Be experts on capital and risk Seismic retrofitting of the Bay Bridge, which sustained considerable damage from the 1989 earthquake in California. Just as retrofitting strengthens physical structures, innovative products such as catastrophe risk swaps can balance and strengthen clients’ financial structures.
Offer excellence based on knowledge On the island of Sardinia, where people live to a very old age, research is only beginning to reveal the genetic factors contributing to long life.
The figures from 1993 until 1996 (1998 for return on investment) represent the previously applied accounting policy and the former Group structure.
Performance 1993–19 March 2003 (pa) 2002 Swiss Re 12.8% –44.9% Swiss Performance Index 9.0% –26.0% DJ Stoxx Insurance Index 2.2% –51.2%
■ Property & Casualty hit combined ratio target of 104% ■ Life & Health return on operating revenues over 9% for fourth consecutive year ■ Administrative costs declined despite strong growth of business
Finally, we would like to thank our employees, who have again dedicated themselves to the company over the past year; we are most sincerely grateful for their commitment. We are confident that our endeavours will return Swiss Re to its successful path.
Operating revenues growth 7% Financial Services Premium business: Combined ratio 95% Premium growth 7% Fee business: Return on total revenues 15% Total revenue growth 10%
12 July Life & Health’s 2001 embedded value Swiss Re’s Life & Health Business Group recorded a 35% increase in its embedded value, to CHF 17.6 billion in 2001, due, in large part, to the acquisition of Lincoln Re.
Swiss Re Annual Report 200218 2002 was characterised by two key developments: the significant decline in the equity markets, particularly in the second half of the year; and the positive performance of the bond markets, where the Group has more than two-thirds of its portfolio invested.
portfolio during the year by completing three Admin ReSM transactions: Conseco Direct, Bankers Life and Northern Life. These transactions required total invested capital of CHF 500 million and added CHF 1 650 million to the Group’s assets.
The Financial Services Business Group serves its clients through four business units: Risk Solutions, Credit Solutions, Advisory & Capital Markets, and Asset Management.
In this environment, Credit Solutions reported an operating loss of CHF 434 million on revenues of CHF 776 million. Premiums earned decreased from the 2001 level because of the NCM deconsolidation. This deconsolidation more than offset the first-time inclusion of the credit and surety business previously written by the Property & Casualty Business Group, the main part of which was US surety business.
In difficult market conditions, Swiss Re’s third-party asset management activities generated net new money inflow of CHF 4.9 billion. In the US, the company was able to attract major new accounts and had excellent client retention. Total client funds decreased during 2002 due to adverse exchange rate developments and market movements (CHF –5.7 billion ), and the sale of Conning’s St. Louisbased mortgage securitisation operation with CHF 4.0 billion of assets under management. In Europe, the build-up of third-party business continued, with new operations now in place in Germany, France and the Netherlands. These businesses aim exclusively at the institutional segment: insurance and pension funds.
Overall, Corporate Risk Underwriting and Credit Solutions are expected to produce a combined ratio in the range of 95% in 2003. The result however, will be moderated by lower investment return expectations.
2.7 Convertible bonds and options a. Convertible bonds As stated in the notes to the Group financial statements (note 6 on Debt) an exchangeable bond (TRIPLES), issued in 1999 and maturing in 2004, as well as a convertible bond, issued in 2001 and maturing in 2021, are outstanding: 3. Board of Directors 3.1 Members of the Board of Directors a. Status as at 31 December 2002 On the relevant reporting date, the Board of Directors was composed as follows: Peter Forstmoser Chairman, non-executive and independent
Mr Forstmoser, a Swiss citizen born in 1943, received his doctor iuris degree from the University of Zurich in 1970, became an attorney-at-law in 1971 and received a master’s degree in law from Harvard Law School in 1972.
Mr Kielholz serves on the board of directors of Credit Suisse Group, Zurich, which elected him chairman with effect from 1 January 2003. He has further directorships in “Winterthur” Swiss Insurance Company, Winterthur, and Partner Re, Bermuda. In addition, Mr Kielholz is president of the International Association for the Study of Insurance Economics, Geneva, “The Geneva Association”, president of the “Avenir Suisse” foundation and chairman of the “Zürcher Kunstgesellschaft ”.
b. First election and remaining term of each director Please refer to the information provided in section 3.1.
d. External auditor The external auditor is accountable to the Audit Committee, the Board of Directors and ultimately to the shareholders. PricewaterhouseCoopers has executed this function since 1991 (originally as Revisuisse Price Waterhouse).
To further protect the independence of the external auditor, the Chief Financial Officer is required to review annually the external auditor’s non-audit services and fees and discuss the results with the Audit Committee. In addition, proposals to employ former senior executives of the external auditor, previously involved in the external audit, are required to be reviewed and approved in advance by the Audit Committee.
