Results: i n — Non-Life reinsurance 32 - 3 — Life reassurance 58 49
Hans Brodbeck Andreas Brügger* Edouard Burnens Paul E. Christen Fritz Ehrsam Joharm J. Hagedorn
Assistant Managers Alfred Bai Emil Baumgarmer Cimnar Benktander Fritz Bolliger Edmond Capt* Richard R. Doerr Rolf Eckert
Arnold Saxer* Otmar Schmidlin Willi Schürpf * Max Tobler Paul Würsch Hans Wyler*
Reinsurance General Remarks In non-Life reinsurance the improvement of the results, compared with the previous year, amounted to about Sw. frs. 20 million and in Life reassurance to about Sw. frs. 3 million. The first-mentioned result was realized in the face of strong adverse trends while Life reassurance was favourably influenced by low mortality.
An analysis of the adverse trends in non-Life reinsurance shows that — apart from the absence of catastrophic claims — the results varied by country, branch of insurance and type of reinsurance (proportional or non-proportional covers). A comparison of the results of the year under review with those of the previous year reveals considerable shifts in the figures.
Repeated mention has been made in the past of the effects of inflation-linked price increases on outstanding claims. Efforts to speed up claims settlement can often only be partially effective owing to factors lying outside the in­ surers' sphere of influence: time-consuming experts' re­ ports, protracted recuperative treatment and rehabilitation therapy in case of severe bodily injuries, and complicated legal procedures. Should it prove impossible to arrest the inflationary spiral, periodic premium increases in non-Life business will become inevitable. Unfortunately, public debate on the topic often reveals a failure to realize that insurance does not of itself cause the general rise in pric­ es, but is forced to follow it when computing premiums.
The rising crime rates affect many branches of the busi­ ness, but especially Burglary insurance. Claims frequency and severity have risen to such an extent in certain mar­ kets that premium increases alone are insufficient to maintain the balance between premium and claim pay­ ments. New methods will have to be found to bring the branch out of its present deficit phase.
As in the previous year, the gross premiums were affected by the parity changes in respect of various currencies. Nevertheless they still increased in the year under review by Sw. frs. 194 million to Sw. frs. 2,345 million, i. e. by 9.0 % (previous year, 3.7 %). All branches of insurance contributed to this growth. In spite of the monetary set­ backs, there was an increase in the Life reassurance busi­ ness in force.
The premium income for own account rose by Sw. frs. 138 million to Sw. frs. 1,871 million, i. e. by 8.0 % (previous year, 2.2 %).
The gross premiums of the Swiss Re Group increased from Sw. frs. 3,011 million to Sw. frs. 3,176 million, i. e. by 5.5 % (previous year, 8.4 %). The net premiums of the Group moved up from Sw. frs. 2,640 million to Sw. frs. 2,762 million, i. e. by 4.6 % (previous year, 7.0 %).
Non-Life Reinsurance As a whole. Fire reinsurance closed with a small profit. The experience in European Fire business was bad. How­ ever, the overall result did remain positive thanks to the overseas business acquired and handled by Swiss Re, Zurich itself and to the highly gratifying retrocession from the North American and British subsidiary companies. The trend towards heavy losses has continued. Too little con­ cern is being shown by many industrial enterprises for the importance of technically advanced fire protection — con­ structional spacing of insured risks, automatic extinguish­ ing or alarm systems, etc. At all events, the application of such protection techniques does not seem to have kept pace with the technical and esthetic refinement of office buildings, factories and high-bay warehouses of all kinds. Technological progress is adding new risk complexes to the known ones. The more rational and more automated the conception for any plant, the more susceptible become its technically sophisticated installations to smoke, fire or water damage. Computers and all electronic control and regulating systems have proved exceptionally sus­ ceptible to damage. In many cases the claims for business interruption are higher than the actual fire damage.
In the European industrial countries, the Burglary branch produced an unprecedented loss. The overseas business of Swiss Re, Zurich and the results of retrocessions from the overseas subsidiary companies sufficed to offset only part of the loss. The aggregate result of this branch reflects the rising crime rates on the one hand and, on the other, the carelessness of the owners of valuables such as an­ tiques, silver, paintings, furs, etc. In cooperation with those involved in this branch of insurance, every effort is being made to improve the situation. However, no favourable prognosis can be made for the development of the Bur­ glary business during the current year.
