2006 Annual Report
Driving Performance
Swiss Re’s Munich office. Working as a
global community, Swiss Re employees
leverage the Group’s expertise in risk and
capital management to drive performance
for clients and shareholders.
Key information
Premiums earned1
40 000
CHF millions
30 000
20 000
39%
33 %
35%
36 %
37 %
10 000
Net income/loss1
5 000
CHF millions
4560
4 000
3 000
2 000
1 000
2475
2304
1702
0
61%
67 %
65 %
64%
63%
0
–91
2002
2003
2004
2005
2006
2002
2003
2004
2005
2006
Non-life Life & Health
Return on equity1
13.6
16.3
10.2
10.3
20
15
10
5
0
in %
–0.5
Shareholders’ equity1
40 000
CHF millions
30 884
24 393
18 511
19 177
16 686
30 000
20 000
10 000
0
2002
2003
2004
2005
2006
2002
2003
2004
2005
2006
¹ 2006 and 2005 figures are based on US GAAP, and previous years on Swiss GAAP.
S&P Moody’s A.M. Best
AA–
Aa2
stable
negative
A+
stable
Financial strength ratings
as of 23 February 2007
Rating
Outlook
Share performance
Market information as of 23 February 2007
Share price (in CHF)
Market capitalisation (in CHF millions)
105.50
37 796
2006
7.7
20.7
17.2
Performance
Swiss Re (in %)
Swiss Performance Index (in %)
DJ Europe STOXX Insurance Index (in %)
2002 – 23 February 2007 (p.a.)
–6.9
10.5
–1.5
300
Share price in CHF (logarithmic scale)
Annual performance in %
100
20
2002
2003
2004
2005
2006
2007
Swiss Re Swiss Performance Index DJ Europe STOXX Insurance Index
50
25
0
–25
–50
Key information
Corporate highlights
Excellent net income of CHF 4.6 billion with strong underlying performance from
all businesses
Successful acquisition and integration of GE Insurance Solutions
Continued strong investment performance with return on investments of 5.3%
Property & Casualty operating income improved to CHF 5.0 billion, reflecting strong
performance across all lines of business and low levels of natural catastrophe
claims; combined ratio improved to 90.4%
Life & Health operating income of CHF 1.7 billion with return on operating revenues
increasing to 10.0%
Financial Services operating income grew 21% to CHF 460 million, driven by
strong results in credit, trading and structuring businesses
Shareholders’ equity increased 27% to CHF 30.9 billion on excellent earnings as
well as equity raised for the financing of the GE Insurance Solutions acquisition
Return on equity increased to 16.3%
Dividend increase of 36% from CHF 2.50 to CHF 3.40 per share, as well as a share
buy-back programme
Financial highlights
CHF millions unless otherwise stated
Non-life business1
Premiums earned
Combined ratio, traditional business (in %)
Life & Health business
Premiums earned
Return on operating revenues (in %)
Financial Services business
Total revenues
Operating income
Group
Premiums earned
Net income
Earnings per share (in CHF)
Dividend per share (in CHF)
Shareholders’ equity
Return on investments (in %)
Return on equity (in %)
Number of employees3
Including Property & Casualty and Credit Solutions
¹
² Subject to approval at the Annual General Meeting on 20 April 2007
³ Permanent staff
2005
2006
Change in %
17 253
112.3
18 541
90.4
9 638
9.6
10 974
10.0
1 560
379
1 963
460
26 891
29 515
2 304
7.44
2.50
24 393
6.3
10.3
8 882
4 560
13.49
3.40²
30 884
5.3
16.3
10 891
7
14
26
21
10
98
81
36
27
23
2006 Annual Report
Contents
Letter to shareholders
2
Profile
5 Key events
7 Swiss Re at a glance
14 Strategic direction
16 Knowledge and expertise
20 Corporate responsibility
Driving performance
23 Driving performance – The CEO’s view
26 Performance for Swiss Re
28 Performance for our clients
30 Performance for partnerships
32 Performance for the future
Financial year
34 Economic environment and industry trends
37 Group results
39
Investments
42 Summary of financial statements
44 Property & Casualty business
48
Life & Health business
51 Financial Services business
53 Business outlook
Governance
54 Risk and capital management
65 Corporate governance
Swiss Re shares
103
Financial statements
107 Financial statements – Contents
109 Group financial statements
115 Notes to the Group financial statements
171 Swiss Reinsurance Company, Zurich
187 Financial years 1998 –2006
General information
188 Glossary
194 Cautionary note on forward-looking statements
Swiss Re 2006 Annual Report 1
Letter to shareholders
Fellow shareholders, colleagues, ladies and gentlemen
2006 was an excellent year for Swiss Re, in which we made significant progress towards
our goal of higher earnings, in terms of both absolute results and sustainability. It gives
us great pleasure to report net income rising 98% to CHF 4.6 billion, or CHF 13.49 per
share, resulting in a return on equity of 16.3%. These excellent results are the outcome
of hard work by the entire Swiss Re community to drive our performance by seizing
attractive opportunities, leveraging the integration of Insurance Solutions and constantly
striving towards our strategic goal of organisational excellence.
All divisions contributed to the success of the 2006 results. Property & Casualty business
delivered a strong operating income of CHF 5.0 billion and a combined ratio of 90.4%,
an improvement of 23.7 percentage points compared with 2005. While the year benefit-
ed from a benign hurricane season, the underlying quality of our underwriting perform-
ance delivered substantially more value. Life & Health business continued to be a strong
contributor to Swiss Re’s earnings with operating income of CHF 1.7 billion. Within our
Client Markets teams, Europe Division, the historical bedrock of our Group with its strong
client franchise, maintained its profitability track record. In the Americas, we strength-
ened our client base, leveraging our leadership position while maintaining pricing disci-
pline across all lines of business. Asia Division achieved further inroads in the Chinese
market and continued to build on Swiss Re’s leading presence in the region. In
a highly competitive environment, Globals & Large Risks successfully grew the business,
complemented by the industrial risk business of Insurance Solutions. Financial Services
delivered strong results, with operating income of CHF 460 million, adding material val-
ue to the rest of the Group in terms of asset management, risk hedging and risk
intermediation. The Group’s active management of duration, credit spreads and equity
exposure resulted in a strong return on investments of 5.3%. We would like to express
our appreciation to the respective teams for these remarkable achievements.
Our strategic direction focuses on four key objectives to deliver enhanced sustainable
returns for shareholders:
Generate economic profit growth
Reduce earnings volatility
Enlarge market scope
Advance organisational excellence
The 2006 results show how this powerful combination drives our performance, allowing
us to deliver best in class client service and, ultimately, attractive shareholder returns.
Our strategic objectives have been embedded in all of Swiss Re’s activities, helping us
to further improve our economic efficiency. Our business goals are simple: to ensure
sustainable earnings per share growth and to pursue high quality business rather than
volume for volume’s sake. This is further supported by continually expanding the scope
and range of services we provide to clients in all lines of business and regions.
2 Swiss Re 2006 Annual Report
Letter to shareholders
In 2006, Swiss Re achieved a series of strategic milestones. The successful integration
of Insurance Solutions marked the largest acquisition ever completed by Swiss Re, pro-
viding us with increased scale and an expanded talent pool. In December, we concluded
our largest Admin ReSM transaction to date: the acquisition in the UK of GE Life business
(which was not part of the acquisition of Insurance Solutions from General Electric). We
also added several sizeable transactions to our securitisation strategy, structuring and
selling pools of extreme mortality risk (Vita Capital), credit reinsurance (Crystal Credit)
and natural catastrophe risks (Successor) to the capital markets. Finally, various efforts
to advance our operational efficiency were successfully completed.
Each of these milestones was achieved smoothly, demonstrating the experience and
organisational skills of the Group. Clients and brokers alike complimented our client
teams on their ability to maintain a consistent and reliable partnership in the market.
This resulted in highly successful renewals for 2007 with non-life premiums rising 14%.
The excellent earnings for 2006 considerably reinforced our strong capital position, and
the Board of Directors will recommend both a dividend increase of 36% to CHF 3.40 per
share and a share buy-back programme. This recommendation reflects Swiss Re’s policy
to focus on active capital management while maintaining superior capital adequacy and
credit ratings.
Our executive management team was further strengthened in 2006 with the appoint-
ment of Roger Ferguson as Head of Financial Services and member of the Executive
Committee, as well as Chairman of Swiss Re America Holding, succeeding Jacques
Dubois. Roger’s vision, managerial talent and experience as a former Vice Chairman
of the US Federal Reserve are a strong addition to our team. We take this opportunity
to thank Jacques, who retired at the end of 2006, for his outstanding contribution to
Swiss Re and more recently for the key role he played in the acquisition of Insurance
Solutions.
In December, the Executive Board was also reinforced with three additional appoint-
ments: Markus Diethelm, Group Chief Legal Officer, Philip Lotz, Head of Capital Manage-
ment and Advisory, and Jonathan Isherwood, Global Head of Claims & Liability Manage-
ment. Each of the new members brings deep experience and leadership to areas which
are of critical value to the long-term success of Swiss Re.
In December, the Group announced that George Quinn will succeed Ann Godbehere
as Group Chief Financial Officer (CFO) and member of our Executive Committee as of
1 March 2007. With his strong experience in all financial aspects of Swiss Re, George
has already made a significant contribution to the success of our Group. In his recent
role as regional CFO for the Americas and CFO of Financial Services, he played a leading
role in the integration of Insurance Solutions and helped to make the acquisition a suc-
cess for Swiss Re. We are gratified to have found the right talent within Swiss Re for
this important position. The entire Board of Directors and Executive Board thank Ann for
Swiss Re 2006 Annual Report 3
Letter to shareholders
4 Swiss Re 2006 Annual Report
her dedication and commitment during the past four years as Group CFO and through-
out her outstanding career, which spans more than 25 years with Swiss Re and the
former Mercantile & General Re.
The executive management can count on the support and also the constructive chal-
lenge of an independent, diversified and experienced Board of Directors, including
former General Electric Vice Chairman Dennis Dammerman, who was elected to the
Board in February 2006. We are pleased that Hans Ulrich Maerki has made himself
available to join our Board. His election will be proposed at the Annual General Meeting
on 20 April 2007. Mr Maerki is currently Chairman of IBM Europe, Middle East and
Africa, and will bring unique business insights to our Board.
Sadly, our friend and trusted Board member George Farr passed away in November. We
would like to express our respect and admiration for his valuable guidance and leader-
ship over the years.
Swiss Re’s success is built on superior client services, pro-active capital management,
diligent and disciplined underwriting, and dynamic growth through new products and
markets. Our focus is to deliver attractive risk-adjusted returns. Our leadership position
has been reached thanks to the dedication and teamwork of over 10 000 colleagues
in more than 25 countries, and we would like to thank all Swiss Re employees around the
world for their invaluable contribution to our success.
We have embarked on 2007 with high confidence and even higher expectations for the
continuing success of your company in delivering sustainable and strong earnings per
share. With the conversion of our accounts to US GAAP and the adoption of quarterly
financial disclosure, we look forward to providing you with a continuous flow of informa-
tion throughout the year.
Zurich, 1 March 2007
Peter Forstmoser
Chairman of the Board of Directors
Jacques Aigrain
Chief Executive Officer
Profile
Key events
1
2
3
1 Opening of Swiss Re’s Asian training centre
2 Swiss Re commits to Clinton Global Initiative
3 Employees in Kansas City join Swiss Re follow-
ing the acquisition of GE Insurance Solutions
2006
23 January
First credit reinsurance securitisation
Swiss Re successfully completed its first
credit reinsurance securitisation. The EUR
252 million issue increased Swiss Re’s
capital efficiency by trans ferring credit
insurance risk to the capital markets.
14 February
2006 renewals
Swiss Re continued to improve the qual-
ity of its non-life reinsurance portfolio
during the 2006 renewals. The volume
of business written grew to CHF 9.3 bil-
lion, while the focus on technical profi-
tability achieved approximately 7% eco-
nomic profit improvement.
27 February
Extraordinary General Meeting
Shareholders approved Swiss Re’s crea-
tion of additional capital related to the
financing of the GE Insurance Solutions
acquisition and for general corporate
purposes. In addition, John R. Coomber
and Dennis D. Dammerman were elected
to Swiss Re’s Board of Directors.
2 March
Swiss Re‘s 2005 results
Swiss Re reported net income of CHF
1.5 billion for 2005. In a year of record
natural catastrophe events, the underlying
business performed well, including an
excellent return on investments of 5.7%
(all figures based on Swiss GAAP).
11 April
2005 embedded value
Swiss Re reported an 18% increase to
CHF 20.1 billion in embedded value of its
life and health business. Operating profit
from existing business grew 38% to
CHF 1.5 billion. Returns on new business
increased to 13.1% for total value added
of CHF 283 million in 2005.
21 April
Annual General Meeting
At Swiss Re’s 142nd Annual General
Meeting, shareholders approved the in-
crease in dividend to CHF 2.50 per share.
Peter Forstmoser, Chairman of the Board
of Directors, Walter B. Kielholz, Executive
Vice Chairman, and Robert A. Scott were
re-elected to the Board.
Swiss Re 2006 Annual Report 5
Profile Key events
4 May
Swiss Re places USD 2.0 billion
equivalent of hybrid securities
Swiss Re successfully placed USD 2.0 bil-
lion equivalent of hybrid securities. The
innovative transaction was awarded
“Deal of the Month“ in the June edition
of Credit Magazine.
10 May
Swiss Re share offering
Swiss Re successfully placed a total of
13.9 million new shares at CHF 92.25 per
share on the back of strong shareholder
and investor take-up. The proceeds were
used to fund part of the GE Insurance
Solutions acquisition.
18 May
Swiss Re opens new Asian training
centre in Hong Kong
Swiss Re officially opened its new training
centre, on the occasion of the Group‘s
50th year in Asia-Pacific. The centre pro-
vides state-of-the-art courses for insur-
ance and reinsurance professionals from
throughout the region.
7 June
Natural catastrophe protection through
the Successor programme
Swiss Re obtained USD 950 million pro-
tection against North Atlantic Hurricane,
Europe Windstorm, California Earthquake
and Japan Earthquake through Successor,
the follow-up catastrophe bonds to the
PIONEER and Arbor programmes.
9 June
Swiss Re completes acquisition
of GE Insurance Solutions
Swiss Re completed the acquisition of
GE Insurance Solutions from General
Electric (GE). The acquisition created
the world’s largest and most diversified
global reinsurer, adding further momen-
tum to Swiss Re’s earnings growth.
6 Swiss Re 2006 Annual Report
2007
4 January
CO2 reduction programme
As part of its commitment to the Clinton
Global Initiative, Swiss Re launched
a worldwide programme to support meas-
ures taken by employees to reduce their
personal CO2 emissions.
16 January
Extreme mortality risk protection
through Vita Capital programme
Swiss Re transferred USD 705 million of
extreme mortality risk to the capital mar-
kets through its Vita Capital securitisation
programme. Part of the issuance replaced
cover provided by Swiss Re’s first Vita
issuance, which expired at the end of
2006, with the balance providing ad-
ditional protection against extreme
mortality risks.
13 February
2007 renewals
Swiss Re successfully grew its non-life
reinsurance portfolio by CHF 1.3 billion or
14%, reflecting successful renewals of
business acquired through the acquisition
of GE Insurance Solutions combined with
a continued focus on underwriting quality.
22 February
Sale of 30 St Mary Axe
Swiss Re completed the sale of its London
office building, 30 St Mary Axe, to an
affiliate of the real-estate corporation
IVG Immobilien AG for GBP 600 million.
Swiss Re remains a principal tenant of
30 St Mary Axe.
29 June
Swiss Re completes sale of Fox-Pitt,
Kelton
Swiss Re completed the sale of its wholly-
owned subsidiary Fox-Pitt, Kelton (FPK)
to a new company formed by J. C. Flowers
& Co. LLC and FPK management. Swiss Re
retained an interest in the new company
through convertible preferred shares.
4 August
Interim results 2006
Swiss Re reported successful first half
2006 results with net income of CHF
1.6 billion, up 16% compared to a strong
first half of 2005, or CHF 4.92 per share.
Annualised return on equity was 13.9%
and shareholders’ equity increased
18% to CHF 27.1 billion (all figures based
on Swiss GAAP).
11 December
Swiss Re to acquire 26% stake in TTK
Healthcare Services in India
Swiss Re signed an agreement with
TTK Group and India Value Funds Advisors
to purchase a 26% stake in TTK Health-
care Services Pvt Ltd, one of India’s lead-
ing health insurance third-party adminis-
trators.
14 December
Acquisition of GE Life UK business
Swiss Re completed the acquisition
in the UK of the GE Life business of
General Electric (GE). The cash purchase
price of GBP 465 million included GBP
260 million for statutory net assets. The
trans action provides further scale and
infrastructure for Swiss Re’s Admin ReSM
business in the UK and is the largest
Admin ReSM deal to date.
Profile
Swiss Re at a glance
Our mission
We enable the risk-taking that is essential to
enterprise and progress.
Who we are
What we do
How we do it
Swiss Re aspires to be the leading force
in the reinsurance industry by combining
expertise and financial strength with
a committed client focus to deliver sus-
tainable economic profit growth.
Founded in Zurich, Switzerland, in 1863,
Swiss Re is the world’s leading and most
diversified reinsurer. It operates in more
than 25 countries and provides its exper-
tise and services to clients throughout
the world. The Group’s position as pre-
ferred partner in the risk transfer industry
is based on value propositions that com-
prise risk expertise, global reach, scale,
diversification, very strong capitalisation
and resilience over the long term.
Swiss Re’s core values include active
engagement with stakeholders, excel-
lence through operational efficiency,
sustainability in its economic, environmen-
tal and social performance, as well as in-
tegrity through its commitment to trans-
parency and ethical principles.
The Group is fully committed to sound
corporate governance. Its organisation
and structure, as well as its risk and capital
management assurance functions are
defined by a governance framework that
supports the Group’s success, and pro-
tects the interests of shareholders and
other stakeholders.
Reinsurance is an indispensable part of
the insurance system, providing an impor-
tant contribution to economic growth
and society. Insurers, corporate clients and
the public sector benefit from risk transfer
and capital relief, as well as from the
product development and risk expertise
that Swiss Re provides. Through its global
reach, the Group diversifies risk portfolios,
allowing risks to be covered more effi-
ciently and securely. Ultimately, policy-
holders benefit from enlarged and more
sustainable protection.
Swiss Re offers a wide variety of reinsur-
ance products and financial services
solutions, enabling insurers, corporations,
the public sector and other partners to
manage capital and risk challenges. This
generates economic benefits for clients
and creates value for Swiss Re’s share-
holders.
The Group’s reinsurance products and
related services for property and casualty
as well as for life and health business are
complemented by insurance-based corpo-
rate finance and risk management solu-
tions. Swiss Re is a pioneer and leader in
insurance securitisation, transferring natu-
ral catastrophe, mortality and other insur-
ance risks to the capital markets to free
up capital and to provide a new source of
capacity for the industry.
Swiss Re’s success is founded on exper-
tise, sound risk management, and dia-
logue with clients and other stakeholders.
The Group works closely with clients to
design solutions that keep them ahead
of the field and solve the issues they face
in their business. Swiss Re is committed
to developing and implementing best
practice standards, and engages closely
with industry bodies, regulators and
governments, striving for progress that
benefits the industry as a whole.
Swiss Re uses risk and capital manage-
ment to ensure prudent risk taking and
corresponding capitalisation. Based on
an integrated risk model, Swiss Re’s
experts identify, assess and control the
Group’s exposures, enabling an efficient
allocation of capital and providing the
basis for Swiss Re’s financial strength.
The Group actively manages compliance
risks and ensures full adherence to the
laws and regulations of all the countries
in which it does business.
Swiss Re’s market-leading position is
based on accumulated expertise and
continuing research. The Group antici-
pates and analyses risks affecting busi-
ness, society, the economy and the
environment. Ultimately, the Group’s
success depends on the skills and com-
mitment of its employees. Swiss Re pro-
vides an exciting and modern working
environment that attracts outstanding
individuals, promotes talent and inspires
excellence at all levels.
Swiss Re 2006 Annual Report 7
Profile Swiss Re at a glance
Global diversification
Operating regions and office locations
Americas
Barbados
Bermuda
Brazil
Canada
Colombia
Mexico
United States
8 Swiss Re 2006 Annual Report
Europe (including Middle East and Africa)
Asia
Australia
China
Hong Kong
India
Japan
Korea
Malaysia
Singapore
Taiwan
Denmark
France
Germany
Ireland
Israel
Italy
Luxembourg
Netherlands
Poland
Russia
South Africa
Spain
Switzerland
United Kingdom
Key facts
Diversification lies at the core of Swiss Re’s value proposition. Spreading risks across
geographical regions and lines of business increases the number of mutually independ-
ent risks, and ensures a more efficient use of capital. Swiss Re is the largest and most
diversified global reinsurer, with more than 90 offices in over 25 countries, allowing for
a wide spread of insurance risks, revenues and investments.
Revenues by business1
43% Life & Health
Net premiums earned by region1
5% Financial Services
52% Property & Casualty
9% Asia
47% Americas
44% Europe
(including Middle East and Africa)
Net premiums earned by product line1
34% Life and health
3% Credit
11% Specialty
¹ As of 31 December 2006
3% Admin ReSM
21% Property
15% Liability
7% Motor
4% Accident
2% Non-traditional
Profile Swiss Re at a glance
Swiss Re 2006 Annual Report 9
Profile Swiss Re at a glance
Group structure
(from left)
Walter B. Kielholz
Executive Vice Chairman
Peter Forstmoser
Chairman
Jacques Aigrain
Chief Executive Officer
10 Swiss Re 2006 Annual Report
Board of Directors
Chairman
Executive Vice Chairman
Members of the Board of Directors
Executive Committee and Executive Board
Chief Executive Officer
Members of the Executive Committee
Members of the Executive Board
Corporate functions
Risk Management
Risk Management
Corporate Actuarial
Sustainability & Emerging
Risk Management
Business functions
Client Markets
Europe
Americas Property & Casualty
Americas Life & Health and
Global Admin ReSM
Asia
Globals & Large Risks
Finance
Capital Management
Corporate Finance & Treasury
Tax
Investor Relations
Planning, Accounting
& Reporting
Operations
Global Information Technology
Communications
& Human Resources
Group Legal
Global Technical Accounting
& Services
Group Logistics
Products
Property & Specialty
Casualty
Life & Health
Claims & Liability Management
Financial Services
Asset Management
Credit Solutions
Capital Management and
Advisory
Profile Swiss Re at a glance
Swiss Re’s structure is closely aligned with its
business focus on profitable growth, the efficient
use of capital and bringing the Group closer to
clients.
Corporate functions
Swiss Re’s corporate functions deliver efficient shared services to support the business
functions. The corporate functions manage Swiss Re’s common resources including:
capital, the risk portfolio, brand reputation, information technology, human resources,
as well as knowledge and skills.
Various corporate functions fulfil obligations to regulatory authorities and other stakehold-
ers, and ensure the protection of the Group by establishing the corporate governance
rules and processes under which Swiss Re operates.
Client Markets
Products
Financial Services
The Client Markets business function is
Swiss Re’s interface to clients, delivering
optimal client services and expanding
client relationships in all lines of business
worldwide. Its key activities are geared
towards identifying market trends, under-
standing client needs, and offering prod-
ucts and services to meet those needs.
The Products business function is the driv-
ing force behind underwriting excellence,
product development and claims manage-
ment at Swiss Re. It actively promotes
innovation and the development of new,
superior risk transfer solutions to meet
the increasingly complex requirements of
clients.
Building on long-standing, close relation-
ships, Client Markets offers global reach,
local knowledge and proven expertise
to solve the capital and risk management
challenges facing clients.
The key mandates of Products include
managing the insurance cycle to optimise
long-term profit levels, and implementing
client-focused claims management stand-
ards in all markets and lines of business.
The Financial Services business function
brings together Swiss Re’s capital man-
agement expertise and risk-taking capa-
bilities to manage the Group’s own invest-
ment assets, and create reinsurance and
capital markets solutions for the Group
as well as for clients.
Financial Services provides sophisticated
risk management, capital management
and structured investment solutions by
integrating the Group’s reinsurance and
capital markets capabilities. The business
function assists Swiss Re and clients in
better managing their capital at risk and,
where appropriate, transferring business
into the capital markets through securiti-
sation. It also provides proprietary and
third-party asset management.
Swiss Re 2006 Annual Report 11
Profile Swiss Re at a glance
Executive Committee
Roger W. Ferguson
Head of Financial Services
Stefan Lippe
Head of Products
Ann F. Godbehere
Chief Financial Officer
until 28 February 2007
Jacques Aigrain
Chief Executive Officer
Michel M. Liès
Head of Client Markets
Andreas Beerli
Chief Operating Officer
Christian Mumenthaler
Chief Risk Officer
12 Swiss Re 2006 Annual Report
Profile Swiss Re at a glance
Executive Board
Client Markets
Products
Financial Services
Corporate functions
Michel M. Liès*
Head of Client Markets
Stefan Lippe*
Head of Products
Roger W. Ferguson*
Head of Financial Services
Andreas Beerli*
Chief Operating Officer
Martin Albers
Europe
Brian Gray
Property & Specialty
Philip A. Lotz
Capital Management and Advisory
Agostino Galvagni
Globals & Large Risks
Jonathan Isherwood
Claims & Liability Management
Benjamin Meuli
Asset Management
Christian Mumenthaler*
Chief Risk Officer
Ann F. Godbehere*
Chief Financial Officer
until 28 February 2007
George Quinn*
Chief Financial Officer
as of 1 March 2007
Pierre L. Ozendo
Americas Property & Casualty
Alberto Izaga
Life & Health
Markus Diethelm
Group Legal
Martyn Parker
Asia
Martin Oesterreicher
Casualty
Charlotte A. Gubler
Communications & Human Resources
W. Weldon Wilson
Americas Life & Health and
Global Admin ReSM
Yury Zaytsev
Global Information Technology
* Member of the Executive Committee
Swiss Re 2006 Annual Report 13
Profile
Strategic direction
Swiss Re’s strategic direction supports a disciplined
approach to delivering best in class customer service
and attractive shareholder returns.
143 years of experience and a deep understanding of risk and capital markets allow
Swiss Re not just to respond to change, but to actively plot its course toward sustained
leadership in the risk transfer industry. The Group’s strategic direction has four key
objectives to deliver enhanced sustainable returns for shareholders: generating eco-
nomic profit growth, reducing earnings volatility, enlarging market scope and advancing
organisational excellence.
Swiss Re’s strategic direction
Building blocks
Generate economic profit growth
Reduce earnings volatility
Enlarge market scope
Foundation of success
Advance organisational excellence
Deliverables
Best in class
customer
service
Attractive
shareholder
returns
Generate economic profit growth
Swiss Re is committed to providing economic profit growth for its shareholders, and
therefore allocates capital and other resources by assessing each business opportunity
in both risk-adjusted and cost-adjusted terms.
Economic profit growth also requires disciplined management of the insurance cycle.
Swiss Re’s scale and diversification combine with the Group’s sound underwriting princi-
ples to mitigate the risks of the cycle. This focus on economic profit secures the quality
of the Group’s earnings and makes Swiss Re a strong, dependable partner for clients.
Reduce earnings volatility
As the world’s leading reinsurer, Swiss Re underwrites significant exposures. In addition
to its scale and diversification, the Group applies a wide range of tools to reduce earnings
volatility. Swiss Re employs hedging instruments to manage financial market risks,
14 Swiss Re 2006 Annual Report
USD 10 billion
Swiss Re is leading the growth of insurance-
linked securities (ILS) and driving the conver-
gence of the capital and insurance markets.
Swiss Re has underwritten over USD 10 billion
since the inception of the ILS market in 1997,
both for the Group as well as for clients.
Profile Strategic direction
limiting downside exposure while capturing attractive risk-adjusted returns on assets.
Swiss Re also uses its capital market expertise to manage volatility in structuring and
underwriting the Group’s business: it remains the leader in insurance-linked securities
(ILS), having underwritten over USD 10 billion since the inception of the market in 1997,
both for the Group as well as for clients.
Sound risk management practices and a disciplined reserving philosophy support
profitable underwriting. At the same time, a Group-level approach to volatility manage-
ment lets the individual business units focus on delivering attractive solutions to clients
and capturing growth opportunities. By addressing potential sources of volatility on
both sides of the balance sheet, Swiss Re aims to deliver sustainable earnings to share-
holders.
Enlarge market scope
The changing risk landscape creates opportunities for Swiss Re, as a risk specialist,
by providing opportunities to extend its presence into new markets and to develop inno-
vative products for existing markets.
As a client-driven company, Swiss Re focuses both on deepening relationships with
existing customers as well as on attracting new ones. The Group is actively pursuing
opportunities for growth, for example by increasing its penetration in selected engineer-
ing markets and diversifying its client base for credit solutions. Swiss Re is also exploring
new markets in life and health by developing variable annuity and longevity products in
close cooperation with clients. Geographically, Swiss Re continues to build on its leading
position in Asia, most recently through expansion of its services and reinsurance capabil-
ities in India and China. Further, skills and resources the Group has developed, such
as risk models, asset management and ILS, have significant commercial value for clients,
bringing additional opportunities for growth through cross-selling.
While Swiss Re primarily engages in organic market building, the Group also turns to
transactional activity when its criteria of strategic fit and value creation are met. The
integration of the most recent acquisition, GE Insurance Solutions, is already delivering
substantial synergies.
Advance organisational excellence
The Group’s long-term success depends critically on its ability to attract and retain the
best people, fostering a working culture that embraces both efficiency and effectiveness.
Clients and shareholders benefit from the innovation and responsiveness of Swiss Re’s
results-oriented approach, which applies global capabilities through cross-functional
teams.
Efficiency and excellent client service depend, in turn, on getting the fundamentals
of the business right: effective risk control and disciplined underwriting. To that end,
Swiss Re has separated responsibility for client service, underwriting, reserving and
reporting, allowing market-leading transparency and best in class service, as well
as attractive, sustainable returns for shareholders.
Swiss Re 2006 Annual Report 15
Profile
Knowledge and expertise
Swiss Re employees combine expertise, creativity
and sound judgement to deliver world-class
solutions for clients.
Combining expertise and creativity
Expertise only becomes effective once it
is shared, turning abstract knowledge into
concrete benefits for others. Understand-
ing clients is the key to delivering effective
services. Swiss Re’s Group-wide network
of experts has the creative resources to
develop new solutions and open up new
markets. This innovative thinking goes
beyond product design to encompass risk
management, investment, client service
and technology; in all areas, the Group
seeks the most efficient way to connect
its skills with each client’s specific needs.
Developing a best in class workforce
Only the best people can deliver the best
from Swiss Re’s experience, capital and
technology. The Group continuously de-
velops its workforce, striving to attract and
retain the leading talent in the industry.
It provides advanced technical and profes-
sional training to all levels of the organi-
sation, combining insight from internal,
industry and academic experts.
Engagement for performance
Skills are only one part of Swiss Re’s cul-
ture; understanding and dedication are
what mobilises those skills. The Group
emphasises and supports employee en-
gagement with its strategic direction and
key objectives: it is of the utmost impor-
tance that all employees understand the
Group’s global course and see clearly how
their own work contributes to fulfilling
Swiss Re’s mission and aspiration. This
shared understanding gives each unit
of Swiss Re a mandate to seek the local
solution that best supports global per-
formance.
Swiss Re Academy
In October 2006, Swiss Re unified its global staff and client training under a single
provider. The new Swiss Re Academy combines the 40-year experience of the
Swiss Insurance Training Centre (SITC), one of the world’s leading insurance training
centres, with the acclaimed Insurance Leadership Institute, integrated as part of the
GE Insurance Solutions acquisition. The Academy provides an efficient platform for
sharing best practice internally and with clients, promoting effective knowledge trans-
fer within the Group and the insurance industry.
Three regional training hubs – in Zurich, Hong Kong and Kansas City – support
Swiss Re’s clear client focus. The opening of the new Hong Kong training centre was
a landmark event in 2006, marking Swiss Re’s 50th year of operation in Asia-Pacific
and demonstrating the Group’s commitment to business growth in the region. Further
initiatives to bring training closer to clients include the “On Wings” programme of
customised, on-site courses, as well as new web-based seminars known as “webi-
nars.” These courses are open to both employees and clients.
16 Swiss Re 2006 Annual Report
Leading in thought, leading by actions
Swiss Re is a knowledge-based company
and welcomes opportunities to contri-
bute to advancing industry expertise,
whether through client events, research
colla boration with universities and eco-
nomic research facilities, expert publica-
tions, the Swiss Re Centre for Global
Dialogue or the Swiss Re Academy.
In particular, Swiss Re has established
close relationships with leading educa-
tional institutions, such as the Swiss
Federal Institute of Technology (ETH) in
Zurich, Beijing Normal University and
Rice University in Houston, to gain exter-
nal perspectives on trends impacting
the insurance industry.
In 2006, the Centre for Global Dialogue
in Rüschlikon, Switzerland, hosted over
450 events with more than 11 500 partic-
ipants assessing insurance industry
challenges such as the adverse effects of
developments in liability regimes, oppor-
tunities and risks of nanotechnology or
trends in global energy markets. The Cen-
tre also established an external Advisory
Panel comprised of distinguished scien-
tists, politicians and business leaders,
to explore emerging issues and provide
strategic insights on issues of relevance
to Swiss Re and the global risk industry.
Also, the Swiss Re Academy provided
70 insurance courses to 1 300 participants
from Swiss Re clients in 2006 and inau-
gurated its training centre in Hong Kong.
Swiss Re experts published several in-
depth studies on emerging risks and
industry issues, including such topics as
the effects of pervasive computing on
the insurance industry or the impact of
climate change on European storm dam-
age. The long-running sigma series ad-
dressed, among other issues, the opportu-
nities in the securitisation market, the
potential implications of the Solvency II
Client Markets Forums
In 2006, Swiss Re held a series of Client Markets Forums in New York, Kansas City,
Shanghai and Rüschlikon, providing a platform for sharing knowledge, developing
solutions and enhancing contact between clients and Swiss Re. A wide range of
topics were discussed, including insurance-linked securities, the integrated Prop-
erty & Casualty and Life & Health sales model, and structured insurance and reinsur-
ance solutions. The forums were part of a major Client Markets initiative, to focus
Swiss Re’s products and financial expertise more closely on client needs and build
a global sales community.
The events were highly interactive, with multidisciplinary breakout groups to discuss
high potential client relationships and improved organisational effectiveness. The
active involvement of Swiss Re clients in the panel discussions and workshops provid-
ed important insights that were subsequently combined with Swiss Re’s own market
and product innovation expertise.
After each forum, Swiss Re integrated the feedback collected from clients to identify
opportunities for new solutions and improved business methods. This approach
has already yielded tangible results in the form of strengthened client relationships
and additional, solutions-driven business.
Profile Knowledge and expertise
regime in Europe and the consolida-
tion trend in the life insurance market.
Swiss Re’s publications as well as com-
prehensive information on insurance
industry topics are available on its web-
site: www.swissre.com.
Swiss Re 2006 Annual Report 17
Profile Knowledge and expertise
Issue management at Swiss Re
Swiss Re’s business opportunities derive from the world’s changing risk landscape.
Identifying emerging issues and industry trends, and sharing Swiss Re’s knowledge are
essential to the Group’s success. In 2006, the Issue Management Council recognised
Swiss Re with the W. Howard Chase Award for excellence in issue management. The
award honoured the Group for leadership on strategic topics that affect both business
performance and stakeholder satisfaction. The table below lists a selection of Swiss Re’s
Top Topics, with the Group’s related activities.
Climate change
Insurance-linked securities
Industry relevance
Swiss Re’s actions
and solutions
Insurance-linked securities
(ILS) are an effective risk
management tool to in-
crease capacity and trans-
fer peak and volume insur-
ance risks to the capital
markets
ILS helps reduce capital
requirements and increase
capital efficiency; it reduc-
es earnings volatility and,
in the case of life insurance,
can monetise intangibles
Swiss Re has been a pio-
neer in developing the
ILS market, having under-
written over USD 10 billion
of risks for itself and third
parties
Swiss Re is a leading struc-
turer and underwriter of
bonds for clients, and was
the number one underwrit-
er for natural catastrophe
bonds in 2006
Scientists and economists
believe that climate change
will have a severe impact
on society and the global
economy
Climate change represents
an opportunity as well as
a risk for the insurance in-
dustry and capital markets
alike
Climate change has be-
come an important ele-
ment in many companies’
long-term risk manage-
ment strategies
Swiss Re has been raising
awareness about climate
change for more than ten
years
Swiss Re factors climate
change risks in its risk
selection, pricing and
capacity deployment
Swiss Re has developed in-
novative solutions related
to climate change, such as
risk securitisation and
weather derivatives
Swiss Re is committed to
becoming greenhouse
neutral by 2013
18 Swiss Re 2006 Annual Report
Profile Knowledge and expertise
Nanotechnology
Natural catastrophes
Solvency II
Terrorism
Nanotechnology is expect-
ed to generate a range of
new products and applica-
tions in many industry
sectors
The impact of nanotechnol-
ogy on humans and the
environment is unclear due
to a lack of long-term statis-
tics and standardised test-
ing methods
Swiss Re has dedicated
resources to assess the
potential risks of nanotech-
nology and promote the
development of tailored
risk management principles
Swiss Re supports regula-
tory efforts to prevent in-
creased exposure and
ensure a balanced public
dialogue on possible risks
The insurance industry is
experiencing higher claims,
largely due to broader in-
surance cover and growing
value concentrations
A viable market for catas-
trophe risk depends on
ensuring adequate pricing
models and exposure data
as a basic requirement for
a sound risk management
As a leading reinsurer,
Swiss Re diversifies the
year-on-year variability
inherent in natural
catastrophe business
Swiss Re continuously
refines its modelling tools
to reflect changes in risk
assessment
Swiss Re offers clients tai-
lor-made solutions for their
catastrophe risk portfolios
Solvency II is an ambitious
EU regulatory project to
improve solvency rules
The new regulation is likely
to have a significant impact
on the industry by redefin-
ing capital requirements
Solvency requirements
must recognise the global
nature of reinsurance, par-
ticularly diversification
effects, and ensure optimal
capital efficiency
Swiss Re supports the in-
troduction of Solvency II:
risk-based solvency re-
gimes will improve risk
management practices, as
well as encourage econom-
ic valuation and the use of
robust internal models
Swiss Re works with regu-
lators and clients to help
implement appropriate
capital models, and pro-
mote the recognition of
reinsurance and diversifica-
tion benefits in solvency
requirements
Terrorism risk is privately
insurable to the extent that
it can be assessed, control-
led and adequately priced
Long-term market solutions
require a risk partnership
between insureds, insurers,
reinsurers, capital markets
and governments; the
challenge is to find the
most efficient way to
achieve such public/private
partnerships
Swiss Re supports existing
market solutions and en-
courages the development
of efficient and fairly-priced
products to meet society’s
need for terrorism cover
As the US Terrorism Risk
Insurance Act expires at the
end of 2007, Swiss Re
continues to work with the
industry and the US gov-
ernment to find a perma-
nent solution based on risk
partnership
Swiss Re 2006 Annual Report 19
Profile
Corporate responsibility
Continued business success depends on responsible
value creation. In 2006, Swiss Re maintained its
commitment to applying sustainability principles
to its business activities and playing an active role
in society. The launch of new products addressing
environmental and social challenges was one of
the highlights of the year.
Swiss Re is committed to its overarching
corporate responsibility, which aims to
create sustainable value for its sharehold-
ers and contribute to a responsible socie-
ty, while providing full accountability
to all its stakeholders. The Group-wide
framework for meeting this responsibility
comprises the three pillars of corporate
governance, corporate sustainability and
corporate citizenship. The following sec-
tion covers Swiss Re’s key initiatives in
corporate sustainability and its corporate
citizenship programme.
ment and thus directly influence the rein-
surance business as a whole. Swiss Re
analyses these trends continuously and
responds to them in its operations and risk
management, as well as in solutions for
clients.
Climate change
Swiss Re was one of the first companies
in the financial sector to recognise the
serious implications of climate change
and has made it a central topic in its sus-
tainability efforts.
