In the past months we have implemented a number of measures in order to improve our favourable current position in the globally growing reinsurance market. These steps specifically include addi­ tional build-up of our presence in growth markets, extension of our range of products and services, especially in the area of financial problem-solving, and expansion of life and health reinsurance, where we see new opportunities and have strengthened our position through acquisition of the Netherlands-based Alhermij Croup.
The Swiss Re Group extensively redefined its strategy in the 1994 financial year. We have already provided you with a detailed explanation of the reasons for our decision to focus on the reinsurance business and divest our majority holdings in the insurance sector. We see attractive opportunities in the globally growing reinsurance market, and as one of the few large and globally active players in this market, the Swiss Re Group is in a very promising position.
The underwriting loss before allocated investment return fell by CHF 281 million to CHF 1.013 billion in 1994.The reasons for this are an additional qualitative improvement in our reinsurance portfolio and increase in original premiums in individual lines and markets. Burdens from large claims were at about the same level as in the previous year; the largest claims were caused by the Northridge earthquake in the USA, which lowered our result by CHF 125 million, and by isolated events in the aviation and technical insurance lines.
We estimate the annual real growth of the reinsurance market to be around 4%. This reflects the growth of the insurance business and a strong increase in large risk exposures which increases the demand for reinsurance capacity. Moreover, the establishment of new risk-bearers - especially niche providers, new life insur­ ance companies and the formation of captives by large companies in developed countries, but also the foundation of companies in developing countries - leads to new need for reinsurance protection and services. Finally, additional market opportunities arise through new products, eg in financial reinsurance or in the field of combined financial and reinsurance solutions. The increasingly compe­ titive insurance business in many markets places growing demands on reinsurers for the structuring of solutions tailored to the specific situation of our clients.
— The ability to optimally diversify risks worldwide. A key service of tbe reinsurer is reduction of the performance volatility of the insurance portfolio through its diversification. Due to Swiss Re's large, global portfolio, we are in a position to offer our clients above-average benefits.
4 October In the context of the mutual development of derivative Instruments for reinsurance, Swiss Re and CS Flolding report on the joint Insurance Investment fund Securitas Capital Partners Programme. Swiss Re and CS Flolding have committed USD 500 mil­ lion to the fund.The foundation of Swiss Re Financial Products, headquartered In New York, was already announced In June, and Reinsurance Finance Consultants,Zur\ch, was established In August.
Gross premiums North and Latin America in millions of Swiss francs
Credit and Surety In credit and surety reinsurance, we posted a modest rise in premium income and a favourable total underwriting result. We attribute this to the economic recovery in several of our main markets and our efforts improve the portfolio. In addition, we were able to reduce massive burdens from claims from previous years. Canada and Germany remain problem markets and will likely still post negative results in 1995. In the USA, profit expectations are falling in the construction surety business due to margin pressure. With a new strategy and corresponding reorganisation, we have laid the foundation for the expansion of Swiss Re's leading position in the worldwide credit and surety business.
Inflation rates in the OECD nations remained moderate, but accelerating economic growth triggered new inflation fears. This, together with the change in course and the first discount rate hike by the US Federal Reserve, set off a global rise in interest rates that was exacerbated by additional interest rate moves aimed at stability. The major bond markets responded with dramatic price falls which were far in advance of the fundamental economic trend.
The breakdown of investments according to investment categories in compari­ son with the previous year reveals changes in line with our investment strategy. Fixed income investments continue to account for the vast majority. Within this category, the focus is on listed securities with first-class quality; also included are loans, mortgages, time deposits and deposits with ceding companies. The share portfolio shows an increase on the previous year as a result of new investments clearly in excess of the currency- and price-related setbacks.
- Investment charges also declined sharply. Relatively unchanged management charges compared with the previous year contrast with a massive drop in valuation adjustments. The main reason for this is the valuation adjustment charge of CHF 480 million in the previous year related to the primary insurer SCHWEIZ Seguros, Barcelona. The removal of this special factor caused marked improvement in the item valuation adjustments. In contrast, realised losses on investments rose in accordance with market conditions.
