Total net cash provided/used –794 1 748 Effect of foreign currency translation –451 –92 Change in cash and cash equivalents –1 245 1 656 Cash and cash equivalents as of 1 January 5 018 3 773 Cash and cash equivalents as of 31 December 3 773 5 429
The Group’s investments in fixed income securities are classified as available-for-sale (“AFS”) or trading. Fixed income securities AFS are reported at amortised cost. Trading fixed income securities are carried at fair value with unrealised gains and losses being included in the income statement.
The carrying value of goodwill is reviewed periodically for indicators of impairment in value. Adjustments to reflect impairment in value are recognised in income during the period in which the determination of impairment is made.
+37.5bp – Subordinated Perpetual Loan 1998 DEM 110 6M Libor 2010 88
Change in average number of shares due to: Convertible bond and employee options 9 397 419
Amounts recognised in the balance sheet consist of Prepaid benefit cost 436 516 Accrued benefit liability –270 –283 –491 –519 Net amount recognised 166 233 –491 –519
As part of its normal business operations, the Group enters into a number of lease agreements. Such agreements, which are operating leases, total the following obligations for the next five years and thereafter: As of 31 December 2003 CHF millions
Other operating costs and expenses –268 –220 –56 –44 –111 –699
Expenses Claims and claim adjustment expenses –1 831 –454 –2 285 Acquisition costs –282 –277 –27 –586 Operating costs –157 –68 –461 –240 –926 Total expenses –2 270 –799 –488 –240 –3 797
Barbados Accra Holdings Corporation 137 100 f Atlantic International Reinsurance Company Ltd 5 100 f Bridge Holding Company Ltd 9 100 f European Finance Reinsurance Company Ltd 6 100 f European International Holding Company Ltd 202 100 f European International Reinsurance Company Ltd 197 100 f Gasper Funding Corporation 0 100 f Joneswood Reinsurance Company Ltd 38 100 f Stockwood Reinsurance Company Ltd 1 100 f Underwriters Reinsurance Company (Barbados) Inc 137 100 f
The Financial Services Business Group reorganised the Asset Management function in 2003. The business group established a provision of CHF 29 million in respect of severance, other personnel-related costs and other expenses. In 2003 CHF 6 million of this provision was utilised.
Other assets Other debtors 750 139 Cash and cash equivalents 341 631 Intangible assets 117 102 Tangible assets 843 787 Other assets and accruals 131 206
Retained earnings brought forward 16 7 Profit for the financial year 106 1 190
Source of shareholders’ equity (after allocation of profit) CHF millions 2002 2003
The Annual General Meeting on 31 May 2001 approved the creation of conditional capital as follows: an amount of CHF 900 000 for conversion rights and warrants granted in connection with bonds and similar financial instruments issued by the company or by Group companies; and an amount of CHF 700 000 for employee participation purposes of which, during the year 2003, CHF nil was issued (2002: CHF 36 948).
The 1994–1996 figures represent the previously applied accounting policy and the former Group structure.
What are the insurance industry’s main concerns regarding gene technology? Current legislative trends are largely driven by the “precautionary principle”, which is often misunderstood to mean the total exclusion of risk. As it is patently impossible to achieve this, lawmakers must acknowledge that legal liability necessarily implies some exposure to risk and that this risk must be quantifiable if it is to be insurable. Legislation designed to eliminate the risk of commingling in modern agricultural biotechnology would inevitably cause the market value of tainted conventional crops to be diminished. The insurance industry cannot be expected to provide cover for such unquantifiable financial losses stemming from attempts to cut costs along the agri-food value chain.
8 December First life securitisation Swiss Re successfully sponsored its first insurance-linked security relating to life insurance risk, thereby obtaining USD 400 million of coverage from institutional investors for extreme mortality risk.
Swiss Re delivered a return on investment of 5.1%, exceeding its three year average target. This result was achieved against a background of volatile bond markets and despite continued significant impairments of equities in the first half of 2003. The investment result was supported by capital gains from both fixed income and equity securities.
Swiss Re has also made major efforts to introduce appropriate coverage limitations in many other products, such as natural catastrophe exposures, motor liability and contingent business interruption. All of these matters were discussed widely with clients during the course of 2003 and were generally endorsed by Swiss Re’s business partners.
Despite a strong life result, return on operating revenues for the business group declined slightly to 8.7%, reflecting the impact of the lower health result. The Life & Health Business Group further demonstrated its leading position in life reinsurance with the expansion of its Admin ReSM operations to the UK and the development of life insurance-linked securities.