In Marine reinsurance an above-average expansion of busi­ ness was achieved. The improvement of the result fore­ cast in last year's Annual Report was partially realized and led to a positive result for the branch. The difficulties facing Marine insurers — rising costs of ship repairs and thefts of cargo — still persist and it is to be feared that, given the extreme pressure of competition, it will be difficult to maintain a premium level commensurate with claims.
Life Reassurance The Life branch had a successful year. Last year's net Life business in force of Sw. frs. 18,000 million was, in fact, reduced by the parity changes during the year under re­ port. As a result of above-average production, however, the net business rose to Sw. frs. 20,600 million by the end of the reporting year.
Lor the Swiss Re Group, the net business in force increased from Sw. frs. 39,300 million to Sw. frs. 42,600 million — this rise being somewhat smaller than in the previous year owing to the slightly lower exchange rates of the dollar and pound sterling.
Low mortality in almost all geographical regions raised the profit from Sw. frs. 18.3 million to Sw. frs. 21.1 million.
As in the previous year, the level of cash deposits with ceding companies, after deduction of the deposit require­ ments with respect to retrocessionaires, remained almost constant. On the other hand, the investments rose steeply, in fact by Sw. frs. 266 million (previous year, Sw. frs. 168 million). There was no change of emphasis in new in­ vestments, 64 % of them (previous year, 60 %) having been assigned to shares and real estate. Once again, a considerable number of convertible bonds were exchanged for shares, or sold.
As a result of this emphasis on equity investments, there has been a further shift in the structure of total actual investments in favour of shares and real estate. On the balance sheet valuation date, the distribution, in percent­ age figures, of the different categories of investments was as follows: At Balance Sheet Values: Fixed-interest investments (including convertibles) 67.6 % (71.4 %)
At Market Values: Fixed-interest investments (including convertibles) 63.0 % (66.6 %)
Shares (excluding Permanent Holdings) 29.5 % (25.9 %) Real Estate (at balance sheet values) 7.5 % (1.5%) Shares and Real Estate 37.0 % (33.4 %)
The hidden surplus on securities increased by Sw. frs. 88 million (previous year, Sw. frs. 162 million) and stood, on the balance sheet valuation date, at Sw. frs. 431 mil­ lion or 19.2 % (previous year, 17.1 %) of the investments in securities.
Of the assets shown below, Sw. frs. 48 million (previous year, 46 million) are held by trustees appointed by us in overseas territories.
Bonds and Preference Shares of Banks, Public Utilities, Industrial and other Companies 522 647 600 664 511
Net Cash Deposits with Insurance Companies 1,210 1,204 1,194 1,213 1,144
Management Expenses In the year under review, the management expenses rose by Sw. frs. 8.1 million, or nearly 20 %, to Sw. frs. 50.0 mil­ lion. The previous year's increase amounted to 11 % but was, in fact, considerably lower than the average of the preceding years. Personnel costs accounted for more than two thirds of the year's management expenses and were swelled by the further 7 % expansion in the number of personnel, by cost-of-living adjustments, by basic salary increases and correspondingly higher allocations to the Employees Welfare Foundation.
Taxes The tax burden increased during the year under report by Sw. frs. 13.1 million (previous year, Sw. frs. 4.7 million) to Sw. frs. 29.1 million. The main reason for this sharp rise was that, having extinguished the debit balance brought forward from previous years, the United States Branch again had to pay American corporate income tax. This amounted to Sw. frs. 11 million while the remaining additional expenditure of Sw. frs. 2.1 million resulted from higher direct taxes in Canada, Switzerland and Australia.
The Board of Directors has made the following appoint­ ments, effective as of 1st January, 1973; as Managers, Messrs. Erik Bosshardt, Paul-Francis Niquille, Ralph Ochsenbein and Hermann Odermatt; as Deputy Managers, Messrs. Erwin E. Arpagaus, Andreas Briigger, Ernst A. Kubli, Jean-Claude Mayor, Jan C. Koos, H. Conrad Rutishauser and Martin Trippel (in advisory capacity); as As­ sistant Managers, Messrs. Edmond Capt, Ernst Jutzi, Wer­ ner Kiinzle, Balthasar Mätzener, Roger P. Merkelbach, Ar­ nold Saxer, Willi SchUrpf and Hans Wyler.