Corporate sustainability
Environmental and social trends affect the
world’s sustainable economic develop-
After the record losses from hurricanes
Katrina, Rita and Wilma in 2005, the
2006 hurricane season was relatively
Clinton Global Initiative
In 2005, former US President Bill Clinton and the William J. Clinton Foundation
launched the Clinton Global Initiative (CGI) to address four of the world’s most urgent
problems: climate change and energy, poverty, public health, and ethnic or religious
conflicts. The CGI brings together the world’s leading minds and problem solvers in
a shared commitment to concrete actions; Swiss Re was invited to take part because
of its expertise on climate change. Represented by CEO Jacques Aigrain at the 2006
CGI Annual Meeting, Swiss Re attracted particular attention for its “COYou2 Reduce
and Gain” programme, a unique initiative that offers all Swiss Re employees financial
incentives to support private investment in emissions-reducing technologies (such
as hybrid cars, photovoltaic solar panels and solar heat collectors), as well as for
voluntary activities. The aim is to raise climate change awareness among Swiss Re
employees and highlight the contribution they can make as individuals.
20 Swiss Re 2006 Annual Report
benign. In Swiss Re’s opinion, however,
this stemmed from specific seasonal
weather patterns rather than from any
reversal of underlying long-term trends
in natural and man-made climate change.
The Group continues to address these
trends through its four-pronged strategy
of:
deepening its understanding of the risk;
developing new risk transfer products;
reducing its own CO2 emissions;
engaging in international risk dialogue.
Swiss Re supports selected research
projects at scientific institutions. A study
by the Swiss Federal Institute of Technolo-
gy in Zurich (ETH) combining scientists’
climate projections with Swiss Re’s event
models revealed that European winter
storm losses are likely to rise in the long
term, especially those from less frequent
but more severe events. These results
were made public and have been incorpo-
rated into Swiss Re’s windstorm pricing
and Group risk models.
New products can help mitigate the finan-
cial consequences of climate change and
facilitate efforts to tackle it. Swiss Re has
been a leader in the marketing of weather
derivatives – in developed and emerging
markets – as well as a pioneer in insur-
ance-linked securities. In 2006, the Group
closed the first deal for another innovative
product, designed to cover key risks of
Clean Development Mechanism (CDM)
projects. The CDM is a market-based
mechanism introduced under the Kyoto
Protocol that allows emitters in industrial-
ised countries to gain Certified Emission
Reductions (CERs) for investments in
emission-cutting projects in developing
countries. Swiss Re’s product provides
protection against a failure or delay in the
approval, certification or issuance of CERs.
In an effort to reduce its own carbon foot-
print, Swiss Re pledged in 2003 to be-
come greenhouse neutral within ten years,
cutting its own CO2 emissions by 15% and
offsetting the remainder. In 2006, the
number of Group locations using renewa-
ble energy continued to grow and by the
end of the year included London, Munich,
Paris, Rome, Sydney (all 100%), Zurich
(66.6%), Armonk (30%) and Amstelveen
(20%). This has helped to cut power-relat-
ed CO2 emissions by 22.3% from 2003
levels. Emissions from business travel fell
slightly in 2006, but were still higher than
in 2003.
The Group’s long-standing commitment
and expertise has made Swiss Re an influ-
ential voice in the international debate on
climate change. Members of the Group’s
senior management were asked to join in
several major events in 2006, including
CO₂ emissions per employee, Swiss Re Group
2003
2006
Power
Heating
Business travel
Total
kg/employee
3 491
Share in % kg/employee
2 713
53.3
Share in %
43.9
750
2 307
6 548
11.5
35.2
100.0
804
2 660
6 177
13.0
43.1
100.0
Change from
base year
2003 in %
–22.3
7.2
15.3
–5.7
Following the integration of Insurance Solutions, the data for the base year 2003 had to be recalculated
to provide a consistent benchmark. All the data has been verified by PricewaterhouseCoopers, who will
publish an Assurance Report as part of Swiss Re’s full 2006 Corporate Responsibility Report.
Profile Corporate responsibility
discussions between Governor of Califor-
nia Arnold Schwarzenegger and British
Prime Minister Tony Blair, which led to the
establishment of a Global Warming Pact
focussing on renewable energy and emis-
sions markets, and a panel discussion with
British Foreign Secretary Margaret Beckett
on climate security. Furthermore, at the
Annual Meeting of the Clinton Global Initi-
ative, Swiss Re presented a unique initia-
tive aimed at assisting its employees in
cutting CO2 emissions in their private lives.
Solutions for emerging markets
Insurance is a vital precondition for eco-
nomic development, as it provides a relia-
ble mechanism for individuals and compa-
nies to assume risks. The development of
the insurance industry in emerging eco-
nomies faces significant challenges, such
as low income levels, insufficient market
information and regulatory restrictions.
Swiss Re sees great promise in public-pri-
vate partnerships involving governments,
non-governmental organisations (NGOs)
and multilateral institutions such as the
World Bank. In 2006, the Group devel-
oped a parametric earthquake insurance
solution for the Mexican government that
provides an indemnity in the event of an
earthquake exceeding a specified intensi-
ty. Part of this insured risk was placed in
the capital markets through a catastrophe
bond.
Asset management
Swiss Re incorporates its sustainability
expertise into its asset management activ-
ities. The Sustainability Portfolio invests in
companies, funds and projects dedicated
to addressing and profiting from new ap-
proaches to climate change, the low car-
bon economy, water quality and scarcity,
and resource efficiency. In 2006, the
portfolio’s value continued to grow sub-
stantially, to a total of CHF 376 million of
investments and commitments.
Swiss Re 2006 Annual Report 21
Profile Corporate responsibility
Emerging risk management
A reinsurer must remain constantly aware
of emerging risks – developing or chang-
ing risks that are difficult to quantify, but
may have a major impact on the business.
Swiss Re has extended its Systematic
Observation of Notions Associated with
Risks (SONAR) system into a Group-wide
Emerging Risk Management framework
with clearly defined responsibilities to
detect and assess such risks as well as
to identify new threat scenarios from
unexpected correlations. Swiss Re is also
a driving force in the Chief Risk Officer
(CRO) Forum Emerging Risk Initiative,
which published its first CRO briefing in
2006, on climate change and tropical
cyclones.
22 Swiss Re 2006 Annual Report
Corporate citizenship
Swiss Re addresses environmental and
social issues that are of relevance to socie-
ty as a whole and the Group’s business
through its “Sharing Solutions” pro-
gramme. Extending risk management ex-
pertise and financial aid to selected part-
ners, the Group supports sustainability,
humanitarian and community initiatives.
Sustainability initiatives
Swiss Re once again conferred its Re-
Source Award for Sustainable Watershed
Management, originally launched five
years ago. The main award went to a
project in the Philippines compensating
local people for environmental activities
in upstream areas that help to preserve
a sustainable water supply for communi-
ties further downstream. The Group also
continued its support for a project promot-
ing ecological sanitation techniques
around Puzhehei Lake in Yunnan province,
China, a previous award winner with sig-
nificant long-term potential. Swiss Re’s
contribution will help extend sanitation
measures to more private households,
as well as to large-scale animal husbandry
and wastewater treatment.
Humanitarian initiatives
Recent experience shows the importance
of systematic efforts in preventing natural
catastrophes from turning into humani-
tarian disasters. Swiss Re is committed to
making a tangible contribution towards
this goal. It has recently entered into two
long-term partnerships with leading or-
ganisations in the field. As one of seven
selected private sector members of the
International Committee of the Red Cross
(ICRC) Corporate Support Group, whose
first annual meeting was hosted by
Swiss Re, the Group supports the training
and development of ICRC employees and
external staff for emergency situations.
A partnership with Caritas Switzerland
focuses on building earthquake-proof
schools in Pakistan; Swiss Re also sup-
ported the publication of an easy-to-use
handbook on earthquake resistant
construction.
Community initiatives
Swiss Re supports local institutions and
employee-initiated charity projects in
the communities in which it operates.
The Group gained a number of new busi-
ness locations through the acquisition
of GE Insurance Solutions and continues
to sponsor local community-building
efforts in these locations. In Kansas City,
the former headquarters of GE Insurance
Solutions, more than 130 employees
took part in the annual “Community Day”,
assisting two local charities with construc-
tion and renovation work. Continuing an
established tradition, employees also
collected a significant amount of money
for a charity funding the health and human
services safety net in the community. In
line with its Group-wide policy, Swiss Re
complemented the amount with a sub-
stantial contri bution.
Driving performance
Driving performance – The CEO’s view
Jacques Aigrain describes how Swiss Re drives
performance – contributing to clients’ success,
enabling global economic growth, and leveraging
its expertise and long-standing history to identify
future trends and market opportunities.
What developments do you see affecting the performance and value proposition
of the reinsurance industry?
There are many developments, and they all point in the same direction: for a leading
reinsurer, the key performance factors continue to be global reach, deep market knowl-
edge, risk diversification and financial strength over the long term.
Despite a benign hurricane season in 2006, we are seeing increased risks fuelled by
weather and demographic trends; these demand not just experience, but sophisticated,
forward-looking assessment. The liability business equally requires a long-term focus:
a genuine, shared commitment with clients, backed by adequate pricing and sound con-
tract terms. The continued low interest rate environment, combined with greater trans-
parency in pricing and reserving, have sharpened the focus of the industry on underwrit-
ing profitability; at the same time, clients and shareholders both benefit from increased
pricing certainty. Finally, our competitive landscape is marked by increased convergence
of banking, reinsurance and other capital market businesses, demanding strong addi-
tional skills from leading players.
A reinsurer offers a strong value proposition when it efficiently provides a full range of
risk-related solutions. Traditional reinsurance remains our core business; however, our
Swiss Re 2006 Annual Report 23
Driving performance The CEO’s view
“Our scale, diversifica-
tion and expertise are
a unique advantage in
enhancing earnings
quality and stability.”
24 Swiss Re 2006 Annual Report
industry requires a more holistic approach to client needs: not just meeting the increased
demand for coverage, but providing pro-active solutions to changing needs.
Further, recent events have revealed shortcomings in the way both markets and govern-
ments address certain risks, such as terrorism and mega-catastrophes. Some solutions
will involve state and private sector partnership, secured, where necessary, with addi-
tional capacity from the capital markets.
The best prepared reinsurance companies will be those that are strongly capitalised,
have an innovative product offering, and have organisationally adapted to the new reality.
How does the regulatory framework affect industry performance?
We secure risk by providing capital. We can do this efficiently only if the regulatory
framework allows it: regulators, rating agencies and accounting standards need to use
the same economic and risk-based view of a reinsurer’s financial strength. We have
seen encouraging progress in this area, particularly in Europe with the positive steps
taken under the Solvency II project.
Harmonisation of regulatory oversight and mutual recognition of regulatory bodies make
markets more efficient. Improved capital efficiency benefits consumers and economies
by providing accelerated risk transfer with increased capacity at lower intrinsic cost. That
is why Swiss Re is committed to working with regulators to improve risk management
practices and establish a comprehensive regulatory framework consistent with the glo-
bal realities of today’s reinsurance business.
How does your strategic direction drive Swiss Re’s performance?
With the strategic direction introduced last year, we are committing ourselves to
gen erating economic profit growth, reducing earnings volatility, enlarging our market
scope and advancing our organisational excellence. Each has a vital role in keeping
us “best in class” over the long term, building upon the knowledge and commitment
of our employees to provide top quality client service and attractive shareholder returns.
Generating economic profit growth demands a focus on quality of earnings. Our scale,
diversification and expertise in financial markets provide Swiss Re with a unique advan-
tage in enhancing earnings quality and stability. For instance, the Successor programme
for natural catastrophe risks, which we completed in 2006, demonstrated our in-house
capability to transfer peak risks to the capital markets, reducing potential earnings
volatility and freeing capital to support further economic profit growth in other areas.
We are actively seeking to enlarge our market scope by developing innovative products
and identifying new clients and opportunities – again, aiming to make best use of our
unique strength and industry knowledge developed over the past 143 years. A recent
transaction with the Mexican government shows how financial strength and expertise
opens the way to new markets. Such hybrid transactions, merging traditional products
with securitisation, provide governments with an effective new tool for mitigating poten-
tial catastrophe losses. We envisage that other governments will likely seek to follow
Mexico’s example.
Driving performance The CEO’s view
Advancing organisational excellence is key to our success. Efficient processes and
advanced technology create a smoother-running organisation and improve speed and
responsiveness to client services. Delivering our employees’ talents efficiently: that,
ultimately, is what drives Swiss Re’s performance.
What is Swiss Re doing to make itself a stronger company and remain the leader?
The acquisition last year of GE Insurance Solutions strengthened Swiss Re’s position as
the leading reinsurer. We expanded our skills and product offerings, established greater
market presence around the world and hence achieved wider diversification.
“By serving clients
well, we build the
foundation of our own
success.”
At the same time, we are transforming ourselves from being a sole risk taker to a sophis-
ticated risk and capital manager. This opens up new areas of opportunity, but also
requires new efforts to capture these fully. The transactions highlighted in this year’s
Annual Report show the successful cross-fertilisation of our products, the entrepreneurial
spirit and client focus of our teams, and the speed and efficiency of delivery that these
new opportunities demand. By serving clients well, we build the foundation of our own
success.
We want to remain the leading reinsurer over the long term. More than anything, that
depends on the commitment and passion of our people. To maintain a top position,
we must continue to attract, retain and develop the best talents in the industry: people
who will use all the resources available at Swiss Re to create innovative solutions
and deliver outstanding service.
How will Swiss Re develop in a longer term?
Our clients’ risks are our risks. To be their first choice reinsurer, we must know deeply,
not just their needs, but the wider developments of industry, economy and society.
Our continuously developing expertise and skills will support a comprehensive range
of risk management and risk transfer services.
We want to build on our high quality client service solutions, such as the Norwich Union
life transaction illustrated in this Annual Report. We want to develop promising new
markets, as in our recent move into the health business in India through our partnership
with TTK Healthcare Services. We were instrumental in the development of the insur-
ance-linked securities market and we expect to create more life securitisations and catas-
trophe bonds like our own programmes going forward.
Overall, we will build upon our leadership: actively addressing the needs of our clients,
seizing attractive opportunities and further developing capital market solutions. Our
Group combines a strong reinsurance base with a wide scope of risk-related solutions.
Together, these can make Swiss Re a pre-eminent firm, able to provide high quality
services for our clients, superior returns for our shareholders and an attractive workplace
for the most talented people in financial services.
Swiss Re 2006 Annual Report 25
Driving performance
Performance for Swiss Re
Swiss Re completed the largest-ever
catastrophe bond, using its new
Successor facility to secure USD 950
million of cover across four peak risks.
The record hurricane losses in 2005 dra-
matically changed the insurance and rein-
surance markets. The industry faced rising
premiums and a significant con traction
in capacity at the same time as model
adjustments and changes in rating agency
methodologies were tightening capital
requirements. Insurers and reinsurers
turned to the capital markets to fill the
Swiss Re’s Successor programme provides
the Group with a powerful risk management
tool and source of capacity. This innovative
transaction is based on the combined global
expertise of Swiss Re’s traditional reinsurance
and capital markets teams. The structure
opens continuous access to the capital mar-
kets by offering four peak perils (US wind,
European wind, California earthquake and
Japan earthquake) across a wide range of
risk layers, with different trigger options. This
flexibility also makes the package attractive
to a broad spectrum of institutional investors,
thus lowering the overall cost of protection.
Representing the next generation of catas-
trophe bond programmes for Swiss Re,
Successor not only provides the Group with
protection against higher-layer capital events,
but also is an important driver in Swiss Re’s
strategy to reduce earnings volatility.
“The successful placement is an important
milestone in Swiss Re’s strategy to change
the business model by transferring risks into
the capital markets rather than holding them
on the balance sheet.” Dan Ozizmir, Head
of Insurance-linked Securities, Capital Man-
agement and Advisory, Swiss Re
26 Swiss Re 2006 Annual Report
Driving performance Performance for Swiss Re
gap, as these have come to represent
an important new source of capacity.
Swiss Re has long been a market leader
in insurance-linked securitisation, both as
a sponsor for its own needs ( accessing the
capital markets for retrocession capacity)
and as an arranger (structuring and plac-
ing insurance-linked securities for clients).
The Successor programme completed
in June 2006 enabled Swiss Re to gain
access to significant capital in a period
of tight capacity and allowed the Group
to actively manage its potential earnings
volatility.
Members of Swiss Re’s capital markets and
reinsurance teams planning the Successor
transaction. New York team on screen (from left):
Claudine Delavy, Markus Schmutz and Stefano
Sola (Capital Management and Advisory).
Zurich team (from left): Martin Bertogg, Martin
Bisping and David Bresch (Property & Specialty).
Swiss Re 2006 Annual Report 27
Driving performance
Performance for our clients
A Swiss Re reinsurance solution
enabled Norwich Union to improve
capital efficiency and increase its rate
of return on in-force life business.
Life insurance is a long-term business:
the profits for a portfolio of in-force risks
typically take many years to emerge. As
elsewhere in finance, future profits have
a present value; but, for some classes
of insurance business, this value is not
always recognised by regulators. This
prevents life insurers from gaining regula-
tory relief, therefore tying up their capital.
28 Swiss Re 2006 Annual Report
Driving performance Performance for our clients
Norwich Union is part of Aviva, the world’s
fifth-largest insurance group and the biggest
insurer in the UK. Aviva is one of the leading
providers of life and pensions products in
Europe, and has substantial businesses else-
where around the world. As a fast-growing
company, Aviva has a particular need for
efficient capital management.
In late 2005, Norwich Union approached
Swiss Re’s Structured Life Reinsurance Solu-
tions team to discuss its 2006 capital plans.
Drawing on Swiss Re’s broad range of capital
solutions, the two parties created a structure
that met Norwich Union’s requirements for
flexibility, cost-effectiveness and, importantly,
speedy execution: the arrangement was fully
implemented just two months after the first
meeting.
“Swiss Re provided Norwich Union with
capital in a cost effective and flexible manner,
ensuring that our regulatory solvency posi-
tion was maintained at the optimal level.
Swiss Re‘s expert understanding of the me-
chanics of the UK life sector facilitated an effi-
cient and timely delivery of the transaction.”
Howard Kew, Director of Capital Manage-
ment, Norwich Union
Capital restrictions can impair a life insur-
er’s capacity to expand its business, so
Swiss Re offers capital management solu-
tions to life insurance clients, such as
Norwich Union, that unlock future profits.
This provides clients with immediate
capital relief by reducing the amount of
regulatory capital they must hold. Under
a reinsurance financing treaty, a life insur-
er can pledge future profits to Swiss Re,
in return for reinsurance capacity that
transfers risk from the insurer to the rein-
surer and satisfies the criteria for regula-
tory capital. For an appropriate fee, the
reinsurer is liable to pay claims if profits
are below a specified threshold.
Swiss Re works closely with clients to deliver
efficient and innovative solutions.
Howard Kew, Director of Capital Management
(Norwich Union), after a meeting at Swiss Re’s
office in London.
Swiss Re 2006 Annual Report 29
Driving performance
Performance for partnerships
Swiss Re assisted Mexico in becoming
the first country to access the reinsur-
ance and capital markets for parametric
catastrophe protection.
Located in one of the world’s most seismi-
cally active regions, Mexico faces signifi-
cant challenges in managing the human
and economic costs of catastrophic
events. Following the devastating Mexico
City earthquake in 1985, the govern-
ment sought to establish a more focused
disaster risk management. This led to the
creation of the Natural Disaster Fund
The catastrophe bond and parametric reinsur-
ance programme designed by Swiss Re and
the FONDEN working group provides the
Mexican government with a significant source
of alternative insurance capacity that meets
their unique requirements. By issuing a catas-
trophe bond, Mexico benefits from multi-year,
collateralised cover at a fixed price.
Swiss Re’s reinsurance expertise and leading
position in the insurance-linked securities
sector made it the ideal partner to lead the
structuring and bond placement. The transac-
tion was a global effort involving teams in
New York, Mexico, Barbados and Zurich.
“The CAT-Mex transaction provides an alter-
native that allows access to the capital mar-
kets, and a new source of capacity for the
Natural Disaster Fund. The Ministry of Finance
of Mexico, in conjunction with Swiss Re‘s
expertise in insurance-linked securities, shows
that it is possible to conceive public-private
partnerships and develop innovative transac-
tions like the Mexican transaction.” Victor
Cardenas Santiago, Deputy Director of Catas-
trophe Risk, Ministry of Finance and Public
Credit of Mexico
30 Swiss Re 2006 Annual Report
Driving performance Performance for partnerships
(FONDEN), a federal trust for disaster ex-
penses. One of FONDEN’s key strategies
is to use its funding in the most cost-effec-
tive way by acquiring insurance.
In June 2006, Swiss Re structured and
placed a transaction that provided
FONDEN with USD 450 million of cover-
age through an innovative combination
of a catastrophe bond issuance by CAT-
Mex Ltd. and a reinsurance placement.
The transaction shows how Swiss Re’s
global expertise and local market knowl-
edge can open up new public-private
partnerships and help governments
finance rebuilding work in the event of
a natural disaster.
The legal and budgetary groundwork
as well as the project management for
Mexico’s first catastrophe bond were
coordinated by the inter-agency group
that manages FONDEN, including the
Ministry of Finance and Public Credit,
the Interior Ministry, and the trustee for
FONDEN, Banco Nacional de Obras
y Servicios Públicos.
Mexican government and Swiss Re representa-
tives meeting in Mexico City: (from left) Victor
Cardenas Santiago, Deputy Director of Catastro-
phe Risk, and Jose Antonio Gonzalez Anaya,
Head of the Unit of Coordination with States
(both from the Ministry of Finance and Public
Credit of Mexico), Jay Green (Swiss Re, Capital
Management and Advisory) and Richard
Schneider (Swiss Re, Americas).
Swiss Re 2006 Annual Report 31
Driving performance
Performance for the future
A partnership between Swiss Re and
TTK Healthcare Services offers best-
practice solutions for the fast growing
medical insurance market in India.
India is going through a period of rapid
economic development and social
change, in which health is a growing con-
cern. However, state-funded health provi-
sion remains very limited; most medical
expenses are paid directly by patients and
their families, with 85% of the population
having no form of health insurance.
32 Swiss Re 2006 Annual Report
Driving performance Performance for the future
In December 2006, Swiss Re set up a part-
nership with TTK Healthcare Services Pvt Ltd,
one of India’s leading health insurance third-
party administrators. The joint venture will
offer insurance companies a full range of serv-
ices, delivered via an extensive network of
hospitals across India. Effective administra-
tion, medical claims handling and risk man-
agement support, as well as close contact
with healthcare providers will enable local
insurers to improve their profitability, allowing
them to concentrate on growth, distribution
and bringing new products to market to meet
rising consumer demand.
The Indian market will benefit from Swiss Re’s
global and long-standing experience.
Swiss Re offers a wide range of innovative
products, access to international best prac-
tice, proven approaches to risk management
and, importantly, a seamless administration
service for medical insurance clients.
“The strategic partnership between Swiss Re
and TTK heralds a new era for the Indian in-
surance industry. Swiss Re has a strong repu-
tation for trust, innovation, financial strength
and global best practices. Combined with the
local expertise and efficient operations of-
fered by TTK, this positions the new partner-
ship to play an important role in the develop-
ment of the health insurance market in India.”
Sandeep Bakhshi, MD & CEO, ICICI Lombard
General Insurance Co. Ltd, Mumbai, India
In response to this clear need, the Indian
medical insurance market has been grow-
ing by 30% annually for the last four years
and is expected to continue to expand
significantly. However, in order to reach
its full potential, the medical insurance in-
dustry needs to overcome several chal-
lenges, including the poor profitability of
group medical business, incomplete medi-
cal provider networks, inconsistent dis-
ease classification and a fragmented
approach to product development, risk
management and pricing.
Swiss Re’s entry into the market, through
an agreement with TTK Group and the
related partnership with TTK Healthcare
Services Pvt Ltd, will support the insur-
Financial district of Mumbai, India. Rapid
economic development in India is fuelling
demand for health insurance.
ance industry in addressing a number of
these issues. Swiss Re’s expertise in every
link of the medical insurance value chain
will enable Indian insurers to develop
a sustainable and profitable book of health
business.
Swiss Re 2006 Annual Report 33
Financial year
Economic environment and industry trends
2006 was a good year for the global insurance
industry, with solid underwriting results, a below-
average burden from catastrophic events, and
a stable macro-economic and financial environment.
Solid economic growth, yields
moderately up, strong stock market
performance, dollar devaluing
The global economy continued to see
solid growth in 2006, at an average rate
of around 5%. The broad-based expansion
finally reached Western Europe, fuelling
growth rates of 2.5% to 3%. Despite a
slowdown in the second half of 2006, the
US still achieved an average annual rate
above 3% and Japan continued its robust
expansion in excess of 2%. Emerging mar-
kets grew by more than 7% – the 10.7%
growth of the Chinese economy signifi-
cantly contributed to global expansion,
although it also sparked shortages and
price increases in many commodity
markets. Oil prices, which had been
perceived as the most important threat
to the global business cycle, peaked
Stock markets 2002–2006
180
December 2001 = 100
Source: Datastream
160
140
120
100
80
60
40
2002
2003
2004
2005
2006
United States (S & P 500) United Kingdom (FTSE 100) DJ Euro STOXX 50
Japan (TOPIX)
Switzerland (SMI)
Ten-year interest rates
in %
Source: Datastream
6
5
4
3
2
1
0
2002
2003
2004
2005
2006
United States United Kingdom Eurozone
Switzerland
Japan
34 Swiss Re 2006 Annual Report
Financial year Economic environment and industry trends
at close to USD 75 per barrel but eased
to USD 61 by the end of the year, avoiding
a negative impact on worldwide growth.
Interest rates rose moderately throughout
2006: by the end of the year, they were
between 30 and 60 basis points higher
than 12 months earlier. Inflation and credit
spreads between government and corpo-
rate bonds remained stable in 2006 at low
levels. Stocks developed well, with most of
the largest markets posting double-digit
growth rates for the year.
In 2006, the US currency resumed its
devaluation against the major European
currencies (EUR –10%, CHF –7%,
GBP –12%).
Property and casualty insurance:
good underwriting results led
to stronger balance sheets
The most notable development in the
property and casualty industry was the
low level of catastrophe events. Property
insurers fared well in 2006 with only
three events in the billion-dollar range
and total insured catastrophe claims of
USD 15.9 billion. This was mainly due to
the quiet hurricane season in the US and
surrounding areas, as well as the absence
of large catastrophes in Europe.
However, the foundation for the excellent
2006 results was clearly laid by the un-
derlying underwriting profitability, and
most of the primary insurers published an-
other year of positive underwriting results.
In the US, an industry-wide combined ra-
tio of below 95% was achieved, compared
to 101% in 2005, and preliminary infor-
mation suggests similarly good results in
major European markets. Reinsurers, who
are comparably more exposed to large
events, enjoyed a quiet year and outper-
formed the primary sector.
Economic Research & Consulting and sigma
Swiss Re has a team of 20 economists based in Zurich, New York and Hong Kong
that constitute the Group’s centre of competence for the economic analysis of risk
transfer and risk financing solutions, global business cycles, and financial markets.
The sigma studies, a recognised source of market information for more than thirty
years and the team’s flagship publication series, analyse market trends in the insur-
ance and financial services industries.
The recent sigma study on “Securitisation: new opportunities for insurers and inves-
tors” discusses how insurance-linked securities (ILS) offer insurers a financing vehicle
and a means of transferring risks to the capital markets. ILS increase industry capacity,
improve insurers’ return on equity, and reduce the volatility of earnings. Structuring
costs for such securities are coming down as the market grows rapidly. The total
volume of ILS outstanding has grown three-fold over the last five years and is close to
USD 23 billion. Of this, two-thirds or USD 15 billion are life bonds, with the remaining
USD 8 billion covering non-life risks.
For fixed-income investors, ILS provide an attractive rate of return that is not corre-
lated with other bonds, so their addition offers diversification benefits that improve
the portfolio’s performance while lowering its risk. Catastrophe bonds yield a higher
return than corporate bonds with the same rating, yet show less year-over-year
volatility. The investor base for catastrophe bonds has been expanding to include
dedicated catastrophe funds, hedge funds and traditional money managers, in addi-
tion to insurance and reinsurance companies.
All sigma studies can be downloaded electronically or ordered as a print copy from
Swiss Re’s homepage at www.swissre.com in English, German, French, Spanish,
Italian, Japanese and Chinese.
Insured losses 1970–2006
120
USD billions, at 2006 prices
Source: Swiss Re
90
60
30
0
1970
1975
1980
1985
1990
1995
2000
2005
Natural catastrophes Man-made catastrophes
Swiss Re 2006 Annual Report 35
Financial year Economic environment and industry trends
Outlook
Primary insurance premium volumes
in industrialised countries are expected
to grow in line with the long-term rise
in GDP (between 3% and 4% per year).
The demand for risk transfer will con-
tinue to increase, although premium
rates are showing signs of softening
from their current high point in the
cycle. Premium increases in emerging
markets should outpace overall eco-
nomic growth. Underwriting results for
non-life insurance will remain strong
in most segments through 2007.
Global life reinsurance premiums are
declining, in particular due to lower
cession rates in the US and UK, where-
as other markets are expected to grow
in line with primary market growth.
Due to the sustained underwriting disci-
pline of recent years, the quality of current
non-life profits is far superior to those seen
in the second half of the 1990s, when ex-
cellent results were driven by a booming
stock market rather than sound technical
pricing.
Although improvements in general eco-
nomic activity triggered a rise in insurance
demand, stable or declining primary
rates in most lines of business meant that
premium growth was sluggish for insurers,
while reinsurers also experienced low
growth as clients increased their retention
of business, reflecting improved financial
health.
Life insurance: back on the road
of expansion
Life insurance continued to expand in
2006, with positive premium growth in
all major regions. First estimates indicate
that markets in the developed world grew
between 5% and 10%, with a global aver-
age of around 7%. However, average
growth has not regained the high levels
seen in the late 1990s.
New business sales in the largest markets
show a mixed picture for 2006. Growth
rates reached double digits in the UK
and Germany, and were close to ten per-
cent in the US –however, in Spain, Italy
and Japan, development was slow or even
negative. Annuity and pension business
achieved particularly high growth rates, as
private customers are increasingly aware
of their old age protection gap. Term sales
were sluggish in the US and UK, but strong
in Southern Europe, where mortgage-re-
lated products profited from the continuing
buoyancy of the housing market.
Premium income growth in life and health
reinsurance developed only moderately
in 2006. The main reasons for this were
lower cession rates in the US, with a shift
from quota share to excess of loss covers,
as well as the increased use of alternative
solutions (such as securitisation) due to
higher reinsurance prices and slowing
term sales in the US and UK.
Due to the ongoing restructuring of the
primary life industry, the market for the
management of closed blocks of business
grew in 2006, particularly in the UK.
36 Swiss Re 2006 Annual Report
Financial year
Group results
Strong underlying performance across all
businesses, combined with low catastrophe
losses and a solid investment performance,
produced net income of CHF 4.6 billion and
excellent earnings per share of CHF 13.49.
Swiss Re reported net income of CHF
4.6 billion in 2006, representing a 98%
increase compared to the previous
year. Earnings per share rose by 81% to
CHF 13.49.
Based on average exchange rates for 2006
and 2005, the Swiss franc remained rela-
tively stable against the US dollar (+0.9%),
the Euro (+1.5%) and the British pound
(+1.8%).
Premiums earned increased by 10% to
CHF 29.5 billion.
The Property & Casualty business main-
tained its strict underwriting discipline
and reported premiums earned of
CHF 17.4 billion, up 7% from 2005. This
increase was largely due to the acquisition
of GE Insurance Solutions, which was
partially offset by reductions due to higher
client retentions and lower demand for
non-traditional products.
Premiums and fee income in the Life
& Health business increased by 13% to
CHF 11.9 billion, reflecting the acquisition
of GE Insurance Solutions as well as new
business written.
Premiums for the Credit Solutions unit of
the Financial Services business grew by
21% to CHF 1.1 billion, reflecting success-
ful renewals in 2006.
Net investment income was CHF 7.0
billion, a 14% increase over the previous
year. This rise was due to increasing
yields on fixed income securities, overall
portfolio growth from strong operating
cash flows and the GE Insurance Solutions
port folio.
Net realised investment gains were
CHF 1.9 billion. This represents a decrease
of 44%. In 2005, realised gains on fixed
income securities were higher due
to sales of USD 1 billion of mostly BBB-
rated corporate bonds in North America.
2005 also included a large unrealised
gain due to currency remeasurement.
Trading revenues increased by 89% to
CHF 654 million, reflecting growth in
Financial Services fee business, particular-
ly in Capital Management and Advisory.
Other revenues were CHF 280 million,
a decrease of 1%.
Claims and claim adjustment expenses
decreased by 20% to CHF 11.8 billion,
reflecting excellent claims experience
during the year. The increase in life and
health benefits by 11% to CHF 9.6 billion
reflects both the inclusion of GE Insurance
Solutions and growth in the business.
Swiss Re 2006 Annual Report 37
Financial year Group results
Interest credited to policyholders de-
creased by 6% to CHF 2.8 billion.
Acquisition costs increased by 3% to
CHF 6.1 billion. The acquisition cost ratio
was 20.6% in 2006 compared to 22.0%
in 2005, partly due to the purchase
GAAP adjustment eliminating the historic
deferred acquisition cost of GE Insurance
Solutions, resulting in less amortisation
in the year.
Other operating costs and expenses were
CHF 4.1 billion in 2006, an increase of
33% over 2005. This rise was mainly due
to the inclusion of GE Insurance Solutions,
increased variable compensation reflect-
ing the much higher business performance
in 2006, restructuring costs and financing
expenses. Overall, the cost ratio was 10.2%
in 2006 compared with 8.1% in 2005.
The tax expense in 2006 was CHF 1.3
billion. This represents an effective tax rate
of 22%, compared to 10% in the prior
year. In 2005, the tax rate was impacted
by currency exchange remeasurement
gains in pre-tax income, and by deferred
and current tax expense, including chang-
es in valuation allowances and the tax
treatment of goodwill and inter-company
dividends.
38 Swiss Re 2006 Annual Report
Income reconciliation
CHF millions
Operating income
Property & Casualty business
Life & Health business
Financial Services business
Total operating income
Corporate Centre expenses
Items excluded from the segments:
Net investment income
Net realised investment gains/losses
Foreign exchange gains/losses
Financing costs
Restructuring costs
Other income /expenses
Net income before tax
2005
2006
Change in %
830
1 645
379
2 854
–386
64
–4
462
–326
–18
–87
2 559
5 016
1 682
460
7 158
–324
82
–297
–55
–520
–117
–71
5 856
>250
2
21
151
–16
28
>250
–112
60
>250
–18
129
Net cash flows from operating activities
decreased by 21% to CHF 1.5 billion, re-
flecting in part the increased claim pay-
ments related to large natural catastrophe
events which occurred in the third and
fourth quarters of 2005.
Shareholders’ equity rose by 27% to
CHF 30.9 billion. The increase was princi-
pally due to excellent earnings over the
year and the equity raised during the year
in conjunction with the financing of the
GE Insurance Solutions acquisition.
Return on equity increased to 16.3% from
10.3% in 2005, reflecting strong earnings
in 2006.
Income reconciliation
The above table reconciles the income
from Swiss Re’s segments and the opera-
tions of its Corporate Centre with the
Group consolidated net income before tax.
Net realised gains or losses on certain
financial instruments, certain currency
exchange gains and losses and other
income and expenses – such as indirect
taxes, capital taxes and interest charges –
have been excluded in the assessment
of each segment’s performance.
Financial year
Investments
Swiss Re continued to deliver strong investment
performance with a return on investments of 5.3%.
Asset management strategy
Swiss Re’s investment strategy has two
goals: meeting the Group’s insurance obli-
gations and achieving an attractive risk-
adjusted return. Insurance obligations
are generally matched using fixed income
securities, where currency, duration and
credit exposure are managed to address
the various liability profiles. Funds not
needed to support insurance obligations
are managed to generate a positive abso-
lute risk-adjusted return through a variety
of investment vehicles. Swiss Re meas-
ures and monitors investment risk in com-
parison with a notional minimum risk port-
folio representing the liability profile of
the business.
All data relating to the investments ac-
quired with GE Insurance Solutions has
been successfully migrated to Swiss Re’s
platform, thus ensuring fully integrated
risk management.
Investment result
The investment result for assets held for
linked liabilities relates to separate ac-
count business and other contracts where
the Group invests the contract holder’s
funds, as directed by the contract holder.
All investment performance is passed
through to the contract holder and does
not belong to Swiss Re. Therefore, the
following comments on the investment
performance and the investment portfolio
exclude assets held for linked liabilities.
Investment performance
Swiss Re delivered a strong investment
result in 2006 as higher fixed income
yields offset a lower net realised
investment gains.
Overall, the return on investments was
5.3%, compared with 6.3% in 2005
which benefited from a large currency
exchange remeasurement gain.
The investment portfolio grew by 30%
over the year, from CHF 125.0 billion to
CHF 162.7 billion, including CHF 29.8 bil-
lion from the acquisition of GE Insurance
Solutions in June 2006 and CHF 12.2
billion from the Admin ReSM acquisition of
GE Life UK business in December 2006.
At the end of 2006, Swiss Re’s overall
gross asset allocation was 8% in equity
securities, 79% in fixed income, 2% in real
estate, 8% in cash and cash equivalents,
and 3% in other assets.
Fixed income
Swiss Re successfully captured market
movements by actively managing the
duration of the portfolio as bond yields
rose over the course of 2006 in the major
bond markets. The Group also liquidated
Investment results
CHF millions
Net investment income
Fixed income
Equities
Other asset classes
Investment expenses
Interest paid on cedent deposits
Assets held for linked liabilities
Net realised investment gains
Fixed income
Equities
Other asset classes
Assets held for linked liabilities
Currency exchange remeasurement and
designated trading portfolios1
Total
Total excluding assets held
for linked liabilities
Return on investments (in %)2
2005
6 137
4 603
164
1 224
–292
–313
751
3 474
481
566
135
1 396
896
9 611
7 464
6.3
2006
6 990
5 582
249
1 462
–373
–600
670
1 948
144
850
–322
1 319
–43
8 938
6 949
5.3
Change in %
14
21
52
19
28
92
–11
–44
–70
50
<–250
–6
–105
–7
–7
¹
²
Designated trading portfolios are foreign currency denominated trading fixed income securities, which
back certain foreign currency denominated liabilities.
At average currency exchange rates; excluding result from assets held for linked liabilities
Swiss Re 2006 Annual Report 39
Financial year Investments
the large municipal bond portfolio ac-
quired with GE Insurance Solutions.
The average running yield on Swiss Re’s
portfolio increased from 4.6% in 2005
to 4.8% in 2006.
Credit spreads ended the year little
changed despite market adjustments in
May and June, when equity markets
weakened and volatility rose. Swiss Re
maintained a sizeable credit position
during 2006 – largely in the US dollar life
and health portfolio. The GE Insurance
Solutions and the GE Life UK acquisitions
added CHF 6.5 billion and CHF 6.6 billion
of corporate bonds to the portfolio respec-
tively, increasing the Group’s total gross
exposure from CHF 21.0 billion at the end
of 2005 to CHF 33.3 billion at the end
of 2006. In addition to sales, mostly in
acquired portfolios, the Group purchased
credit default swaps on investment grade
indices with the majority of the protection
acquired in the A and BBB ratings. The
net effect of the hedges was to reduce
Swiss Re’s stress test exposure to widen-
ing credit spreads to CHF 1.2 billion on
average in 2006.
Swiss Re’s fixed income portfolio rose
to CHF 129.3 billion in 2006 from
CHF 104.0 billion in 2005, including
CHF 23.9 billion related to GE Insurance
Solutions and CHF 8.0 billion to GE Life
UK business. The portfolio increase was
partly offset by a shift to equities, as
well as by the weakening US dollar com-
pared to the Swiss franc. Net investment
income on the fixed income portfolio grew
by 21% to CHF 5.6 billion. Net realised
gains on fixed income securities were
CHF 144 million in 2006, compared to
CHF 481 million in 2005 which benefited
from a sizeable sale of BBB-rated corpo-
rate bonds.
Net unrealised gains of CHF 2.2 billion at
the end of 2005 decreased to CHF 1 bil-
lion at the end of 2006. However, as a
40 Swiss Re 2006 Annual Report
Allocation of investments as of 31 December 2006
Total CHF 162.7 billion¹
8% Equities
3% Other
8% Cash and cash
equivalents
2% Real estate
79% Fixed income
Investments by currency as of 31 December 2006
Total CHF 162.7 billion¹
4% CAD
6% Other
17% GBP
17% EUR
¹ Excluding assets held for linked liabilities of CHF 23.3 billion
2% CHF
54% USD
major portion of the fixed income portfolio
was matched by duration to the insurance
liabilities, the market movements had little
economic impact.
Equities
After a strong performance during the first
four months of 2006, equity markets cor-
rected in May and June before resuming
their upward trend for the rest of the year.