Jacques Aigrain Member of the Executive Board Committee, Head of the Financial Services Business Group
Stefan Lippe Member of the Executive Board Committee, Head of the Property & Casualty Business Group
11 November Appointment of John R. News release Coomber as Chief Executive Officer and John H.
Section of cover in a non-proportional reinsurance programme in which total coverage is divided into a number of consecutive layers starting at the retention or attachment point up to the maximum limit of indemnity. Individual layers may be placed with different (re)insurers.
Cash paid/received for acquisitions/disposals and reinsurance transactions, net –4 196 1 056 Other investments, net –1 566 –455 Net cash provided/used by investing activities –8 385 –6 562
Companies in which Swiss Re Zurich, directly or indirectly, holds a voting majority or otherwise controls are consolidated in the Group accounts. Companies in which Swiss Re Zurich maintains a direct or indirect holding of between 20% and 50% and has a significant influence, but not a controlling interest, are accounted for using the equity method and are included in other invested assets. The Swiss Re Group’s share of net profit or loss in investees accounted for under the equity method is included in net investment income. Equity and net income of these companies are adjusted as necessary to be in line with the Group accounting policies. The results of consolidated subsidiaries and investees accounted for using the equity method are included in the financial statements for the period commencing from the date of acquisition.
Acquisition costs, which vary with, and are primarily related to, the production of new business, are deferred to the extent they are deemed recoverable from future gross profits. Deferred acquisition costs consist principally of commissions. Deferred acquisition costs associated with property and casualty reinsurance business are amortised in proportion to the property and casualty premiums earned. Future investment income is considered in determining the recoverability of deferred acquisition costs on property and casualty business.
Assets and liabilities denominated in foreign currencies are translated at the rates of exchange on the balance sheet date. Revenues and expenses are translated at average exchange rates. Unrealised gains or losses resulting from translation of functional currencies to the reporting currency are included as a separate component of shareholders’ equity. Realised currency gains and losses resulting from foreign currency transactions are included in income.
Depreciation expense related to income-producing properties was CHF 28 million and CHF 30 million for 2001 and 2002, respectively. Accumulated depreciation on investment real estate totalled CHF 593 million and CHF 569 million as of 31 December 2001 and 2002, respectively.
The Group enters into long- and short-term debt arrangements to obtain funds for general corporate use and specific transaction financing. The Group defines long-term debt as debt having a maturity of greater than one year. The Group’s long-term debt as of 31 December 2002 was as follows: Book value Nominal Interest in CHF
In May 1998, the Group issued CHF 1 010 million of multi-currency subordinated debt with a perpetual term, bearing interest at the rate of six-month Libor plus 37.5 basis points, for the first tranche of CHF 300 million, Libor plus 40 basis points for a tranche of DEM 340 million, Libor plus 45 basis points for a tranche of DEM 110 million, payable semi-annually, and 5.71% for a tranche of DEM 400 million, payable annually. The loan is subordinated in the event of liquidation to all senior creditors of Swiss Re Zurich, but will be paid in priority to all holders of its equity.
In April 2002, the Group privately placed GBP 100 million of preference shares in the United Kingdom. These shares are redeemable, non-voting and were issued with a cumulative fixed rate dividend of 4.84% (payable semi-annually) and have a final redemption date in 2006.
Effect of settlement, curtailment and termination –2 –4 Net periodic benefit cost 34 68 57 56
The fair value of each option grant is estimated on the date of the grant using a binomial option-pricing model, with the following weighted average assumptions used for grants in 2001and 2002, respectively: dividend yield of 2.0% and 2.3%; expected volatility of 23.1% and 25.1%; risk-free interest rate of 3.4% and 3.4%; expected life of 5.75 years and 6.0 years.
Reinsurance recoverable on paid and unpaid claims 3 655 1298 584 5 537 Reinsurance recoverable on life and health policy benefits 2 317 2 317
Expenses Claims and claim adjustment expenses; life and health benefits –6 554 –1 948 –8 502 Acquisition costs –1 652 –425 –2 077 Other operating costs and expenses –427 –137 –564
Operating result, excluding net realised investment gains/losses 934 410 1 344
Ireland Pegasus Strategic Investment Company Plc 299 100 f Swiss Re International Treasury (Ireland) Ltd 0 100 f Swiss Re Ireland Ltd 122 100 f Swiss Re Life & Health (Ireland) Ltd 1 100 f
Liabilities from derivative financial instruments 610 1 281 Other liabilities 561 976 Accruals and deferred income 269 182
Details on the Swiss Re Group’s subsidiaries are to be found on pages 48 to 51.
Retained earnings brought forward from previous year 12 738 328 16 405 444
Withdrawal from reserves – –195 000 000 Allocation to reserves 150 000 000 –
Liabilities Unpaid claims and claim adjustment expenses 41 876 45 866 54 072 59 600 68 618 62 652 Liabilities for life and health policy benefits 9 963 15 143 23 279 29 300 41 370 37 269
Total number of registered shares 55 720 100.0 198 737 205 64.0
The Annual Report 2002 is also available in German and French.