Mr. Jacques-Etienne Rossier, Manager, and Mr. Victor Cachin, Deputy Manager, retired on 31st December, 1971. We should like to express our sincere gratitude to these gentlemen for their many years of valuable service to our Company.
Dividend 36,000,000 34,000,000 Directors' Remuneration 450,000 425,000 Allocation to Special Reserve Fund 8,000,000 7,000,000 Allocation to Reserve Fund for Catastrophe Losses 8,000,000 4,000,000 Donations 450,000 425,000 i Balance carried forward 1,372,494 887,183 J
embracing the reinsurance business for the calendar year 1971 and the other income and expenditure for the period from 1st July, 1971 to 30th June, 1972
Outstanding Claims for Own Account All classes excl. Life (inch Valuation of Current Annuity Indemnities)
Acting upon our terms of reference, we have checked the Profit and Loss Account for the business year 1971/72 and the Balance Sheet as at 30th Jime, 1972, 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.
The only change in respect of the capital structure of the Group companies took place in the share capital of the Canadian Reinsurance Company, which was adapted by the issue of preferred stock in the amount of C S 800,000 to the premium volume which had risen rapidly over the two preceding years.
The tables on pages 20—22 give a general picture of the development of the essential income components and of the consolidated net profit of the Swiss Re Croup in the narrower sense, i. e. of the companies which are fully owned. The business year of the foreign subsidiary com­ panies and the SwissRe Holding corresponds to the calen­ dar year, while the Swiss Re and the European General close their books as at the end of June. The conversion rates used were those applied by the Swiss Re, Zurich, in balancing its accounts, i. e. the average rates as at 30th June of the year following the foreign subsidiary com­ panies' closing of their books.
Accident 298 297 269 192 167 Sickness 76 124 167 135 121 Third Party Liability 228 203 181 150 141
Interest from Parent Company _ 0.7 Dividends and Interest from Holdings 13.7 11.1
Balance Sheet (after approval of the proposal of the Board of Directors) in millions of francs 31/12/71 31/12/70
Underwriting Result * 2,506,000 889,000 Investment Income 6,877,000 6,149,000 Management Expenses - 2,024,000 - 1,622,000 Net Realized Capital Gains/Losses - 252,000 - 106,000 Taxes - 2,731,000 - 1,286,000 adjusted for changes in commission equity Various factors, especially the absence of catastrophe losses, contributed to an improvement of the tmdervyriting result. The considerable loss in the Casualty lines was more than compensated by the good result in the Property branches. The continued rapid expansion of personnel caused a further substantial increase in management ex­ penses. Taxes increased in line with the improved profit position. - In 1971, a total of US $ 500,000 in dividends was paid (previous year, US $ 375,000).
Underwriting Result 80,000 595,000 Income from Free Investments 257,000 228,000 Management Expenses - 547,000 - 519,000 Net Realized Capital Gains/Losses - 24,000 - 36,000 Taxes 98,000 - 185,000
The gross Life business in force increased by C $ 132 mil­ lion to C $ 1,160 million. Numerous surrenders, which followed amendment of the Canadian tax law and caused a backflow of new business costs to the retrocessionaires, led to a sharp reduction of the net underwriting profit. For the first time in years, therefore, a loss has been shown. — In 1971, an unchanged dividend of C $ 50,000 was paid; in 1972, no dividend was paid.
Underwriting Result Investment Income Management Expenses Net Realized Capital Gains/Losses Taxes
The gross premium income and the gross Life business in force increased during the year imder review to the same extent as hitherto. Although the results in the Fire branch were still slightly negative, non-Life reinsurance produced a small surplus for the first time in years. In spite of higher mortality, the development of Life reassurance was again satisfactory. — In 1971, a further instalment of A $ 150,000 (previous year A $ 100,000) of the initial financing funds was repaid to the parent company.
Canadian Reinsurance Company 1953 All classes excl. Life 95 St. Clair Avenue West, Toronto 195, Ontario with an Office in Montreal
Swiss-South African Reinsurance Company Ltd. 1950 All classes Swiss House, 86 Main Street, Johannesburg with Offices in Cape Town and Pretoria
Swiss Reinsurance Company (U. K.) Ltd. 1969 All classes 108 Cannon Street, London EC4N 6HE with an Office in Hong Kong
SwissRe Advisers Ltd. 1956 Rooms 820/23, Union House, Connaught Road/Chater Road, Hong Kong