Swiss Re successfully protected its earn-
ings during this period by using equity de-
rivative instruments. During the second
half of 2006, Swiss Re increased its gross
exposure from CHF 8.4 billion at the end
of 2005 to CHF 13.2 billion at the end
of 2006, to take advantage of rising stock
prices.
While Swiss Re continued to favour Euro-
pean equities during 2006, it tactically
lowered its exposure to Asian equities and
increased its appetite for US equities, es-
pecially in financial, technology and health
care stocks. Listed real estate also per-
formed very well.
Net realised investment gains on publicly
traded equities increased to CHF 850 mil-
lion from CHF 566 million in 2005 and
net unrealised gains on the balance sheet
were CHF 2.0 billion at the end of 2006,
compared to CHF 1.1 billion at the end
of 2005.
The net effect of equity hedges was to
reduce Swiss Re’s stress test exposure
(based on a 30% fall in traded equity
markets with a simultaneous increase in
Financial year Investments
volatility) to CHF 1.2 billion on average
in 2006.
Other
Other includes the costs (net realised
losses) of CHF 396 million for the deriva-
tives used to hedge the equity and corpo-
rate bond portfolios against potential large
declines in equity markets or widening of
spreads. In addition, costs (net realised
losses) of CHF 182 million were increased
for various reinsurance derivatives, reflect-
ing the lower level of natural catastrophes
in 2006. Aggregate costs on derivatives
were more than offset by the performance
of the underlying portfolios in 2006.
In September 2006, Horizon 21 and
Swiss Re combined their private equity
fund of funds businesses. The Group con-
tributed CHF 3.1 billion of assets to the
partnership. Swiss Re also became a stra-
tegic shareholder of Horizon 21 Private
Equity Holding with a 30% stake.
In February 2007, Swiss Re sold its London
office building at 30 St Mary Axe. Real-
ised gains from this transaction will be
recorded in 2007 and future years.
Investment expenses
Investment expenses increased in line
with the growth in assets under manage-
ment.
Interest paid on cedant deposits
The increase in interest paid on cedant
deposits was mainly due to higher interest
credited to third parties as a result of the
full year impact from securitisation trans-
actions undertaken during 2005 and
fund withheld covers acquired as part of
GE Insurance Solutions.
Asset-liability management at Swiss Re
Asset-liability management (ALM) is an integral part of the way Swiss Re monitors
and manages financial market risk. It involves splitting Swiss Re’s economic balance
sheet into two virtual balance sheets: one exposed to insurance risk and the other
to financial market risk.
The insurance risk balance sheet shows the market-consistent value of insurance
liabilities and capital on the liability side and a notional “minimum risk portfolio” on
the asset side. This notional portfolio represents investments – typically cash and
fixed income instruments replicating the risk characteristics of future liability cash
flows – that minimise financial market risk relative to the liabilities.
The market risk balance sheet shows the Group’s actual investments on the asset side
and the minimum risk portfolio as a liability, which is then used as the basis for setting
the benchmark for Swiss Re’s Asset Management. Combining both balance sheets
reproduces the full Group balance sheet.
Group balance sheet
Insurance risk
Market risk
Assets
Liabilities
Minimum
risk
portfolio
=
Liabilities
Assets
+
Minimum
risk
portfolio
Capital
Capital
In particular, the Group monitors the potential impact from interest rate changes on its
investment and minimum risk portfolios. The interest rate exposure is measured in
terms of the change in value of interest rate sensitive instruments from an upward
shift of key interest rates by 1 basis point (price value of 1 basis point). In addition,
interest rate risk is assessed by scenario analysis, and quantified in terms of Value at
Risk (VaR) and Tail VaR (expected shortfall) for various confidence levels and holding
periods.
The interest rate risk of the Group is managed relative to the minimum risk portfolio.
As at 31 December 2006, assets and liabilities were closely matched, resulting in
moderate interest rate risk for the Group.
Asset-liability match of Swiss Re Group as at 31 December 2006
Price value of 1 basis point
1
1
1
2
2
2
3
3
3
5
5
5
10
10
10
20
20
20
30
30
30
Maturity of key interest rates in years
Investment risk portfolio Minimum risk portfolio Net
Swiss Re 2006 Annual Report 41
Financial year
Summary of financial statements
Income statement
CHF millions
Revenues
Premiums earned
Fee income
Net investment income
Net realised investment gains
Trading revenues
Other revenues
Total revenues
Expenses
2005
2006
Change in %
26 891
881
6 137
3 474
346
283
38 012
29 515
879
6 990
1 948
654
280
40 266
10
0
14
–44
89
–1
6
Claims and claim adjustment expenses
–14 758
–11 799
–20
Life and health benefits
Interest credited to policyholders
Acquisition costs
Other operating costs and expenses
Total expenses
Income before income tax expense
Income tax expense
Net income on ordinary activities
Earnings per share in CHF
Basic
Diluted
Changes in shareholders’ equity
CHF millions
Balance as of 1 January
Net income
Change in unrealised gains on securities, net
Change in foreign currency translation
Dividends
Purchase/sale of treasury shares
and shares issued under employee plans
Other changes in equity
Balance as of 31 December
–8 668
–3 019
–5 927
–3 081
–9 594
–2 827
–6 079
–4 111
–35 453
–34 410
2 559
–255
2 304
5 856
–1 296
4 560
11
–6
3
33
–3
129
>250
98
7.44
7.14
13.49
12.53
81
75
2005
20 495
2 304
–226
2 272
–497
30
–15
2006
24 393
4 560
322
–1 176
–776
–63
3 624
24 393
30 884
Change in %
19
98
242
–152
56
<–250
>250
27
42 Swiss Re 2006 Annual Report
Financial year Summary of financial statements
Summary balance sheet
CHF millions
Assets
Investments
Fixed income securities
Equity securities
Policy loans, mortgages and other loans
Investment real estate
Short-term investments, at amortised cost which
approximates fair value
Other invested assets
Total investments
Cash and cash equivalents
Reinsurance assets
Deferrred acquisition costs and other intangible assets
Goodwill
Financial services assets
Other assets
Total assets
Liabilities
Unpaid claims and claim adjustment expenses
Liabilities for life and health policy benefits
Provisions for linked liabilities
Unearned premiums
Funds held under reinsurance treaties
Reinsurance balances payable
Income taxes payable
Deferred tax liabilities
Financial services liabilities
Short-term debt
Accrued expenses and other liabilities
Long term debt
Total liabilities
Total shareholders’ equity
Total liabilities and shareholders’ equity
Summary cash flow statement
CHF millions
Cash flow from operating activities
Cash flow from investing activities
Cash flow from financing activities
Reclassification to Financial Services assets
Effect of foreign currency translation
Change in cash and cash equivalents
Cash and cash equivalents as of 1 January
Cash and cash equivalents as of 31 December
2005
2006
Change in %
93 801
19 592
7 305
1 729
4 539
3 635
115 749
31 673
7 058
4 227
9 464
4 336
130 601
172 507
8 368
37 872
11 928
3 429
22 361
6 740
13 606
47 636
12 820
4 838
32 352
7 541
221 299
291 300
71 759
31 081
34 115
6 563
10 941
4 673
896
2 838
95 011
44 899
42 834
8 025
10 531
6 832
866
2 685
22 355
32 373
1 015
4 818
5 852
1 917
6 470
7 973
196 906
260 416
24 393
30 884
221 299
291 300
23
62
–3
144
109
19
32
63
26
7
41
45
12
32
32
44
26
22
–4
46
–3
–5
45
89
34
36
32
27
32
2005
1 972
–3 630
–77
–
422
–1 313
9 681
8 368
2006
1 554
3 044
3 250
–2451
–159
5 238
8 368
13 606
Change in %
–21
184
>250
>250
–138
>250
–14
63
Swiss Re 2006 Annual Report 43
Financial year
Property & Casualty business
Operating income increased to CHF 5.0 billion,
reflecting both strong underlying performance
and the lower level of natural catastrophe events.
Business developments
2006 was a strong year for property, engi-
neering, marine and aviation lines. Eco-
nomic growth and development trends,
combined with heightened awareness of
weather-related risk, kept demand and
prices for natural catastrophe exposures
at high levels. Combined with below-aver-
age claims frequency and severity, this
allowed property insurers and reinsurers
to achieve strong results. The increased
demand attracted additional capacity to
the market, stabilising price levels late in
the year. Swiss Re continued to manage
its natural catastrophe exposure using var-
ious hedging instruments to reduce year-
to-year claims volatility.
Airline facultative accounts, many of
which renew in the fourth quarter, saw
significant price reductions. Swiss Re
responded by reducing its market share
by 30 percent in this segment. Treaty
reinsurance and smaller general aviation
accounts on the other hand experienced
only modest reductions, enabling
Swiss Re to maintain its leading position
in this highly profitable segment.
Terrorism exposure received continued
attention. In the US, the Terrorism Risk
Insurance Act legislation was extended
while the industry continues to pursue
a permanent public-private partnership
solution. In Europe, both France and
Belgium made legislative enhancements
to terrorism coverage.
The casualty segment has reached a chal-
lenging point in the business cycle. Price
competition increased in 2006 and there
is a noticeable trend towards higher client
retentions. Rate levels were mostly flat or,
in some instances, decreased slightly.
Swiss Re’s strong underwriting discipline
ensures that it achieves its overall profit
margins and deploys capital to areas that
add the most economic value.
Further positive developments in the US
legal landscape suggest a promising trend
for the liability environment. Swiss Re wel-
comes these legislative changes and court
rulings, and continues to carefully monitor
their effects on the industry to gauge their
sustainability, especially as some of them
are translating into premature premium
reductions – particularly in workers’
compensation.
Despite encouraging steps in the US relat-
ed to compensation for bodily injury
claims, elsewhere motor third party liabili-
ty claims continue to rise. For example in
the UK and France courts recently reo-
pened old claims and insurance compa-
nies had to consider late reserving adjust-
ments. Swiss Re is responding to these
developments by maintaining its strict
underwriting discipline, adjusting prices
and developing new products.
Clients benefited from Swiss Re’s rapid
integration of Insurance Solutions, which
established a uniform philosophy and un-
derwriting approach across all lines and
extended the benefit of Swiss Re’s exper-
tise and capacity to all clients in year-end
renewals.
44 Swiss Re 2006 Annual Report
Business results
Operating income increased from CHF
0.8 billion in 2005 to CHF 5.0 billion in
2006. This improvement reflects three
factors: strong performance across all
lines of business, a lower level of natural
catastrophe claims compared to 2005
and the contribution from GE Insurance
Solutions in the second half of the year.
Underlying portfolio profitability increased
as a result of attractive rates, as well as the
tighter terms and conditions introduced in
previous years. Claims from natural catas-
trophes amounted to CHF 0.7 billion, or
3.8% of premiums, compared to CHF 3.0
billion or 17% of premiums in 2005. The
acquisition of GE Insurance Solutions fur-
ther diversified Swiss Re’s book of busi-
ness, in particular in the US regional prop-
erty and casualty business.
Net investment result increased by 14% to
CHF 3.6 billion, reflecting higher interest
rates and overall portfolio growth.
Premiums earned
Premiums earned increased by 7%, in-
cluding the contribution of GE Insurance
Solutions in the second half of the year,
which provided 14% of total premiums.
Premiums for non-traditional business
fell by 61%, reflecting a general slowdown
in demand for these covers. Excluding
the impact of GE Insurance Solutions, tra-
ditional volumes were affected by a 7%
decrease in facultative business and a
4% reduction in treaty business. Treaty
renewals during the year were marked by
Swiss Re’s move to reduce liability busi-
ness as well as by stable volume in prop-
erty. The general shift from proportional to
non-proportional solutions continued.
Financial year Property & Casualty business
Property & Casualty business results
CHF millions
Revenues
Premiums earned
Net investment income
Net realised investment gains
Trading revenues
Fees, commissions and other revenues
Total revenues
2005
2006
Change in %
16 346
1 988
1 188
27
46
19 595
17 441
2 883
752
4
74
21 154
Expenses
Claims and claim adjustment expenses
–14 430
–11 306
Acquisition costs
Other operating costs and expenses
Total expenses
–3 411
–924
–3 459
–1 373
–18 765
–16 138
7
45
–37
–85
61
8
–22
1
49
–14
Operating income
830
5 016
>250
Thereof:
Traditional business
Non-traditional business
639
191
4 925
91
>250
–52
Ratios for traditional business
Claims ratio (in %), excluding unwind of discount
Expense ratio (in %)
Combined ratio (in %),
89.3
24.8
63.3
26.3
excluding unwind of discount
114.1
89.6
Premiums earned 2006 by division
Total CHF 17.4 billion
11% Asia
38% Americas
51% Europe
Swiss Re 2006 Annual Report 45
Financial year Property & Casualty business
46 Swiss Re 2006 Annual Report
Combined ratio
Strong underwriting performance im-
proved the combined ratio for traditional
business from 114.1% in 2005 to 89.6%
in 2006. This change was also due to the
absence of exceptional natural catastro-
phe claims experienced in the second half
of 2005. Liability experience improved
significantly compared to the previous
year. Purchase GAAP accounting applied
on GE Insurance Solutions accounts at
acquisition requires acquired assets and
liabilities to be measured at fair value. The
resulting discount of Property & Casualty
reserves will unwind over the estimated
average duration of the reserves. The dis-
count, net of capital cost, increased the
combined ratio by 0.8 percentage points
in 2006, which is more than offset by the
investment returns on the assets backing
the liabilities.
Expense ratio
The expense ratio rose by 1.5 percentage
points to 26.3% in 2006. The increase
was mainly due to a rise in profit sharing
paid to clients, reflecting the higher profit-
ability of the business.
Lines of business
Swiss Re continues to actively manage
its mix of business, directing capital to
those lines that generate superior returns.
All lines of business, except for motor and
accident, contributed to the combined
ratio improvement, thanks to increased
rates and the lower level of natural catas-
trophes and other large losses.
Property
CHF millions
Premiums earned
2005
2006
5 095 6 063
Operating income/loss
–66
2 371
Combined ratio (in %)
111.2
70.7
Combined ratio (in %),
excluding unwind of discount 111.2
70.1
Premium growth stemmed from all divi-
sions. The increase is mainly due to
GE Insurance Solutions’ contribution (13%
of premiums), increased rates at 2006
renewals and new business written in the
US. Higher retentions by ceding compa-
nies in Europe partially offset this increase
in volume. The underwriting result im-
proved in all regions, with a major contri-
bution from the UK property business.
After a heavy year in 2005 for large North
Atlantic hurricanes, the US benefited from
a much lighter burden of large natural
catastrophe claims in 2006. Strong recent
premium growth in the US demonstrates
good cycle management, capturing very
attractive rates, terms and conditions.
The combined ratio improved from 111.2%
to 70.1% excluding the unwind of reserve
discount, reflecting the lower incidence
and severity of both natural catastrophes
and man-made claims.
Liability
CHF millions
Premiums earned
Operating income/loss
Combined ratio (in %)
Combined ratio (in %),
2005
2006
4 095 4 563
–118
1 144
133.2 107.4
excluding unwind of discount 133.2 105.9
The increase in premiums earned for the
liability business is principally due to the
contribution of Insurance Solutions in the
second half of the year.
Liability experience improved significantly
compared to 2005, reflected in a 27.3%
decrease in the combined ratio excluding
the unwind of reserves discount. Overall,
liability business achieved an operating
profit of CHF 1.1 billion reflecting the sub-
stantial investment income earned on the
assets backing the claims reserves.
Financial year Property & Casualty business
Motor
Specialty lines
2005
CHF millions
Premiums earned
Operating income
Combined ratio (in %)
Combined ratio (in %),
excluding unwind of discount 104.3 102.8
2006
2 070 1 923
352
104.3 103.5
246
Motor pricing remained stable and terms
and conditions in general were un-
changed. France reported higher claims
as an upward trend in bodily injury awards
continued.
Swiss Re maintained disciplined under-
writing to improve the quality of its motor
book, which led to a 7% decrease of pre-
miums earned. Operating income was
CHF 352 million compared to CHF 246
million in the prior year.
Accident
CHF millions
Premiums earned
Operating income
Combined ratio (in %)
Combined ratio (in %),
2005
2006
812 1 057
275
113
95.3 127.9
CHF millions
Premiums earned
Operating income
Combined ratio (in %)
Combined ratio (in %),
excluding unwind of discount 104.2
2005
2006
2 785 3 251
945
83.4
302
104.2
83.2
Specialty lines improved their perform-
ance significantly, particularly in marine
as well as positive run-off in aviation and
space. Excluding the contribution from
GE Insurance Solutions, premium volume
remained stable at CHF 2.8 billion.
Marine business benefited from increased
rates at the 2006 renewals, due mainly to
the hurricanes in the US during 2005.
Overall, operating income grew substan-
tially to CHF 945 million compared to
CHF 302 million in the previous year,
benefiting from the increase in premiums.
Non-traditional
CHF millions
Premiums earned
2005
1 489
191
2006
584
91
excluding unwind of discount
95.3 126.6
Operating income
The combined ratio is not a suitable meas-
ure for some non-traditional treaties, since
the source of profits typically arises from
a combination of investment performance
and underwriting performance. Overall,
there was a significant reduction in non-
traditional premiums in all lines, mainly
due to the non-renewal of certain large
quota share agreements. Profitability de-
creased compared to the previous year,
reflecting the lower volume of business.
Premiums earned grew significantly, by
30%. Most of the increase stemmed from
Asia and the Americas. GE Insurance
Solutions contributed CHF 249 million
to premiums earned in 2006, mostly in
the US.
Reserve strengthening in the US and the
impact of a large proportional contract
led to an increase in the combined ratio.
Swiss Re continues to manage this line
carefully, including shifting to more short
tail lines in the US and further reducing
workers’ compensation business.
While the underwriting performance was
low in 2006, the accident line remained
profitable due to the investment income
on the claims reserves.
Swiss Re 2006 Annual Report 47
Financial year
Life & Health business
Return on operating revenues rose to 10.0%,
reflecting solid underlying results. Growth was
achieved through both business expansion as
well as acquisitions.
Business developments
In the US, premiums grew moderately
year-on-year despite declining cession
rates. The underwriting and risk manage-
ment of primary insurers continues to
improve. The mortality experience in
North America for the Life & Health busi-
ness was stable over the year.
The acquisition of GE Insurance Solutions
significantly expanded Swiss Re’s product
range and geographic reach, particularly
in Europe. With more than 98% of GE
Insurance Solutions’ life and health busi-
ness retained since completion, the acqui-
sition particularly increased the Group’s
presence in living benefits lines. Swiss Re
successfully grew its UK guaranteed criti-
cal illness business, facilitated by GE Insur-
ance Solutions’ position as the leading
reinsurer in this field, which further diver-
sified the Group’s book by adding addi-
tional health business.
New business in Asia continued to reflect
strong profitable growth throughout the
region and across both life and health
business lines.
In December 2006, Swiss Re successfully
completed the acquisition of the GE Life
UK business, providing further scale and
infrastructure for Swiss Re’s Admin ReSM
business in the UK. This acquisition is
Swiss Re’s largest Admin ReSM deal to
date, increasing assets acquired by over
CHF 20 billion.
In January 2007, Swiss Re transferred a
further USD 705 million (CHF 885 million)
of extreme mortality risk to the capital
markets through its Vita Capital securitisa-
tion programme. Interest was strong in
Swiss Re’s third mortality catastrophe
bond, enabling peak mortality exposures
to be managed in a sustainable and capi-
tal-efficient manner. Part of the issuance
has been used to replace cover provided
by the first Vita issuance, which expired
at the end of 2006.
Business results
The operating result, excluding non-
participating realised gains, rose to
CHF 1.5 billion in 2006, an increase of
14%. The business acquired as part of GE
Insurance Solutions contributed CHF 66
million to the operating result for 2006.
The overall Life & Health return on operat-
ing re venues of 10.0% exceeded the pre-
vious year’s return of 9.6%, reflecting solid
underlying performance in all lines.
The traditional life operating result de-
creased to CHF 688 million. While 2006
mortality experience was in line with
expectations, 2005 benefited from favour-
able US mortality experience as well as
the release of the unused 2004 tsunami
provision of CHF 52 million. The tradition-
al health result improved by CHF 182 mil-
lion to CHF 394 million, mainly due to
excellent claims experience in 2006. The
Admin ReSM operating result increased by
15% to CHF 435 million.
48 Swiss Re 2006 Annual Report
Net investment income was CHF 3.9 bil-
lion in 2006, a decrease of 1% compared
to the previous year. The income generat-
ed by investments acquired as part of
GE Insurance Solutions was offset by the
impact of the Admin ReSM securitisations
(Queensgate and ALPS transactions) as
well as by lower investment income on
unit-linked contracts. The Admin ReSM
securitisations reduced net investment in-
come by CHF 245 million in 2006, com-
pared to CHF 111 million in 2005, mainly
due to the first full year impact of the ALPS
transaction in 2006. Unit-linked contracts
have no impact on the operating result,
as the investment result on such contracts
is passed through to contract holders as
interest credited to policyholders.
Acquisition costs slightly increased to
CHF 2.3 billion. The amortisation of the
present value of future profits (PVFP) was
reduced by the Admin ReSM securitisa-
tions, which are in the form of retrocession
arrangements. This reduction was offset
by the amortisation of the PVFP recog-
nised in the GE Insurance Solutions
acquisition.
The management expense ratio increased
to 6.3% in 2006, partly due to increased
variable compensation costs.
Premiums earned and fee income
Premiums and fees increased by 13% to
CHF 11.9 billion. GE Insurance Solutions
contributed CHF 1.0 billion of premiums
and fees in 2006. The Admin ReSM securi-
tisations reduced premiums and fees by
CHF 384 million in 2006 (compared to
a reduction of CHF 181 million in 2005),
due to the full year impact of the ALPS se-
curitisation. Excluding the effect of the se-
curitisations, underlying premium and fee
growth was 14%.
Financial year Life & Health business
2005
2006
Change in %
Life & Health business results
CHF millions
Revenues
Premiums earned
Fee income
Net investment income
Net realised investment gains
Total revenues
Expenses
Claims and claim adjustment expenses;
life and health benefits
Interest credited to policyholders
Acquisition costs
Other operating costs and expenses
9 638
881
4 000
1 799
16 318
10 974
879
3 946
1 521
17 320
–8 668
–3 019
–2 221
–765
–9 594
–2 827
–2 256
–961
Total expenses
–14 673
–15 638
Operating income
1 645
1 682
Operating result, excluding non-
participating net realised investment gains
1 333
1 517
Net investment income – unit-linked
Net realised investment gains – unit-linked
751
1 396
670
1 319
Net realised investment gains
– non-participating
312
165
Operating revenues1
13 859
15 166
14
0
–1
–15
6
11
–6
2
26
7
2
14
–11
–6
–47
9
Management expense ratio in %
Return on operating revenues in %
5.5
9.6
6.3
10.0
1 Operating revenues exclude net investment income and net realised investment gains from unit-linked
business as these are passed through to contract holders via interest credited to policyholders and
therefore do not have an impact on the operating result.
Swiss Re 2006 Annual Report 49
Financial year Life & Health business
Traditional life premiums and fees totalled
CHF 7.9 billion in 2006, an increase of
12%, reflecting new business written in
the US, the UK, and Asia as well as the
European life business acquired as part
of GE Insurance Solutions. Traditional
health premiums grew from CHF 1.6 bil-
lion in 2005 to CHF 2.2 billion in 2006,
largely due to the GE Insurance Solutions
acquisition. Excluding the impact of the
securitisations, Admin ReSM premiums and
fees remained stable at CHF 2.1 billion.
Premiums earned and fee income in
Europe increased with the acquisition
of the European life and health business
of GE Insurance Solutions and general
growth in new business. The business
growth in North America was more than
offset by the European business acquired
as part of GE Insurance Solutions.
50 Swiss Re 2006 Annual Report
Premiums earned and fee income by region
in %
North America
Europe
Rest of the world
Total CHF millions
2005
63.7
27.2
9.1
2006
61.0
31.3
7.7
10 519 11 853
Lines of business
Traditional life
CHF millions
Operating revenues
Operating result
Admin ReSM
CHF millions
Operating revenues
Operating result
2006
8 907
688
Return on operating revenues
2005
7 930
742
2005
3 727
2006
3 391
379
435
Return on operating revenues
(in %)
10.2
12.8
(in %)
9.4
7.7
The Admin ReSM securitisations reduced
operating revenues by CHF 630 million,
compared to a reduction of CHF 292 mil-
lion in 2005, due to the first full year im-
pact of the ALPS securitisation.
The Admin ReSM return increased from
10.2% in 2005 to 12.8% in 2006, reflect-
ing good claims experience.
The return for traditional life business
declined from 9.4% in 2005 to 7.7% in
2006, reflecting stable mortality experi-
ence in 2006 compared to favourable
mortality experience in the prior year.
2005 also benefited from the release
of the tsunami provision.
Traditional health
CHF millions
Operating revenues
Operating result
2005
2006
2 202 2 868
212
394
Return on operating revenues
(in %)
9.6
13.7
The return for traditional health business
rose from 9.6% in 2005 to 13.7% in 2006,
reflecting excellent claims experience.
Financial year
Financial Services business
Operating income rose 21% to CHF 460 million
with strong performances in Credit Solutions and
Capital Management and Advisory.
Business developments
In 2006, Credit Solutions extended its
leadership position and continued to ben-
efit from a favourable credit environment.
The division complements stringent credit
underwriting standards with selective
hedging, including credit default swaps
and risk securitisation. It successfully com-
pleted a trade credit reinsurance securiti-
sation in January 2006 – a first in the
market. The acquisition of GE Insurance
Solutions brought in a strong trade finance
portfolio, which helped further diversify
Credit Solutions’ structured credit portfolio.
Capital Management and Advisory (CMA)
retained its position at the forefront for in-
termediating insurance risk, supported by
growing capacities for trading and struc-
turing other asset classes. CMA originates,
structures, trades and distributes interest
rate, equity, credit, insurance and weather
risks. 2006 was another year of strong
growth for the insurance-linked securities
market and CMA retained its lead under-
writer position for Swiss Re’s own risks
(eg Crystal Credit, Successor and Australis
programmes), as well as third-party risks
(eg OSIRIS Capital). CMA also significant-
ly increased trading revenues across most
product lines.
Swiss Re provides asset management
services for insurance clients under the
Conning Asset Management brand in the
US, Canada, Bermuda, UK and Europe.
Third-party assets under management
increased to CHF 85.4 billion at the end
of 2006 from CHF 72.4 billion at the end
of 2005.
Fox-Pitt, Kelton (FPK) was sold to an
investor group on 28 June 2006.
Business results
Continued strong underwriting perform-
ance of Credit Solutions, as well as suc-
cessful trading and structuring in CMA
led to an operating income of CHF 460
million, up 21% compared to 2005 which
had benefited from a favourable claims
settlement agreement.
Total revenues rose 26% to CHF 2 billion,
due to higher trading revenues from CMA,
premium growth in Credit Solutions and
increased fees from third-party asset man-
agement in Conning Asset Management.
Premiums earned increased 21%, primari-
ly due to the successful renewals in Credit
Solutions throughout the year. The acqui-
sition of the bank trade finance portfolio
of GE Insurance Solutions generated addi-
tional premiums.
Total investment return decreased by 7%
to CHF 106 million from CHF 114 million
in 2005.
Trading revenues, fees and commissions
increased by 40% to CHF 757 million,
reflecting strong growth in trading reve-
nue in CMA and continued growth in fees
Swiss Re 2006 Annual Report 51
Financial Services business results
CHF millions
Revenues
Premiums earned
Net investment income
Net realised investment gains
Trading revenues, fees and commissions
Total revenues
Expenses
Claims and claim adjustment expenses
Acquisition costs
Operating costs
Total expenses
2005
2006
Change in %
907
85
29
539
1 560
–328
–295
–558
1 100
79
27
757
1 963
–493
–364
–646
–1 181
–1 503
21
–7
–7
40
26
–50
–23
–16
–27
21
Operating income
379
460
Premium business, traditional
Combined ratio (in %)
Fee business
Return on total revenues (in %),
81.2
89.9
excluding proprietary asset management
8.1
26.9
Financial year Financial Services business
from third-party asset management. This
growth was accompanied by improved
performance, producing an excellent re-
turn on total revenues of 26.9% in 2006,
compared to 8.1% in 2005.
The Credit Solutions business continued
to post very good performance, with
a combined ratio of 89.9%. Claims and
claim adjustment expenses increased by
50% to CHF 493 million compared to
2005, which had benefited from a favour-
able claims settlement. Acquisition costs
increased 23% to CHF 364 million, re-
flecting increased premium volume and
a rise in profit commissions due to favour-
able claims experience.
Operating costs increased to CHF 646 mil-
lion, driven by an increase in variable
compensation costs resulting from strong
business performance.
52 Swiss Re 2006 Annual Report
Business outlook
Swiss Re will maintain its focus on economic
profit growth, earnings stability and innovative
client solutions to seize the full opportunities
of the reinsurance and financial services markets.
Business developments
Fundamentals for 2007 remain strong.
Swiss Re will benefit from growth provid-
ed by the first full year inclusion of the
GE Insurance Solutions and GE Life UK
acquisitions. Developments in the Europe-
an regulatory framework, including the
EU Reinsurance Directive and the move
towards Solvency II, will create new op-
portunities for strongly capitalised compa-
nies like Swiss Re to support clients with
efficient capital management solutions.
Swiss Re remains committed to delivering
enhanced sustainable returns to its share-
holders by maintaining strict underwriting
discipline and withdrawing capacity
where economic terms are insufficient.
Also, the Group will continue to address
volatility on both sides of its balance sheet
by actively hedging its investment and un-
derwriting exposures, including seeking
innovative solutions in the capital markets.
The January 2007 renewals of Swiss Re’s
non-life reinsurance portfolio, including
the former GE Insurance Solutions busi-
ness, grew by 14% with rates up 1%, re-
sulting in overall growth in economic profit
of 21%. Since the acquisition in June
2006, 75% of GE Insurance Solutions
non-life premiums have been successfully
renewed.
In property, price levels for peak natural
catastrophe exposures are expected to re-
main technically very strong despite the
increase of the Florida Hurricane Catastro-
phe Fund, especially for reinsurers with
strong security. Winterstorm Kyrill in
January 2007 reminded the industry
of European weather-related risk.
In casualty, Swiss Re continues to address
the drivers of liability risks, translating the
evolving risk landscape into new products
for clients. One example is the EU Direc-
tive on Environmental Liability which will
be adopted into the law of the member
states by 30 April 2007. Swiss Re has de-
veloped a site-related model for hazard
analysis, linking current models with geo-
graphic information systems.
In life and health, Swiss Re anticipates
strong sales of accumulation and retire-
ment products in developed markets such
as the US, Europe and Japan. The Group
is actively addressing client needs by de-
veloping new variable annuity products
and exploring longevity products. Sales
of protection products are expected to
continue to grow but at a slower pace.
Swiss Re’s strength in traditional reinsur-
ance makes it ideally positioned to offer
effective solutions and respond to the
needs of clients.
In Asia, a combination of regulatory, mar-
ket and social changes suggests contin-
ued strong prospects for volume and
growth. As a key example, the agreement
to purchase a 26% stake in TTK Health-
care Services Pvt Ltd demonstrates
Swiss Re’s commitment to India and
marks a milestone in Swiss Re’s strategy
to enter the private medical insurance
business in Asia.
Financial year
Further consolidation in the life sector in
developed markets will continue to drive
the growing trend for transferring closed
blocks of life business to third parties –
a trend Swiss Re is well placed to take
advantage of through its Admin ReSM
operation.
The outlook for Financial Services remains
positive. The credit market should contin-
ue to provide growth with favourable
terms and conditions, and Credit Solutions
is expected to further extend its leading
global position, particularly in Asia. While
loss ratios are at historical lows, Swiss Re’s
credit hedging strategy is in place to man-
age volatility, ensuring that Swiss Re’s
portfolio is well protected. The insurance-
linked securities market will continue to
grow rapidly over the coming years and
Swiss Re aims to maintain its leading posi-
tion as structurer and underwriter. Third
party asset management should also
increase revenues further, building on the
excellent track record of Conning Asset
Management.
Financial targets
Swiss Re maintains its targets of earnings
per share growth of 10% and return on
equity of 13% over the cycle, reflecting the
Group’s commitment to achieving sustain-
able returns for shareholders.
Swiss Re 2006 Annual Report 53
Governance
Risk and capital management
Swiss Re’s risk and capital management ensures
controlled risk taking and adequate capitalisation,
maintaining the financial flexibility to profit from
attractive business opportunities.
Risk management
Controlled risk taking requires a strong
risk management organisation and com-
prehensive risk management processes to
identify, assess and control the Group’s
risk exposures.
management principles and policies,
as well as for approving Swiss Re’s overall
risk tolerance. The Board committees
dealing with risk management issues
include the Finance and Risk Committee
as well as the Audit Committee.
Risk management principles
At Swiss Re, risk management is based
on four guiding principles that are applied
throughout the Group:
Controlled risk taking: financial strength
and sustainable value creation are an
integral part of Swiss Re’s value propo-
sition. As a result, the Group operates
within a clearly defined risk policy and
risk control framework.
Clear accountability: Swiss Re operates
on the principle of delegated and clear-
ly defined authority. Individuals are
accountable for the risks they take on
and their incentives are aligned with
Swiss Re’s overall business objectives.
Independent risk controlling function:
to avoid conflicts of interest, dedicated
specialised units monitor risk-taking
activities.
Open risk culture: risk transparency
and responsiveness to change are
integral to Swiss Re’s risk control pro-
cess. Swiss Re has institutionalised
knowledge-sharing processes at all
levels.
Risk management organisation
The Board of Directors is ultimately
responsible for Swiss Re Group’s risk
54 Swiss Re 2006 Annual Report
The Executive Committee is responsible
for implementing the risk management
framework through the following two
committees:
The Group Capital and Capacity Allo-
cation Committee is responsible for
allocating capital and capacity, and
approving the investment risk limits,
as well as changes to the internal risk
and capital methodology.
The Group Products and Limits Com-
mittee determines the Group’s product
policy and standards, grants reinsur-
ance limits and decides on large or
non-standard transactions.
Within the Executive Committee, the
Chief Financial Officer is responsible for
the business planning process and defin-
ing asset management benchmarks. The
Chief Risk Officer leads the global risk
management function, which is responsi-
ble for risk controlling across the Group
(see Figure 1).
The global risk management function is
organised by risk categories with dedicat-
ed departments for credit and financial
market risk, property and casualty risk,
life and health risk, and operational risk.
Governance Risk and capital management
Each of these departments is entrusted
with Group-wide responsibility for identi-
fying, assessing and controlling their allo-
cated risks. The Corporate Integrated Risk
Management department is responsible
for assessing the combined impact of all
risks and reporting on Swiss Re’s overall
risk position. The Sustainability & Emerging
Risks unit coordinates the monitoring
and management of emerging risks that
may become significant for Swiss Re as
well as the Group’s sustainability activities.
Finally, the Corporate Actuarial depart-
ment assesses life and non-life insurance
liabilities from the accounting, statutory
and economic perspectives.
None of these departments executes
business; they oversee risk-taking activi-
ties and set the risk management guide-
lines and best practice standards that
the business units implement.
Group Internal Audit monitors the execu-
tion of processes within the Group, includ-
ing those in risk management.
Swiss Re’s risk landscape
Risk management is essential to Swiss Re’s
strategic planning and is embedded in
the Group’s management discipline.
In addition to strategic risks, Swiss Re
distinguishes three types of risks: core
risks, operational risks and other risks
(see Figure 2).
Figure 1: Risk management – overview of Swiss Re’s key bodies and functions
Board of Directors
Group Internal Audit
Chief Executive Officer
Chief Risk Officer
Chief Financial Officer
Credit & Financial Market
Risk Management
Life & Health
Risk Management
Group Capital
Management
Property & Casualty
Risk Management
Corporate Integrated
Risk Management
Corporate Actuarial
Americas Insurance
& Reinsurance Risk
Management
Group Operational
Risk Management
Sustainability
& Emerging Risks
Figure 2: Categorisation of Swiss Re’s risk landscape
Operational risks
Other risks
Funding and liquidity
Reputational
People
Processes
Systems
External
Core risks
Insurance
Property and casualty
Life and health
Financial markets
Equity market
Interest rate
Foreign exchange
Credit spread
Real estate
Credit
Credit migration
Credit default
Core risks are split into three broad cate-
gories:
Insurance risk is the risk of incurring
a financial loss as a result of a property,
casualty, life or health insurance
event.
Financial market risk is the risk of as-
sets and /or liabilities being negatively
affected by movements in financial
market prices or rates, such as equity
prices, interest rates, credit spreads,
foreign exchange rates or real estate
prices.
Credit risk is the risk of incurring
a financial loss due to diminished credit-
worthiness (eroding credit ratings
and, ultimately, counterparty default)
among counterparties of Swiss Re
and /or third parties.
The risks classified under operational
risks and other risks are ancillary and
arise as a consequence of undertaking
business.
Operational risk, defined according to the
Basel II risk areas, includes potential losses
from inadequate or failed internal process-
Swiss Re 2006 Annual Report 55
Governance Risk and capital management
es, people, systems, external events, or
non-compliance with regulation resulting
in regulatory penalties or an inability to
operate properly. Management of opera-
tional risk is designed to reduce it to an
acceptable level, since there is no financial
return for carrying operational risk.
Other risks comprise:
Funding and liquidity risk is the risk
that Swiss Re is unable to meet its
short-term financial obligations or
raise funds in the markets to finance
its commitments at a reasonable cost.
Reputational risk is the risk that a par-
ticular event or behaviour damages
stakeholders’ perception of Swiss Re,
thus impairing its ability to operate
effectively.
Funding and liquidity risk may result
from larger than expected cash outflows
or smaller than expected cash inflows
and a restricted ability to raise short-
term funds. In addition, sudden liquidity
requirements may arise if covenants
are triggered under specific adverse
circumstances, requiring the collater-
alisation of debt obligations and third-
party guarantees with assets of a speci-
fied quality.
Maintaining its reputation is key to
Swiss Re’s business. Upholding the clear
values defined in the Group’s Code of
Con duct mitigates reputational risk. These
values are supported by processes that
enable early identification of potential
problems.
EU Solvency II and Swiss Solvency Test
Discussions on the Solvency II project, which will modernise the existing EU solvency
regime, have accelerated in 2006. In Switzerland, a similar approach to risk-based
solvency control – the Swiss Solvency Test (SST) – is being implemented. Swiss Re
welcomes these developments, as they encourage sound risk management as well
as more effective governance structures. The use of internal models – validated by
the supervisor – for calculating solvency capital requirements will support a better
understanding of insurers’ risk landscapes. Swiss Re continues to contribute actively
to developing standards in various regulatory and professional bodies such as the
Solvency II related expert groups within the Comité Européen des Assurances (CEA)
and the Chief Risk Officer (CRO) Forum.
An important aspect of the SST is the recognition of the fundamental economic
principle of diversification, taking legal structures and contracts into consideration.
Swiss Re is tailoring its internal risk-based approach to meet the specific SST
requirements.
The details of Solvency II are yet to be defined. Swiss Re is actively involved in the
development of Solvency II and participated in the two Quantitative Impact Studies
conducted by the European Commission. Thanks to this involvement and Swiss Re’s
long experience in using an economic risk-based framework for internal purposes,
the Group is well prepared for the new solvency requirements.
56 Swiss Re 2006 Annual Report
Integrated risk modelling
Swiss Re has a proprietary internal inte-
grated risk model, which is used to deter-
mine the capital required to support the
risks on Swiss Re’s books and allocate
risk-taking capacity to lines of business.
The model is continuously updated to
reflect prevailing best practice.
Swiss Re’s risk model is based on two im-
portant principles. Firstly, it uses an asset-
liability management (ALM) approach,
measuring the net impact of risk on the
economic value of both assets and liabili-
ties. Secondly, it adopts an integrated
perspective, recognising that a single risk
factor can affect different sub-portfolios
and that different risk factors can have
mutual dependencies.
The model generates a probability distri-
bution for the Group’s annual economic
profit and loss, specifying the likelihood
that the profit or loss will fall within
any given range. From this distribution
a base capital requirement is derived that
captures the potential for severe, but
rare, aggregate losses over a one-year
time horizon. Swiss Re compares the
base capital requirement with available
capital to determine the adequacy of
its capitalisation.
One widely used measure for summaris-
ing the risk distribution and defining the
base capital requirement is the 99% Value
at Risk (VaR): a level of loss likely to be
exceeded in only one year out of a hun-
dred. In addition to the overall Group 99%
VaR, Table 1 shows the 99% VaR for prop-
erty and casualty, life and health, financial
market, credit, and funding and liquidity
risks. This clearly demonstrates the diver-
sification effect: the base capital require-
ment for the entire portfolio is smaller than
the sum of the base capital requirements
for the individual sub-portfolios.
