Swiss Re’s ability to perform and adhere to its business plan under adverse conditions, along with the strong support of its investor base, has been acknowledged by the rating agencies. They confirmed their top financial strength ratings for Swiss Re.
Foresight of the nature of risk: we add value to our clients’ business by anticipating societal trends, providing in-depth analysis of the nature of risk and making this information available to decision makers and to the public. Global yet local perspective: by integrating the knowledge of our local experts around the world into our outlook, we build multicultural understanding and maintain a global presence.
Thomas W. Bechtler 1993–2005 Born 1949, Swiss citizen. Mr Bechtler has been Managing Director of Hesta AG, Zug, since 1972. He joined Swiss Re’s Board of Directors in November 1993. He is also Chairman of the Board of Directors of Zellweger Luwa AG, Uster, and serves on the board of directors of Credit Suisse Group, Zurich, Bucher Industries, Niederweningen, Robert Bosch Internationale Beteiligungen AG, Zurich, Sika Finance AG, Baar, and Conzzeta Holding, Zurich.
20 September Update on tragic event in the United States Swiss Re estimated the after-tax effect of the event to be approximately CHF 2 billion. The largest exposure comes from property and business interruption lines. Swiss Re stated that the impact of this event, based on the magnitude of the claims, will negatively affect earnings per share (EPS) in 27 September Extraordinary General Meeting approved creation of authorised capital The Extraordinary General Meeting approved the proposal of the Board of Directors regarding the creation of an additional 10% in authorised capital.
This was partially offset by a reduction of CHF 46 million in the provision established in 2000 for restructuring in the Property & Casualty Business Group.
Substantial capital gains of CHF 3.4 billion were realised, although these were lower than during the preceding outstandingly favourable investment years. On the bond side, gains of CHF 1.3 billion were realised and locked in as interest rates approached their low point in the cycle. On the equity side, a few large transactions contributed significantly to the gains of CHF 1.8 billion, notably the sale of a part of Swiss Re’s interest in NCM.
Primary market Important markets such as the US, the UK, France and Australia saw continued consolidation throughout 2001, due both to mergers and acquisitions and to company closures. The Japanese insurance market is also undergoing fundamental change evidenced by a number of mergers, driven by persistent problems in the national economy. Terrorism coverage has been much debated in many jurisdictions but, except in France, has yet to produce regulatory changes.
Premium volume of the Property & Casualty Business Group grew by 20% to CHF 13 846 million in 2001, driven by improving rates and the full year inclusion of Underwriters Re. The combined ratio worsened to 124%, due to the 11 September attack.
Man-made losses ■ Natural catastrophes Source: Swiss Re Economic Research & Consulting
Engineering: following a thorough reunderwriting of the portfolio, engineering premium volume remained stable as cancelled business was offset by higher rates on the remaining portfolio and by new, better-priced business.
In Europe, as the level of social, medical and other benefits provided directly by the government reduces, insurance companies are continuing to take on these added responsibilities.
Acquisition of Lincoln Re On 7 December 2001, Swiss Re completed the acquisition of the reinsurance operations of Lincoln National Corporation (Lincoln Re) for USD 2 billion in cash. Lincoln Re, which began writing reinsurance in 1912, was the second largest life reinsurer in the United States.
The total assets under proprietary investment in 2001 reached CHF 99 billion, up from CHF 90 billion one year ago.
In December 2001, Capital Partners managed a transaction between NCM and Gerling Insurance Group to form Gerling NCM Credit and Finance AG. Swiss Re, previously owner of 90% of NCM, retained a 44.1% holding in the new company with the intent to further reduce its holding in 2002; this realised a capital gain of CHF 184 million during 2001. Asset Management also achieved an investment return of CHF 391 million from the partial disposal of its participation in diAx, the Swiss mobile operator. Part of this investment return is shown in this business segment. Conversely, as a consequence of the downturn in the private equity sector, Swiss Re wrote down investments of approximately CHF 231 million, primarily in the portfolios of externally managed funds.
Structured Risk Finance saw a significant increase in activities in the second half of 2001, due to the rise in rates of traditional reinsurance, the decrease of reinsurance capital post 11 September, and specific opportunities in sectors such as oil and gas, energy and transportation. Financial reinsurance accounted for the majority of revenue; the other areas, New Asset Risks and Contingent Capital developed innovative structures such as securitisations and capital facilities for corporate clients.
In February 2002 the Asian head office completed its move to Hong Kong. The Asian market is now served entirely from local offices in that region.
The amortised cost or cost and estimated fair values of investments in fixed income securities by remaining maturity are shown below. Fixed maturity investments are assumed not to be called for redemption prior to the stated maturity date. As of 31 December 2000 and 2001, CHF 2 180 million and CHF 2 131 million, respectively, of fixed income securities were callable or had call options in the instruments’ structure.
Depreciation expense related to income producing properties was CHF 27 million and CHF 28 million for 2000 and 2001, respectively. Accumulated depreciation on investment real estate totalled CHF 638 million and CHF 593 million as of 31 December 2000 and 2001, respectively.
In November 2001, concurrent with its global equity offering, the Group issued USD 1 150 million of subordinated convertible bonds. The bonds have a maturity of 20 years and a fixed coupon of 3.25% during the first 10 years, which will be reset to a floating six-month LIBOR plus 180 basis points for the last 10 years. Up to and including 21 November 2011, the bonds can be converted into Swiss Re shares at a price of CHF 207.19 per share with a fixed USD exchange rate of 1.6641. The bonds have been issued by the Group and are unconditionally and irrevocably guaranteed on a subordinated level.
Assumed health-care cost trend rates have a significant effect on the amounts reported for the health-care plans. A one percentage point change in assumed health-care cost trend rates would have the following effects for 2001: 1 percentage 1 percentage CHF millions point increase point decrease
2000 Property & Life & Financial Corporate ReconciliCHF millions Casualty Health Services1 Centre ation Total
Premiums, claims and claim adjustment expenses are reported net of retrocession in the Group’s income statement. Gross, retroceded and net amounts for these items were as follows: 2000 Property & Life & Financial CHF millions Casualty Health Services Total
2001 Property & Life & Financial CHF millions Casualty Health Services Total
With the exception of property, fixed assets are stated at cost, less individually scheduled straight-line depreciation over their useful lives. Items of minor value are not capitalised. The same principles apply to the capitalisation of intangible assets which refer entirely to software development expenses.
Claims paid Change in the provisions for claims outstanding 2. Claims incurred 3. Change in the provisions for life reinsurance 4. Profit commissions
The current account obligations towards employee pension funds amounted to CHF 49 million on the 2001 balance sheet date (2000: CHF 61 million).
Furthermore, capital in the amount of CHF 2 852 237 was authorised by the Extraordinary General Meeting on 27 September 2001 and fully issued for the purpose of acquiring Lincoln Re.
Share structure For the financial year 2001 – eligible for dividend – not eligible for dividend