November 1987 English translation of original German report; French and Spanish versions are also available.
Paul R. Jolles Berne, Chairman of the Board of Directors of Nestle S.A., Vevey 1988
Chairman of the Board of Directors and Chairman of the Executive Committee and Group Management
Member of the Executive Committee and Group Management Group Vice Rresident Senior Vice Rresident Vice Rresident
Whatever reservations one may have about judging un­ derwriting and financial results separately - in the more recent forms of reinsurance, the two elements are inter­ woven -, the underwriting resuit is and will remain an es­ sential yardstick for the reinsurer for assessing business experience in individual countries and lines of business and especially for anticipating any impending risk changes. Fortunately, this view seems more and more to be gaining ground in reinsurance. It is justified by the vul­ nerability of financial Income to changes in the trend of in­ terest rates or unexpected stock market developments and arises from the pronounced long-term nature of rein­ surance business. Major and accumulation risks, which are reinsured in particularly large number, can only be rated on the basis of several years' loss experience. It is therefore important to prevent dubious assumptions about medium and long-term interest rate and stock mar­ ket developments from entering into the calculation of premiums for risks of this nature and thus diluting the rates technically necessary.
The unusually close association of the reinsurer's activi­ ties with social, economic, technical and legal develop­ ments gives him the feeling of being involved and of help­ ing to cover all manner of risks. He is, however, fully aware that there are limits to insurability by the private insurance industry. Since these limits cannot be defined with abso­ lute clarity, it is impossible to prevent them from being partially or temporarily exceeded. Insurability presup­ poses that a particular loss potential can be calculated, or at least estimated with sufficient accuracy. Examples of the difficulties this entails are to be found in the assump­ tions made in Credit and Surety insurance about the con­ sequences of unexpected economic developments. The same category also includes the high losses suffered in Mortgage Guaranty insurance in the southern states of the U. S. following the collapse of oil prices. Likewise it is still hard to assess at the moment the extent of the effects the sudden appearance and rapid spread of the disease Aids will have on Life insurance. The examples men­ tioned substantiate the significance of carefully deter­ mined technical underwriting reserves and appropriate financial provisions as a prerequisite for successful inter­ national reinsurance activity.
The Board of Directors and Executive Committee are sparing no effort to achieve continual improvement in the contributory factors that make for the success of our enterprise.
There is no uniform, self-contained international reinsur­ ance market. A number of "markets" exist, distinguished by special features of continental and national signifi­ cance. It is impossible to submit a market report that is comprehensive and yet concise; a few specific aspects have been selected for comment below.
In the 1986 business year an overall underwriting result was achieved which was a clear improvement on that of the three preceding years. This gratifying development is due to the pronounced reduction of the underwriting loss in Non-Life reinsurance; in contrast, the profit of Life rein­ surance declined somewhat, although it remained in the same range as in previous years. Overall, there was an underwriting loss of Sw. frs. 161.0 million (in the previous year, the loss was of Sw.frs. 233.8 million).
Aviation 209 186 Nuclear Energy 18 18 Credit/Surety 242 276 business; the decline In the year under report Is attribut­ able to the expiry of one source of such business. - The previous year's substantial underwriting loss has been greatly reduced. The remaining loss Is due to American Workmen's Compensation Insurance.
A threat of proportions which at the moment are difficult to assess is that posed by the rapid spread of the disease known as Aids (Acquired Immune Deficiency Syndrome). Since as yet neither protection by vaccination nor cure is possible (merely measures which mitigate and delay the course of the illness) and any virus carrier is permanently contagious, the disease could develop into a scourge of humanity. Aids presents a serious hazard to Sickness, Disability and Life insurance and reinsurance. Swiss Re has therefore worked extensively to inform clients and has suggested underwriting measures which should pre­ vent exceptional losses on new business and a general inflation of insurance prices. Since it cannot be ruled out that Aids will have an unfavourable effect on the loss bur­ den, the reserves were strengthened in the year under re­ port as a precautionary measure.
Proposal of the Board of Directors The General Meeting to be held in Zurich on 20th Novem­ ber, 1987 has at Its disposal the following profit (of. Profit and Loss Account and Balance Sheet, pages 20/21): Sw. frs. Sw. frs.
If the proposal of the Board of Directors is accepted, dividends of Sw. frs. 125.- per registered or bearer share (nominal value, Sw.frs. 250.-) and Sw.frs. 25.- per non­ voting share (nominal value Sw.frs. 50.-) will be paid.
Canada Canadian Reassurance Company 99 Yorkville Avenue, Suite 300, Toronto, Ontario M5R 3K5 with a branch office in Montreal Canadian Reinsurance Company 99 Yorkville Avenue, Suite 300, Toronto, Ontario M5R 3K5 with branch offices in Montreal and Vancouver
United States SwissRe Holding (North America) Inc. 237 Park Avenue, New York, NY10017