Governance Risk and capital management
Swiss Re’s overall risk exposure measured
based on 99% VaR increased from CHF
9.9 billion in mid-2005 to CHF 11.3 billion
in mid-2006. The main source of this
rise was the acquisition of GE Insurance
So lutions, which increased the insurance
risk within the Group’s portfolio. This was
partly mitigated by Successor, the USD
950 million catastrophe bond programme
completed in June 2006, as well as by the
increased use of industry loss warranties,
mainly to reduce Atlantic hurricane expo-
sure. Swiss Re’s financial market and cred-
it risk was reduced by the EUR 252 million
Crystal Credit securitisation of January
2006, providing coverage for extreme
credit events, as well as by hedging activi-
ties to protect Swiss Re’s portfolio in case
of falling equity markets and widening
credit spreads.
Between mid-2005 and mid-2006,
Swiss Re’s property and casualty risk
increased by 44%, again largely due to
the natural catastrophe risks taken
on through the GE Insurance Solutions
acquisition. The higher life and health
risk also mainly resulted from increased
exposure through the business acquired
as part of GE In surance Solutions.
Swiss Re’s financial market risk declined,
however, largely due to increased hedg-
ing of tradable equity and credit spread
exposures. Credit risk increased by 12%,
mainly from the growth of the credit busi-
ness and the acquisition of GE Insurance
Solutions. The exposure to funding and
liquidity risk, which reflects risks arising
from Swiss Re’s use of letter of credit
facilities, was immaterial as Swiss Re’s
capital increased between mid-2005 and
mid-2006.
In addition to the 99% VaR, Swiss Re also
considers other measures, including the
99% Tail VaR (expected shortfall) and the
99.5% VaR. The 99% Tail VaR measures
Table 1: Base capital requirement using one year 99% VaR
CHF billions
Property and casualty
Life and health
Financial market
Credit
Funding and liquidity
Simple sum
Diversification effect
Swiss Re Group
Mid-2005
(excl. IS)
5.5
1.8
5.7
1.5
0.1
14.6
4.7
9.9
Mid-2006
(incl. IS)1
7.9
2.5
5.3
1.7
0.0
17.4
6.1
11.3
Change
in %
44
36
–7
12
–100
19
14
¹
Different to mid-2005, mid-2006 data includes GE Insurance Solutions (IS). Between mid-2005 and
mid-2006 there have been a few model improvements and data enhancements. They include enhanced
models for natural catastrophes, eg the recalibration of the Atlantic hurricane model after Katrina.
Table 2: Natural catastrophe stress tests
Estimated economic impact of each single loss event
in CHF billions as of 31 December
Atlantic hurricane (200-year return period)
European windstorm (200-year return period)
California earthquake (200-year return period)
Japanese earthquake (200-year return period)
2005
–3.3
–3.0
–1.5
–1.7
2006
–5.7
–5.2
–4.0
–2.4
the average annual loss likely to occur
with a frequency of less than once in one
hundred years, while the 99.5% VaR
measures the level of loss likely to be
exceeded in only one year out of two
hundred. Both the 99% Tail VaR and the
99.5% VaR are more conservative risk
capital measures than the 99% VaR.
Based on mid-2006 exposure data,
the Group’s 99% Tail VaR amounted to
CHF 17 billion, a 10% increase com-
pared to mid-2005 and the 99.5% VaR
amounted to CHF 14 billion, a 9% in-
crease compared to mid-2005.
Stress scenario analyses complement
the integrated risk model by providing in-
formation on the economic implications
of certain adverse situations. Some of
these analyses appear in the following
sections.
Risk management per core risk
category
Risk appetite and risk tolerance at Group
level are defined by a set of limits ap-
proved by the Executive Committee and
the Board of Directors. The relevant Group
bodies allocate capacity to lower levels.
Insurance risk management
Property and casualty risk arises predomi-
nantly from the property, casualty (includ-
ing motor), and specialty lines. The Group
Property & Casualty Risk Guideline in con-
junction with the Group Risk Management
Guideline establishes the risk governance
framework for property and casualty
risk. Limits to prevent excessive exposure
to any individual risk, or to the same under-
lying risk, are monitored Group-wide.
In addition, each underwriter is given
a defined limit per treaty programme and
Swiss Re 2006 Annual Report 57
Governance Risk and capital management
single risk. There is a well-defined escala-
tion process at various levels up to the
Group Products and Limits Committee.
These procedures and limits define the
underwriting process and are laid down
in the Group Underwriting Guidelines,
which are approved by the Group Prod-
ucts and Limits Committee.
Property & Casualty Risk Management
is responsible for Group-wide monitoring
and reporting of property and casualty
risks. Underwriting systems across the
Group provide timely reporting on risks
assumed and capacity used. The global
Products function plays a major role in
managing property and casualty risks by
proposing the annual renewal strategy
and closely monitoring renewal business.
Where appropriate, Swiss Re also uses
insurance-linked securities, industry loss
warranties, retrocession and risk swaps
to balance its portfolio.
Table 2 reports the expected pre-tax
claims of Swiss Re for major natural catas-
trophe loss events, allowing for insurance-
linked securities, industry loss warranties,
retrocession and risk swaps. The figures
take into account the fact that an event
can trig ger claims in various lines of busi-
ness. For instance, the windstorm Europe
scenario includes, among others, claims
from the motor line, and the California
earthquake scenario also reflects – but
is not limited to – additional claims arising
from workers’ compensation and general
liability.
The economic impact of the top natural
catastrophe risk scenarios has increased
greatly since the end of 2005 (see
Table 2). This is primarily due to the risks
assumed through the GE Insurance Solu-
tions acquisition but also reflects model
adjustments, specifically to Atlantic hurri-
cane storm surge and storm frequency,
58 Swiss Re 2006 Annual Report
Influenza pandemic modelling
Swiss Re has significant exposure to mortality risk through its life and health business;
the Group recognises that pandemic influenza is a material risk that has the potential
to affect all markets around the world. Swiss Re has developed a sophisticated epide-
miological model to improve understanding of the potential range of outcomes from
a pandemic, better enabling the Group to hold appropriate capital for this risk.
There were three influenza pandemics in the 20th century. The great Spanish Flu of
1918–19 is believed to have been the worst pandemic in over 400 years, with high
mortality rates and a disproportionate impact on young adults. At that time, antibiot-
ics were not yet available to treat secondary infections and the nature of the infectious
agent was not understood. Medical progress, as well as weaker underlying disease
factors, produced much lower mortality in the 1957 and 1968 pandemics.
Swiss Re’s model incorporates the underlying epidemiological variation shown in
these three pandemics, including rate of spread, lethality, and differences in infection
rates and lethality between age groups. The model also includes the far more sophis-
ticated pharmaceutical and behavioural interventions available today. Based on these
factors, a large number of potential pandemics are generated (“event sets”), taking
account of intervention options in today’s environment and thus giving an appropriate
range of potential pandemics.
Pharmaceutical interventions include antibiotics and antivirals. Antibiotics have
a large effect in reducing mortality from secondary infections – their effectiveness is
well understood. Therefore, only a small variation in effectiveness has been assumed
in the model. Pandemics with high lethality are expected to cause larger numbers
of viral pneumonia deaths, affecting mostly young adults. Antivirals are in most cases
expected to slow the spread of influenza, reduce the peak rate of illness, and reduce
overall mortality substantially. Such therapy is now available and these drugs are be-
ing stockpiled by many governments. Nevertheless, their effectiveness against a wide
range of potential viruses is not fully understood. This is accommodated in the model
by assuming that antivirals would not work at all in one out of three simulated
pandemics.
The effect of each potential pandemic produced by this model is estimated for
Swiss Re’s portfolio of business by weighting for exposure by country and age group.
This produces a complete distribution model of potential additional mortality and the
probability of each level. The model includes the possibility of very high additional
mortality, but with very low probability. This enables estimation of all relevant statisti-
cal measures, such as 99% VaR, 99% Tail VaR and losses for various return periods.
Governance Risk and capital management
prompted by the experience of Hurricane
Katrina. The significant rise in the potential
impact from a California earthquake also
reflects increased exposure in the port-
folio due to attractive risk-adjusted market
opportunities.
The GE Insurance Solutions acquisition not
only influences top natural catastrophe
risks but also a number of specialty lines.
Swiss Re’s exposure to aviation terror risk,
for example, increased significantly due to
a large increase in all-risks covers and the
inclusion of the GE Insurance Solutions’
third-party liability war/terror product. In
a scenario such as the Heathrow terror plot
thwarted in August 2006, in which two
of the targeted airlines were owned by
non-US carriers (US airline carriers receive
governmental coverage under the Home-
land Security Act) and where the airplanes
potentially could have exploded over the
ocean, the total potential loss to Swiss Re
would have been approximately USD
125 million. If, however, five non-US air-
planes had crashed into urban areas, thus
creating additional third-party liability war/
terror claims, the potential loss to Swiss Re
would have been ten times larger.
Swiss Re takes on life and health risk
through written mortality and morbidity
covers as well as acquired run-off (Admin
ReSM) business. Local business units can
accept business within agreed limits, such
as per life retention limits for individual
business, maximum market exposures for
life and health catastrophe business, and
occupational scheme aggregation limits.
The Group pays particular attention to
accumulation risk in areas of high popula-
tion density, including individual buildings.
Any business that falls outside of specified
limits must be approved according to
the risk governance framework.
Table 3: Life insurance stress test
Estimated economic impact of each single loss event
in CHF billions as of 31 December
US epidemic – 300 000 excess deaths, proportionally spread
US epidemic – 300 000 excess deaths, evenly spread
2005
–0.5
–2.1
2006
–0.4
–1.9
The Group Life & Health Risk Management
Guidelines and Group Reinsurance Guide-
lines articulate Swiss Re’s attitude and
approach towards life and health risk tak-
ing by the business units with oversight
by Life & Health Risk Management. These
guidelines include detailed guidance on
referral procedures and approval bodies.
All large and complex transactions are
subject to independent review by the cen-
tral Products team and by Risk Manage-
ment. An integrated approach to assur-
ance and audit across the business pro-
vides increased oversight by Swiss Re
experts on the appropriateness of techni-
cal processes and decisions.
Life & Health Risk Management is respon-
sible for the Group-wide monitoring and
reporting of life and health risk. The ac-
quired GE Insurance Solutions portfolio
has been incorporated into this process.
Where appropriate, Swiss Re also uses
insurance-linked securities as a means
of reducing peak exposures. The Vita in-
dex-linked security transactions, for exam-
ple, were arranged to provide protection
against extreme mortality events. This
is now a well established programme.
The original Vita I programme for USD
400 million expired at the end of 2006
and was successfully replaced by Vita III
for USD 705 million.
scenarios describe the potential impact
of an extreme epidemic in the US, assum-
ing 300 000 excess deaths across the
whole country. This is more extreme
than the upper end of the World Health
Organisation’s scenarios used in their pan-
demic preparedness planning. The sce-
nario which assumes that excess mortality
is evenly spread across the population
is more conservative (ie high) because
it does not allow for the typically lower
mortality experienced among the insured
population.
The decreases in expected losses for
Swiss Re compared to the previous
year’s estimates are mainly due to the
decline in value of the US dollar relative
to the Swiss franc.
Financial market risk management
Financial market risk arises from three
main sources: Swiss Re’s Proprietary
Asset Management unit (PAM), the inter-
est rate sensitivity of the present value
of liabilities, and the capital markets trad-
ing activities of the Capital Management
and Advisory division (CMA). The overall
risk limits framework is defined by the
Group Capital and Capacity Allocation
Committee. With effect from 1 January
2007, all activities involving financial
market risk are subject to one overall limit
for each major risk class, expressed in
terms of both, VaR and stress testing.
The estimated pre-tax claims for Swiss Re
in the life and health scenarios (Table 3)
are based on the average sum at risk. The
CMA and PAM translate the limits frame-
work for their own activities, incorporating
Swiss Re 2006 Annual Report 59
Governance Risk and capital management
a more detailed set of risk limits into their
business, including stop loss triggers.
CMA, for instance, uses a 10-day 99%
VaR to limit and monitor its financial
market risk on a daily basis. Group Credit
& Financial Market Risk Guidelines define
minimum standards for managing finan-
cial market risk; these are supplemented
by Derivative Guidelines, Investment
Guidelines and business-specific guide-
lines.
Financial market risk is identified using
a risk inventory of the various risk factors
that each business unit is exposed to.
Each business area is responsible for
measuring the financial market risk arising
from its own activities within guidelines
provided by Risk Management; the results
are captured in the Market Risk Aggrega-
tion & Reporting System, which is also
used for risk modelling and risk reporting
at Group level. The asset-liability manage-
ment report summarises financial market
risks at Group level. PAM reports risk on
a weekly basis, while CMA uses a combi-
nation of daily and weekly reporting.
These reports are the primary tools used
to track exposures and monitor usage
of limits. Credit & Financial Market Risk
Management independently monitors
limit usage. The limits are reported to the
head of the business unit, who is also ulti-
mately responsible for risk steering. The
business unit heads seek to optimise their
re spective portfolios within their limits,
including the use of cash and derivative
instruments.
Table 4 shows the pre-tax impact of mar-
ket scenarios on available economic capi-
tal. The equity scenario includes traded
equities, private equities, equity deriva-
tives, Guaranteed Minimum Death Benefit
products and funding obligations arising
from equity holdings in Swiss Re pension
60 Swiss Re 2006 Annual Report
Table 4: Market scenarios
Estimated economic impact of each single loss event
in CHF billions as of 31 December
30% fall in global equity markets
100bp parallel increase in global yield curves
15% fall in global real estate markets
Table 5: Credit scenarios
Estimated economic impact of each single loss event
in CHF billions as of 31 December
Rating migration comparable to experience of 2001
Default rate increase comparable to experience of 2001
Deterioration of recovery levels comparable to
experience of 2001
Combined effect
2005
–2.5
0.4
–0.7
2005
–0.3
–0.5
–0.2
–1.0
2006
–3.7
–0.1
–0.7
2006
–0.3
–0.5
–0.3
–1.2
funds. The significant rise in the global
equity market scenario is due to increased
exposures from traded equities, hedge
funds and private equity. The interest rate
scenario shows the net impact on assets
and liabilities from a rise in interest rates.
Real estate exposure includes investments
in real estate and own-use property.
Credit risk management
Credit risk exposure within the Group
arises directly from Swiss Re’s investment
activities as well as its portfolio of assets
and liabilities underwritten directly by
the business units. Swiss Re distinguishes
three kinds of exposure: the risk of
issuer default from instruments in which
Swiss Re invests or trades, such as cor-
porate bonds; counterparty exposure
in a direct contractual relationship, such
as retrocession or over-the-counter (OTC)
derivatives; in addition, Swiss Re assumes
risk with no direct contractual relation-
ship, such as trade credit and surety
reinsurance business. All contribute to
an overall credit risk portfolio governed
by Group Credit & Financial Market Risk
Guidelines that are approved by the
Group Capital and Capacity Allocation
Committee.
The guidelines include credit shortfall lim-
its by business unit and limits by country
based on the nature of the exposure and
a detailed assessment of the counterpar-
ty’s financial strength, the prevailing eco-
nomic environment, industry position and
qualitative factors. This assessment ge-
nerates an internal counterparty-specific
rating in one of 20 categories. Swiss Re
constantly monitors counterparty credit
quality and exposures, compiling “watch
lists” of those cases that merit particularly
close attention.
The reporting process is supported by the
Group Credit Risk Exposure Reporting
Management and Information Tool that
contains all relevant information including
counterparty details, ratings, credit risk
exposures, credit limits and watch lists. It
is accessible by all key credit practitioners
Governance Risk and capital management
in the Group, thus providing essential
transparency to allow for the successful
implementation of active exposure man-
agement strategies for specific counter-
parties, industry sectors and geographic
regions.
The figures in Table 5 report the estimat-
ed pre-tax impact of credit scenarios on
available economic capital. For instance,
the default scenario shows estimated ad-
ditional (unexpected) losses due to ad-
verse default rate changes. The scenarios
are based on a credit environment devel-
opment similar to 2001, which was
the worst credit experience in the past
ten years. The increase in the combined
credit scenario reflects changes in the
credit portfolios due to the acquisition of
GE Insurance Solutions as well as organic
business growth within Credit Solutions
and CMA.
Operational risk management
The management of operational risk is
an integral part of Swiss Re’s risk manage-
ment framework.
In 2006, Swiss Re implemented a com-
mon Group-wide operational risk manage-
ment methodology that emphasises man-
aging operational risks as close to their
source as possible. Top-down and bottom-
up assessments provide comprehensive
coverage of the entire operational risk
landscape. The top-down process is
based on Group-wide input by senior
executives. In contrast, the bottom-up
assessment is based on more than 300
risk and control self assessments across
Swiss Re, supported by a Group-wide
management information system. The
results from these processes have prompt-
ed significant progress in identifying,
quantifying and mitigating key operational
risk exposures. A formal referral process
Risk tolerance: Capital and earnings protection
Swiss Re’s risk tolerance represents the amount of risk the Group is willing to accept
within the constraints imposed by its capital resources, its strategy, its risk appetite,
and the regulatory and rating agency environment within which it operates. This risk
tolerance is reflected by clearly defined targets for all relevant areas. These targets
primarily aim to control risks to capital adequacy, but also consider other dimensions,
such as earnings volatility.
Swiss Re actively manages its earnings volatility in order to ensure more consistent
returns to shareholders, enhance Swiss Re’s credit quality and lower the Group’s
capital costs. The size and technical expertise of Swiss Re enables the Group to be
a leader in the use of a wide variety of reinsurance and capital market instruments
that are used to manage volatility and diversify risk, including insurance-linked securi-
ties, industry loss warranties, retrocession, insurance risk swaps, equity derivatives
and credit default swaps.
For example, as at the end of September 2006, in the midst of the US hurricane
season, Swiss Re’s overall earnings protection based on a 25-year return period for
Atlantic hurricane amounted to USD 1.0 billion, which corresponds to nearly half of
the expected gross claims amount from such an event (see table below). For this and
other top catastrophe risks, earnings and capital protection measures are in place,
such as the Successor catastrophe bond programme issued in 2006.
Swiss Re’s earnings protection for selected natural catastrophe risks1
In USD billions, as of 30 September 2006
Atlantic hurricane
European windstorm
California earthquake
Japanese earthquake
Return period
25 years
25 years
50 years
50 years
Estimated
gross claims
2.1
1.5
1.2
0.6
Claims hedge
1.0
Net claims
1.1
0.4
0.2
0.2
1.1
1.0
0.4
1 For larger claims, Swiss Re has additional protection in place.
ensures that the top operational risks
of the Group and their mitigation status
are regularly monitored by the Executive
Committee.
Experts in different areas of operational
risk management (such as IT Security and
Business Continuity Management) have
their activities integrated within the overall
risk governance structure. Moreover,
Group Internal Audit establishes its priori-
ties using quantified risk landscapes es-
tablished by the operational risk manage-
ment function in collaboration with the
audit function.
Capital management
Capital Management’s key task is to en-
sure that Swiss Re is adequately capital-
ised at all times and able to maintain
Swiss Re 2006 Annual Report 61
Governance Risk and capital management
financial strength even after a large loss
event, and that all legal entities meet
their respective capital requirements.
This task takes into account internal eco-
nomic and accounting views, as well
as rating agency and regulatory solvency
models.
Capital Management seeks to maintain
an optimal Group-wide capital structure,
giving Swiss Re financial flexibility at opti-
mal funding costs.
Internal capital adequacy
Swiss Re determines the amount of eco-
nomic capital it has available to cover
adverse events based on published share-
holders’ equity and a number of adjust-
ments net of tax. Thus, no allowance is
made for potential tax offsets due to future
losses arising from adverse experience.
The calculation of available capital is
shown in Table 6.
Dividing the available capital of CHF
40.6 billion by the capital requirements
of CHF 11.3 billion based on 99% VaR
gives a capital adequacy ratio (CAR)
of 360% at 30 June 2006, compared to
Available and required capital
50
40
30
20
10
0
CHF billions1
32.6
9.9
329%
40.6
11.3
360%
Mid-2005
Mid-2006
Available capital
Required capital at 99% VaR
Capital adequacy ratio
¹ Figures based on Swiss GAAP
62 Swiss Re 2006 Annual Report
Table 6: Calculation of available capital
CHF billions1
Shareholders‘ equity
Mark-to-market adjustments2
Goodwill and intangibles
Equalisation reserves
P&C and L&H valuation adjustments3
Hybrid capital
Tax and other4
Available capital
Mid-2005
22.0
1.8
–2.6
1.2
8.5
4.4
–2.7
32.6
Mid-20065
27.1
–0.3
–4.7
1.3
12.3
8.1
–3.2
40.6
1 All figures based on Swiss GAAP
2 Includes fixed income securities (excluding fixed income securities backing life and health reserves),
investments in real estate, and own-use property
3 Includes discounting of non-life reserves, life and health‘s value not recognised in the balance sheet
and other
4 Tax impact on the above adjustments
5 Includes GE Insurance Solutions
329% on 30 June 2005. This improve-
ment stemmed from the strong increase
in available capital, primarily due to posi-
tive economic earnings and an increase
in pro perty and casualty valuation adjust-
ments resulting from a reassessment of
non-life payment patterns. The GE Insur-
ance Solutions acquisition had a neutral
effect on the Group’s internal capital
adequacy ratio: the additional external
funding ef fectively balanced the increase
in capital requirements due to the en-
larged risk profile.
Financial strength is a central component
of Swiss Re’s value proposition to clients
and therefore of the Group’s franchise.
Swiss Re aims to hold sufficient capital to
ensure that it is financially strong, even
after an extreme loss event. Swiss Re
manages 99% Tail VaR and 99.5% VaR
measures of required capital in addition
to the 99% VaR. Based on these more
conservative measures for required capi-
tal, the Group’s CAR on 30 June 2006
amounted to 239% for the 99% Tail VaR
and 291% for the 99.5% VaR. In addition
to the considerations on an internal eco-
nomic value basis, Swiss Re must allow
for external constraints from rating agen-
cies and regulators.
Rating agency models differ in a number
of areas from Swiss Re’s economic bal-
ance sheet: for instance, Standard & Poor’s
(S & P) does not give full quantitative credit
for deferred acquisition costs nor acquired
present value of future profits in its capital
model.
Credit ratings
Standard & Poor’s, Moody’s and A.M. Best
rate Swiss Re’s financial strength based
on interactive relationships.
Swiss Re’s very strong capitalisation, busi-
ness position, financial flexibility, as well
as its outstanding franchise, and prudent
capital and risk management are reflected
in superior insurance financial strength
ratings which are among the highest in
the industry.
Governance Risk and capital management
market profile. These transactions appear
on the balance sheet as “Financial servic-
es assets” and “Financial services liabili-
ties” (see pages 110–111 of the Financial
Statements) and are taken into account
in Swiss Re’s risk management process.
Group Treasury activities in 2006
Group Treasury is responsible for manag-
ing the cash, liquidity and funding of
Swiss Re Group. Its main focus in 2006
was the financing of the GE Insurance
Solutions acquisition which closed on
9 June 2006. The funding package was
consistent with Swiss Re’s strong capital
adequacy and included a well balanced
mix of shares, mandatory convertibles,
debt and internal funds:
In April 2006, a rights offering to exist-
ing shareholders, followed by a global
offering, resulted in a total of 14.4 mil-
lion shares placed at CHF 92.25 per
share, or CHF 1.3 billion. Existing
shareholders subscribed for two thirds
of the shares. In addition, Swiss Re
issued a total of USD 785 million
equivalent of senior notes under its
European Medium Term Note (EMTN)
programme.
In May 2006, Swiss Re completed the
placement of EUR 1 billion of 5.252%
perpetual step-up notes and USD
752 million of 6.854% perpetual subor-
dinated step-up preferred securities.
Both fixed income hybrids qualify for
favourable capital treatment from regu-
lators and the major rating agencies.
In order to achieve favourable capital
treatment, both instruments require
Swiss Re, in specified circumstances
(which relate to changes in the financial
condition of Swiss Re), either to defer
interest otherwise payable or to settle
such interest through the issue of its
shares or certain other types of securi-
ties. Any interest that is so deferred can
only be settled through the issue of
Swiss Re’s financial strength ratings1
Rating
Outlook
S&P Moody’s A.M. Best
A+
Aa2
AA–
stable
negative
stable
1 As of 23 February 2007
After the acquisition of GE Insurance
Solutions was completed on 9 June
2006, both Moody’s and A.M. Best con-
firmed Swiss Re’s rating at Aa2 and
A+. These affirmations reflect Swiss Re’s
thorough due diligence process, prudent
financing and well advanced integration
of the acquired business.
Standard & Poor’s lowering of Swiss Re’s
rating to AA-/stable on 12 June 2006
reflects the size of the acquisition. S & P
in dicated that the outlook could be revised
to positive, once the integration is suc-
cessfully completed and the combined
entity demonstrates a very strong operat-
ing performance.
On 31 October and 8 November 2006,
S & P and Moody’s upgraded all acquired
operating GE Insurance Solutions entities
to the Group’s AA– and Aa2 ratings
respectively. On 5 February 2007, A.M.
Best upgraded all acquired US subsi-
diaries of GE Insurance Solutions to the
Group’s A+ rating. These upgrades to
core status within Swiss Re Group reflect
the advanced stage of integration of the
acquired business.
Swiss Re’s funded business strategy
Swiss Re continues to expand its funded
business strategy, diversifying its business
while offering value-added solutions for
clients. Funded business creates assets
and liabilities – usually capital market in-
struments – that generate additional reve-
nues. In funded transactions, foreign ex-
change, interest rate, equity and credit
risks are typically offset. They do not sig-
nificantly affect Swiss Re’s overall financial
Swiss Re 2006 Annual Report 63
such shares or other securities. In the
unlikely event that the specified circum-
stances arise on those instruments
(other than in circumstances where it
is deferring interest or distributions on
all its hybrid issues) Swiss Re would
use its best endeavours to arrange for
the issue or sale of its shares or such
other securities so as to raise cash to
enable it to settle interest, no later than
30 days after its original due date for
payment.
Upon closing the acquisition, Swiss Re
issued CHF 610 million of three-year
mandatory convertible instruments to
General Electric. Swiss Re also issued
the equivalent of USD 2.4 billion in new
shares to General Electric at a price
per share of CHF 87.58 which was just
below the upper collar set in the trans-
action agreement.
Swiss Re also successfully renewed its
European Medium Term Note (EMTN)
programme with dual registration on the
Euro MTF in Luxembourg and the SWX
Swiss Exchange, increasing the pro-
gramme limit to USD 10 billion. As of the
end of December 2006, outstanding
EMTN issues amounted to an aggregate
book value of USD 3.6 billion.
As additional resources to meet funding
requirements, Swiss Re also has access to
the US commercial paper market through
its USD 1.5 billion programme, as well as
back-up credit lines, committed repo lines
and letter of credit facilities in place with
several major banks.
During 2006, Swiss Re repaid USD
300 million and CHF 100 million of senior
financial debt, as well as EUR 250 million
of subordinated financial debt.
Governance Risk and capital management
64 Swiss Re 2006 Annual Report
Governance
Corporate governance
Swiss Re is committed to meeting the highest
standards of corporate governance and fully
endorses transparency towards shareholders
and other stakeholders.
Corporate governance is the framework comprising a company’s organisation, structure,
management and assurance functions. Transparency is an important component of
the framework, designed to protect the interests of shareholders and create value for all
stakeholders.
In the wake of major corporate failures and breakdowns, corporate governance, as well
as legislative and regulatory developments, have been increasingly in the spotlight
worldwide in recent years. Swiss Re takes a proactive approach to aligning investors’
expectations and interests with its own, and continues to conduct benchmarking with
best practice standards.
There is a growing connection between corporate governance, corporate sustainability
and corporate citizenship. A company’s integration of sustainability principles across its
business operations and its wider role in society are increasingly being perceived as im-
portant drivers of continued business success. All three dimensions are firmly embedded
in Swiss Re’s corporate responsibility framework, thus enabling the Group to create eco-
nomic value by improving its environmental and social performance beyond mere com-
pliance with laws and regulations.
As a Swiss publicly listed company, Swiss Re’s governance is measured primarily against
the Swiss Code of Best Practice for Corporate Governance. Swiss Re is also subject to
the Directive on Information relating to Corporate Governance and its Annex and Com-
mentary, issued by SWX Swiss Exchange and effective since 1 July 2002 (also referred
to as the “SWX Directive”). Additionally, Swiss Re complies with the applicable local
rules and regulations of all the countries in which it does business. As the SWX Directive
continues to be applicable, the information provided in this section of the Annual Report
remains similar to preceding years, following the structure of the SWX Directive.
1 Group structure and shareholders, page 66
2 Capital structure, page 67
3 Board of Directors, page 73
4 Executive management, page 88
5 Compensation, shareholdings and loans, page 92
6 Shareholders’ participation rights, page 98
7 Changes of control and defence measures, page 99
8 Auditors, page 99
9 Information policy, page 101
Swiss Re 2006 Annual Report 65
Governance Corporate governance
1 Group structure and shareholders
1.1 Group structure
1.1 Group structure
Operational Group structure
Please refer to page 10.
Listed Group companies
Swiss Reinsurance Company, the Group’s parent company, is a joint stock company,
listed on SWX Swiss Exchange, domiciled at Mythenquai 50/60 in 8022 Zurich and
organised in accordance with the laws of Switzerland. Please see the chapter on
“Swiss Re shares”, pages 103–106, for details on share information. For the other listed
Group companies, please refer to the Financial Statements, note 15 on “Subsidiaries,
equity investees and variable interest entities”, pages 161–165.
Non-listed Group companies
Please refer to the Financial Statements, note 15 on “Subsidiaries, equity investees and
variable interest entities”, pages 161–165.
1.2 Significant shareholders
1.2 Significant shareholders
As of 31 December 2006, there were two shareholders with a participation exceeding
the 5% threshold of Swiss Re’s share capital.
a. General Electric Company, 3135 Easton Turnpike, Fairfield, Connecticut 06828, USA,
held, directly or indirectly through group subsidiaries, 33 300 957 Swiss Re shares on
31 December 2006, representing 8.89% of Swiss Re’s voting rights.
b. The Capital Group Companies, Inc., domiciled in Los Angeles, informed SWX Swiss
Exchange on 22 November 2005 that its holdings increased to 5.1% of Swiss Re’s
voting rights. As these shares have mostly not been registered under Capital Group
Companies or any of their group companies, Swiss Re is unable to track, on its own,
changes in this shareholder’s aggregate holdings.
Franklin Resources, Inc., 500 E. Broward Blvd., Ft. Lauderdale, FL 33394, USA, known
as Franklin Templeton Investments, announced on 20 March 2006 that its aggregate
holdings in Swiss Re shares fell below the threshold of 5% of Swiss Re’s voting rights.
1.3 Cross-shareholdings
1.3 Cross-shareholdings
There are no cross-shareholdings to report, as Swiss Re does not hold 5% or more
of the shares or voting rights of any company which, in turn, also owns 5% or more of
Swiss Re’s shares or voting rights.
66 Swiss Re 2006 Annual Report
Governance Corporate governance
2 Capital structure
In accordance with the SWX Directive, the following information about Swiss Re’s
capital structure is provided for the listed parent company, Swiss Reinsurance Company,
Zurich.
2.1 Capital
2.1 Capital
Please refer to the Swiss Reinsurance Company, Zurich, financial statements, note 5
on “Shareholders’ equity”, page 181.
2.2 Authorised and conditional capital
2.2 Authorised and conditional capital
At the Annual General Meeting in 2001, the creation of conditional capital was approved
as follows: a maximum nominal amount of CHF 900 000 for conversion rights and
warrants granted in connection with convertible bonds or similar financial instruments
issued by the Group.
No additional conditional capital and no authorised capital was created or approved
in 2002 and 2003.
The Annual General Meeting 2004 approved an increase of conditional capital from
CHF 900 000 to CHF 2 000 000, representing a maximum of 20 million registered
shares, payable in full, each with a nominal value of CHF 0.10, for the exercise of
con version rights and warrants granted in connection with bonds or similar instruments
issued by the Group.
No additional conditional capital and no authorised capital was created or approved
in 2005.
As of 31 December 2005, Swiss Re’s total conditional capital outstanding amounted
to CHF 2 659 564.80, consisting of 26 595 648 registered shares. Of these 26 595 648
shares, 20 000 000 shares were reserved for the exercise of conversion rights and
warrants granted in connection with bonds or similar instruments and 6 595 648 shares
for employee participation purposes. As of 31 December 2005, Swiss Reinsurance
Company had no authorised share capital in place.
With regard to the conditional capital created for bonds or similar financial instruments
with a conversion right, shareholders’ pre-emptive rights may be restricted or excluded
by decision of the Board of Directors, in order to finance or refinance the acquisition
of companies, parts of companies, holdings, or new investments planned by the Group,
or to issue convertible bonds and warrants on the international capital markets. If pre-
emptive rights are excluded, then (1) the bonds are to be placed at market conditions,
(2) the exercise period is not to exceed ten years from the date of issue for options and
twenty years for conversion rights, and (3) the conversion or the exercise price for the
new shares is to be set at least in line with the market conditions prevailing at the date
on which the bonds are issued.
With regard to the conditional capital for employee participation purposes, shareholders’
subscription rights are excluded. Such shares may be issued at a price below the current
market price. The Board of Directors shall specify the precise conditions of issue.
Swiss Re issued shares reserved for corporate purposes (“Vorratsaktien”) prior to the
Swiss Re 2006 Annual Report 67
Governance Corporate governance
2.3 Changes in capital
2.3 Changes in capital
68 Swiss Re 2006 Annual Report
revision of Swiss corporate law in 1992. These shares were paid in only at a nominal
value of CHF 0.10 for a total amount of CHF 794 228 and are not entitled to dividend.
At an Extraordinary General Meeting (EGM) held on 27 February 2006, shareholders
approved the creation of CHF 9 000 000 of authorised capital as well as an increase
of conditional capital by CHF 2 000 000, thereby enabling management to execute the
transaction agreement relating to the acquisition of GE Insurance Solutions Corporation
and for general corporate purposes. An overview of the effects of the EGM resolutions
on Swiss Re’s capital is shown in the following tables:
Authorised capital
General Electric (GE)
Up to 60 million shares in
favour of GE:
Share component of purchase
price for GEIS1
Capital markets
Up to 30 million shares for capital
increase with shareholders’
subscription rights:
Possible funding of cash compo-
Shareholders’ subscription rights
nent of purchase price for GEIS
excluded in favour of GE
Shares will be offered to existing
Authorisation to increase share
Swiss Re shareholders
capital over two years (remainder
Authorisation to increase share
will lapse)
capital over two years
Lock-up period of 360 days for
GE from date of closing
Conditional capital
Up to 9 million shares in
Increase of up to 11 million shares
favour of GE:
Share component of purchase
for bonds or similar instruments:
Significant portion has already
price for GEIS through possible
been allocated to mandatory
mandatory convertible
convertible issued in December
Shareholders’ pre-emption rights
2005
excluded in favour of GE
Conditional capital not needed
in connection with the closing
of GEIS acquisition will lapse
1 GEIS: GE Insurance Solutions
As of 31 December 2006, Swiss Re’s total conditional capital outstanding amounted
to CHF 4 649 560.10, consisting of 46 495 601 registered shares. Of these 46 495 601
shares, 40 000 000 shares were reserved for the exercise of conversion rights and war-
rants granted in connection with bonds or similar instruments and 6 495 601 shares for
employee participation purposes. As of 31 December 2006, Swiss Reinsurance Compa-
ny had used a part of the CHF 9 million authorised share capital approved by the EGM;
for the number of shares that have been issued in connection with the GE Insurance
Solutions transaction, please refer to section 2.3. Authorised capital with shareholders’
subscription rights amounted to CHF 1 105 336.80 at year-end 2006.
In 2003, the company’s share capital remained at CHF 32 million. Total reserves de-
creased by CHF 195 million to CHF 9.9 billion. The higher profit for the financial year of
CHF 1.2 billion (compared to CHF 106 million in 2002) led to an increase of disposable
profit from CHF 122 million to CHF 1.2 billion. Total shareholders’ equity before allocation
Governance Corporate governance
of profit increased from CHF 10.3 billion to CHF 11.2 billion. At the Annual General
Meeting, shareholders approved a dividend payment of CHF 341 million, compared
to CHF 310 million in the previous year.
In 2004, the company’s share capital remained at CHF 32 million. Total reserves in-
creased by CHF 795 million to CHF 10.7 billion. The higher profit for the financial year
of CHF 1.4 billion (compared to CHF 1.2 billion in 2003) led to an increase of disposable
profit from CHF 1.2 billion to CHF 1.5 billion. Total shareholders’ equity before allocation
of profit increased from CHF 11.2 billion to CHF 12.2 billion. At the Annual General
Meeting, shareholders approved a dividend payment of CHF 497 million, compared
to CHF 341 million in the previous year.
In 2005, the company’s share capital remained at CHF 32 million. Total reserves in-
creased by CHF 952 million to CHF 11.7 billion. The lower profit for the financial year
2005 of CHF 1.1 billion (compared to CHF 1.4 billion in 2004) led to a decrease of
disposable profit from CHF 1.5 billion to CHF 1.1 billion. Total shareholders’ equity before
allocation of profit increased from CHF 12.2 billion to CHF 12.8 billion. At the Annual
General Meeting, shareholders approved a dividend payment of CHF 776 million, com-
pared to CHF 497 million in the previous year.
In 2006, the company’s share capital increased from CHF 32 million to CHF 37 million,
mainly due to shares issued to General Electric (GE) and to capital markets as a result
of the acquisition of GE Insurance Solutions. Total reserves increased by CHF 4.5 billion
to CHF 16.2 billion. The higher profit for the financial year 2006 of CHF 2.1 billion
(compared to CHF 1.1 billion in 2005) led to an increase of disposable profit from
CHF 1.1 billion to CHF 2.2 billion. Total shareholders’ equity before allocation of profit
increased from CHF 12.8 billion to CHF 18.4 billion. At the Annual General Meeting,
shareholders will vote on the proposal of a dividend payment of CHF 1.2 billion, com-
pared to CHF 776 million paid in the previous year.
As of 31 December 2006, Swiss Reinsurance Company’s share capital, including shares
reserved for corporate purposes, amounted to CHF 37 444 038. It is fully paid-in and
divided into 374 440 378 registered shares (each with a nominal value of CHF 0.10),
of which 358 256 229 are entitled to dividend. Other than the shares reserved for corpo-
rate purposes, which have no voting power and are not entitled to dividend, there are
no additional types of shares with a higher or limited voting power, privileged dividend
entitlement or any other preferential rights; nor are there any other securities represent-
ing a part of the company’s share capital. Swiss Re’s capital structure ensures equal
treatment of all shareholders in accordance with the principle of “one share, one vote”.
2.4 Shares
2.4 Shares
2.5 Profit-sharing certificates
2.5 Profit-sharing certificates
Profit-sharing certificates in the sense of the SWX Directive are particular types of non-
voting securities that substitute or complement shares. These do not exist at Swiss Re.
2.6 Limitations on transferability and
2.6 Limitations on transferability and
nominee registrations
nominee registrations
Free transferability
Swiss Reinsurance Company’s shares are freely transferable, without any limitations,
provided that the buyers declare they are the beneficial owners of the shares and comply
with the disclosure requirements of the Federal Act on Stock Exchanges and Securities
Trading (“Stock Exchange Act”) of 24 March 1995.
Swiss Re 2006 Annual Report 69
Governance Corporate governance
Admissibility of nominee registrations
Trustees or nominees who act as fiduciaries of shareholders are entered without further
inquiry in Swiss Reinsurance Company’s share register as shareholders with voting rights
up to a maximum of 2% of the outstanding share capital available at the time. Additional
shares held by such nominees, which exceed the limit of 2% of the outstanding share
capital, are entered in the share register with voting rights only if such nominees disclose
the names, addresses and shareholdings of the beneficial owners of the holdings
amounting to or exceeding 0.5% of the outstanding share capital. In addition, such nom-
inees must comply with the disclosure requirements of the Stock Exchange Act.
Procedure and conditions for cancelling statutory privileges and limitations
on transferability
This point is not applicable, as no statutory privileges or limitations on transferability exist.