What is new about this tool? FRAT is new in as much as it was developed primarily for use by our clients. The tool divides a country into risk zones – ie different flood risk categories – which are used to price individual risks in primary insurance or facultative reinsurance.
Swiss Re uses its own Risk Adjusted Capital (RAC) model to calculate the amount of capital the company requires, while also taking account of the views of external parties such as regulators and rating agencies.
Climate change, with its associated risks and opportunities, has been a core issue, and in 2003
Finally, Swiss Re’s ReSource Award was presented for the first time in 2003. This award is conferred on organisations that put forward especially innovative solutions to local water related challenges.
For such transactions to be successful, investors need a clear understanding of the risk of potential losses involved. How can investors judge these risks? To evaluate a cat bond and any other ILS, an investor must analyse the underlying risk, among other factors. A cat bond prospectus will discuss the underlying risk exposure, including the expected loss estimates. The information on the natural catastrophe risk underlying the cat bonds is prepared by a specialised independent consulting firm. As an institutional salesperson for Swiss Re, I interact with institutional investors and discuss how ILS can be an appropriate addition to their investment portfolio.
Corporate governance has become increasingly regulated in recent years. In addition, best practice recommendations for corporate governance have recently been developed. As an internationally active company, Swiss Re has to comply with the local rules and regulations of all countries in which it does business. Swiss Re’s governance is therefore influenced by a variety of legal systems. However, Swiss Re is principally a Swiss company and its shares are listed on SWX Swiss Exchange. Swiss Re’s governance is thus mainly to be measured against the Swiss Code of Best Practice governance recommendations. As a publicly listed company, Swiss Re must provide detailed information on its governance in its annual report as described in the annex to the Directive on Information relating to Corporate Governance, issued by SWX Swiss Exchange (also referred to as the “SWX directive“). This section follows the structure of the SWX directive and contains the following information: ■ Group structure and shareholders, page 48 ■ Capital structure, page 49 ■ Board of Directors, page 52 ■ Executive Board, page 62 ■ Compensations, shareholdings and loans, page 67 ■ Shareholders’ participation rights, page 70 ■ Changes of control and defence measures, page 71 ■ Auditors, page 71 ■ Information policy, page 73
Capital Please refer to the “Statement of shareholders’ equity” of Swiss Reinsurance Company, Zurich on page 64 of the Financial Statements.
Maturity Instrument Issued in Currency Nominal (m) Exchange terms 2004 Exch. Bond (TRIPLES) 1999 USD 530 i)
The Committees may conduct or authorise investigations into any matters within their respective scope of responsibility, thereby taking into consideration both relevant peer group practices as well as general best practice. They are empowered to retain independent counsel, accountants or other experts if deemed necessary, including for purposes of benchmarking best practice.
In personnel matters, the Committee makes proposals that ensure an adequate size and a well-balanced composition of the Board and further ensure that a majority of the Board is independent; it develops guidelines for selecting candidates for election to the Board and the Executive Board; it evaluates Board member candidates and makes recommendations to the Board; it evaluates proposals made to the Board for the appointment and removal of members of the Executive Board; it approves employment contracts with the Chairman, the Executive Vice Chairman, the CEO and the members of the Executive Board; and it reviews executive succession and emergency plans.
Mr Lippe, a German citizen born in 1955, graduated in mathematics and received a doctorate in business administration from the University of Mannheim in 1982.
Changes in the course of the business year 2003 (in chronological order) John J. Hendrickson stepped down from the Executive Board on 31 March 2003, following a reorganisation of the company’s Asset Management operations. He became a Senior Advisor in the Capital Management and Advisory business sector.
The total shown includes all the remuneration components except for shares and options, which are shown separately. Cash payments, allowances, value of preferential rates on loans, other financial benefits, as well as the amount of actuarial funding needed for pensions, are included in this figure. Swiss Re does not have a separate pension plan for members of the governing bodies.
Contact addresses are listed on the final pages of the Annual Report (inside cover).
Combined ratio The combination of the non-life claims ratio and the expense ratio.
IBNR (provision) Provision for claims Incurred But Not Reported by the balance sheet date. In other words, it is anticipated that an event will affect a number of policies, although no claims have been made so far, and is therefore likely to result in liability for the insurer.
Retrocession Amount of the risk accepted by the reinsurer which is then passed on to other reinsurance companies.
Return on operating revenues Measure of profitability in the Life & Health Business Group: the operating result (operating income excluding realised gains and losses) as a percentage of operating revenue (premiums earned and net investment income) plus other revenues.