The proposed multi-stage increase of share capital will subject to approval by our shareholders - further enhance Swiss Re's financial strength. This should create excellent conditions in this sector for us to meet the challenges of the 1990s.
The development of interest rates in the major industrial nations, with the exception of Japan, took a similar course in 1988, although at varying times. After the stock market crash, a liberal monetary policy at the start of the year un­ der report caused interest rates to go down worldwide. The emphasis shifted in the course of the year, as the un­ abated economic boom and the rising dollar threatened to disrupt the price stability. In a bid to check the price rise in good time, interest rates were increased in the United States, Great Britain and Australia, and subsequently In other industrial nations. This intervention on the part of central banks triggered a rise In the money market rates, and then in long-term capital market rates. In the second half of the year, yield curves progressively evened out, with short-term rates at times even surpassing long-term ones. It seemed apt to respond to fears that interest rates might rise even more by undertaking new investments primarily in the short and middle-term range. - The total return achieved - comprising investment income and capital re­ sult on fixed income investments - turned out to be satis­ factory in view of the upward interest rate trend.
Holdings and loans comprise holdings of Sw. frs. 71 million (previous year, Sw. frs. 47 million) and loans to Group com­ panies of Sw. frs. 1,818 million (previous year, Sw. frs. 840 million). Overall these investments rose by Sw.frs. 1,002 million to Sw. frs. 1,889 million, largely because of an addi­ tional loan granted to SwissRe Holding Limited, which used these funds to extend its holdings.
All items of the balance sheet and profit and loss account in foreign currencies were uniformly converted into Swiss francs using the average foreign currency rates as at 31 December 1988. Differences arising from the conver­ sion of balance-sheet Items in foreign currencies are booked via a corresponding reserve; this serves to offset valuation differences of foreign currency items based on exchange rate fluctuations. The currencies which are most important for business activity abroad developed over the previous year as follows: Average Foreign Currency Rates on Balance-sheet Date*
Claims comprise benefits for term and endowment insur­ ance, paid annuities and the adjustment in the outstanding claims reserve. The total figure for own account rose in the year under report by Sw.frs. 61.5 million to Sw.frs. 301.5 million.
The Lloyd Adriatico S.p.A., Trieste, increased its gross pre­ miums by 9.2% to Lit. 818,300 million (previous year, Lit. 749,300 million). Of this amount 10.8% was attributable to Life insurance, which reported a 29.8% increase in gross premiums as against the previous year. Thanks to the overall improvement in the underwriting result - despite high financing costs in Life insurance business - and a similar rise in the investment income, the profit for the year was increased by 21 % to Lit. 36,300 million (previous year, Lit. 30,000 million), from which dividends of Lit. 11,400 mil­ lion on ordinary shares and Lit. 4,100 million on savings (risparmio) shares were paid.
The net profit in 1988 amounted to Sw.frs. 14.8 million (previous year, Sw.frs. 15.2 million). Dividend payments from company holdings continued to rise while the bal­ ance of realized capital gains over write-offs and value ad­ justments was higher than in the previous year. As a result of the increased loan, the interest payment to Swiss Re also rose. From the almost unchanged result for the year, a dividend of Sw. frs. 9.0 million was paid, as in the previous year.
On the basis of our examination, we confirm that the sub­ mitted Group accounts are presented in accordance with the principles of consolidation and valuation set out in the notes on Group accounts.
Fixed-interest investments are in principle entered at ac­ quisition cost or, if they are quoted and the stock exchange price is lower on the balance-sheet date, at the lower val­ ue. The lower valuation is retained until disposal of the cor­ responding securities. Special treatment is given only to registered debentures owned by Group companies in Germany which, in accordance with German practice, are shown at nominal value and incorporated in the Group ac­ counts unchanged.
The claims incurred comprise payments for Life and An­ nuity insurance as well as the adjustment in the outstand­ ing claims reserve. The total outgo for own account rose in the year under report by Sw. frs. 158 million to Sw. frs. 865 million. Of this amount, Sw. frs. 644 million concerned rein­ surance companies and Sw.frs. 221 million insurance companies.
North American International Reinsurance Company Umited US$ 100 5,368 6,689 1,282
Cession: Insurance that is reinsured; passing on of the ̂ insurer's risks to the ^ reinsurer against payment of a ^ premium.
- Gross amount: Life insurance in force of the -»insurer before deduction of the ̂ cessions or Life business of the -» reinsurer before deduction of ^ retrocessions.
- Facultative reinsurance: Reinsurance of the ̂ Insur­ er's ^ risks on an individual basis.
- Motor insurance: Insurance against accident and lia­ bility, as well as against accidental collision damage, in connection with motor vehicles.
- Occupational incapacity insurance: Insurance against the incapacity to exercise a profession as a re­ sult of sickness or other infirmity.
- Annuity insurance: Life insurance in which the benefits consist of a regular income payment for a specified peri­ od of time (cf. Death and Maturity Benefits).