2.7 Convertible bonds and options
2.7 Convertible bonds and options
Convertible bonds
As stated in note 6 on “Debt” on pages 134–137 of the Financial Statements, the follow-
ing convertible bonds are outstanding:
Maturity
2021
2007
2008
2009
Instrument
Convertible bond
Mandatory convertible bond
Mandatory convertible bond
Mandatory convertible bond
Issued in
2001
2004
2005
2006
Currency
USD
Nominal (m) Exchange terms
i)
1 150
EUR
CHF
CHF
672
1 000
610
ii)
iii)
iv)
(i) Holders may convert the bonds, due 2021 and issued in denominations of USD 10 000
principal amount and integral multiples thereof, into registered shares of Swiss Reinsur-
ance Company (nominal value CHF 0.10 per share) at any time on and after 22 Novem-
ber 2001, and prior to the close of business on 21 November 2011, at a conversion price
of CHF 207.19 per share and a fixed exchange rate of USD 1= CHF 1.6641. The exercise
of this convertible bond will not affect Swiss Re’s conditional capital, as Swiss Reinsur-
ance Company purchased a call option to hedge the underlying shares. If bond holders
exercise this convertible bond, Swiss Re will exercise the hedge option purchased to
obtain the necessary shares without accessing Swiss Re’s conditional capital.
(ii) The Mandatory Convertible Bond (MCS) may, at the option of each holder, be con-
verted into registered shares of Swiss Reinsurance Company at any time from 2 Septem-
ber 2004 until 4.00 pm CET on the business day (as defined in the prospectus) before
the 20th trading day (as defined in the prospectus) prior to the maturity date. Holders
exercising such early conversion right will be entitled initially to receive 15.796 shares,
subject to adjustment as described in the prospectus, for each MCS. Unless previously
converted, each MCS will be mandatorily converted on the maturity date into such
number of registered shares of Swiss Re as is equal to the maturity conversion ratio.
The maturity conversion ratio equals the arithmetic average of the 15 conversion ratios
(calculated to five decimal places) calculated on the basis of the CHF closing prices of
the shares on the virt-x (“closing price”) on each of the 15 consecutive trading days
ending on the third trading day prior to the maturity date. For the purposes of calculating
such arithmetic average, the conversion ratio for a given trading day is determined
as follows: (i) if the closing price is less than or equal to the minimum conversion price
of CHF 80.4140, the conversion ratio shall be equal to the maximum conversion ratio
70 Swiss Re 2006 Annual Report
Governance Corporate governance
of initially 18.956 shares per MCS; (ii) if the closing price is greater than or equal to the
maximum conversion price of CHF 96.4968, the conversion ratio shall be equal to the
minimum conversion ratio of initially 15.796 shares per MCS; and (iii) if the closing price
is greater than the minimum conversion price, but less than the maximum conversion
price, the conversion ratio shall be equal to EUR 1 000 multiplied by the fixed exchange
rate (EUR 1 = CHF 1.5243) and divided by the closing price. Based on the closing price,
Swiss Re will be required to deliver between 10.6 million and 12.7 million shares created
from conditional capital or shares reserved for corporate purposes.
(iii) The Mandatory Convertible Bond (MCS), issued as a private offering to institutional
investors only, may, at the option of each holder, be converted into registered shares of
Swiss Reinsurance Company at any time from 24 January 2006 until 4.00 pm CET on
the business day before the 20th trading day prior to the maturity date on 15 December
2008. Holders exercising such early conversion right will be entitled initially to receive
871.68759 shares, subject to adjustment, for each MCS of CHF 100 000 nominal value.
Unless previously converted, each MCS will be mandatorily converted on the maturity
date into such number of registered shares of Swiss Re as is equal to the maturity con-
version ratio. The maturity conversion ratio equals the arithmetic average of the 15 con-
version ratios calculated on the basis of the CHF closing prices of the shares on the virt-x
(“closing price”) on each of the 15 consecutive trading days ending on the third trading
day prior to the maturity date. For the purposes of calculating such arithmetic average,
the conversion ratio for a given trading day is determined as follows: (i) if the closing
price is less than or equal to the minimum conversion price of CHF 95.60, the conversion
ratio shall be equal to the maximum conversion ratio of initially 1 046.0251 shares per
MCS; (ii) if the closing price is greater than or equal to the maximum conversion price
of CHF 114.72, the conversion ratio shall be equal to the minimum conversion ratio of ini-
tially 871.68759 shares per MCS; and (iii) if the closing price is greater than the mini-
mum conversion price, but less than the maximum conversion price, the conversion ratio
shall be equal to CHF 100 000 divided by the closing price. Based on the closing price,
Swiss Re will be required to deliver between 8.7 million and 10.5 million shares created
from conditional capital or shares reserved for corporate purposes.
(iv) Upon closing the GE Insurance Solutions acquisition, Swiss Re issued CHF 610 mil-
lion of three-year mandatory convertible instruments to General Electric. The Mandatory
Convertible Bond (MCS), issued as a private offering, may, at the option of each holder,
be converted into registered shares of Swiss Reinsurance Company at any time from
18 July 2006 until 4.00 pm CET on the business day before the 20th trading day prior
to the maturity date on 8 June 2009. Holders exercising such early conversion right
will be entitled initially to receive 1 024.14923 shares, subject to adjustment, for each
MCS of CHF 100 000 nominal value.
Unless previously converted, each MCS will be mandatorily converted on the maturity
date into such number of registered shares of Swiss Reinsurance Company as is equal to
the maturity conversion ratio. The maturity conversion ratio equals the arithmetic average
of the 15 conversion ratios calculated on the basis of the CHF closing prices of the shares
on the virt-x (“closing price”) on each of the 15 consecutive trading days ending on the
third trading day prior to the maturity date. For the purposes of calculating such arithme-
tic average, the conversion ratio for a given trading day is determined as follows: (i) if the
Swiss Re 2006 Annual Report 71
closing price is less than or equal to the minimum conversion price of CHF 84.90610,
the conversion ratio shall be equal to the maximum conversion ratio of initially
1 177.77168 shares per MCS of CHF 100 000 nominal value; (ii) if the closing price is
greater than or equal to the maximum conversion price, of CHF 97.64202, the conver-
sion ratio shall be equal to the minimum conversion ratio of initially 1 024.14923 shares
per MCS of CHF 100 000 nominal value; and (iii) if the closing price is greater than the
minimum conversion price, but less than the maximum conversion price, the conversion
ratio shall be equal to CHF 100 000 divided by the closing price. Based on the closing
price, Swiss Re will be required to deliver between 6.25 million and 7.18 million shares
created from conditional capital or shares reserved for corporate purposes.
Options
For details on stock options granted to Swiss Re employees, please refer to note 12
on “Share-based payments” on pages 150–153 and to note 9 on “Shareholders’
equity”, page 142 of the Financial Statements and section 5.6 on pages 95–96 in
the corporate governance chapter.
Governance Corporate governance
72 Swiss Re 2006 Annual Report
Governance Corporate governance
3 Board of Directors
3.1 Members of the Board of Directors
3.1 Members of the Board of Directors
Membership as at 31 December
Membership as at 31 December
2006
2006
Name
Peter Forstmoser
Nationality Age
63
Swiss
Walter B. Kielholz
Swiss
55
Initial election
1990
Current term ends
2010
1998
2010
Function
Chairman of the Board
Chair of the GC
Executive Vice Chairman
of the Board
Member of the FRC
Member of the GC
Jakob Baer
Swiss
62 Member
2005
2009
Chair of the AC
Member of the FRC
Thomas W. Bechtler
Swiss
57 Member
Raymund Breu
Swiss
61 Member
Member of the CC
Member of the AC
Member of the CC
John R. Coomber
British
57 Member
Chair of the FRC
Dennis D. Dammerman US
61 Member
Member of the CC
Member of the FRC
Member of the GC
1993
2003
2006
2006
2009
2007
2009
2009
Rajna Gibson Brandon
Swiss
44 Member
2000
2008
Member of the AC
Member of the FRC
Bénédict G.F. Hentsch
Swiss
58 Member
1993
2009
Member of the GC
Robert A. Scott
British
64 Member
2002
2010
Australian
Member of the AC
Chair of the CC
Member of the FRC
John F. Smith, Jr.
US
Swiss
68 Member
2003
2007
Member of the AC
Member of the GC
Kaspar Villiger
Swiss
65 Member
2004
2008
Member of the FRC
Member of the GC
Abbreviations:
AC
CC
FRC
GC
Audit Committee
Compensation Committee
Finance and Risk Committee
Governance Committee
Independence
Swiss Re requires a majority of the Board of Directors to be independent. Nominations
are submitted to General Meetings of Shareholders accordingly. To be considered inde-
pendent, a director may not be, and may not have been in the past three years, employed
as an executive officer of the Group. In addition, he or she must not have a material rela-
tionship with any part of the Group (either directly or as a partner, director or shareholder
Swiss Re 2006 Annual Report 73
Governance Corporate governance
of an organisation that has a material relationship with the Group). Based on Swiss Re’s
independence criteria, a strong majority of ten of Swiss Re’s twelve directors qualify as
independent. Walter B. Kielholz, Executive Vice Chairman, and John R. Coomber, who
was Chief Executive Officer until 31 December 2005, may not be considered independ-
ent under the applicable criteria.
Information about managerial positions and significant business connections
of non-executive directors
With the exception of Walter B. Kielholz, all members of the Board of Directors are non-
executive. One of these 11 non-executive directors, John R. Coomber, was a member
of Swiss Re’s executive management and CEO until 31 December 2005. Therefore, he
cannot be considered independent although he has a non-executive status. Of the other
ten non-executive directors, none has ever held a management position in the Group.
No director has any significant business connection with Swiss Re or any of its Group
companies.
Peter Forstmoser
Peter Forstmoser
Chairman, non-executive and
Chairman, non-executive and
independent
independent
Mr Forstmoser, a Swiss citizen born in 1943, received a doctorate in law from the
University of Zurich in 1970, became an attorney-at-law in 1971 and earned a master’s
degree in law from Harvard Law School in 1972.
Mr Forstmoser has been a law professor at the University of Zurich since 1974 and
a partner of Niederer Kraft & Frey, Attorneys, in Zurich, since 1975. Mr Forstmoser was
elected to Swiss Re’s Board of Directors in 1990. His mandate was renewed in 1994 and
1998, each time for a further four years. The Board of Directors elected him Chairman on
30 June 2000. He was re-elected in 2002 and 2006 for further four-year terms.
Mr Forstmoser is also chairman of the board of directors of Hesta AG and Hesta Tex AG,
Zug, and a member of the boards of Mikron Holding AG, Biel, Bank Hofmann AG, Zurich
(until January 2007), Ernst Basler AG, Zollikon, Remer Holding AG, Ennetbaden, and
Hyos Invest Holding AG, Zurich.
Mr Forstmoser is the author of numerous publications on business law, company law,
capital markets law and data protection law. In the context of corporate and investment
fund legislation, he has been engaged in numerous expert committees, some of which
he presided as chairman. In addition, he frequently acts as an arbitrator in international
law disputes.
Walter B. Kielholz
Walter B. Kielholz
Executive Vice Chairman
Executive Vice Chairman
Mr Kielholz, a Swiss citizen born in 1951, studied business administration at the Univer-
sity of St. Gallen, Switzerland, and graduated in 1976 with a master’s degree in business
finance and accounting.
Mr Kielholz’s career began at the General Reinsurance Corporation, Zurich. After work-
ing in the US, the UK and Italy, he assumed responsibility for the company’s European
marketing. In 1986 he joined Credit Suisse, Zurich, responsible for client relations with
large insurance groups in the multinational services department.
At the beginning of 1989, Mr Kielholz joined Swiss Re, Zurich. He became a member
of the Executive Board in January 1993 and was Swiss Re’s Chief Executive Officer from
74 Swiss Re 2006 Annual Report
Governance Corporate governance
1 January 1997 to 31 December 2002. In June 1998 he was elected to Swiss Re’s Board
of Directors, which at the same time appointed him Executive Director. His mandate
was renewed for a further four-year period in 2002 and 2006. Mr Kielholz was appoint-
ed Executive Vice Chairman with effect from 1 January 2003.
Mr Kielholz was elected to the board of directors of Credit Suisse Group in 1999. Since
1 January 2003 he has been Chairman of that company’s board of directors.
In addition, Mr Kielholz is a member of the European Financial Roundtable (EFR) and
president of the International Monetary Conference. Mr Kielholz is also chairman of the
supervisory board of Avenir Suisse, a member of the board and the committee of the
Swiss Business Federation (economiesuisse) and a member of the Center for Strategic
and International Studies (CSIS), a US-based think tank. In 2005, he was elected to
the Insurance Hall of Fame, which honours individuals who have exercised substantial
influence on the insurance industry for the benefit of society.
Furthermore, Mr Kielholz is a member of the Society of Zurich Friends of the Arts and
chairman of the Zurich Art Society.
Jakob Baer
Jakob Baer
Non-executive and independent director
Non-executive and independent director
Mr Baer, a Swiss citizen born in 1944, became an attorney-at-law in 1971 and
graduated from the University of Bern in 1973 with a doctorate in law.
Mr Baer began his career in the legal department of the Federal Finance Administration.
In 1975, he joined Fides Trust Company. Following the successful planning and execu-
tion of a management buyout of Fides’ advisory business, he became a member of the
management board of KPMG Switzerland in 1992. In 1994, he was appointed CEO of
KPMG Switzerland and a member of KPMG’s European and international management
boards. He retired from KPMG in September 2004, having reached the statutory retire-
ment age.
Mr Baer was elected to Swiss Re’s Board of Directors in May 2005. He also serves on
the boards of directors of Adecco S.A., Chéserex, Rieter Holding AG, Winterthur, Allreal
Holding AG, Baar, Emmentalische Mobiliar Versicherungs-Gesellschaft, Konolfingen,
and IFBC – Integrated Financial Business Consulting AG, Zurich.
Thomas W. Bechtler
Thomas W. Bechtler
Non-executive and independent director
Non-executive and independent director
Mr Bechtler, a Swiss citizen born in 1949, received a doctorate in law from the University
of Zurich in 1973 and a master’s degree in law from Harvard Law School in 1975.
Mr Bechtler has been chief executive officer of Hesta AG as well as Hesta Tex AG, Zug,
since 1982.
Mr Bechtler joined Swiss Re’s Board of Directors in November 1993. His mandate
was renewed in 1997, 2001 and 2005, each time for a further four years. Mr Bechtler
also serves on the boards of directors of Credit Suisse Group, Zurich, Bucher Industries,
Niederweningen, Sika AG, Baar, and Conzzeta Holding, Zurich. From 1987 to 1999,
he served as chairman of “Swisscontact”, a large Swiss development foundation, and
from 1987 to 2002 as chairman of the Zurich Art Society. Since 2005 he has been
chairman of the Zurich committee of Human Rights Watch.
Swiss Re 2006 Annual Report 75
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Raymund Breu
Raymund Breu
Non-executive and independent director
Non-executive and independent director
Mr Breu, a Swiss citizen born in 1945, graduated from the Swiss Federal Institute of
Technology (ETH) in Zurich with a doctorate in mathematics.
Mr Breu is Chief Financial Officer of the Novartis Group and a member of the company’s
executive committee, positions he assumed when Novartis was created in December
1996. He joined the group treasury of Sandoz, a predecessor company of Novartis,
in 1975. Ten years later, he was appointed CFO of Sandoz Corporation in New York. In
1990, he became group treasurer of Sandoz Ltd, and, in 1993, head of group finance
and a member of the Sandoz executive board.
Mr Breu was elected to Swiss Re’s Board of Directors in 2003 for a four year term of
office. He will stand for re-election at the Annual General Meeting of 20 April 2007.
Mr Breu is also a member of the board of directors of the SWX Swiss Exchange and
its admission panel as well as a member of the Swiss Takeover Board.
John R. Coomber
John R. Coomber
Non-executive director
Non-executive director
Mr Coomber, a British citizen born in 1949, graduated in theoretical mechanics from
Nottingham University in 1970.
Mr Coomber started his career with the Phoenix Insurance Company. He joined Swiss Re
in 1973. Having qualified as an actuary in 1974, he first specialised in the company’s
life reinsurance. He was Swiss Re (UK)’s appointed actuary from 1983 to 1990. In 1987,
he assumed responsibility for the life division and, in 1993, was made head of the com-
pany’s UK operations. Mr Coomber was appointed member of the Executive Board in
April 1995, responsible for the Group’s Life & Health Division. In June 2000, he became
a member of the Executive Committee. He was Swiss Re’s Chief Executive Officer from
1 January 2003 through 31 December 2005, when he retired after 33 years of employ-
ment with Swiss Re.
Mr Coomber was elected to Swiss Re’s Board of Directors at the Extraordinary General
Meeting of 27 February 2006 for a term ending at the AGM of 2009. Mr Coomber
also serves as a member of the supervisory board of Euler Hermes, Paris, as a director
of Pension Insurance Corporation Holdings LLP and as a trustee of The Climate Group.
Dennis D. Dammerman
Dennis D. Dammerman
Non-executive and independent director
Non-executive and independent director
Mr Dammerman, a US citizen born in 1945, graduated with a Bachelor of Science from
the University of Dubuque, Iowa, US in 1967.
Mr Dammerman began his professional career with General Electric in the Financial
Management Program at GE Appliances. In 1984, he became senior vice president
finance of General Electric Company. He was elected to the company’s board of directors
in December 1994 and was subsequently appointed vice chairman of the board, at the
same time remaining an executive officer of GE and a member of the corporate executive
office. He also served as chairman of GE Capital Services. At the end of 2005, he retired
from all General Electric positions.
Mr Dammerman was elected to Swiss Re’s Board of Directors at the Extraordinary
General Meeting of 27 February 2006 for a term ending at the AGM of 2009. He also
serves as a non-executive director of BlackRock Inc., New York. In addition, he is a mem-
ber of the board of trustees of Skidmore College, Saratoga Springs, New York.
76 Swiss Re 2006 Annual Report
Governance Corporate governance
Rajna Gibson Brandon
Rajna Gibson Brandon
Non-executive and independent director
Non-executive and independent director
Ms Gibson, a Swiss citizen born in 1962, studied business and economics at the
Uni versity of Geneva, graduating with a BA in 1982 and a PhD in economics and
social sciences in 1987.
Ms Gibson has been a professor of financial economics at the Swiss Banking Institute
of the University of Zurich since March 2000. Ms Gibson was previously a professor
of finance at the University of Lausanne. She is also a director of the National Centre of
Competence in Research (NCCR) “Financial Valuation and Risk Management” research
network, and an adviser to scientific councils of various educational institutions. She
was a member of the Swiss Federal Banking Commission until the end of 2004.
Ms Gibson was elected to Swiss Re’s Board of Directors in June 2000. Her mandate
was renewed in 2004 for a further four-year term.
Bénédict G.F. Hentsch
Bénédict G.F. Hentsch
Non-executive and independent director
Non-executive and independent director
Mr Hentsch, a Swiss citizen born in 1948, studied business administration at the
University of St. Gallen, Switzerland, graduating in 1972 with a master’s degree in
business finance and accounting.
Mr Hentsch was a general partner of Darier Hentsch & Cie, Private Bankers, Geneva
from 1985 until 2001. He chaired the Swiss Private Bankers Association from 1998
until 2001. In 2004, he founded GEM – Global Estate Managers – as well as Banque
Bénédict Hentsch & Cie S.A., both entities dedicated to global wealth management.
Mr Hentsch was elected to Swiss Re’s Board of Directors in 1993. His mandate was
renewed in 1997, 2001 and 2005, each time for a further four-year term. He is also
a member of the board of the ISC Foundation and the MLE-Foundation, both at the
University of St. Gallen.
Robert A. Scott
Robert A. Scott
Non-executive and independent director
Non-executive and independent director
Mr Scott, a British and Australian citizen born in 1942, was educated at Scots College,
Wellington, New Zealand. He has been a Senior Associate of the Australian and New
Zealand Institute of Insurance and Finance (ANZIIF) since 1965 and was made a Com-
mander of the British Empire (CBE) in 2002.
Mr Scott is a retired group chief executive of CGNU plc, now Aviva. In the 1990s, he was
group chief executive of General Accident and, following the merger with Commercial
Union in 1998, was appointed group chief executive of CGU plc. Following the merger in
2000 with Norwich Union, Mr Scott became group chief executive of CGNU plc, retiring
in May 2001. Mr Scott was also chairman of the Association of British Insurers in 2000–
2001, and a board member in the previous four years.
Mr Scott joined Swiss Re’s Board of Directors in 2002 for a four-year term. He was
re-elected for a further four-year term in 2006. Mr Scott is also chairman of the board of
directors of Yell Group plc, and a non-executive director of the Royal Bank of Scotland
Group plc and Jardine Lloyd Thompson Group plc. In addition, he is an adviser to Duke
Street Capital and Pension Insurance Corporation Holdings LLP.
Swiss Re 2006 Annual Report 77
Governance Corporate governance
John F. Smith, Jr.
John F. Smith, Jr.
Non-executive and independent director
Non-executive and independent director
Mr Smith, a US and Swiss citizen born in 1938, received a Bachelor of Business
Ad ministration from the University of Massachusetts in 1960 and a Master of Business
Administration from Boston University in 1965.
Mr Smith joined General Motors Corporation, Detroit, in 1961. He became the company’s
president in 1992, a position he held until 1998. He served as chief executive officer
from 1992 to 2000 and was chairman of the board of directors from 1996 to April 2003.
Mr Smith joined Swiss Re’s Board of Directors in 2003 for a four-year term. He will stand
for re-election at the Annual General Meeting of 20 April 2007. Mr Smith is also chair-
man of Delta Air Lines and a director of The Procter & Gamble Company. In addition, he
serves as a member of the chancellor’s executive committee of the University of Massa-
chusetts and as a member of the board of trustees at Boston University.
Kaspar Villiger
Kaspar Villiger
Non-executive and independent director
Non-executive and independent director
Mr Villiger, a Swiss citizen born in 1941, graduated from the Swiss Federal Institute of
Technology (ETH) in Zurich with a degree in mechanical engineering in 1966.
As an entrepreneur, Mr Villiger co-owned and managed two businesses from 1966 until
1989. Simultaneously, Mr Villiger had several political positions, first in the parliament
of canton Lucerne and, from 1982, in the Swiss Federal Parliament. He became a Feder-
al Councillor in 1989. He initially served as Defence Minister, with responsibility for the
Federal Military Department. He then became Finance Minister in 1995, being in charge
of the Federal Department of Finance until the end of 2003. Mr Villiger was President
of the Swiss Confederation in 1995 and 2002.
Mr Villiger joined Swiss Re’s Board of Directors in 2004 for a four-year term. He also
serves as non-executive director on the boards of Nestlé SA, Vevey, and the newspaper
“Neue Zürcher Zeitung”, Zurich.
Changes in the course of the business year 2006
George L. Farr, who was a non-executive and independent director since 1996, passed
away on 5 November 2006. Swiss Re’s Board of Directors and executive management
highly appreciated Mr Farr’s outstanding commitment and exceptional contribution to
Swiss Re.
Nominations for the election to be held at the Annual General Meeting of 20 April
2007
The Board of Directors has decided to nominate the following candidates for re-election
to the Board:
Raymund Breu, for a further four-year term;
John F. Smith, Jr., for a one-year term, in consideration of his age.
The Board of Directors has further decided to nominate the following candidate for first
time election to the Board:
Hans Ulrich Maerki, a Swiss citizen, born on 15 November 1946, currently Chairman
of IBM Europe, Middle East and Africa. Mr Maerki will step down from his executive
functions with IBM in the course of the first half 2007.
78 Swiss Re 2006 Annual Report
Governance Corporate governance
3.2 Other activities and vested
3.2 Other activities and vested
Please refer to the information provided in each director’s biography on pages 74–78.
interests
interests
3.3 Cross-involvement
3.3 Cross-involvement
3.4 Elections and term of office
3.4 Elections and term of office
Cross-involvement refers to interlocking memberships between the boards of directors of
two or more listed companies. According to the relevant SWX commentary, the mere
fact that a given person holds a seat on the boards of two listed companies is alone suffi-
cient to invoke the obligation to disclose such an interlocking directorate. Pursuant to
such definition, the following cross-involvements existed on 31 December 2006:
Peter Forstmoser, Chairman, is also a director of Mikron Holding AG.
Walter B. Kielholz, Executive Vice Chairman, is also chairman of the board of directors
of Credit Suisse Group.
Jakob Baer, Director, is also a director and chairman of the audit committees of Adecco
SA and Allreal Holding AG, as well as a director of Rieter Holding AG.
Thomas W. Bechtler, Director, is also a director of Bucher Industries, Conzzeta Holding,
Credit Suisse Group and Sika AG.
Dennis D. Dammerman, Director, is also director of BlackRock Inc.
Robert A. Scott, Director, is also chairman of the board of directors of Yell Group plc and
director of The Royal Bank of Scotland Group plc and Jardine Lloyd Thompson Group plc.
John F. Smith, Jr., Director, is also chairman of the board of directors of Delta Air Lines
and a director of The Procter & Gamble Company.
Kaspar Villiger, Director, is also a director of Nestlé.
Principles of the election procedure and term limits
The term of office of a directorship is four years in principle. It usually begins with the
date of election by a General Meeting of shareholders and ends on the fourth subse-
quent Annual General Meeting. Members whose term has expired are immediately
eligible for re-election. Each proposed election and re-election is substantiated by
the Chairman at the General Meeting and is separately voted upon.
The age limit is 70. Members who reach the age of 70 during a regular term of office
shall tender their resignation at the Annual General Meeting following the attainment
of that age.
First election and remaining term of each director
Please refer to the table at the beginning of section 3, Board of Directors.
Swiss Re 2006 Annual Report 79
Governance Corporate governance
3.5 Internal organisational structure
3.5 Internal organisational structure
80 Swiss Re 2006 Annual Report
The organisational structure is laid down in the Corporate Bylaws, which also define the
responsibilities of the Board of Directors, its committees, the executive management
as well as the reporting procedures. Given their significance, the Corporate Bylaws are
reviewed annually by both the Governance Committee and the full Board for considera-
tion of expediency as well as compliance with domestic and applicable international
laws, regulations and best practice standards.
a. Allocation of tasks within the Board of Directors
Chairman of the Board of Directors
The Chairman of the Board of Directors (the “Board”) exercises ultimate supervision
of the executive management on behalf of the Board; he usually attends the meetings
of the Executive Committee and the Executive Board and receives all related documenta-
tion and minutes; together with the Chairman of the Audit Committee, he is responsible
for Group Internal Audit; he appoints its head, subject to confirmation by the Audit Com-
mittee, and determines his or her compensation; he convenes meetings of the Board
and its committees; he makes preparations for, and presides at, the meetings of the
Board; he presides at the General Meetings of shareholders; he ensures adequate report-
ing to the Board by the Board committees, the Executive Committee and the Executive
Board; he coordinates the activities of the Board committees; he receives comments
from the directors as to the Board’s performance and reports annually to the Board with
an assessment of the Board’s performance; he represents the Group in matters involving
shareholders; in cases of doubt, he makes decisions concerning the authority of the
Board or its committees and about the application and interpretation of the Corporate
Bylaws.
Executive Vice Chairman
The Executive Vice Chairman liaises between the Board and executive management
in matters not reserved to the Chairman; he may attend the meetings of the Executive
Committee and the Executive Board and receives the relevant documentation and min-
utes. Other responsibilities include supervising management’s preparation and execution
of Board resolutions in operational matters, supervising management’s development
of Group strategies and overseeing management development for the Group’s senior
executives.
b. Committees of the Board of Directors: members, tasks and responsibilities
General provisions for all committees
The Board may delegate certain responsibilities, including the preparation and execution
of its resolutions, to committees or the Executive Vice Chairman. Any such committee
or the Executive Vice Chairman must keep the Board apprised on a timely basis of ac-
tions and determinations.
The committees may conduct or authorise special investigations at any time and at their
full discretion into any matters within their respective scope of responsibilities, as laid
down in their respective charters of duties, thereby taking into consideration relevant
peer group practice and general best practice. They are empowered to retain independ-
ent counsel, accountants or other experts if deemed necessary, including for purposes
of benchmarking best practice, and shall receive appropriate funding for payment
of compensation to such outside advisors.
Governance Corporate governance
Audit Committee
Members
Jakob Baer, Chair
Raymund Breu
Rajna Gibson Brandon
Robert A. Scott
John F. Smith, Jr.
Independence and other qualifications
All members of the Audit Committee must be non-executive and independent. In addi-
tion to the independence criteria applicable for the Board members, members of the
Audit Committee may not accept any consulting, advisory, or other compensatory fee
from the company. All members must be financially literate. At least one member must
have the attributes qualifying such member as an Audit Committee Financial Expert
as determined by the Board. Furthermore, Audit Committee members should not serve
on audit committees of more than two other listed companies.
Tasks and responsibilities
The central task of the Audit Committee is to assist the Board in fulfilling its oversight
responsibilities as they relate to the integrity of the Group’s financial statements, the
Group’s compliance with legal and regulatory requirements, the external auditor’s quali-
fications and independence, and the performance of the Group’s internal audit function
and its external auditor.
The Committee serves as an independent and objective monitor of the Group’s financial
reporting process and system of internal control, and facilitates ongoing communication
between the external auditor, management, Group Internal Audit and the Board with
regard to the Group’s financial position and affairs. The Audit Committee reviews its own
performance annually.
More specific duties and responsibilities of the Committee are listed in its charter
of duties.
Compensation Committee
Members
Robert A. Scott, Chair (from 8 December 2006, previously George L. Farr)
Thomas W. Bechtler
Raymund Breu (from 8 December 2006)
Dennis D. Dammerman
Independence
All members of the Compensation Committee must be non-executive and independent.
Tasks and responsibilities
Formerly known as the Compensation and Appointments Committee, the Compensation
Committee was renamed in February 2007, when personnel matters were transferred
to the Governance Committee (the former Governance and Shareholder Relations Com-
mittee). Its charter of duties was amended accordingly. The tasks and responsibilites
outlined below reflect the current status.
Swiss Re 2006 Annual Report 81
Governance Corporate governance
82 Swiss Re 2006 Annual Report
The Compensation Committee oversees the development of a set of compensation
principles, submits them to the Board for approval, monitors adherence to such princi-
ples and regularly discusses their appropriateness; it keeps itself informed of industry
and peer compensation practice; it recommends to the Board the remuneration of the
members of the Board other than the Chairman and the Executive Vice Chairman;
it determines the compensation of the Chairman, the Executive Vice Chairman, the
CEO and the members of executive management on the basis of their performance;
it determines the total amount for bonus payments, related deferral plans and long-term
incentive plans on the basis of achieved performance; it reviews and approves the
Group’s compensation and pension plans; it ensures compliance with any remuneration
disclosure requirements; it approves employment contracts with the Chairman, the
Executive Vice Chairman, the Chief Executive Officer and the members of executive
management; it also reviews its own performance annually.
Finance and Risk Committee
Members
John R. Coomber, Chair (from 1 March 2006, previously Rajna Gibson Brandon)
Jakob Baer
Dennis D. Dammerman (from 1 March 2006)
Rajna Gibson Brandon
Walter B. Kielholz
Robert A. Scott
Kaspar Villiger
Tasks and responsibilities
This Committee oversees risk management, approves the fundamental risk management
principles, reviews their implementation, and the appropriateness of the Group’s risk
management framework and its implementation. It reviews, and makes recommenda-
tions in respect of, the Group’s risk strategy proposed by management, it evaluates
the bases on which the Board determines the overall risk tolerance and the risk appetite
for the Group’s most significant risk taking activities, and it also reviews the strategic
asset allocation and its conformity with the risk tolerance level as determined by the
Board; in respect of risk controlling, it reviews the methodology for risk measurement, the
results of risk-adjusted capital calculations and the most significant risk exposures and
their limits, and it receives reports on the Group-wide use of derivative instruments; in
respect of the balance sheet, it reviews the valuation of assets and liabilities for econom-
ic, accounting and regulatory purposes, and the treasury strategy; it reviews capital ade-
quacy, the ratings received from the rating agencies, and management’s reaction and
recommendations thereto; and it reviews the Group’s integrated portfolio risk manage-
ment activities. The Finance and Risk Committee reviews its own performance annually.
Governance Committee
Members
Peter Forstmoser, Chair
Dennis D. Dammerman (from 1 March 2006)
Benedict G. F. Hentsch
Walter B. Kielholz
John F. Smith, Jr.
Kaspar Villiger
Governance Corporate governance
Tasks and responsibilities
Formerly known as the Governance and Shareholder Relations Committee, the Govern-
ance Committee was renamed in February 2007. The committee is now also respon-
sible for personnel matters which used to be the duty of the former Compensation and
Appointments Committee. The charter of the Governance Committee was amended
accordingly. The tasks and reponsibilites outlined below reflect the current status.
The Committee keeps itself informed on corporate governance developments; it meas-
ures the Group’s governance against relevant best practice standards and informs the
Board of its findings and emerging trends; it makes proposals that ensure an adequate
size and a well-balanced composition of the Board and further ensures that a majority
of the Board is independent; it evaluates candidates for Board membership and makes
recommendations to the Board; it evaluates proposals made to the Board for the appoint-
ment and removal of members of executive management; it ensures the effectiveness
of executive succession and emergency planning processes; it ensures compliance with
corporate governance disclosure requirements; it annually reviews the company’s
Articles of Association and the Corporate Bylaws and informs the Board of its findings
and proposals; it reviews the Group’s communication policy; it periodically reviews the
Group’s guiding principles, the corporate citizenship activities and the corporate sus-
tainability plan; it monitors investor relations activities and the relationship with rating
agencies; it examines how public reports are perceived, especially with regard to
whether they fulfil the needs and expectations of international investors; it monitors the
shareholder structure; it has initial responsibility for assessing any merger and take-over
proposals submitted to the Group; it has initial responsibility for reviewing material
transactions with any of the Group’s significant shareholders; and it establishes a proce-
dure for the directors to comment on the Board’s performance. The Governance Commit-
tee reviews its own performance annually.
c. Work methods of the Board of Directors and its committees
In 2006, the Board had six regular meetings on two consecutive days. The first day is
reserved for committee meetings, while on the second day the full Board meets for as
long as required, usually the whole day. The regular meetings are typically held in early
and late February, April, June, September and December. Additional meetings were
called at short notice if and when required. Each of the regular Board meetings has
a special focus, broadly determined by Swiss Re’s reporting schedule, and including
such topics as strategic issues, financial statements, analysis of internal results, the
medium-term business plan, and corporate governance. Meeting invitations and agendas
are delivered to the directors about 10 days before the meetings together with written
materials, including recent financial information, to permit meaningful preparation.
Swiss Re 2006 Annual Report 83
Governance Corporate governance
3.6 Definition of areas of responsibility
3.6 Definition of areas of responsibility
84 Swiss Re 2006 Annual Report
In 2006, the following meetings were held:
Dates
1 February
2/3 February
28 February/1 March
10 April
19/20 April
27 April
8/9 June
15–17 June
21 July
3 August
14/15 September
28 September
10 November
30 November
7/8 December
¹ Board of Directors
² Audit Committee
³ Compensation Committee
CC3
regular
regular
FRC4
GC5
regular
regular
regular
regular
regular
regular
regular
extra
regular
BoD1
AC2
regular
regular
extra
regular
extra
extra
regular
regular
extra
regular
regular
regular
regular
extra
regular
regular
extra
extra
regular
regular
regular
regular
4 Finance and Risk Committee
5 Governance Committee
Normally, the members of the Executive Committee attend the meetings of the Board
in an advisory capacity. Attendance at committee meetings is normally restricted to
those members of executive management with the information and expertise required
for the relevant committee to perform its duties. The Head of Group Internal Audit and at
least the two head auditors of the external auditor regularly participate in Audit Commit-
tee meetings.
The average attendance rate at the regular Board meetings was 98.7% throughout the
year. Including the extraordinary meetings that were convened at relatively short notice,
the average attendance rate was 94.2%.
For every meeting, it is contemplated that an executive session be held for discussions
between the Board of Directors and the Chief Executive Officer, discussions involving all
members of the Board, or discussions among the independent members of the Board,
as the case may be.
Swiss Re’s Board of Directors has delegated the responsibility for managing the Group’s
operations to the Executive Committee (see section 4 below). In 2006, it comprised
seven members. The Executive Committee has, as a rule, two meetings per month,
except when the Executive Board meets and in holiday seasons. In 2006, the Executive
Committee met 32 times; it involved the members of the larger Executive Board in 16 of
these meetings, some of which extended to two or more consecutive days. One meeting
to consider strategic issues was held over a period of four days.
Governance Corporate governance
In addition to its overall responsibility for the operational management of the Group,
the Executive Committee has, inter alia, the following specific key responsibilities:
Submits proposals to the Board of Directors relating to all matters within the Board’s
responsibilities, for the Board’s consideration, such as the Group strategy, the business
plan, risk tolerances, accounting principles and financial statements;
Approves the strategies, structures and business plans of the global functions and
divisions;
Establishes principles on financing through capital markets, financing Group compa-
nies and the allocation of financial resources within the Group;
Decides on individual debt issuances and credit facilities;
Establishes the performance targets for the Group, the global functions and the
divisions, monitors performance and takes any necessary action;
Forms Group Committees, delegates to them authorities and responsibilities, and
issues binding Group guidelines;
Decides on the underwriting authority of the business functions and divisions, and on
individual reinsurance transactions exceeding their underwriting authority;
Exercises oversight responsibilities in respect of the Group‘s internal control evaluation
and certification process;
Oversees the implementation of Group compliance procedures, monitors remediation
of identified regulatory and compliance deficiencies and ensures that appropriate risk
management committees are constituted;
Assumes responsibility for personnel planning and management development of the
Group, decides on promotions to or removals of Managing Directors, and appoints the
Responsible Actuary.
The Executive Committee is supported by the larger Executive Board made up of
21 senior executive officers (including the seven members of the Executive Committee).
All members of the Executive Board are appointed by the Board of Directors upon recom-
mendation of the Chief Executive Officer and after consultation with the Governance
Committee. The Executive Board has two objectives:
Defines the most senior management team with direct accountability and responsibili-
ty for divisions; and
Acts as a sounding board for strategic development and discussion, and tables Group-
wide issues such as the business plan.
3.7 Information and control
3.7 Information and control
instruments of the Board vis-à-vis
instruments of the Board vis-à-vis
executive management
executive management
a. Participation of Board members at meetings of executive management
Both the Chairman of the Board and the Executive Vice Chairman are invited to all meet-
ings of the Executive Committee; effectively, the Board of Directors was represented
at 24 of the 32 meetings. The Chairman of the Board and the Executive Vice Chairman
always receive the meeting documentation and minutes.
b. Involvement of executive management in Board meetings and committee
meetings
As a matter of principle, all members of the Executive Committee are invited to all meet-
ings of the Board of Directors. At the meetings of the Board committees, executive man-
agement members participate in an advisory capacity as follows:
Swiss Re 2006 Annual Report 85
Governance Corporate governance
86 Swiss Re 2006 Annual Report
Audit Committee
Jacques Aigrain
Ann F. Godbehere1
Compensation Committee
Jacques Aigrain
Finance and Risk Committee
Governance Committee
¹ Until 28 February 2007
Jacques Aigrain
Roger W. Ferguson
Ann F. Godbehere1
Stefan Lippe
Benjamin Meuli
Christian Mumenthaler
Jacques Aigrain
Ann F. Godbehere1
c. Description of periodic reporting by executive management
At each Board meeting, the “Executive Report” is a standard agenda item, comprising
a comprehensive CEO report accompanied by reports of the three business function
heads. In addition, Board members receive a printed Monthly Business Update based
on the electronic Management Information System.
d. Assurance Framework
Swiss Re’s governing bodies recognise the value of a high quality corporate Assurance
Framework. As governance and accounting standards continue to evolve, it is essential
that Swiss Re’s governing bodies strive to have a best in class system of coordinated
assurance functions to rely on. Therefore, the corresponding framework is subject to peri-
odic reviews and improvements as required.
Assurance functions in Swiss Re comprise an internal audit organisation, a dedicated
organisation that ensures compliance with legal and regulatory requirements as well as
ethical standards, a risk management system designed for the size, complexity and risk
profile of the company, and a specially qualified external auditor.
d1. Group Internal Audit
Group Internal Audit (GIA) is an independent, objective assurance and consulting func-
tion performing activities designed to assess the adequacy and effectiveness of the
Group‘s internal control systems, and add value through improving the Group‘s opera-
tions. GIA helps the Group accomplish its objectives by bringing a systematic, disciplined
approach to evaluate and improve the effectiveness of risk management, control, and
governance processes.
GIA staff govern themselves in accordance with the Code of Ethics established by the
Institute of Internal Auditors (IIA). The IIA’s “International Standards for the Professional
Practice of Internal Auditing” constitute the operating guidance for the department.
