100 - USD 6.3 6.3 237 Park Avenue New York, NY 10017
SwissRe Finance (US) Inc. O 100 f USD -27.8 40.3 237 Park Avenue New York, NY 10017
Swiss Re Financial Products^ • 100 _ _ _ _ Tower49,12th East 49th Street New York, NY 10017
Swiss Re Life Company America • 100 f USD -20.0 118.2 237 Park Avenue New York, NY 10017
Columbia Compani'a Suiza de Reaseguros Oficina de Aseson'a Tecnica Calle72,No.12-65,Of. 502 Bogota
Mexico OFATEC Mexico SA de CV EdificloTorre Diamante, Av. Insurgentes Sur No.1685 Piso 13-B Colonia Guadalupe inn Apartado Postal 19-334 03901 Mexico, D.F.
Japan Swiss Reinsurance Company Representative OfficeTokyo 5-1 Otemachi 1-chome Chiyoda-ku,Tokyo 100
Korea Swiss Reinsurance Company Korea Liaison office' 7th Floor Kwanghwamun-Building 211, Sejang-ro, Chongro-ku Seoul
Philippines SwissRe Advisers Ltd. 11th Floor, PCI BankTower II Makati Avenue cor. H.V. de la Costa Street Makati, Metro Manila 88 Swiss Re Group
Singapore SwissRe Advisers (Singapore) Pte. Ltd. 1 Raffles Place No. 60-00 UOB Centre Singapore 0104
Taiwan Swiss Reinsurance Company Tapel Liaison office' Room CIO F-2, No. 156 MIn Sheng East Road Sec3,Talpel R.O.C.
International Risk Management (Australia) Pty. Ltd. 255 George Street Sydney, N.S.W. 2000
Swiss Re Australia Limited 31 Queen Street Melbourne, Vic. 3000 with branch offices In Sydney, and In Auckland and Wellington, New Zealand
Little noticed by the general public, but common knowledge in the spe­ cialist arena, each year we publish our own considerations on global risks.
Recent catastrophes due to extreme weather conditions show how unpre­ dictable climate can be. It is a risk fac­ tor with far-reaching consequences. AR 2, languages E, G, F, S
Legal principles and practice concern­ ing compensation for bodily injury and death in road traffic accidents. With examples of calculations from 11 European countries. AR 13, languages E, G, F, I
Corrosion and frost are the most trivial of all damages: coverage and weighting of pipe water damage. Includes a checklist. AR 15, languages E, G, F, S
Answers to frequently asked ques­ tions about one of the earliest forms of insurance: marine insurance. The most important standard clauses are listed in the appendix. AR 17, language E
Risk coverages, methods of Insuring, underwriting, marketing and financial controlling: the basic principles of group Insurance. AR 19, language E
Concerns spinal cord Injury, the social consequences, liability, prevention and above all rehabilitating patients into working life. AR 21, languages E, G
Swiss Re's new Corporate Identity was presented to Its staff with this brochure. AR 24, languages E, G
Enables the proper recognition of income and expenses attributable to the financial year.
Passing on of the risks of insurance companies to reinsurance companies.
Payment incurred under the terms of a (re)insurance contract for the risk event.
Claims incurred: AW claims payments plus the adjustment in the outstanding claims provision of a business year.
Sum of claims paid, change in the provision for claims outstanding and change in other technical provisions, in relation to net earned premiums.This ratio enables the assessment of business performance in non-life reinsurance.
Sum of the claims ratio and the expense ratio.This ratio enables the assessment of business performance in non-life reinsurance before inclusion of allocated invest­ ment return.
Commission Remuneration paid by the insurer to his agents, brokers or intermediaries or by the reinsurer to the insurer for their costs in connection with the acquisition and administration of insurance business.
Life or Endowment insurance: life insurance in which the benefits take the form of a contractually determined amount payable upon death or on survival to a specified age.
Business Interruption/Loss of Profits/Business Income Protection insurance: Insurance against financial effects of a loss on a company's income.The insurance covers over­ head costs and lost profit.
Products Liability insurance: Insurance of the liability of the manufacturer or supplier of goods for damage caused by their products.
Professional and institutional liability: \nsurance of liabilities arising from the per­ formance of professional or official company duties.
Facultative reinsurance: Reinsurance of the insurer's risks on an individual basis.
Quota-share reinsurance: Form of proportional reinsurance, in which risks are reinsured over a specified amount.
Treaty re/nsurance; Participation of the reinsurer in certain sections of the insurer's business as agreed by treaty.
Ordinary profit in relation to the average capital funds stated in the balance sheet.
Risk spread: Stabilisation of the claims experience by as large a number of similar risks as possible.
Important Dates 24 November 1995 131st Ordinary General Meeting 1 December 1995 Payment of dividend 1 March 1996 Capital repayment