Accordingly, Swiss Re's personnel policy serves the company policy. Its ob­ jective is to provide the staff-related prerequisites required for the attainment of the company's goals. This objective leads to the following work priorities for human resources: — Assurance of outstanding basic professional training and permanent ongoing education of all employees. We are convinced that successful entrepreneurial action over the long term requires employees at all levels today and tomorrow who are equally capable of teaching and learning. In addition, they must be able to swiftly translate what they have learned into decisions and actions; — Creation and promotion of mobility within the separate companies as well as the Group; 32 Swiss Re Group
The new compensation system should foster thinking in terms of the Group as a whole and bolster management's sense of "co-ownership". The variable component of compensation will be largely or wholly in the form of Swiss Re shares.
Technical provisions Premiums written relating to future periods are accrued as provisions for unearned premiums and are calculated individually or by statistical methods. Provisions for unearned premiums are shown after deduction of deferred acquisition costs.The amount deducted is disclosed in the notes to the financial statements.
Effects of exchange rate fluctuations on opening balance sheet figures Dividend by the parent company for the previous year Additional paid-in capital by shareholders Profit for the financial year Change in revaluation reserve Goodwill offset against retained earnings
Effect of currency translation Change in technical provisions in accordance with the ordinary profit and loss account Increase in provisions for claims outstanding included in extraordinary charges Technical provisions, including technical provisions for unit-linked life reinsurance policies where policyholders bear the investment risk, on 31 December 1994 in CHF millions
Marine Erich Steider Marc A. Bloesch, Walter M. Meliert, Fritz Stabinger
Information Services Gottlieb Schmidii Arthur Ammann, Markus Bienz, Josef Brun, Hans­ walter Buff, Erwin Franclick, Fridolin Hauser, Thomas Jäggl, Christoph Locher, BeatW, Niethammer
The 1994 financial year comprises the accounting period from 1 January to 31 December 1994. However, due to local convention, reinsurance business from Japan included in the accounts is forthe period from 1 April 1994 to 31 March 1995.
As statutory auditors of your company, we have audited the books of account and the financial statements - consisting of the balance sheet, the profit and loss account and the notes to the financial statements - presented by the Board of Directors for the year ended 31 December 1994 in accordance with the provisions of the Swiss Code of Obligations. Our audit was conducted in accordance with auditing standards promulgated by the profession in Switzer­ land. We confirm that we comply with the legal requirements concerning professional qualification and independence.
Switzerland Audatex Holding AG^ Seestrasse 315 8038 Zurich with 15 subsidiaries and affiliated companies in 13 countries
International Risk • 70 f USD 1.9 11.1 Management Group Limited 69 Pitts Bay Road Hamilton HM CX with 8 subsidiaries worldwide 41 Cedar Avenue Hamilton HM 12
SwissRe Advisers, Inc. • 100 _ _ _ _ 200 Park Avenue New York, NY 10166
In the United Kingdom, an insurance market with long-standing tradition, the "Financial Times", with a circula­ tion of 290 000, is the leading eco­ nomic and financial newspaper. Its Influence extends far beyond this key market for international risks-to Europe, America and Asia.
This is no pardonable crime as is clear from the very serious conse­ quences: insurance fraud and how it can be combatted. AR 10, languages E, G, F, S
How to deal with emergencies caused by accidents or breakdowns: how intervention can break the chain of events before they reach catastrophic dimension. AR 14, languages E, G, F, I
The recipe for successful Insurance of machines and technical Installations. How risks can be assessed and man­ aged. AR 18, languages E, F, S
Mortgage Guaranty Insurance: Insurance protection of the mortgagee against loss of capital and interest.
Passing on of risks by the reinsurer to other reinsurance companies.