In addition, GIA adheres to the Group’s guidelines and procedures, as well as to GIA’s
own manuals and guidelines governing its organisation and processes.
Governance Corporate governance
Authority is granted for full, free and unrestricted access to any and all of the Group’s
property and personnel relevant to any function under review. All employees are required
to assist GIA in fulfilling their duty. Documents and information provided to GIA will be
handled prudently, respecting their confidentially as defined by the function which has
ownership of the information.
GIA performs its internal audit activities with independence and objectivity. Activities
are coordinated with the other assurance functions as they are defined in the Assurance
Framework. Group Internal Audit has no direct operational responsibility or authority over
any of the activities they review.
The scope of GIA encompasses the examination and evaluation of the adequacy and
effectiveness of the Group’s internal controls environment, and the quality of perform-
ance in carrying out assigned responsibilities to achieve the organisation’s goals and
objectives. In fulfilling its responsibilities, GIA
submits audit services plans to the Audit Committee for approval;
periodically reports to the Audit Committee;
informs the Audit Committee about significant findings during the year;
provides any additional information requested by the Audit Committee.
d2. Compliance
Compliance at Swiss Re means the upholding of legal, regulatory and ethical standards
by all staff and all legal entities throughout the Group. The Compliance function accord-
ingly provides and maintains compliance-related policies, procedures, training and moni-
toring regimes designed to ensure that established businesses adhere to established in-
ternal and external rules – laws, regulations, ethical standards – in each location where
Swiss Re operates. The Compliance Officers, who support and advise management in
its ultimate responsibility to ensure compliance with laws, regulations and ethical stand-
ards, report to the Group Compliance Officer on any instances of non-compliance or
other compliance-relevant matters. External regulatory compliance requirements for
Swiss Re’s regulated Group companies are addressed by the Head of Legal Entity Com-
pliance. The Group Compliance Officer provides regular compliance reports to the Group
Audit Committee and the Executive Committee. Swiss Re has developed a Group-wide
Code of Conduct (see: swissre.com/About Us/Corporate governance/Regulations),
which lays down the Group’s core principles and values, and offers guidance on how
to apply these in all business activities. The Code of Conduct also sets out certain behav-
ioural standards which all Swiss Re employees are expected to maintain. A Group Com-
pliance Programme defines the accountabilities and duties of both management and
Compliance Officers at Swiss Re. Training for staff and Compliance Officers is carried out
regularly at both local and Group level to ensure ongoing best practice in compliance
matters throughout the Group. Within the Group’s Assurance Framework, Compliance
takes on a specialist risk controlling and reporting function; accordingly, each Compli-
ance Officer conducts periodic compliance risk assessments and advises management
on appropriate compliance control measures. Compliance interacts closely with Group
Regulatory Affairs (see below) and various other control functions, typically Operational
Risk Management and Group Internal Audit, as well as with many middle office func-
tions.
Swiss Re 2006 Annual Report 87
Governance Corporate governance
d3. Regulatory Affairs
Vested within Group Finance and headed by the Chief Regulatory Officer, Swiss Re has
established a Group Regulatory Affairs function and a Group Regulatory Affairs Network
to support the Group in monitoring regulatory developments with a Group impact and
ensure a consistent approach to the external communication of regulatory matters.
Group Regulatory Affairs assumes a coordinating role in preparing Swiss Re to address
and steer current and emerging regulatory reporting standards as well as regulatory
capital requirements. Its tasks include ensuring a consistent representation of Swiss Re’s
regulatory interests at all levels, preparing and coordinating Swiss Re’s strategic regula-
tory positions, and leading major regulatory implementations. The Group Regulatory
Committee steers the activities and initiatives of Group Regulatory Affairs, and decides
on Swiss Re’s regulatory positions.
d4. Risk Management
For the risk management organisation and its responsibilities, please see the detailed
section on pages 54–55 of the Annual Report.
d5. External auditor
Please refer to section 8.4.
e. Description of the Management Information System (MIS)
Members of the Board of Directors have access to a protected Internet site which offers
a variety of information. The site includes a comprehensive electronic Management
Information System (MIS). The MIS provides a strategic dashboard, an overview of the
current status of strategic initiatives, the current financial performance, information on
risk and capital management aspects, an analysis of the competitive landscape, and in-
formation on Swiss Re shares. Further sections supply detailed information on Swiss Re’s
business and corporate functions.
4 Executive management
4.1 Members of the Executive
4.1 Members of the Executive
Membership as at 31 December 2006
Committee
Committee
Name
Jacques Aigrain
Nationality
Swiss and French
Ann F. Godbehere
Canadian and British
Christian Mumenthaler
Swiss
Michel M. Liès
Stefan Lippe
Roger W. Ferguson
Andreas Beerli
Luxembourg
German
US
Swiss
Age
52
51
37
52
51
54
55
Function
Chief Executive Officer
Chief Financial Officer
Chief Risk Officer
Head of Client Markets
Head of Products
Head of Financial Services
Chief Operating Officer
Jacques Aigrain
Jacques Aigrain
Chief Executive Officer
Chief Executive Officer
Member of the Executive Committee
Member of the Executive Committee
Mr Aigrain, a Swiss and French citizen born in 1954, received a PhD in economics
in 1981 from the Sorbonne in France and a master’s degree in economics from Paris-
Dauphine University.
Mr Aigrain started his career with JP Morgan in 1981 and had various functions in in-
vestment banking in London, Paris and New York. Immediately prior to joining Swiss Re,
88 Swiss Re 2006 Annual Report
Governance Corporate governance
he was a managing director and a member of JP Morgan‘s investment banking manage-
ment committee, where he was co-head of client coverage.
In June 2001, he joined Swiss Re as Head of the Financial Services Business Group
and member of the Executive Committee. In August 2004, the Board of Directors
appointed Mr Aigrain Deputy CEO in addition to his Financial Services role, a task that
included a number of coordination functions across the firm, in particular Regulatory
Affairs. He was appointed CEO with effect from 1 January 2006.
Mr Aigrain is a member of the board of directors of Swiss International Air Lines Ltd.,
Basel, a member of the board of the International Association for the Study of Insurance
Economics, Geneva (“The Geneva Association”) and a member of various advisory com-
mittees of a regional or financial nature.
Ms Godbehere, a Canadian and British citizen born in 1955, qualified as a Certified
General Accountant in Canada in 1984 and became a fellow of the Certified General
Accountant‘s Association in 2003. She started her career with Sun Life of Canada in
1976 in Montreal, Canada. She joined the Mercantile & General Reinsurance Group in
1981, where she held several management roles, including Senior Vice President and
Controller for both the life and health, and property and casualty businesses throughout
North America.
Ms Godbehere joined Swiss Re in 1996, following the acquisition of the Mercantile
& General Group. Until 1998, she held a number of senior positions in Swiss Re
Life & Health North America, the last of which being Chief Executive Officer of Swiss Re
Life & Health Canada. From 1998 to 2001, she was the Chief Financial Officer of the
Life & Health Business Group based in London and, from 2002 to 2003, Chief Financial
Officer of the Property & Casualty Business Group based in Zurich.
On 1 April 2003, Ms Godbehere was appointed Chief Financial Officer of Swiss Re
Group and became a member of the Executive Committee. In December 2006, it was
announced that she would leave Swiss Re at the end of February 2007.
Ms Godbehere is also a board member of IMD, the Swiss based international business
school.
Ann F. Godbehere
Ann F. Godbehere
Chief Financial Officer, Head of Global
Chief Financial Officer, Head of Global
Finance (until 28 February 2007)
Finance (until 28 February 2007)
Member of the Executive Committee
Member of the Executive Committee
Christian Mumenthaler
Christian Mumenthaler
Chief Risk Officer, Head of Global Risk
Chief Risk Officer, Head of Global Risk
Management
Management
Member of the Executive Committee
Member of the Executive Committee
Mr Mumenthaler, a Swiss citizen born in 1969, received a PhD from the Institute
of Molecular Biology and Biophysics at the Swiss Federal Institute of Technology (ETH) in
Zurich. He started his professional career in 1997 as an Associate at the Boston Consult-
ing Group before joining Swiss Re in 1999 as manager in Group Strategic Planning.
Between 1999 and 2002, Mr Mumenthaler was responsible for a number of key compa-
ny projects, including securitisation solutions for the Group. In 2002, he established a
new unit, Group Retro & Syndication, which was responsible for optimising the Group‘s
risk and capital base through retrocession and securitisation. He was appointed Group
Chief Risk Officer and Head of Risk & Knowledge Division effective 1 January 2005. At
the same time, he became a member of the Executive Committee. In September 2005,
he became Head of Global Risk Management.
Swiss Re 2006 Annual Report 89
Governance Corporate governance
Michel M. Liès
Michel M. Liès
Head of Client Markets
Head of Client Markets
Member of the Executive Committee
Member of the Executive Committee
Mr Mumenthaler’s commitments in organisations outside Swiss Re include member-
ships in the International Risk Governance Council (IRGC) as Vice Chairman, the World
Business Council for Sustainable Development (WBCSD) and the Young Global Leaders
at the World Economic Forum (WEF).
Mr Liès, a citizen of Luxembourg born in 1954, gained a degree in mathematics from the
Swiss Federal Institute of Technology (ETH) in Zurich in 1974.
In 1978, he joined the Life department of Swiss Re in Zurich and was mainly active in the
Latin American market. From 1983 to 1993, he was responsible for France and the Iberi-
an Peninsula, and coordinated Swiss Re‘s life strategy across the European Community.
In 1994, he transferred to the non-life sector of the Southern Europe / Latin America
department, where he was initially responsible for the Spanish market. He was appoint-
ed head of the same department at the beginning of 1997. He became a member of
the Executive Board and Head of Latin America Division in 1998. On 1 April 2000, he
was named Head of Europe Division and from 2002 to the end of 2004 he assumed the
role of Chief Executive Officer of Swiss Re Germany. He was appointed to his current
position in September 2005.
Mr Liès is a member of the board of the Swiss Insurance Association.
Stefan Lippe
Stefan Lippe
Head of Products
Head of Products
Member of the Executive Committee
Member of the Executive Committee
Mr Lippe, a German citizen born in 1955, graduated in mathematics and business
administration from the University of Mannheim in 1982. He obtained his doctorate in
1982 while working as scientific assistant to the chair of insurance business manage-
ment, being awarded the Kurt Hamann foundation prize for his thesis.
In October 1983, he joined Bavarian Re as a team member of a business analysis project.
He was appointed deputy member of the board of management in 1988 and a full mem-
ber in 1991, when he assumed general responsibility for the company‘s operations in the
German-speaking area. In 1993, he became chairman of the board of management of
Bavarian Re. Since 2001, he has been chairman of the board of directors of the renamed
Swiss Re Germany Holding AG.
Mr Lippe was appointed a member of Swiss Re‘s Executive Board in 1995, as Head
of the Bavarian Re Group. In 2001, he was assigned as Head of the Property & Casualty
Business Group and appointed a member of the Executive Committee. In September
2005, he assumed the position of Head of the Products business function.
A US citizen born in 1951, Mr Ferguson received a PhD in economics in 1981, a JD in
law in 1979 and a BA in economics in 1973, all from Harvard University.
Prior to his employment at Swiss Re, Mr Ferguson served as Vice Chairman of the Board
of Governors of the US Federal Reserve System from 1999 to 2006 and, from 1984
to 1997, was an Associate and Partner at McKinsey & Company, where he managed
a variety of studies for financial institutions, and was Director of Research and Informa-
tion Services. From 1981 to 1984, he was an attorney at the New York City office of
Davis Polk & Wardwell, where he worked on syndicated loans, public offerings, mergers
and acquisitions, and new product development.
Roger W. Ferguson
Roger W. Ferguson
Head of Financial Services
Head of Financial Services
(since 3 October 2006)
(since 3 October 2006)
Member of the Executive Committee
Member of the Executive Committee
90 Swiss Re 2006 Annual Report
Andreas Beerli
Andreas Beerli
Chief Operating Officer
Chief Operating Officer
Member of the Executive Committee
Member of the Executive Committee
Governance Corporate governance
Mr Ferguson joined Swiss Re in June 2006 from the US Federal Reserve Board as
Chairman of Swiss Re America Holding. In October 2006, he was appointed Head
of Financial Services and a member of Swiss Re’s Executive Committee.
Mr Ferguson is a member of the Board of Overseers of Harvard University and of the
Board of Trustees of the Institute for Advanced Study. He is also a member of the Council
on Foreign Relations and the Group of Thirty.
Mr Beerli, a Swiss citizen born in 1951, graduated in law in 1976 and received a doctor-
ate in law from the University of Basel in 1983. He joined Swiss Re in 1979, serving in
various marketing functions until 1984. He then worked for Credit Suisse in private bank-
ing and for the Baloise Insurance Group, where he served in the Company’s foreign
operations.
He rejoined Swiss Re in 1993 as chief of staff. Two years later, he assumed marketing
responsibilities for Austria, Italy and Switzerland. In 1997, he was appointed managing
director of Swiss Re Italia SpA in Rome, successfully restructuring and integrating the
newly acquired Italian reinsurance company Uniorias. In 1998, he assumed an additional
position as Head of the Global Clients unit. He served as Head of the Americas Division
from January 2000 to December 2005 and took on a new role as Chief Operating
Officer on 1 January 2006.
Mr Beerli is the chairman of the Reinsurance Association of America.
Changes in the course of the business year 2006
In April, it was announced that John F. Fitzpatrick would step down with immediate
effect as Head of Financial Services and member of the Executive Committee to focus
on a new project. Jacques Aigrain took on the role of interim head.
In June, the retirement was announced of Jacques E. Dubois as Head of Corporate
Development and Chairman of Swiss Re America Holding at the end of the year. Roger
W. Ferguson joined Swiss Re to succeed him as Chairman of Swiss Re America Holding
and member of the Executive Board; Mr Ferguson was subsequently appointed Head
of Financial Services and member of the Executive Committee on 3 October 2006.
In December, it was announced that George Quinn would succeed Ann F. Godbehere
as Chief Financial Officer and member of the Executive Committee with effect from
1 March 2007.
George Quinn, a British citizen born in 1966, joined Swiss Re in 1999 from KPMG, where
he led the team that advised Swiss Re on its Swiss GAAP project from 1996 to 1998.
He was Chief Accounting Officer from 1999 to 2003. From 2003 to 2005, he was Chief
Financial Officer of the Financial Services Business Group. In 2005, Mr Quinn was also
appointed Regional Chief Financial Officer for the Americas, based in New York, and
played a leading role in the integration of Insurance Solutions.
Mr Quinn is a member of the Institute of Chartered Accountants in England and Wales,
and holds a degree in Engineering from the University of Strathclyde. He has represented
Swiss Re in the Geneva Association‘s accounting task force and the European Insurance
Swiss Re 2006 Annual Report 91
Governance Corporate governance
4.2 Other activities and vested
4.2 Other activities and vested
interests
interests
CFO Forum. He has also served as a member of the International Accounting Standards
Board‘s insurance advisory committee.
To the extent that members of the Executive Committee are engaged in activities in
governing and supervisory bodies, institutions and foundations, or perform permanent
management and consultancy functions for important interest groups or accepted
official functions and political posts, such information is included in the curricula vitae
under 4.1 above.
4.3 Management contracts
4.3 Management contracts
Swiss Re has not entered into reportable management contracts with any third party.
5 Compensation, shareholdings and loans
The Board’s Compensation Committee recommends to the Board the remuneration of
the members of the Board (other than the Chairman and the Executive Vice Chairman);
it determines the compensation of the Chairman, the Executive Vice Chairman, the CEO
and the members of the executive management on the basis of their performance. It also
ensures the development of a set of Group compensation principles and compliance
with any remuneration disclosure requirements. The Compensation Committee retained
Mercer Human Resource Consulting, New York, in the year under review. Mercer attend-
ed the meetings as independent expert providing advice regarding best practice and
the levels of compensation, including comparisons with a peer group of companies.
The members of the Board of Directors receive an honorarium of CHF 325 000 per
annum from 22 April 2006 (previously CHF 250 000 per annum). A minimum of 40%
of the honorarium must be taken in Swiss Re shares with a four-year deferral period. The
Chairman of the Board, the Executive Vice Chairman as well as the chairmen of the Audit
Committee, the Compensation Committee and the Finance and Risk Committee receive
a higher compensation to reflect their increased responsibilities and engagements. The
Chairman of the Board and the Executive Vice Chairman are, in addition, eligible for
a variable payment based on the company’s performance. The non-executive members
are not eligible for any pension benefits or long-term incentive plans.
The members of the Executive Committee are paid a base salary as well as a variable
annual performance incentive (bonus), and participate in a long-term incentive plan.
The fixed salary is paid in cash, while the bonus consists of a current portion (which can
be elected either in cash or deferred shares with a blocking period of four years) and a
delayed portion which is allocated to the Value Alignment Incentive plan (VAI). 45%
of the bonus for members of the Executive Board and 60% of the bonus for the CEO are
allo cated to the VAI.
The VAI has been introduced to support Swiss Re’s philosophy of carrying appropriate
reserves. It links the final bonus to be paid to the development of prior year claims
over a three-year period. The part of the bonus which is allocated to the VAI is multiplied
by a factor that varies between 62.5% and 187.5%. The factor is linked to the surplus
or deficiency of the claims provisions set at the end of the current financial year after
a three-year development period. The VAI is paid in cash at the end of the three-year
period.
5.1 Content and method of determin-
5.1 Content and method of determin-
ing the compensation and share-
ing the compensation and share-
holding programmes
holding programmes
92 Swiss Re 2006 Annual Report
5.2 Compensation for acting members
5.2 Compensation for acting members
of governing bodies
of governing bodies
Governance Corporate governance
Swiss Re has stopped granting employee stock options on a regular basis. A new Long-
Term Incentive plan (LTI) was introduced in 2006 for a select group of senior executives.
The plan contains performance criteria based on a matrix of average return on equity
and compound earnings per share growth over a three-year period. It is therefore aligned
with shareholder interests. The LTI is denominated in units being the grant amount divid-
ed by the share price at the grant date. This initial grant for the members of the Executive
Committee, at the date of grant (3 March 2006) was CHF 8.76 million or 97 450 units
for the year ended 31 December 2006, based on the share price of CHF 89.90 at the
date of grant. The final payout in 2009 will be the number of units multiplied by the
share price at the end of the three-year period and by a factor that can vary between 0%
and 200% based on the matrix of average return on equity and compound earnings per
share growth over the three-year period.
The Executive Committee’s performance assessment is based on annual objectives
involving financial and qualitative elements. The bonuses distributed for a year’s service
are paid in March of the following year. All amounts disclosed relate to the performance
year 2006 with some elements credited in March 2007.
The disclosure follows the SWX Directive, which requires differentiation between the
executive members of the Board of Directors and the Executive Committee in total and
the non-executive members of the Board of Directors in total. The 2006 disclosure
relates to 9 executive members as opposed to 21 members in 2005. This change to
the reporting scope was made to better reflect the spirit of the disclosure requirements
and improve comparability with other firms. Therefore, the 2005 compensation figures
have been restated in order for them to be comparable to the 2006 figures. This applies
to the tables shown on page 94.
9 executive members – 1 Executive Vice Chairman and 8 Executive
Committee members
CHF millions
Base salary and allowances
Variable pay
Cash bonus (included in variable pay)
Bonus shares (included in variable pay)
VAI (included in variable pay)
Compensation due to member leaving1
Subtotal
Actuarial funding of pension benefits
Total
2005
15.09
19.06
11.30
7.76
0.00
0.00
34.15
9.54
43.69
2006
14.23
34.25
19.59
2.62
12.04
6.07
54.55
10.30
64.85
¹
The member who left the Executive Committee in 2006 had an expatriate contract which contained tax equalisation
provisions between his home country and the country where he resided. The amount is strongly impacted by such tax
effects, some of which span over several years.
Swiss Re 2006 Annual Report 93
Governance Corporate governance
94 Swiss Re 2006 Annual Report
In addition, the estimated fair value of the LTI granted to 6 members of the Executive
Committee was as shown below. This fair value was estimated based upon the actual
results for 2006 and the forecast results for 2007 and 2008. It will change based
upon the actual results in 2007 and 2008.
CHF millions
LTI granted in year at grant value as of 3 March 2006
LTI granted in year at fair value as of 31 December 20061
¹
The value of the 2006 LTI payout will fluctuate until payment in 2009.
12 non-executive members (2005: 10) – Board of Directors
CHF millions
Honorarium
Cash bonus
Deferred and non-deferred shares
Total
2006
8.76
14.54
2006
2.67
1.00
2.71
6.38
2005
1.92
1.00
2.08
5.00
The bonus shares allotted representing the variable pay shown above are as follows
Share allocation (deferred shares)
9 executive members
12 non-executive members (2005: 10)
Total
2005
101 871
26 252
128 123
2006
31 968
38 090
70 058
All shares awarded to the Executive Committee are subject to a four-year deferral period.
The bonus plan stipulates that Executive Committee members elect a split between
cash and shares. The share price of 2 March 2007 will be used to determine the actual
allocation of these shares. To reflect the deferred nature of these shares, a discount of 6%
per annum was applied, leading to an estimated value of CHF 82.10, which has been
used to determine the amount of compensation shown in the table above. This approach
coincides with the tax treatment of the shares in Switzerland. At the end of the four-year
deferral period the number of shares awarded is uplifted by 25%.
Members of the Board of Directors receive an honorarium, a mandatory 40% of which
is in the form of shares; the remainder may be taken either in the form of cash or shares
with a four-year deferral period. The share price at 3 March 2006 of CHF 89.90 has
been used for calculating the number of shares awarded based upon the amount of the
honorarium received in shares. The discounted value of CHF 71.20 at 3 March 2006 has
been used to determine the amount of compensation shown in the table above.
The total shown in the tables above includes all the remuneration components except for
restricted shares and options, which are shown separately. Cash payments, allowances,
variable pay, 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. Please note
that the actuarial funding can vary substantially from year to year, depending on age and
years of service of the benefiting Executive Committee members.
Governance Corporate governance
5.3 Compensation for former
5.3 Compensation for former
members of governing bodies
members of governing bodies
3 executive members
Non-executive members
Total
CHF
162 962
None
162 962
The payments made to former members of the Executive Committee relate to periodic
services such as representation in boards and associations on behalf of the firm.
5.4 Share allotment in the year under
5.4 Share allotment in the year under
The shares allotted during the year are shown in section 5.2.
review
review
5.5 Share ownership
5.5 Share ownership
7 executive members (as defined in section 5.2)
11 non-executive members (as defined in section 5.2)
Total
Number of shares held on 31 December 2006
479 804
290 707
770 511
In addition to those shares held by the person in question on the reporting date, share-
holdings consist of any shares held by such person’s spouse, minors, and of directly con-
trolled companies.
5.6 Options and related instruments
5.6 Options and related instruments
Options
Swiss Re no longer grants options on an annual basis. The following options were held
by members of governing bodies on 31 December 2006.
Executive members
Grant year
1997 (2)
1998 (5)
1999 (5)
2000 (4)
2001 (5)
2002 (7)
2003 (7)
2004 (5)
2005 (4)
67
74
18 000
91
93
128
144
152
Exercise price in CHF
181
162
41 400
64 200
90 000
198 500
287 000
245 000
162 000
165 000
In brackets: number of participating members
Swiss Re 2006 Annual Report 95
Governance Corporate governance
96 Swiss Re 2006 Annual Report
Non-executive members
Grant year
1998 (1)
1999 (1)
2000 (1)
2001 (1)
2002 (1)
2003 (2)
2004 (1)
2005 (2)
78
83
93
128
144
24 000
40 000
120 000
60 000
90 000
In brackets: number of participating members
Exercise price in CHF
186
162
152
11 000
12 000
40 000
All options have a four-year vesting period, during which there is a risk of forfeiture,
and an exercise period of six years. The exchange ratio is 1:1, ie each option entitles the
beneficiary to purchase one share at an unadjustable exercise price.
In addition, 100 000 options with a strike price of CHF 94.00 were granted to an execu-
tive member leaving Swiss Re in 2006.
Restricted shares
In 2004 and 2005, the beneficiaries of the option programme received, as an alternative
to the stock options, the right to opt for restricted shares. The applicable ratio was four
to one, ie four stock options equalled one restricted share. The restricted shares vest after
four years. During the vesting period, there is a risk of forfeiture.
Overview of the restricted shares held
Executive members
Grant year
2004 (2)
2005 (5)
In brackets: number of participating members
Non-executive members
Grant year
2004 (1)
2005 (1)
In brackets: number of participating members
Share price in CHF as of date of grant
83
93
8 750
38 750
Share price in CHF as of date of grant
93
83
10 000
5 000
Governance Corporate governance
5.7 Additional fees and remuneration
5.7 Additional fees and remuneration
Under the SWX Directive, Swiss Re is required to disclose the sum of the honorariums
(eg consultancy fees) and other remunerations billed to Swiss Re or any of its Group
companies by a member of a governing body, or parties closely linked to such persons
for additional services performed during the year under review, in the case of sums ex-
ceeding half of the ordinary remuneration of the member in question. No such additional
payments were made.
5.8 Loans to members of governing
5.8 Loans to members of governing
bodies
bodies
Mortgages and loans to 5 executive members
Mortgages and loans to non-executive members
CHF millions
12.1
none
All credit is secured against real estate or pledged shares. The terms and conditions
of loans and mortgages are the same as those available to all Swiss Re employees in the
respective locations. Fixed-rate mortgages have a maturity of five years and interest rates
that correspond to the five-year Swiss franc swap rate plus a margin of 10 basis points.
Adjustable-rate mortgages have no agreed maturity dates. The basic preferential interest
rates equal the corresponding interest rates applied by the Zurich Cantonal Bank minus
one percentage point. To the extent that fixed or adjustable interest rates are preferential,
such values have been factored into the compensation sums given to the governing body
members under section 5.2 Compensation for acting members of governing bodies,
on pages 93–94.
5.9 Highest total compensation
5.9 Highest total compensation
The compensation of the highest paid member of the Board of Directors (Peter
Forstmoser) during the reporting year can be broken down as follows:
Compensation (as defined in 5.2)
Number of shares
Number of shares
16 409
CHF millions
1.70
The shares have an estimated discounted value of CHF 82.10. The share price of 2 March
2007 will be used for the actual allocation of the shares.
Swiss Re 2006 Annual Report 97
Governance Corporate governance
6 Shareholders’ participation rights
6.1 Voting right restrictions and
6.1 Voting right restrictions and
representation
representation
Voting right restrictions, statutory group clauses, exception rules
There are no voting right restrictions, no statutory group clauses and hence no rules
on making exceptions.
Reasons for making exceptions in the year under review
No exceptions were made.
Procedure and conditions for cancelling statutory voting right restrictions
As there are no voting right restrictions, there is neither a procedure nor a condition
for their cancellation.
Statutory rules on participating in the General Meeting of shareholders if differing
from legal provisions
In line with the legal provisions, any shareholder with a voting right may have his/her
shares represented at any General Meeting by another person authorised in writing or by
corporate bodies, independent proxies or proxies for deposited shares. Such representa-
tives need not be shareholders.
6.2 Statutory quorums
6.2 Statutory quorums
The Articles of Association do not provide for any statutory quorums. Any General
Meeting of shareholders passes resolutions by an absolute majority of the votes validly
cast, subject to the compulsory exceptions provided by law.
6.3 Convocation of the General
6.3 Convocation of the General
Meeting of shareholders
Meeting of shareholders
The statutory rules on the convocation of the General Meeting of shareholders corre-
spond with the legal provisions. Accordingly, the General Meeting of shareholders is
summoned at least 20 days before the date of the meeting by notice published in the
Swiss Official Gazette of Commerce.
6.4 Agenda
6.4 Agenda
6.5 Registrations in the share register
6.5 Registrations in the share register
The Board of Directors announces the agenda. Shareholders with voting powers whose
combined holdings represent shares with a nominal value of at least CHF 100 000 may,
up to 45 days before the date of the meeting, demand that matters be included in the
agenda. Such demands must be in writing and must specify the items and the proposals
to be submitted.
There is no statutory rule on the deadline for registering shareholders in connection with
the attendance of the General Meeting. In recent years, Swiss Re has acknowledged
voting rights of shares which were registered at least two working days before the
General Meeting. In 2006, the qualifying dates were 24 February and 19 April for the
Extraordinary General Meeting held on Monday 27 February and the Annual General
Meeting on Friday 21 April 2006, respectively.
98 Swiss Re 2006 Annual Report
Governance Corporate governance
7.1 Duty to make an offer
7.1 Duty to make an offer
7 Changes of control and defence measures
Swiss Re has not taken any defence measures against take-over attempts. The governing
bodies believe that the best protection is a fair valuation of the shares. They believe in
the efficiency of a free market rather than relying on defence measures that normally
have a long-term negative effect on the share price development. Therefore, there are no
statutory rules on “opting up” or “opting out”. (“Opting up” is a statutory rule based on
which the triggering threshold would be lifted to a higher percentage, while “opting out”
is a statutory rule waiving the legal duty to submit an offer.) Should a shareholder reach
the threshold of 33 1/3 % of all voting rights, then, pursuant to the Stock Exchange Act,
the shareholder would be required to submit a general take-over offer.
7.2 Clauses on change of control
7.2 Clauses on change of control
Unvested bonus shares, share options, and certain other employee benefit programmes
would vest upon a change of control. Rights of members of the governing bodies are
identical to those of employees generally.
8 Auditors
8.1 Duration of the mandate and term
8.1 Duration of the mandate and term
of office of the head auditors
of office of the head auditors
PricewaterhouseCoopers AG, then known as Revisuisse Price Waterhouse AG, were
elected as Swiss Re’s auditors at the Annual General Meeting of 25 November 1991
and, since then, have been re-elected annually.
Mr David JA Law and Ms Dawn M Kink took up office as head auditors responsible for
the existing auditing mandate as of 1 January 2004 and 1 September 2006, respective-
ly.
8.2 Auditing honorarium
8.2 Auditing honorarium
The following summarises fees for professional services for the year ended 31 December
2006.
Audit fees
PricewaterhouseCoopers
Audit-related fees
PricewaterhouseCoopers
CHF 32.9 million
CHF 3.8 million
Audit-related fees comprise, among other things, amounts for comfort letters, accounting
advice, information systems reviews and reviews on internal controls.
8.3 Additional honorarium
8.3 Additional honorarium
In addition to the fees described above, aggregate fees of CHF 4.2 million were billed by
PricewaterhouseCoopers during the year ended 31 December 2006, primarily for the
following:
Income tax compliance and related tax services
Other fees
CHF 2.5 million
CHF 1.7 million
Other fees include permitted advisory work related to a range of projects and due
diligence.
Swiss Re 2006 Annual Report 99
Governance Corporate governance
8.4 Supervisory and control
8.4 Supervisory and control
instruments vis-à-vis the
instruments vis-à-vis the
external auditor
external auditor
100 Swiss Re 2006 Annual Report
The external auditor is accountable to the Audit Committee, the Board of Directors and
ultimately to the shareholders. PricewaterhouseCoopers has performed this function
since 1991 (formerly as Revisuisse Price Waterhouse AG). The Audit Committee and
Board place great emphasis on the objectivity of the Group’s auditor, Pricewaterhouse-
Coopers AG, in their reporting to shareholders.
The Board of Directors established the Audit Committee in 1992. The Audit Committee
holds regular meetings throughout the year to which the two head auditors are regularly
invited. The Committee held six regular and three extra meetings in 2006. Starting in
2007, the Audit Committee will meet eight times a year. The Audit Committee evaluates
the external auditor annually and recommends one firm to the Board for election at the
following Annual General Meeting of shareholders. The lead audit partner is rotated from
his or her role on a five-year basis to ensure that independence is maintained.
The Audit Committee liaises closely with the elected external auditor. In particular, it dis-
cusses with the auditor significant risks, contingencies or other obligations of the compa-
ny; it reviews and approves the planned audit services and discusses the audits with the
auditor; it approves in advance non-audit services expected to be provided by the audi-
tor, and reviews and approves other non-audit services that have been pre-approved
by the Chairman of the Audit Committee between committee meetings; it reviews major
changes to the company’s accounting principles and practice; it reviews the adequacy
and efficacy of the financial reporting process, the system of internal controls and quality
control procedures, as well as any significant findings and recommendations made by
the external auditor.
According to its charter, the Audit Committee meets at least annually and in private, with
the external auditor to review any significant matters or disagreement between manage-
ment and the auditor, if and when such disagreements arise. It discusses with the auditor
its plan and any necessary changes to it, the findings of the annual audit, the auditor’s
proposed report on the financial statements, critical accounting policies, and alternative
accounting treatments that have been discussed with management. The Audit Commit-
tee’s discussions include considering the possible consequences of using such alterna-
tives.
The Audit Committee also discusses other material written communications with man-
agement, such as management letters and management‘s responsiveness to the points
raised in such letters, as well as schedules of unadjusted differences. The auditor is re-
quested to supply a formal written statement at least once a year, delineating all relation-
ships with the company that might affect auditor independence.
The Audit Committee actively engages in a dialogue with the auditor in respect of any
disclosed relationships or services that might impact the auditor’s objectivity and inde-
pendence, and recommends to the Board of Directors appropriate action in response to
the aforementioned statement; it obtains from the auditor and reviews, at least annually,
a report describing the auditor’s own quality control procedures, and any material issues
raised by the most recent internal reviews, or inquiries or investigations by governmental
or professional authorities within the preceeding five years and any steps taken to deal
with any such issues. In addition, it reviews the audit fees to consider whether the level of
fees is appropriate, as well as any fees paid to the auditor in respect of non-audit services.
Governance Corporate governance
9 Information policy
One of the core values of Swiss Re’s guiding principles is integrity through uncompro-
mising commitment to transparency and ethical principles. As a result, the Group’s infor-
mation policy goes beyond legal requirements, aiming to meet best practice standards.
Swiss Re maintains a close relationship with the financial community and the broader
public by using all available communication channels. The company’s website includes
full details of its corporate disclosure. Meetings dealing with important corporate infor-
mation are held with institutional investors and analysts; they can also be followed by
private shareholders via telephone conference or on the Internet.
Swiss Re is strongly committed to treating all investors equally. The Group prevents se-
lective disclosure by observing ad-hoc publicity rules and a policy of restrictions for the
so-called “close period”, during which financial information is finalised. The close period
commences on a given date preceding the official publication of the financial informa-
tion and lasts until such publication has been made. No meetings are held with analysts
or investors during this period. In addition, members of the governing bodies, their secre-
tariats and employees preparing or communicating material non-public financial infor-
mation are subject to close period communication and trading prohibitions.
Swiss Re has elected to be listed on the SWX “EU-Compatible” Segment, complying
with the requirements of the EU Transparency Directive. The Group has reported its fi-
nancial performance semi-annually to date, but will adopt quarterly reporting in 2007.
Swiss Re announces important corporate news on an ad-hoc basis. Furthermore, the
company organises events with investors and analysts, at which specific topics are dis-
cussed. In 2006, Swiss Re held an investors’ day on property and casualty reserving and
US GAAP, as well as an investors’ meeting on Insurance Solutions and non-life renewals.
In addition to these events, Swiss Re holds frequent meetings with institutional investors
and participates in investors’ conferences organised by investment banks. Presentations
from conferences are made available to the public on the company’s website.
The Investor Relations unit at Swiss Re is responsible for managing all contacts with
investors and analysts. For contact information, please see the inside back cover of the
2006 Annual Report.
Important dates 2007
Non-life January 2007 renewals, conference call
Annual results 2006, analysts’ meeting
Life and health European embedded value 2006, conference call
143rd Annual General Meeting
First quarter 2007 results, conference call
Second quarter 2007 results, conference call
Third quarter 2007 results, conference call
Investors’ Day 2007
The corporate calendar is available on Swiss Re’s website:
www.swissre.com/investorrelations
13 February
1 March
3 April
20 April
8 May
7 August
6 November
11 December
Swiss Re 2006 Annual Report 101
Governance Corporate governance
102 Swiss Re 2006 Annual Report
Corporate news in 2006 and method of dissemination
Date
23 January
14 February
27 February
2 March
News
Completion of EUR 252 million credit
reinsurance securitisation
Reporting of January 2006 non-life
renewals
Extraordinary General Meeting
approves creation of additional capital
for GE Insurance Solutions acquisition
Annual reporting 2005
Method of dissemination
News release
News release and telephone conference
Meeting in Zurich (Swiss Re head-
quarters) and news release
News release, press conference and
analysts’ meeting in Zurich (including
telephone conference and webcast)
11 April
Reporting of life and health embedded
News release and telephone conference
21 April
10 May
7 June
9 June
value 2005
142nd Annual General Meeting
Meeting in Zurich and news release
Completion of rights and global
News release
offering to finance GE Insurance
Solutions acquisition
Placement of USD 950 million of
natural catastrophe protection
through Successor programme
Successful completion of GE
Insurance Solutions acquisition
News release
News release
4 August
Interim reporting 2006
News release, press conference and
analysts’ meeting in Zurich (including
telephone conference and webcast)
11 September
Investors’ presentation on Insurance
Meeting in Monte Carlo
Solutions and upcoming renewals
3 October
Appointment of Roger Ferguson
News release
13 October
as Head of Financial Services and
member of Executive Committee
Announcement of acquisition of GE
Life UK business for GBP 465 million
News release
20 November
Investors’ day on P&C reserving and
Meeting in Rüschlikon and telephone
US GAAP
conference
15 December
Appointment of George Quinn as
News release
Chief Financial Officer, effective
1 March 2007
Swiss Re shares
Swiss Re’s share price rose 7.7% in 2006.
The global rights offering for the acquisition of
GE Insurance Solutions was successfully placed
at CHF 92.25 per share.
Swiss Re shares
On 31 December 2006, Swiss Re’s mar-
ket capitalisation was CHF 37.1 billion,
with 374.4 million shares outstanding.
Swiss Re’s shares are listed on the main
board of the SWX Swiss Exchange (SWX)
and traded on virt-x in its EU regulated
segment under the symbol ”RUKN”.
Since 1 February 1996, Swiss Re’s shares
are also traded in the form of an Ameri-
can Depository Receipt (ADR) level 1 pro-
gramme in cooperation with Morgan
Guaranty Trust Company of New York.
Swiss Re share price performance
Global equity markets continued to rise
in 2006. Swiss Re’s main benchmark indi-
ces – the Swiss Market Index (SMI) and
the Dow Jones EURO STOXX Insurance
Index (STOXX Ins. Index) – rose by 15.9%
and 17.2% respectively. In the same
period, Swiss Re’s share price rose 7.7%,
reaching a high for the year of CHF
108.50 on 9 November after a low of
CHF 79.60 on 13 June, and recovering
by more than 30% from its low point by
the end of 2006.
First quarter 2006: Swiss Re’s shares
underperformed its benchmark indices
by more than 10%, finishing 5.3% low-
er by the end of March. The quarter
saw the publication of Swiss Re’s Janu-
ary renewals data and its 2005 annual
results.
Second quarter 2006: Swiss Re’s
shares declined 6.2%, underperforming
the SMI by 1.5% and outperforming the
STOXX Ins. Index by 2.2%. The shares
reached their year low on 13 June at
CHF 79.60. The Group announced its
embedded value results for 2005 on
11 April and held its annual general
meeting on 21 April. The global rights
offering for the acquisition of GE Insur-
ance Solutions was priced on 10 May
at CHF 92.25 per share. The acquisition
closed on 9 June 2006.
Third quarter 2006: Swiss Re’s shares
went up 12.0% in the third quarter, vir-
tually in line with the rise of its bench-
mark indices. On 4 August, Swiss Re
published its half-year results for 2006.
Fourth quarter 2006: Swiss Re shares
rose 8.3%, closely tracking the SMI and
the STOXX Ins. Index. In this period, the
STOXX Ins. Index slightly outperformed
the SMI. The insurance sector profited
from a benign 2006 hurricane season
in the US. On 20 November, Swiss Re
held its Investors’ Day focusing on prop-
erty and casualty reserving, as well as
the transition to US GAAP.
In the US, Swiss Re’s ADRs rose 16.4%
year-on-year, reflecting the depreciation
of the US dollar against the Swiss franc
(exchange rate adjusted: 9.0%).
The Swiss Re share price and trading
volume in 2006 graph shows the price
and volume development, together with
key events for 2006.
Swiss Re share trading
The average daily traded share volume for
2006 was 1.6 million shares on-exchange
Swiss Re 2006 Annual Report 103
Swiss Re shares
Swiss Re share price and trading volume in 2006
110
Closing price in CHF
Volume in millions
20
100
90
80
70
Annual results 2005
(2 March)
Rights offering 2006
(10 May)
Interim results 2006
(4 August)
Closing of GE Insurance
Solutions aquisition
(9 June)
Investors’ Day 2006
(20 November)
15
10
5
0
January
February
March
April
May
June
July
August
September
Oktober
November
December
and 1 million shares off-exchange. The
highest volume traded on-exchange in
2006 was on 2 March, when Swiss Re
published its annual results for 2005,
with 5.7 million shares changing owner-
ship on-exchange and 1.5 million off-ex-
change. The highest cumulative volume
was recorded on 2 May with 32.6 million
shares traded, both off- and on-exchange.
Shareholder base
The shareholders structure table shows
that Swiss Re’s shareholder base is highly
diversified, both geographically and be-
tween private and institutional investors.
Institutional shareholders, including nomi-
nee accounts, represent roughly two-
thirds of Swiss Re’s share capital. These
shareholders are geographically diverse:
24% are based in Switzerland, 28% in
Europe (excluding Switzerland), 44% in
North America and 4% throughout the
rest of the world. The top ten institutional
shareholders hold 33% of Swiss Re’s
shares, up six percentage points from the
previous year; the top 100 hold 54% of
total outstanding shares.
On 31 December 2006, Swiss Re had
43 834 registered private shareholders,
104 Swiss Re 2006 Annual Report
representing 19% of the shares registered;
91% of these hold fewer than 2 000
shares. The vast majority of Swiss Re’s
private shareholders are domiciled in
Switzerland.
Socially responsible investors, whose port-
folios expressly reflect social, environmen-
tal and corporate governance criteria, hold
approximately 2% of Swiss Re’s shares.
Index representation
In addition to its relevant industry indices,
Swiss Re is also represented in various
global, European and Swiss indices – in-
cluding the SMI, Financial Times Stock
Exchange (FTSE), Eurotop 100 and S & P
GLOBAL 100. The composition of these
indices is usually based on free-float
market capitalisation. Swiss Re is also
a member of various sustainability indices,
Shareholder structure
As of 31 December 2006
Institutional investors Switzerland
Holdings
48 821 781
in % Free float in %
13.04
23.83
Europe (excluding
Switzerland)
North America
Rest of world
Total
58 123 911
89 880 686
8 043 468
28.37
43.87
3.93
204 869 846
100.00
Additional shares
held in nominee form (within Share Register)
37 433 583
Private shareholders
registered
Unassigned shares
(Total)
(including retail investors
57 190 226
and trading positions)
25 441 241
Shares reserved
Shares held by General Electric Company
Grand total
16 184 149
33 321 333
374 440 378
15.52
24.01
2.15
54.71
10.00
15.27
6.79
4.32
8.90
100.00
Swiss Re shares
including the Dow Jones Sustainability
and FTSE4Good index families.
Dividend policy and payment
Dividend growth reflects progress in
earnings: Swiss Re’s policy is to focus
on sustainable dividend payout and active
capital management while maintaining
superior capital adequacy and credit
ratings. Dividends are typically paid out
of current earnings. Swiss Re pays its
dividend annually, three working days
after the Annual General Meeting; as
of that day, the share price is ex-dividend.
Share custody
Swiss Re offers its shareholders the op-
portunity to deposit shares in their own
names with the Share Register in Zurich.
Share custody is free of charge. The appli-
cation form can be downloaded from
Swiss Re’s homepage.
Investor Relations homepage
More information on Swiss Re’s shares
is available at:
www.swissre.com/investorrelations
Swiss Re’s weighting in indices as of 31 December 2006
Swiss/blue chip indices
SMI
SPI
FTSE Eurotop 100
Insurance indices
DJ Europe STOXX Insurance
Bloomberg Europe 500 Insurance
FTSE E300 Insurance
Thomson Reinsurance Index World
Sustainability indices
DJSI World
DJSI STOXX
FTSE4Good Global
Index weight (in %)
3.32
2.89
0.51
Index weight (in %)
4.68
5.14
8.49
10.15
Index weight (in %)
0.30
0.59
0.21
Identification numbers
Swiss Security Number (Valorennummer)
Share
1233237
ADR level 11
–
ISIN
(International Securities Identification Number)
CH0012332372 US8708872051
Ticker symbols
Share
ADR level 1
Bloomberg
RUKN VX
SWCEY US
Telekurs
RUKN
SWCEY
Reuters
RUKN.VX
SWCEY.US
¹ Swiss Re’s ADR are not listed but traded over-the-counter; one ADR corresponds to one Swiss Re share.
Swiss Re 2006 Annual Report 105
Swiss Re shares
Key share statistics 2002–2007
Shares outstanding1
of which reserved for
corporate purposes
of which reserved to
underlie convertible bond
Shares entitled to dividend
CHF unless otherwise stated
Dividend paid per share
Dividend yield2 (in %)
Earnings per share3,6
Equity per share3,6
Price per share year-end
Price per share year high (intraday)
Price per share year low (intraday)
Daily trading volume (CHF m)
Market capitalisation3 (CHF m)
ADR price at year-end (USD)
2002
322 057 870
2003
322 057 870
2004
322 066 174
2005
322 092 742
2006
374 440 378
20074
374 443 527
7 942 280
7 942 280
7 942 280
7 942 280
7 942 280
7 942 280
3 736 522
310 379 068
3 736 522
310 379 068
3 736 522
310 387 372
3 736 522
310 413 940
8 241 869
358 256 229
8 241 869
358 259 378
2002
2.50
2.8
–0.29
53.76
90.70
171.25
70.10
166
28 151
65.50
2003
1.00
1.2
5.48
59.64
83.50
108.00
49.60
115
25 917
67.40
2004
1.10
1.4
8.00
61.78
81.10
97.05
66.35
104
25 172
71.80
2005
1.60
1.7
4.68
73.87
96.20
103.40
75.10
126
29 862
73.25
2006
2.50
2.4
13.49
86.21
103.60
108.50
79.60
153
37 115
85.25
20074
3.405
3.35
105.50
109.90
101.50
213
37 796
85.25
¹ Nominal value of CHF 0.10 per share
² Dividend divided by year-end share price of corresponding year
³ Based on shares entitled to dividend
⁴ All data as of 23 February 2007
⁵ Subject to approval at the Annual General Meeting on 20 April 2007
⁶ Figures for 2002-2004 represent the previously applied accounting policy
106 Swiss Re 2006 Annual Report
Profile Thema
Financial statements
Contents
Group financial statements
109
Income statement
Notes to the Group financial
statements
110 Balance sheet
112 Statement of shareholders’ equity
113 Statement of comprehensive income
114 Statement of cash flow
115 Note 1. Organisation and summary of significant accounting policies
123 Note 2. Investments
128 Note 3. Derivative financial instruments
130 Note 4. Acquisitions and dispositions
133 Note 5. Deferred acquisition costs and acquired present value of future profits
134 Note 6. Debt
138 Note 7. Unpaid claims and claim adjustment expenses
140 Note 8. Reinsurance information
142 Note 9. Shareholders’ equity
143 Note 10. Income taxes
145 Note 11. Benefit plans
150 Note 12. Share-based payments
154 Note 13. Commitments and contingent liabilities
156 Note 14. Information on business segments
161 Note 15. Subsidiaries, equity investees and variable interest entities
166 Note 16. Restructuring provision
167 Note 17. Change in accounting basis
169 Report of the Group auditors
Swiss Reinsurance Company, Zurich 171 Annual report
173
Income statement
174 Balance sheet
176 Notes
185 Proposal for allocation of profit
186 Report of the statutory auditors
Financial years 1998–2006
187
Swiss Re 2006 Annual Report 107
Swiss Re 2006 Annual Report 107
Swiss Re Group financial statements
Profile Thema
108 Swiss Re 2006 Annual Report
108 Swiss Re 2006 Annual Report
Income statement
For the years ended 31 December
CHF millions
Revenues
Premiums earned
Fee income from policyholders
Net investment income
Net realised investment gains/losses
Trading revenues
Other revenues
Total revenues
Expenses
Claims and claim adjustment expenses
Life and health benefits
Interest credited to policyholders
Acquisition costs
Other operating costs and expenses
Total expenses
Income before income tax expense
Income tax expense
Net income
Earnings per share in CHF
Basic
Diluted
The accompanying notes are an integral part of the Group financial statements.
Financial statements Group financial statements
Profile Thema
Notes
2005
2006
8, 14
8, 14
2
2
2
26 891
881
6 137
3 474
346
283
38 012
29 515
879
6 990
1 948
654
280
40 266
7, 8, 14
–14 758
–11 799
8, 14
14
8, 14
14
–8 668
–3 019
–5 927
–3 081
–9 594
–2 827
–6 079
–4 111
–35 453
–34 410
10
9
9
2 559
–255
2 304
5 856
–1 296
4 560
7.44
7.14
13.49
12.53
Swiss Re 2006 Annual Report 109
Swiss Re 2006 Annual Report 109
Financial statements Group financial statements
Profile Thema
Balance sheet
As of 31 December
Assets
CHF millions
Investments
Fixed income securities:
Available-for-sale, at fair value (including 7 770 in 2005 and 18 744 in 2006 subject to securities
Notes
2, 3
2005
2006
lending and repurchase agreements) (amortised cost: 2005: 77 124; 2006: 92 151)
79 344
93 127
Trading (including nil in 2005 and 2 234 in 2006 subject to securities
lending and repurchase agreements)
Equity securities:
Available-for-sale, at fair value (including nil in 2005 and 923 in 2006 subject to securities
lending and repurchase agreements) (amortised cost: 2005: 7 001; 2006: 8 839)
Trading
Policy loans, mortgages and other loans
Investment real estate
Short-term investments, at amortised cost, which approximates fair value
Other invested assets
Total investments
Cash and cash equivalents
Accrued investment income
Premiums and other receivables
Reinsurance recoverable on unpaid claims and policy benefits
Funds held by ceding companies
Deferred acquisition costs
Acquired present value of future profits
Goodwill
Income taxes recoverable
Financial services assets:
Fixed income securities, trading (including 1 526 in 2005 and 8 746 in 2006
subject to securities lending and repurchase agreements)
Other financial services assets
Other assets
Total assets
The accompanying notes are an integral part of the Group financial statements.
14 457
22 622
8 116
11 476
7 305
1 729
4 539
3 635
10 845
20 828
7 058
4 227
9 464
4 336
130 601
172 507
8 368
1 379
10 754
13 191
13 927
5 393
6 535
3 429
466
15 218
7 143
4 895
13 606
1 782
14 726
18 699
14 211
5 270
7 550
4 838
714
23 714
8 638
5 045
221 299
291 300
8
5, 8
5
110 Swiss Re 2006 Annual Report
110 Swiss Re 2006 Annual Report
Liabilities and shareholders’ equity
CHF millions
Liabilities
Unpaid claims and claim adjustment expenses
Liabilities for life and health policy benefits
Policyholder account balances
Unearned premiums
Funds held under reinsurance treaties
Reinsurance balances payable
Income taxes payable
Deferred income taxes
Financial services liabilities:
Financial services liabilities: Short-term debt
Financial services liabilities: Long-term debt
Other financial services liabilities
Short-term debt
Accrued expenses and other liabilities
Long-term debt
Total liabilities
Shareholders’ equity
Common stock, CHF 0.10 par value;
2005: 322 092 742; 2006: 374 440 378 shares authorised and issued
Additional paid-in capital
Treasury shares
Accumulated other comprehensive income:
Net unrealised investment gains/losses, net of deferred tax
Foreign currency translation
Accumulated adjustment for pension and postretirement benefits
Total accumulated other comprehensive income
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of the Group financial statements.
Financial statements Group financial statements
Profile Thema
Notes
2005
2006
7, 8
8
8
10
6
71 759
31 081
34 115
6 563
10 941
4 673
896
2 838
7 217
4 389
95 011
44 899
42 834
8 025
10 531
6 832
866
2 685
7 201
6 765
10 749
18 407
1 015
4 818
5 852
1 917
6 470
7 973
196 906
260 416
32
6 852
–209
1 908
971
–59
2 820
37
11 136
–272
2 230
–205
–724
1 301
14 898
24 393
18 682
30 884
221 299
291 300
Swiss Re 2006 Annual Report 111
Swiss Re 2006 Annual Report 111
Financial statements Group financial statements
Profile Thema
Statement of shareholders’ equity
For the years ended 31 December
CHF millions
Common shares
Balance, beginning of year
Issue of common shares
Balance, end of year
Additional paid-in capital
Balance, beginning of year
Issue of common shares
Share based compensation
Realised gains/losses on treasury shares
Balance, end of year
Treasury shares
Balance, beginning of year
Purchase of treasury shares
Sale of treasury shares
Balance, end of year
Net unrealised gains/losses, net of tax
Balance, beginning of year
Change during the year
Balance, end of year
Foreign currency translation
Balance, beginning of year
Change during the year
Balance, end of year
Adjustment for pension and post-retirement benefits
Balance, beginning of year
Reclassification of additional minimum liability prior year
Change during the year
Balance, end of year
Retained earnings
Balance, beginning of year
Net income
Dividends on common stock (CHF 1.60 and CHF 2.50 per share in 2005 and 2006, respectively)
Reclassification of additional minimum liability prior year
Balance, end of year
Total shareholders’ equity
The accompanying notes are an integral part of the Group financial statements.
112 Swiss Re 2006 Annual Report
112 Swiss Re 2006 Annual Report
2005
2006
32
32
6 862
2
–13
1
6 852
–239
–278
308
–209
2 134
–226
1 908
32
5
37
6 852
4 234
57
–7
11 136
–209
–284
221
–272
1 908
322
2 230
–1 301
2 272
971
971
–1 176
–205
–84
25
–59
–59
–665
–724
13 007
14 898
2 304
–497
84
4 560
–776
14 898
18 682
24 393
30 884
Financial statements Group financial statements
Profile Thema
Statement of comprehensive income
For the years ended 31 December
CHF millions
Net income
Other comprehensive income, net of tax:
Change in unrealised gains/losses (tax: –180 for 2005, and 178 for 2006)
Change in foreign currency translation (tax: –18 for 2005, and 38 for 2006)
Change in adjustment for pension benefits (tax: –7 for 2005, and 210 for 2006)
Comprehensive income
The accompanying notes are an integral part of the Group financial statements.
2005
2 304
–226
2 272
25
4 375
2006
4 560
322
–1 176
–665
3 041
Swiss Re 2006 Annual Report 113
Swiss Re 2006 Annual Report 113
Financial statements Group financial statements
Profile Thema
Statement of cash flow
For the years ended 31 December
CHF millions
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided/used by operating activities:
Depreciation, amortisation and other non-cash items
Net realised investment gains/losses
Change in:
Technical provisions, net
Funds held by ceding companies and other reinsurance balances
Other assets and liabilities, net
Income taxes payable/recoverable
Income from equity-accounted investments, net of dividends received
Trading positions, net
Change in Financial services assets and liabilities:
Financial services assets
Financial services liabilities – Short-term debt
Financial services liabilities – Long-term debt
Financial services liabilities – Other
Net cash provided/used by operating activities
Cash flows from investing activities
Fixed income securities:
Sales and maturities
Purchases
Net purchases/sales/maturities of short-term investments
Equity securities:
Sales
Purchases
Acquisitions/disposals, net of cash acquired/disposed
Net purchases/sales/maturities of other investments
Net cash provided/used by investing activities
Cash flows from financing activities
Issuance of long-term debt
Issuance/repayment of short-term debt
Equity issued
Net purchases/sales of treasury shares
Dividends paid to shareholder
Net cash provided/used by financing activities
Total net cash provided/used
Reclassification to Financial services assets
Effect of foreign currency translation
Change in cash and cash equivalents
Cash and cash equivalents as of 1 January
Cash and cash equivalents as of 31 December
2005
2006
2 304
4 560
782
–3 474
5 243
–519
–3
183
–407
–2 459
886
–1 948
–2 140
524
1 033
910
–375
–1 674
–4 556
–10 251
2 246
1 478
1 154
1 972
–662
779
9 912
1 554
39 035
59 024
–41 422
–46 105
–1 061
–4 760
4 861
–6 488
643
802
–3 630
987
–599
2
30
–497
–77
–1 735
422
–1 313
9 681
8 368
7 873
–8 799
–3 506
–683
3 044
3 146
–380
1 323
–63
–776
3 250
7 848
–2 451
–159
5 238
8 368
13 606
The accompanying notes are an integral part of the Group financial statements.
The Group has reclassified CHF 2 451 million from cash to Financial services assets related to the assumption of the debt of GE Insurance
Solutions. Interest paid during 2006 was CHF 812 million. There were several non-cash investment activities in 2006. The major trans-
actions included the issuance of equity of CHF 2 916 million and a mandatory convertible of CHF 610 million to General Electric directly.
114 Swiss Re 2006 Annual Report
114 Swiss Re 2006 Annual Report
Financial statements
Profile Thema
Notes to the Group financial statements
Nature of operations
Nature of operations
Basis of presentation
Basis of presentation
Principles of consolidation
Principles of consolidation
Use of estimates in the preparation
Use of estimates in the preparation
of financial statements
of financial statements
1. Organisation and summary of significant accounting policies
The Swiss Re Group, which is headquartered in Zurich, Switzerland, comprises Swiss
Reinsurance Company (the parent company, referred to as “Swiss Re Zurich”) and its
subsidiaries (collectively, the “Swiss Re Group” or the “Group”). The Group provides rein-
surance and other related products and services to insurance companies, clients and
others worldwide through a network of offices in over 25 countries as well as through re-
insurance brokers.
The accompanying consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America (US
GAAP) and comply with Swiss law. The Group’s financial statements are stated in Swiss
francs (CHF), the currency of the country in which Swiss Re Zurich is incorporated. The
financial year of the Swiss Re Group ends on 31 December. All significant inter-company
transactions and balances have been eliminated on consolidation.
The Group’s financial statements include the consolidated financial statements of Swiss
Re Zurich and its subsidiaries. Entities which Swiss Re Zurich directly or indirectly con-
trols through holding a majority of the voting rights are consolidated in the Group ac-
counts. The Group also consolidates variable interest entities where Swiss Re is the pri-
mary beneficiary. Companies which Swiss Re Zurich does not control, but over which
Swiss Re Zurich directly or indirectly exercises significant influence, are accounted for us-
ing the equity method and are included in other invested assets. The Swiss Re Group’s
share of net profit or loss in investments accounted for under the equity method is includ-
ed 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 investments accounted for using the equity method are included in the
financial statements for the period commencing from the date of acquisition.
The preparation of financial statements requires management to make significant esti-
mates and assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses as well as the related disclosure including contingent assets and liabilities.
The Swiss Re Group’s liabilities for unpaid claims and claim adjustment expenses and
policy benefits for life and health include estimates for premium, claim and benefit data
not received from ceding companies at the date of the financial statements. In addition,
the Group uses certain financial instruments and invests in securities of certain entities
for which exchange trading does not exist. The Group determines these estimates on the
basis of historical information, actuarial analyses, financial modelling and other analytical
techniques. Actual results could differ significantly from the estimates described above.
Swiss Re 2006 Annual Report 115
Swiss Re 2006 Annual Report 115
Financial statements Notes to the Group financial statements
Profile Thema
Transactions denominated in foreign currencies are remeasured to the respective subsid-
iary’s functional currency at average exchange rates. Monetary assets and liabilities are
remeasured to the functional currency at closing exchange rates, whereas non-monetary
assets and liabilities are remeasured to the functional currency at historical rates. Re-
measurement gains and losses on monetary assets and liabilities and trading securities
are reported in earnings. Remeasurement gains and losses on available-for-sale securi-
ties, investments in consolidated subsidiaries and investments accounted for using the
equity method are reported in shareholders’ equity.
For consolidation purposes, assets and liabilities of subsidiaries with functional curren-
cies other than CHF are translated from the functional currency to CHF at closing rates.
Revenues and expenses are translated at average exchange rates. Translation adjust-
ments are reported in shareholders’ equity.
Currency exchange rates in CHF per 100 units of foreign currency are as follows:
Australian dollar
British pound
Canadian dollar
Euro
Japanese yen
South African rand
US dollar
Closing rate
96.68
226.26
112.82
155.46
1.12
20.78
2005
Average rate
94.91
226.40
102.61
154.82
1.13
19.54
Closing rate
96.22
238.92
104.90
160.98
1.02
17.31
2006
Average rate
94.33
230.48
110.68
157.20
1.08
18.70
131.80
124.37
122.08
125.46
AUD
GBP
CAD
EUR
JPY
ZAR
USD
The Group’s investments in fixed income and equity securities are classified as available-
for-sale (“AFS”) or trading. Fixed income securities AFS and equity securities AFS are car-
ried at fair value, based on quoted market prices, with the difference between original
cost and fair value being recognised in shareholders’ equity. Trading fixed income and
equity securities are carried at fair value with unrealised gains and losses being recog-
nised in earnings.
The cost of fixed income and equity securities is reduced to fair value, with a correspond-
ing charge to realised investment losses if the decline in value, expressed in functional
currency terms, is other than temporary. Subsequent recoveries of previously recognised
impairment are not recognised.
Interest on fixed income securities is recorded in net investment income when earned
and is adjusted for the amortisation of any purchase premium or discount. Dividends on
equity securities are recorded on the basis of the ex-dividend date. Realised gains and
losses on sales are included in earnings and are calculated using the specific
identification method.
Foreign currency remeasurement and
Foreign currency remeasurement and
translation
translation
Investments
Investments
116 Swiss Re 2006 Annual Report
116 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
Policy loans, mortgages and other loans are carried at amortised cost (effective yield
method), net of any allowance for amounts estimated to be uncollectible.
Investment in real estate that the Group intends to hold for the production of income is
carried at depreciated cost, net of any write-down for impairment in value. An impair-
ment in value is recognised if the sum of the estimated future undiscounted cash flows
from the use of the real estate is lower than its carrying value. Impairment in value, de-
preciation and other related charges or credits are included in net investment income. In-
vestment in real estate held for sale is carried at the lower of cost or fair value, less esti-
mated selling costs, and is not depreciated. Reductions in the carrying value of real es-
tate held for sale are included in realised investment losses.
Short-term investments are carried at amortised cost which approximates fair value. The
Group considers highly liquid investments with a remaining maturity at the date of acqui-
sition of one year or less, but greater than three months, to be short-term investments.
Other invested assets include affiliated companies, derivative financial instruments and
investments without readily determinable fair value (including limited partnership invest-
ments). Investments in limited partnerships where the Group’s interest equals or exceeds
3% are accounted for using the equity method. Investments in limited partnerships
where the Group’s interest is below 3% and equity investments in corporate entities
which are not publicly traded are accounted for at estimated fair value with changes in
fair value recognised as unrealised gains/losses in shareholders’ equity.
The Group enters into security lending arrangements under which it loans certain securi-
ties in exchange for collateral and receives securities lending fees. The Group’s policy is
to require collateral, consisting of cash or securities, equal to at least 102% of the carry-
ing value of the securities loaned. In certain arrangements, the Group may accept collat-
eral of less than 102%, if the structure of the overall transaction offers an equivalent level
of security. Cash received as collateral is recognised along with an obligation to return
the cash. Securities received as collateral that can be sold or repledged are also recog-
nised along with an obligation to return those securities. Security lending fees are recog-
nised over the term of the related loans.
The Group uses a variety of derivative financial instruments including swaps, options, for-
wards and exchange-traded financial futures for the Group’s trading and hedging strate-
gy in line with the overall risk management strategy. Derivative financial instruments are
primarily used as a means of managing exposure to price, foreign currency and/or inter-
est rate risk on planned or anticipated investment purchases, existing assets or liabilities
and also to lock in attractive investment conditions for funds which become available in
the future. The Group recognises all of its derivative instruments on the balance sheet at
fair value. Derivatives that are not designated as hedging instruments are adjusted to fair
value through earnings.
Swiss Re 2006 Annual Report 117
Swiss Re 2006 Annual Report 117
Derivative financial instruments and
Derivative financial instruments and
hedge accounting
hedge accounting
Financial statements Notes to the Group financial statements
Profile Thema
If the derivative is designated as a hedge of the fair value of assets or liabilities, changes
in the fair value of the derivative are recognised in earnings, together with changes in the
fair value of the related hedged item. If the derivative is designated as a hedge of the var-
iability in expected future cash flows related to a particular risk, changes in the fair value
of the derivative are reported in other comprehensive income until the hedged item is
recognised in earnings. The ineffective portion of the hedge is recognised in earnings.
When hedge accounting is discontinued on a cash flow hedge, the net gain or loss re-
mains in accumulated other comprehensive income and is reclassified to earnings in the
period in which the formerly hedged transaction is reported in earnings. When the Group
discontinues hedge accounting because it is no longer probable that a forecasted trans-
action will occur within the required time period, the derivative continues to be carried
on the balance sheet at fair value, and gains and losses that were previously recorded in
accumulated other comprehensive income are recognised in earnings.
Derivative financial instrument assets are generally included in other invested assets or
financial services assets. Derivative financial instrument liabilities are generally included
in accrued expenses and other liabilities or financial services liabilities.
The Group also designates non-derivative monetary financial instruments as hedging the
foreign currency exposure of its net investment in certain foreign operations. From the in-
ception of the hedging relationship, remeasurement gains and losses on the designated
non-derivative monetary financial instruments and translation gains and losses on the
hedged net investment are reported as translation gains and losses in shareholders’ equity.
Cash and cash equivalents include cash on hand, short-term deposits, certain short-term
investments in money market funds, and highly liquid debt instruments with a remaining
maturity at the date of acquisition of three months or less.
Acquisition costs, which vary with, and are primarily related to, the production of new in-
surance and reinsurance business, are deferred to the extent they are deemed recovera-
ble from future gross profits. Deferred acquisition costs consist principally of commis-
sions. Deferred acquisition costs for short-duration contracts are amortised in proportion
to premiums earned. Future investment income is considered in determining the recover-
ability of deferred acquisition costs for short-duration contracts. Deferred acquisition
costs for long-duration contracts are amortised over the life of underlying contracts. De-
ferred acquisition costs for universal life-type contracts are amortised based on the
present value of estimated gross profits.
The acquired present value of future profits (“PVFP”) of business in force is recorded in
connection with the acquisition of life and/or health operations. The initial value is deter-
mined actuarially by discounting estimated future gross profits as a measure of the value
of business acquired. The resulting asset is amortised on a constant yield basis over the
expected revenue recognition period of the business acquired, generally over periods
ranging up to 30 years, with the accrual of interest added to the unamortised balance at
the earned rate. The carrying value of PVFP is reviewed periodically for indicators of im-
pairment in value. Adjustments to reflect impairment in value are recognised in earnings
during the period in which the determination of impairment is made.
Cash and cash equivalents
Cash and cash equivalents
Deferred acquisition costs
Deferred acquisition costs
Acquired present value of
Acquired present value of
future profits
future profits
118 Swiss Re 2006 Annual Report
118 Swiss Re 2006 Annual Report
Goodwill
Goodwill
Financial services assets
Financial services assets
and liabilities
and liabilities
Other assets
Other assets
Capitalised software costs
Capitalised software costs
Deferred income taxes
Deferred income taxes
Unpaid claims and claim
Unpaid claims and claim
adjustment expenses
adjustment expenses
Financial statements Notes to the Group financial statements
Profile Thema
The excess of the purchase price of acquired businesses over the estimated fair value of
net assets acquired is recorded as goodwill, which is reviewed periodically for indicators
of impairment in value. Adjustments to reflect an impairment in value are recognised in
earnings in the period in which the determination of impairment is made.
The Group uses debt for general corporate purposes and also to fund “Financial services
assets and liabilities“ (funded business). “Financial services assets and liabilities“ are
structured with the intention of creating assets and liabilities that generate offsetting
market risks (foreign exchange, interest rate, equity, credit). Debt that is strictly used for
funded business is classified as operational debt. “Financial services assets and liabili-
ties“ are valued according to the relevant principles for the underlying instruments.
Other assets include deferred expenses on retroactive reinsurance, separate account as-
sets, prepaid reinsurance premiums, real estate for own use, property, plant and equip-
ment, accrued income, certain intangible assets and prepaid assets.
The excess of estimated liabilities for claims and claim adjustment expenses payable
over consideration received in respect of retroactive property and casualty reinsurance
contracts is recorded as a deferred expense. The deferred expense on retroactive reinsur-
ance contracts is amortised through earnings over the expected claims-paying period.
Separate account assets are carried at fair value. The investment performance (including
interest, dividends, realised gains and losses and changes in unrealised gains and losses)
of separate account assets and the corresponding amounts credited to the contract hold-
er are offset to zero in the same line item in earnings.
Real estate for own use, property, plant and equipment are carried at depreciated cost.
External direct costs of materials and services incurred to develop or obtain software for
internal use, payroll and payroll-related costs for employees directly associated with soft-
ware development and interest cost incurred while developing software for internal use
are capitalised and amortised on a straight-line basis through earnings over the
estimated useful life.
Deferred income tax assets and liabilities are recognised based on the difference be-
tween financial statement carrying amounts and the corresponding income tax bases of
assets and liabilities using enacted income tax rates and laws. A valuation allowance is
recorded against deferred tax assets when it is deemed more likely than not that some or
all of the deferred tax asset may not be realised.
Liabilities for unpaid claims and claim adjustment expenses for property and casualty re-
insurance contracts are accrued when insured events occur and are based on the esti-
mated ultimate cost of settling the claims, using reports and individual case estimates re-
ceived from ceding companies. A provision is also included for claims incurred but not
reported, which is developed on the basis of past experience adjusted for current trends
and other factors that modify past experience. The establishment of the appropriate level
of reserves is an inherently uncertain process involving estimates and judgements made
by management, and therefore there can be no assurance that ultimate claims and claim
adjustment expenses will not exceed the loss reserves currently established. These
Swiss Re 2006 Annual Report 119
Swiss Re 2006 Annual Report 119
Profile Thema
Financial statements Notes to the Group financial statements
Liabilities for life and health
Liabilities for life and health
policy benefits
policy benefits
estimates are regularly reviewed, and adjustments for differences between estimates
and actual payments for claims and for changes in estimates are reflected in income in
the period in which the estimates are changed or payments are made.
The Group does not discount liabilities arising from prospective property and casualty in-
surance and reinsurance contracts, including liabilities which are discounted for US stat-
utory reporting purposes. Liabilities arising from property and casualty insurance and re-
insurance contracts acquired in a business combination are initially recognised at fair val-
ue in accordance with the purchase method of accounting.
Experience features which are directly linked to a reinsurance asset or liability are classi-
fied in a manner that is consistent with the presentation of that asset or liability.
Liabilities for life and health policy benefits from reinsurance business are generally calcu-
lated using the net level premium method, based on assumptions as to investment yields,
mortality, withdrawals, lapses and policyholder dividends. Assumptions are set at the time
the contract is issued or, in the case of contracts acquired by purchase, at the purchase
date. The assumptions are based on projections from past experience, making allowance
for possible adverse deviation. Interest assumptions for life and health reinsurance bene-
fits liabilities range from 1% to 13%. Assumed mortality rates are generally based on
experience multiples applied to the actuarial select and ultimate tables based on industry
experience. Liabilities for policy benefits are increased if it is determined that future cash
flows, including investment income, are insufficient to cover future benefits and expenses.
The liability for accident and health policy benefits consists of active life reserves and the
estimated present value of the remaining ultimate net costs of incurred claims. The active
life reserves include unearned premiums and additional reserves. The additional reserves
are computed on the net level premium method using assumptions for future investment
yield, mortality and morbidity experience. The assumptions are based on projections of
past experience and include provisions for possible adverse deviation.
Policyholder account balances
Policyholder account balances
Policyholder account balances relate to universal life-type contracts and investment con-
tracts. Interest crediting rates for policyholder account balances range from 3% to 10%.
Universal life-type contracts are long-duration insurance contracts, providing either
death or annuity benefits, with terms that are not fixed and guaranteed.
Investment contracts are long-duration contracts that do not incorporate significant in-
surance risk, i.e. there is no mortality and morbidity risk, or the mortality and morbidity
risk associated with the insurance benefit features offered in the contract is of insignifi-
cant amount or remote probability. Amounts received as payment for investment con-
tracts are reported as policyholder account balances. Related assets are included in gen-
eral account assets.
Amounts assessed against policyholders for mortality, administration and surrender are
shown as fee income. Amounts credited to policyholders are shown as interest credited
to policyholders. Investment income and realised investment gains and losses allocable
to policyholders are included in net investment income and net realised investment
gains/losses.
120 Swiss Re 2006 Annual Report
120 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
Funds held assets and liabilities
Funds held assets and liabilities
Premiums
Premiums
Reinsurance ceded
Reinsurance ceded
Funds held assets and liabilities include amounts retained by the ceding company or the
Group for business written on a funds withheld basis, and amounts arising from the ap-
plication of the deposit method of accounting to insurance and reinsurance contracts
that do not indemnify the ceding company or the Group against loss or liability relating to
insurance risk.
Under the deposit method of accounting, the deposit asset or liability is initially meas-
ured based on the consideration paid or received. For contracts that transfer neither sig-
nificant timing nor underwriting risk, and contracts that transfer only significant timing
risk, changes in estimates of the timing or amounts of cash flows are accounted for by re-
calculating the effective yield. The deposit is then adjusted to the amount that would
have existed had the new effective yield been applied since the inception of the contract.
The revenue and expense recorded for such contracts is included in net investment in-
come. For contracts that transfer only significant underwriting risk, once a loss is in-
curred, the deposit is adjusted by the present value of the incurred loss. At each subse-
quent balance sheet date, the portion of the deposit attributable to the incurred loss is re-
calculated by discounting the estimated future cash flows. The resulting changes in the
carrying amount of the deposit are recognised in claims and claim adjustment expenses.
Property and casualty reinsurance premiums are recorded when written and include an
estimate for written premiums receivable at period end. Premiums earned are generally
recognised in income over the contract period in proportion to the amount of reinsur-
ance provided. Unearned premiums consist of the unexpired portion of reinsurance pro-
vided. Life reinsurance premiums are earned when due. Related policy benefits are re-
corded in relation to the associated premium or gross profits so that profits are recog-
nised over the expected lives of the contracts.
Life and health reinsurance premiums for group coverages are generally earned over the
term of the coverage. For group contracts that allow experience adjustments to premi-
ums, such premiums are recognised as the related experience emerges.
The Group uses retrocession arrangements to increase its aggregate underwriting ca-
pacity, to diversify its risk and to reduce the risk of catastrophic loss from reinsurance as-
sumed. The ceding of risks to retrocessionaires does not relieve the Group of its obliga-
tions to its ceding companies. The Group regularly evaluates the financial condition of its
retrocessionaires and monitors the concentration of credit risk to minimise its exposure
to financial loss from retrocessionaires’ insolvency. Premiums and losses ceded under
retrocession contracts are reported as reductions of premiums earned and claims and
claim adjustment expenses. Amounts recoverable for ceded short- and long-duration
contracts, including universal life-type and investment contracts, are reported as assets
in the accompanying consolidated balance sheet.
The Group provides reserves for uncollectible amounts on reinsurance balances ceded,
based on management’s assessment of the collectibility of the outstanding balances.
Pensions and other post-retirement
Pensions and other post-retirement
benefits
benefits
The Group accounts for its pension and other post-retirement benefit costs using the ac-
crual method of accounting. Amounts charged to expense are based on periodic actuari-
al determinations.
Swiss Re 2006 Annual Report 121
Swiss Re 2006 Annual Report 121
Financial statements Notes to the Group financial statements
Profile Thema
Share-based payment transactions
Share-based payment transactions
Treasury shares
Treasury shares
Earnings per common share
Earnings per common share
New accounting pronouncements
New accounting pronouncements
The Group has a long term incentive plan, a fixed option plan, a restricted share plan, and
an employee participation plan. These plans are described in more detail in note 11. The
Group accounts for share based payment transactions with employees using the fair val-
ue method. Under the fair value method, the fair value of the awards is recognised in
earnings over the vesting period.
For share based compensation plans which are settled in cash, compensation costs are
recognised as liabilities, whereas for equity-settled plans, compensation costs are recog-
nised as an accrual to additional paid-in capital within shareholders’ equity.
Treasury shares are reported at cost in shareholders’ equity. Treasury shares also include
stand-alone derivative instruments indexed to the Group’s shares that meet the require-
ments for classification in shareholders’ equity as well as embedded derivative instru-
ments indexed to the Group’s shares, which are bifurcated from the host contract and
meet the requirements for classification in shareholders’ equity.
Basic earnings per common share are determined by dividing net income available to
shareholders by the weighted average number of common shares entitled to dividends
during the year. Diluted earnings per common share reflect the effect on earnings and
average common shares outstanding associated with dilutive securities.
On 4 December 2004, the FASB issued SFAS No. 123 (revised 2004) “Share-Based
Payment” (“FAS 123R”). FAS 123R requires share based payments to be accounted for
using the fair value method, and eliminates the ability to account for such transactions
using the previously allowed intrinsic value method. The Group adopted the provisions of
FAS 123R as of 1 January 2006.
On 6 September 2006, the FASB issued SFAS No. 158 “Employers’ Accounting for De-
fined Benefit Pension and Other Post-retirement Plans” (“FAS 158”). FAS 158 requires an
employer to recognise the overfunded or underfunded status of a defined benefit postre-
tirement plan as an asset or liability and to recognise changes in that funded status in the
year in which the changes occur through comprehensive income. The Group adopted
the provisions of FAS 158 for the year ended 31 December 2006.
On 6 June 2006, the FASB issued FASB Interpretation No. 48 “Accounting for Uncer-
tainty in Income Taxes” (“FIN 48”). FIN 48 prescribes a recognition threshold and meas-
urement attribute for the recognition and measurement of a tax position taken or expect-
ed to be taken in a tax return. FIN 48 also provides guidance on derecognition, classifica-
tion, interest and penalties, accounting in interim periods, disclosure, and transition. The
Group will adopt the provisions of FIN 48 in the first quarter of 2007.
122 Swiss Re 2006 Annual Report
122 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
Investment income
Investment income
Net investment income by source was as follows:
2. Investments
CHF millions
Fixed income securities
Equity securities
Policy loans, mortgages and other loans
Investment real estate
Short-term investments
Other current investments
Equity in earnings of equity-accounted investments
Cash and cash equivalents
Funds held by ceding companies
Gross investment income
Investment management expenses
Funds held under reinsurance treaties
Net investment income
2005
3 919
547
602
150
152
137
420
197
645
6 769
–318
–314
6 137
2006
4 768
721
618
156
283
83
389
294
680
7 992
–404
–598
6 990
Dividends received from investments accounted for using the equity method were
CHF 13 million and CHF 14 million in 2005 and 2006, respectively.
Net investment income includes income on unit-linked business of CHF 751 million and
CHF 670 million in 2005 and 2006, respectively, which is credited to unit-linked policy-
holders.
Realised gains and losses
Realised gains and losses
Realised gains and losses for fixed income, equity securities and other investments were
as follows:
CHF millions
Fixed income securities available-for-sale
Gross realised gains
Gross realised losses
Equity securities available-for-sale
Gross realised gains
Gross realised losses
Other-than-temporary impairments
Net realised investment gains /losses on trading securities
Change in net unrealised investment gains /losses on trading securities
Other investments
Gross realised gains
Gross realised losses
Exchange gains
Net realised investment gains
2005
2006
666
–232
777
–96
–98
166
51
566
–344
2 018
3 474
922
–591
1 151
–189
–156
664
1 746
2 141
–2 451
–1 289
1 948
Proceeds from fixed income securities available-for-sale amounted to CHF 53 720 million
in 2006 (2005: CHF 35 098 million) and sales of equity securities available-for-sale
amounted to CHF 7 881 million in 2006 (2005: CHF 4 874 million).
Swiss Re 2006 Annual Report 123
Swiss Re 2006 Annual Report 123
Profile Thema
Financial statements Notes to the Group financial statements
Net realised gains include income on unit-linked business of CHF 1 396 million and CHF
1 319 million in 2005 and 2006, respectively, which is credited to unit-linked policyhol-
ders.
Realised gains and losses do not include the change in fair value of Financial Services
assets/liabilities classified as trading revenues/expenses and the change in fair value of
derivative financial instruments classified as cash flow hedges.
Trading revenues
Trading revenues
Trading revenues mainly generated by the trading activities of the Financial Services
business segment were as follows:
CHF millions
Income from fixed income securities
Income from other financial services assets
Net investment income from Financial Services assets
Net realised investment gains/losses on trading securities
Net unrealised investment gains/losses on trading securities
Net realised and unrealised investment gains/losses on other assets
Net realised investment gains/losses on Financial Services assets
Trading expenses
Trading revenues
2005
776
41
817
257
–163
–13
81
–552
346
2006
1 409
87
1 496
17
–225
366
158
–1 000
654
Investments available-for-sale
Investments available-for-sale
Amortised cost or cost and estimated fair values of investments in fixed income and
equity securities classified as available-for-sale were as follows:
As of 31 December 2005
CHF millions
Debt securities issued by governments
and government agencies:
US Treasury and other US government
Amortised
cost or cost
Gross unrea-
lised gains
Gross unrea-
lised losses
Estimated
fair value
corporations and agencies
24 669
451
–675
24 445
States of the United States and
political subdivisions of the states
United Kingdom
Canada
Germany
France
Other
Total
Corporate debt securities
Mortgage and asset-backed securities
Fixed income securities
available-for-sale
Equity securities available-for-sale
340
5 960
4 246
2 711
1 545
5 755
45 226
19 224
12 674
77 124
7 001
46
300
1 529
42
56
559
2 983
1 230
118
4 331
2 462
–215
–393
–15
–19
–278
–1 595
–283
–233
–2 111
–1 347
386
6 045
5 382
2 738
1 582
6 036
46 614
20 171
12 559
79 344
8 116
124 Swiss Re 2006 Annual Report
124 Swiss Re 2006 Annual Report
Maturity of fixed income
Maturity of fixed income
securities available-for-sale
securities available-for-sale
Financial statements Notes to the Group financial statements
Profile Thema
As of 31 December 2006
CHF millions
Debt securities issued by governments
and government agencies:
US Treasury and other US government
corporations and agencies
States of the United States and
political subdivisions of the states
United Kingdom
Canada
Germany
France
Other
Total
Corporate debt securities
Mortgage and asset-backed securities
Fixed income securities
available-for-sale
Equity securities available-for-sale
Amortised
cost or cost
Gross unrea-
lised gains
Gross unrea-
lised losses
Estimated
fair value
29 555
190
–598
29 147
676
5 280
3 239
2 293
1 537
7 455
50 035
26 836
15 280
92 151
8 839
34
87
755
4
12
212
1 294
921
102
2 317
2 268
–2
–54
–12
–28
–18
–66
–778
–373
–190
–1 341
–262
708
5 313
3 982
2 269
1 531
7 601
50 551
27 384
15 192
93 127
10 845
The amortised cost or cost and estimated fair values of investments in fixed income se-
curities 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
2005 and 2006, CHF 2 148 million and CHF 5 426 million, respectively, of fixed income
securities were callable.
As of 31 December
CHF millions
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Mortgage and asset-backed securities
with no fixed maturity
Total fixed income securities
available-for-sale
Amortised
cost or cost
4 762
21 779
16 304
21 605
2005
Estimated
fair value
4 630
21 266
16 733
24 156
Amortised
cost or cost
5 768
26 196
19 224
25 683
2006
Estimated
fair value
5 804
26 171
19 129
26 831
12 674
12 559
15 280
15 192
77 124
79 344
92 151
93 127
Swiss Re 2006 Annual Report 125
Swiss Re 2006 Annual Report 125
Financial statements Notes to the Group financial statements
Profile Thema
Assets on deposit or pledged
Assets on deposit or pledged
As of 31 December 2005 and 2006, investments with the carrying value of CHF 663
million and CHF 1 565 million, respectively, were on deposit with regulatory agencies in
accordance with local requirements.
Collateral accepted which the Group
Collateral accepted which the Group
has the right to sell or repledge
has the right to sell or repledge
Unrealised losses on fixed income
Unrealised losses on fixed income
securities available-for-sale
securities available-for-sale
As of 31 December 2005 and 2006, investments (including cash and cash equivalents)
with a carrying value of approximately CHF 8 823 million and CHF 17 132 million, re-
spectively, were placed on deposit or pledged to secure certain reinsurance liabilities.
As of 31 December 2005 and 2006, the fair value of the Government and Corporate
bond securities received as collateral, is CHF 2 892 million and CHF 6 502 million, re-
spectively. Of this, the amount that has been sold or repledged as of 31 December 2005
and 2006 is CHF 1 316 million and CHF 5 450 million, respectively, which is used to set-
tle short Government bond positions. The sources of the collateral are highly rated bank-
ing market counterparties.
The following table shows the fair value and unrealised losses of the Group’s fixed in-
come securities, aggregated by investment category and length of time that individual
securities were in a continuous unrealised loss position, as of 31 December 2005 and
2006. A continuous decline in the value of equity securities available-for-sale for longer
than twelve months is considered other-than-temporary and recognised as net realised
investment gains/losses in the income statement. Therefore, as of 31 December 2005
and 2006, the gross unrealised loss on equity securities available-for-sale of CHF 1 347
million and CHF 262 million relates to declines in value for less than 12 months.
As of 31 December 2005
CHF millions
Debt securities issued by govern-
Less than 12 months
Unrealised
losses
Fair
value
12 months or more
Unrealised
losses
Fair
value
Total
Unrealised
losses
Fair
value
ments and government agencies
25 288
1 213
8 372
382 33 660
1 595
Corporate debt securities
Mortgage and asset-backed securities
6 261
7 253
255
184
551
1 153
28
49
6 812
8 406
283
233
Total
38 802
1 652 10 076
459 48 878
2 111
As of 31 December 2006
CHF millions
Debt securities issued by govern-
Less than 12 months
Unrealised
losses
Fair
value
12 months or more
Unrealised
losses
Fair
value
Total
Unrealised
losses
Fair
value
ments and government agencies
20 633
295 13 443
483 34 076
Corporate debt securities
Mortgage and asset-backed securities
6 362
4 939
104
51
2 618
4 138
269
139
8 980
9 077
778
373
190
Total
31 934
450 20 199
891 52 133
1 341
126 Swiss Re 2006 Annual Report
126 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
An assessment of whether an other-than-temporary decline in the value of equity and
fixed income securities available-for-sale has occurred is based on a case-by-case evalu-
ation of the reasons for the decline in value. This evaluation includes: (a) an assessment
of the duration and extent of the decline in value; (b) review of the financial performance
and outlook for the economic environment and industry in which the issuer operates; (c)
review of the financial performance and outlook for the issuer compared to industry
peers; and (d) analysis of any other factors, including credit rating, that may adversely af-
fect the ability of the security to recover in value in the short term. Other-than-temporary
declines in the value of equity and fixed income securities available-for-sale are recog-
nised as net realised investment gains/losses in the income statement.
Mortgages, loans and real estate
Mortgages, loans and real estate
As of 31 December 2005 and 2006, investments in mortgages and other loans,
real estate comprised the following:
As of 31 December
CHF millions
Mortgages and other loans
Investment real estate
Carrying value
7 305
1 729
2005
Fair value
7 305
3 475
Carrying value
7 058
4 227
2006
Fair value
7 058
5 389
As of 31 December 2005 and 2006, the Group’s investment in mortgages and other
loans included CHF 207 million and CHF 231 million, respectively, of loans due from em-
ployees and CHF 396 million and 388 million, respectively, due from officers. These
loans generally consist of mortgages offered at variable and fixed interest rates.
As of 31 December 2005 and 2006, investments in real estate included CHF 9 million
and CHF 67 million, respectively, of real estate held for sale.
Depreciation expense related to income-producing properties was CHF 36 million and
CHF 34 million for 2005 and 2006, respectively. Accumulated depreciation on invest-
ment real estate totalled CHF 446 million and CHF 444 million as of 31 December 2005
and 2006, respectively.
Substantially all mortgages and other loans receivable are secured by buildings, land or
the underlying policies. The ultimate collectibility of the receivables is evaluated regularly
and an appropriate allowance for uncollectible amounts is established.
Swiss Re 2006 Annual Report 127
Swiss Re 2006 Annual Report 127
Financial statements Notes to the Group financial statements
Profile Thema
3. Derivative financial instruments
The Group uses a variety of derivative financial instruments including swaps, options, for-
wards, credit derivatives and exchange-traded financial futures in its trading and hedg-
ing strategies, in line with the Group’s overall risk management strategy. The objectives
include managing exposure to price, foreign currency and/or interest rate risk on planned
or anticipated investment purchases, existing assets or liabilities, as well as locking in at-
tractive investment conditions for future available funds.
The fair values represent the gross carrying value amounts at the reporting date for each
class of derivative contract held or issued by the Group. The fair values below are not an
indication of credit risk, as many over-the-counter transactions are contracted and docu-
mented under ISDA master agreements or their equivalent. Management believes that
such agreements provide for legally enforceable set-off in the event of default, which
substantially reduces credit exposure.
The maximum potential loss assuming non-performance by all counterparties, and based
on the market replacement cost at 31 December 2005 and 2006 approximated CHF 2 889
million and CHF 2 220 million, respectively. These values are net of amounts offset pursuant
to rights of set-off and qualifying master netting arrangements with various counterparties.
The fair value of derivatives outstanding as of 31 December 2005 and 2006 is as follows:
CHF millions
Interest rate contracts
Forwards and futures
Options
Swaps
Total
Equity and index contracts
Forwards and futures
Options
Swaps
Other
Total
Foreign currency
Options
Swaps
Total
Other derivatives
Credit derivatives
Weather derivatives
Other
Total
As of 31 December 2005
Carrying
value
assets/
liabilities
Negative
fair value
Positive
fair value
As of 31 December 2006
Carrying
value
assets/
liabilities
Negative
fair value
Positive
fair value
26
9
–5
–5
3 133 –3 212
3 168 –3 222
21
4
–79
–54
24
–71
–47
2 863 –3 062
2 887 –3 133
–199
–246
4
–23
–19
260
–343
–83
2 120 –2 377
–257
1 999 –2 146
–147
202
–148
–11
54
–11
2 124 –2 400
–276
2 461 –2 648
–187
279
–284
–5
1 017 –1 218
1 017 –1 218
–201
–201
1 286 –1 496
1 565 –1 780
–210
–215
805
56
190
1 051
–619
–81
–176
–876
186
–25
14
175
1 427 –1 041
95
133
–124
–205
1 655 –1 370
386
–29
–72
285
Total derivative financial instruments 7 360 –7 716
–356
8 568 –8 931
–363
128 Swiss Re 2006 Annual Report
128 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
The Group has reviewed the right of offset arrangements in certain derivative related col-
lateral contracts and concluded that the Group has both the right and the intent to offset
collateral assets/liabilities and derivative assets/liabilities. As a result, the Group has
changed the presentation of the relevant assets/liabilities to a net presentation. The
equivalent impact to the 2005 balances would be to decrease the carrying value of de-
rivative assets/liabilities to minus CHF 788 million. The balance sheet impact in 2005
would have been to reduce both financial services assets and liabilities by CHF 1 552
million. The change has no impact on net income or shareholders’ equity.
As of 31 December 2005 and 2006, other invested assets include derivative financial
instruments with a fair value of CHF 562 million and CHF 718 million, respectively.
As of 31 December 2005 and 2006, other financial services assets include derivative fi-
nancial instruments with a fair value of CHF 2 367 million and CHF 2 086 million respec-
tively.
As of 31 December 2005 and 2006 other accrued expenses and other liabilities
include derivative financial instruments with a fair value of CHF 394 million and CHF 555
million, respectively.
As of 31 December 2005 and 2006, other financial services liabilities include derivative
financial instruments with a fair value of CHF 2 891 million and CHF 2 612 million re-
spectively.
These derivative financial instruments include cash flow hedges with a fair value of
CHF 60 million and CHF 31million as of 31 December 2005 and 2006, respectively.
Hedges of the net investment in a
Hedges of the net investment in a
foreign operation
foreign operation
For the years ended 31 December 2005 and 2006, the Group recorded net unrealised
foreign currency transaction losses of CHF nil and CHF 96 million, respectively, in foreign
currency translation related to hedges of the foreign currency exposure of its net invest-
ments in foreign operations.
Swiss Re 2006 Annual Report 129
Swiss Re 2006 Annual Report 129
Profile Thema
Financial statements Notes to the Group financial statements
4. Acquisitions and dispositions
On 9 June 2006, Swiss Re completed the acquisition of 100% of the outstanding com-
mon shares of GE Insurance Solutions Corporation, excluding its US life and health oper-
ation and certain other assets and liabilities, from General Electric Company. The total
cost of investment was USD 8.8 billion, including reimbursement of capital injected
since November 2005 of USD 1.2 billion and estimated purchase price adjustments. The
results of the operations of GE Insurance Solutions have been included in the consolidat-
ed financial statements since 9 June 2006. The transaction contributes to Swiss Re’s
global diversification. It closely complements the Group’s existing business profile while
extending the franchise, client base and product offering. The integration of the acquired
operations will streamline the combined organisations.
In addition Swiss Re acquired 100% of the outstanding common shares of GE Life Group
Limited, GE Insurance Holdings Limited and GE Life Services Limited for a cash payment
of GBP 465 million. Swiss Re has acquired around 400 000 policies with total assets of
over GBP 8 billion. The acquisition was completed on 14 December 2006. By acquiring
GE Life’s operations Swiss Re will complement the existing Admin ReSM platform.
Determination of purchase price
Determination of purchase price
Millions (except share data)
Number of Swiss Re common shares delivered to GE
CHF
USD
as of 9 June 2006
33 300 957 33 300 957
Swiss Re’s share price (volume weighted average price over
20 trading days before 7 June 2006 )
Fair value of Swiss Re’s common shares delivered to GE
Mandatory convertible instruments
Cash
Transaction cost
Purchase price
Capital contribution1
Other2
Total cost of investment
87.58
2 916
610
5 456
57
9 039
1 519
192
10 750
72.07
2 400
500
4 435
46
7 381
1 235
156
8 772
1 Swiss Re had agreed that in the event that General Electric (i) provided capital to the GE Insurance Solutions
business in response to an increase in any rating agency’s capital requirements for the insurance or reinsurance
industry or (ii) otherwise provided capital to the GE Insurance Solutions business, Swiss Re would pay General
Electric an amount equal to such capital increase, net of any capital distributions.
2 Swiss Re agreed to pay to General Electric in cash an amount equal to the undistributed proceeds of the re-
demption of shares of common stock of a GE Insurance Solutions subsidiary. Swiss Re is entitled to the undis-
tributed proceeds. In addition, this includes adjustments to the consideration identified as of 31 December
2006.
130 Swiss Re 2006 Annual Report
130 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
Allocation of the purchase price
Allocation of the purchase price
Intangible assets
Intangible assets
The purchase price has been allocated based on a preliminary estimate of the fair value
of assets acquired and liabilities assumed at the date of acquisition. The allocation re-
quires significant judgement and it is possible that the preliminary estimates will change
as the purchase price allocations are finalised. The allocation of the purchase price in-
cluded adjustments to the following assets and liabilities:
CHF millions
Total cost of investment at 31 December 2006
Net assets acquired
Historic intangibles set to zero
Adjustments to assets acquired and liabilities assumed:
Unpaid claims and claim adjustment expenses gross
discounting, net of capital cost
Unpaid claims and claim adjustment expenses adjustments
and reinsurance payables / receivables and funds held
Customer intangible assets
Liabilities for policy benefits for life and health
Present value of future profits (PVFP)
Restructuring provision
Other
Tax impact of above adjustments and other tax adjustments
Purchased net assets excluding goodwill
Goodwill
GE Insurance Solutions
10 750
11 620
–3 551
GE Life UK
1 122
1 498
–226
2 284
–1 545
619
–70
1 170
–89
–579
–646
9 213
1 537
–343
195
–9
7
1 122
Historic intangible assets including goodwill, deferred acquisition costs and present val-
ue of future profits have been eliminated. Qualifying purchased intangible assets, includ-
ing customer related intangibles, present value of future profits and goodwill have been
established.
The following table presents details of acquired intangible assets subject to amortisation
as of the date of acquisition:
GE Insurance Solutions customer related intangibles
GE Insurance Solutions PVFP
GE Life UK PVFP
Amortisation
period
10 years
25 years
36 years
Value
(CHF millions)
619
1 170
195
The goodwill of CHF 1 537 million relates to the P&C business segment. The goodwill is
not expected to be deductible for tax purposes.
Equalisation reserves
Equalisation reserves
Under US GAAP, equalisation reserves are not recognised as a liability. The change to US
GAAP reduced the goodwill of CHF 1 909 million published in the interim 2006
financial statements by CHF 458 million.
Investments
Investments
Fair values have been attributed to investments mainly according to quoted market
prices. If quoted market prices were not available, valuation models were applied.
Swiss Re 2006 Annual Report 131
Swiss Re 2006 Annual Report 131
Financial statements Notes to the Group financial statements
Profile Thema
Property and casualty reserves gross
Property and casualty reserves gross
and retrocession and reinsurance
and retrocession and reinsurance
payables/receivables and funds held
payables/receivables and funds held
Property and casualty reserves, both assumed and ceded, have been adjusted based
on an estimate of their fair value. This estimate includes the best estimate of the ultimate
claims payments and receipts and the timing of those payments. The estimated pay-
ments have been discounted and adjusted for the expected cost of holding capital to
support the reinsurance assets and liabilities.
Life and health policy benefits and
Life and health policy benefits and
present value of future profits
present value of future profits
The life and health policy benefit reserves have been adjusted based on best estimate
assumptions at the time of the acquisition. The present value of future profits has been
estimated based on the best estimate of expected future profits adjusted for expected
cost of holding capital to support the reinsurance assets and liabilities.
Other assets and liabilities
Other assets and liabilities
Other assets and liabilities have been adjusted to their estimated fair values. For informa-
tion on the restructuring provision see note 16.
Deferred taxes
Deferred taxes
Pro forma financial results (unaudited)
Pro forma financial results (unaudited)
Deferred tax has been recognised on the fair value adjustments summarised above. His-
toric deferred tax assets and liabilities have been adjusted to the expected payable and
recoverable amounts which the Group expects to realise.
The unaudited pro forma financial information as of 31 December 2006 is presented to
illustrate the effect on the Group’s income statement of the GE Insurance Solutions ac-
quisition. The GE Insurance Solutions information is based on the estimated revenues
and net income of the acquired business in 2005 and 2006 and includes estimates for
the impact of purchase accounting. The 2005 pro forma net income includes USD 3.8
billion of property and casualty reserve strengthening, made by GE Insurance Solutions
in 2005, gross of tax. This pro forma information is not necessarily indicative for what
would have occurred had the acquisition and related transactions been made on the
dates indicated, or of future results of the company.
Unaudited pro forma results after the GE Insurance Solutions acquisition
Total revenues
Net income
Earnings per share – basic
Earnings per share – diluted
2005
(CHF millions)
46 996
2006
(CHF millions)
41 968
–449
4 870
–1.45
–1.45
13.61
12.63
132 Swiss Re 2006 Annual Report
132 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
5. Deferred acquisition costs (DAC) and acquired present value of
future profits (PVFP)
CHF millions
Balance as of 1 January
Deferred
Effect of acquisitions/disposals
and retrocessions
Amortisation
Interest accrued on unamortised PVFP
Effect of foreign currency translation
Effect of change in unrealised gains/losses
Balance as of 31 December
DAC
4 855
4 107
–4 099
530
5 393
2005
PVFP
6 315
–393
–794
409
788
210
6 535
DAC
5 393
4 161
–4 100
–184
5 270
2006
PVFP
6 535
1 443
–790
413
–245
194
7 550
The amortisation of DAC in 2006 represents CHF 3 427 million, CHF 309 million, and
CHF 364 million for the Property & Casualty, Life & Health, and Financial Services business
segments, respectively.
Retroceded DAC and PVFP may arise on retrocession of reinsurance portfolios, including
reinsurance undertaken as part of a securitisation. The associated potential retrocession
recoveries are determined by the nature of the retrocession agreements and by the terms
of the securitisation.
The percentage of the PVFP which is expected to be amortised in each of the next five
years is 6%, 6%, 5%, 5% and 5%, respectively.
Swiss Re 2006 Annual Report 133
Swiss Re 2006 Annual Report 133
Profile Thema
Financial statements Notes to the Group financial statements
6. Debt
The Group enters into long- and short-term debt arrangements to obtain funds for general
corporate use and specific transaction financing. The Group defines short-term debt as
debt having a maturity at the balance sheet date of less than one year and long-term debt
of greater than one year. The Group’s debt as of 31 December 2005 and 2006 was as
follows:
CHF millions
Senior financial debt
Senior operational debt
Short-term debt - financial and operational debt
Senior financial debt
Senior operational debt
Subordinated financial debt
2005
1 015
7 217
8 232
2 794
4 389
3 058
2006
1 917
7 201
9 118
2 482
6 765
5 491
Long-term debt - financial and operational debt
Total debt
10 241
18 473
14 738
23 856
Maturity of long-term debt
Maturity of long-term debt
As of 31 December 2005 and 2006, long-term debt as reported above have the follow-
ing maturities:
CHF millions
Due in 2007
Due in 2008
Due in 2009
Due in 2010
Due in 2011
Due after 2011
Total carrying value
Total fair value
1 This balance was reclassified to short-term debt.
2005
1 900
1 697
940
953
21
4 730
10 241
10 567
2006
01
1 935
1 818
1 201
917
8 867
14 738
15 081
134 Swiss Re 2006 Annual Report
134 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
Senior debt
Senior debt
Instrument
Maturity
2008 Mandatory Convertible
Issued in
2005
Currency
CHF
Nominal in
millions
1 000
Interest
rate
6.00%
Book value
in CHF
millions
994
2008
2008
2008
2008
2008
2008
2008
2009
2009
2009
2009
2009
2009
Bond
Private Placement
(step-up)
EMTN
EMTN
EMTN
EMTN
EMTN
EMTN
3 EMTN
EMTN
EMTN
3 EMTN
(Zero coupon Notes)
EMTN
Insurance-linked
Placement
2001
CHF
100
3.60%
100
17 340
100
various
3 M Libor + 1bp
35 3 M Libor + 3.5bp
3 M Libor + 5bp
90
3M Libor
8 100
177
100
84
215
83
182
32
51
31
55
4.13%
Various
0.81%
0.41%
Various
2006
2006
2006
2005
2005
2005
2004
2004
2005
2004
2005
2006
JPY
CHF
GBP
GBP
JPY
USD
EUR
JPY
JPY
USD
CHF
USD
150
20
5 000
3 000
46
300
59
2009
EMTN
2006
CHF
300
2009
EMTN
2009 Mandatory Convertible
Bond
2009
2010
Private Placement
EMTN (Amortising
Bond)
EMTN
2 EMTN
Senior Notes1
Credit-linked Note
EMTN (Straight Bond)
Trust-preferred Stock
(Trups)2
Credit-linked Note
Senior Notes1
Senior Notes1
Senior Notes1
2010
2010
2010
2011
2015
2017
2017
2019
2026
2030
2006
2006
2006
2003
2005
2005
2000
2006
2001
1997
2000
1999
1996
2000
CHF
CHF
CHF
GBP
CZK
CHF
USD
USD
CHF
USD
USD
USD
USD
USD
200
610
175
40
300
625
350
735
150
42
9
400
600
350
1.25%
298
Libor + 2.30%
– 2.35%
3M Libor +
0.5bp
2.50%
9.80%
2.59%
4.38%
2.88%
Various
7.50%
5.01%
4.00%
8.72%
Various
6.45%
7.00%
7.75%
66
300
200
609
175
96
18
624
464
898
151
60
6
488
774
490
Various Payment Undertaking
Various
Various
Various
Various
1 426
Agreements
Total senior debt as of 31 December 2006
Total senior debt as of 31 December 2005
1 Assumed in the acquisition of GE Insurance Solutions
2 Assumed in the acquisition of Life Re Corporation
9 247
7 183
Swiss Re 2006 Annual Report 135
Swiss Re 2006 Annual Report 135
Financial statements Notes to the Group financial statements
Profile Thema
Subordinated debt
Subordinated debt
Maturity Instrument
2021 Convertible Bond
–
Subordinated Perpetual Loan
Issued in Currency
USD
DEM
2001
1998
Nominal
in millions
1 150
340
Interest
rate…
...first
call in
3.25% 2011
2008
6M Libor
+ 40bp
Book value
in CHF
millions
1 384
280
329
300
–
–
–
–
–
–
Subordinated Perpetual Loan
Subordinated Perpetual Loan
1998
1998
DEM
CHF
400
300
5.71% 2008
2008
6M Libor
+ 37.5bp
Subordinated Perpetual Loan
1998
DEM
110
6M Libor
+ 45bp
2010
91
Subordinated Perpetual Bond
1999
CHF
600
3.75% 2011
592
(SUPERBs)
Subordinated Perpetual Loan
2006
EUR
1 000
5.25% 2016
1 598
Note
Subordinated Perpetual
2006
USD
752
6.85% 2016
917
Note
Total subordinated debt as of 31 December 2006
Total subordinated debt as of 31 December 2005
5 491
3 058
Swiss Re uses debt to finance general corporate purposes but also to fund “Financial ser-
vices assets and liabilities” (funded business). “Financial services assets and liabilities”
are structured with the intention of creating assets and liabilities that generate offsetting
foreign exchange and interest rate risks. Debt that is strictly used for funded business is
classified as operational debt and is included in financial services liabilities. Operational
debt is excluded by rating agencies from financial leverage calculations.
Interest expense on long-term debt
Interest expense on long-term debt
Interest expense on long-term debt for the years ended 31 December 2005 and 2006,
respectively, was as follows:
CHF millions
Senior financial debt
Senior operational debt
Subordinated financial debt
Total
2005
105
146
124
375
2006
121
216
221
558
136 Swiss Re 2006 Annual Report
136 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
Debt issued in 2006
Debt issued in 2006
In April 2006, the Group issued a credit linked note of USD 735 million, due in March
2011, bearing interest of 5.01%.
In May 2006, the Group issued a EUR 1 000 million subordinated Loan Note with a per-
petual term, bearing interest at the rate of 5.25% and a USD 752 million subordinated
Note with a perpetual term, bearing interest at the rate of 6.85%. Further, the Group
structured and underwrote an insurance linked security of USD 59 million, bearing inter-
est at the rate of Libor plus 2.30 – 2.35% , maturing in three years.
In June 2006, the Group issued CHF 300 million under the EMTN programme, with a
three-year maturity and a coupon of three-month Libor plus 0.5 basis points, and CHF
200 million with a three-year maturity and a coupon of 2.50%. Further, the Group issued
a mandatory convertible bond totalling CHF 610 million to General Electric with an inter-
est rate of 9.80%. The securities will automatically convert into Swiss Re shares in three
years. The Group also assumed in the acquisition of GE Insurance Solutions USD 400
million senior notes due in March 2019, bearing interest at the rate of 6.45%, USD 600
million due in February 2026, bearing interest at the rate of 7.00%, USD 350 million due
in June 2010, bearing interest at the rate of 7.50%, and USD 350 million due in June
2030, bearing interest at the rate of 7.75%. These newly assumed senior notes are used
for funded business and therefore classified as operational debt.
In November 2006, the Group issued JPY 12 340 million under the EMTN programme,
with a two-year maturity and a coupon of three-month Libor, and CHF 100 million with a
two-year maturity and a coupon of three-month Libor plus 1 basis point.
In December 2006, the Group issued GBP 35 million under the EMTN programme, with
a two-year maturity and a coupon of three-month Libor plus 3.5 basis points, and JPY
5 000 million with a two-year maturity and a coupon of six-month Libor plus 2.7 basis
points. Further, the Group issued a private placement of CHF 175 million, with a three-
year maturity and a coupon of 2.59%.
Swiss Re 2006 Annual Report 137
Swiss Re 2006 Annual Report 137
Financial statements Notes to the Group financial statements
Profile Thema
7. Unpaid claims and claim adjustment expenses
The liability for unpaid claims and claim adjustment expenses is analysed as follows:
CHF millions
Non-life
Life & Health
Total
2005
59 104
12 655
71 759
2006
80 391
14 620
95 011
A reconciliation of the beginning and ending reserve balances for non-life unpaid claims
and claim adjustment expenses for the periods is presented as follows:
CHF millions
Balance as of 1 January
Reinsurance recoverable
Deferred expense on retroactive reinsurance
Net
Incurred related to:
Current year
Prior year
Amortisation of deferred expense on retroactive
reinsurance and impact of commutations
Total incurred
Paid related to:
Current year
Prior year
Total paid
Foreign exchange
Effect of acquisitions, disposals, new retroactive reinsurance
and other items
Net
Reinsurance recoverable
Deferred expense on retroactive reinsurance
Balance as of 31 December
2005
50 099
–1 718
–1 040
47 341
2006
59 104
–2 555
–1 057
55 492
13 692
1 000
12 292
–593
66
100
14 758
11 799
–1 601
–10 129
–11 730
–2 853
–10 538
–13 391
4 616
–1 796
507
19 790
55 492
71 894
2 555
1 057
7 622
875
59 104
80 391
The Group does not discount liabilities arising from prospective property and casualty in-
surance and reinsurance contracts, including liabilities which are discounted for US stat-
utory reporting purposes. Liabilities arising from property and casualty insurance and re-
insurance contracts acquired in a business combination are initially recognised at fair val-
ue in accordance with the purchase method of accounting.
138 Swiss Re 2006 Annual Report
138 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
Asbestos and environmental claims
Asbestos and environmental claims
exposure
exposure
The Group’s obligation for claims payments and claims settlement charges also includes
obligations for long-latent injury claims arising out of policies written prior to 1985, in
particular in the area of US asbestos and environmental liability.
Due to the inherent uncertainties and assumptions on which these estimates are based,
however, the Group cannot exclude the need to make further additions to these provi-
sions in the future.
At the end of 2006 the Group carried net reserves for US asbestos, environmental and
other long-latent health hazards equal to CHF 2 226 million, which includes an increase
of CHF 1 203 million because of acquisitions. During 2006, the net claims paid against
these liabilities totalled CHF 244 million.
The Group maintains an active commutation strategy to reduce exposure. When com-
mutation payments are made, the traditional “survival ratio” is artificially reduced by pre-
mature payments which does not imply a reduction in reserve adequacy.
Swiss Re 2006 Annual Report 139
Swiss Re 2006 Annual Report 139
Financial statements Notes to the Group financial statements
Profile Thema
8. Reinsurance information
Premiums written, premiums
Premiums written, premiums
earned and fees assessed
earned and fees assessed
against policyholders
against policyholders
CHF millions
Premiums written
Direct
Assumed
Ceded
Total premiums written
Premiums earned
Direct
Assumed
Ceded
Non-Life
Life&
Health
Total
Non-Life
2005
Life&
Health
2006
Total
1 312
17 024
1 192
9 921
–912 –1 484 –2 396
27 053
9 629
17 424
2 504
2 256
26 945 16 896
1 338
3 594
11 306 28 202
–979 –1 738 –2 717
29 079
10 906
18 173
1 335
1 192
2 527
2 242
1 338
3 580
16 871
9 923
26 794
17 653 11 372 29 025
–953 –1 477 –2 430 –1 354 –1 736 –3 090
Total premiums earned
17 253
9 638
26 891
18 541
10 974
29 515
Fees assessed against policyholders
Direct
Assumed
Ceded
Total fees assessed against
policyholders
472
539
472
539
–130
–130
455
563
455
563
–139
–139
881
881
879
879
140 Swiss Re 2006 Annual Report
140 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
Claims and claim adjustment expenses
Claims and claim adjustment expenses
CHF millions
Claims
Claims paid, gross
Claims paid, retro
Claims paid, net
Change in unpaid claims and
claim adjustment expenses;
life and health benefits, gross
Change in unpaid claims and
claim adjustment expenses;
Non-Life
Life &
Health
Total
Non-Life
2005
Life &
Health
2006
Total
–12 332 –9 057 –21 389 –16 825 –9 631 –26 456
5 165
–11 730 –7 753 –19 483 –13 391 –7 900 –21 291
1 304
3 434
1 906
1 731
602
–3 671 –1 166 –4 837
3 720 –1 922
1 798
life and health benefits, retro
643
251
894 –2 128
228 –1 900
Change in unpaid claims and
claim adjustment expenses;
life and health benefits, net
–3 028
–915 –3 943
1 592 –1 694
–102
Claims and claim
adjustment expenses;
life and health benefits
–14 758 –8 668 –23 426 –11 799 –9 594 –21 393
Acquisition costs
Acquisition costs
Acquisition costs
Acquisition costs, gross
–3 802 –2 617 –6 419 –3 970 –2 596 –6 566
Acquisition costs, retro
Acquisition costs, net
96
396
492
147
340
487
–3 706 –2 221 –5 927 –3 823 –2 256 –6 079
Reinsurance assets and liabilities
Reinsurance assets and liabilities
CHF millions
Assets
Non-Life
Life &
Health
Total
Non-Life
2005
Life &
Health
2006
Total
Reinsurance recoverable
2 555 10 636 13 191
7 622
11 077
18 699
Deferred acquisition costs
1 404
3 989
5 393
1 440
3 830
5 270
Liabilities
Unpaid claims and claim
adjustment expenses
Life and health policy benefits
Policyholder account balances
59 104 12 655 71 759
80 391
14 620
95 011
31 081
31 081
34 115
34 115
44 899
44 899
42 834
42 834
Swiss Re 2006 Annual Report 141
Swiss Re 2006 Annual Report 141
Financial statements Notes to the Group financial statements
Profile Thema
9. Shareholders’ equity
All of the Group’s reinsurance companies prepare statutory financial statements based on
local laws and regulations. Most jurisdictions require reinsurers to maintain a minimum
amount of capital in excess of a statutory definition of net assets or maintain certain min-
imum capital and surplus levels. In addition, some jurisdictions place certain restrictions
on amounts that may be loaned or transferred to the parent company. The Group’s ability
to pay dividends may be restricted by these requirements.
Dividends are declared in Swiss francs. For the years ended 31 December 2005 and
2006 the Group’s dividends per share were CHF 1.60 and CHF 2.50, respectively.
CHF millions (except share data)
Basic earnings per share
Income available to common shares
2005
2006
2 304
4 560
Weighted average common shares outstanding
309 827 189
337 961 019
Net income per share in CHF
7.44
13.49
Effect of dilutive securities
Change in income available to common shares
due to convertible bonds
Change in average number of shares due to
convertible bonds and employee options
Diluted earnings per share
Net income assuming debt conversion and exercise
72
140
22 943 994
37 275 628
of options
2 376
4 700
Weighted average common shares outstanding
332 771 183
375 236 647
Net income per share in CHF
7.14
12.53
In 2004 Swiss Re purchased 9 236 800 call options to offset the exposure to deliver
Swiss Re shares under the convertible bond issued in 2001.
Share data
Share data
142 Swiss Re 2006 Annual Report
142 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
10. Income taxes
The Group is generally subject to corporate income taxes based on the taxable net income
in various jurisdictions in which the Group operates. The components of the income tax
charge were:
CHF millions
Current taxes
Deferred taxes
Income tax expense
2005
533
–278
255
2006
581
715
1 296
Tax rate reconciliation
Tax rate reconciliation
The following table reconciles the expected tax expense at the Swiss statutory tax rate to
the actual tax expense in the accompanying income statement:
CHF millions
Income tax at the Swiss statutory tax rate of 21.3%
Increase (decrease) in the income tax charge resulting from:
Foreign Income taxed at different rates
Tax exempt income/deduction for dividends received
Intercompany dividends subject to tax
Impact of tax deductible goodwill
Change in the valuation allowance
Other, net
Total
The components of deferred income taxes were as follows:
CHF millions
Deferred tax assets
Income accrued/deferred
Technical provisions
Pension provisions
Benefit on loss carryforwards
Other
Gross deferred tax asset
Valuation allowance
Total
Deferred tax liabilities
Present value of future profits
Income accrued/deferred
Bond amortisation
Deferred acquisition costs
Technical provisions
Unrealised gains on investments
Other
Total
Deferred income taxes
2005
545
–80
–65
261
–113
–244
–49
255
2006
1 247
421
–262
–14
–228
132
1 296
2005
2006
410
1 335
87
1 981
967
4 780
–1 175
3 605
720
1 941
348
2 063
1 410
6 482
–1 162
5 320
–2 272
–2 469
–484
–336
–317
–1 081
–897
–1 056
–6 443
–2 838
–767
–230
–746
–1 577
–649
–1 567
–8 005
–2 685
Swiss Re 2006 Annual Report 143
Swiss Re 2006 Annual Report 143
Financial statements Notes to the Group financial statements
Profile Thema
Deferred taxes have not been recognised on the undistributed earnings of certain foreign
subsidiaries to the extent the Company considers such earnings as being indefinitely
reinvested abroad and does not expect to repatriate these earnings in the foreseeable
future. The amount of such earnings included in consolidated retained earnings as of
31 December 2006 was approximately CHF 7 572 million. It is not practicable to
estimate the amount of additional tax that might be payable if such earnings were not
reinvested indefinitely.
As of 31 December 2006, the Group had CHF 6 241 million foreign net operating tax
loss carryforwards, expiring as follows: CHF 298 million in 2007, CHF 61 million in 2008,
CHF 32 million in 2009, CHF 64 million in 2010, CHF 55 million in 2011 and CHF 5 731
million after 2011. The Group also had capital loss carryforwards of CHF 364 million,
expiring as follows: CHF 10 million in 2007, CHF 4 million in 2008, CHF 303 million in
2009, CHF 43 million in 2010 and CHF 4 million after 2010.
Net Operating losses of CHF 678 million were utilised or expired during 2006.
Components of the deferred tax attributes table shown above, including valuation allow-
ances, incorporate amounts that were acquired during the year. To the extent it is man-
agement’s assessment that some, or all, of the acquired attributes will not be realised, a
valuation allowance has been established in purchase accounting.
Income taxes paid in 2005 and 2006 were CHF 282 million and CHF 742 million re-
spectively.
144 Swiss Re 2006 Annual Report
144 Swiss Re 2006 Annual Report
Defined benefit pension plans and
Defined benefit pension plans and
post-retirement benefits
post-retirement benefits
Financial statements Notes to the Group financial statements
Profile Thema
11. Benefit plans
The Group sponsors various funded defined benefit pension plans. Employer contribu-
tions to the plans are charged to income on a basis which recognises the costs of pen-
sions over the expected service lives of employees covered by the plans. The Group’s
funding policy for these plans is to contribute annually at a rate that is intended to main-
tain a level percentage of compensation for the employees covered. A full valuation is
prepared at least every three years.
Effective from 1 January 2007, Swiss Re has changed the structure of its Swiss pension
plan to a defined contribution scheme. The plan will continue to be accounted for as a
defined benefit plan under US GAAP.
The Group also provides certain health-care and life insurance benefits for retired em-
ployees and their dependants. Employees become eligible for these benefits when they
become eligible for pension benefits.
Incremental effect of the newly issued generally accepted guidance on employee benefit
plans as of 31 December 2006:
CHF millions
Prepaid benefit cost
Liability for pension benefits
Deferred income tax liability
Intangible asset
Accumulated other comprehensive income
Total shareholders’ equity
Before
application
609
1 297
2 871
2
1 878
31 461
Adjustments
–535
After application
74
226
–186
–2
–577
–577
1 523
2 685
1 301
30 884
Swiss Re 2006 Annual Report 145
Swiss Re 2006 Annual Report 145
Financial statements Notes to the Group financial statements
Profile Thema
The measurement date of these plans is 30 September for each year presented (except
for one UK pension plan with a measurement date as of 31 December).
CHF millions
Benefit obligation as of 1 January
Service cost
Interest cost
Amendments
Actuarial gains/losses
Benefits paid
Acquisitions/disposals
2005
2 454
96
90
Swiss plans
pension benefits
2006
2 803
115
83
50
–81
–80
257
–94
Reclassification/curtailment/termination
3
Effect of foreign currency translation
Foreign plans
pension benefits
2006
1 712
63
92
2005
1 332
49
80
188
–48
–5
116
106
–52
416
–7
19
Benefit obligation as of 31 December
2 803
2 893
1 712
2 349
Other benefits
2006
620
38
23
–12
–13
28
–14
670
2005
519
28
21
2
42
–12
20
620
Fair value of plan assets as of 1 January
2 362
2 678
Actual return on plan assets
Company contribution
Benefits paid
Acquisitions/disposals
Effect of foreign currency translation
Fair value of plan assets as of
283
127
–94
207
115
–80
944
146
60
–48
89
1 191
105
76
–52
215
8
12
–12
13
–13
31 December
Funded status
2 678
–125
2 920
27
1 191
–521
1 543
–806
–620
–670
Amounts recognised in the balance
sheet in 2006 consist of:
CHF millions
Non-current assets
Current liabilities
Non-current liabilities
Net amount recognised
Swiss
plans
27
27
Foreign
plans
47
–10
–843
–806
Amounts recognised in accumulated other comprehensive
income in 2006 consist of, gross of tax:
Net gain/loss
Prior service cost/credit
Total
457
79
536
403
2
405
Other
benefits
–13
–657
–670
60
–46
14
Total
74
–23
–1 500
–1 449
920
35
955
146 Swiss Re 2006 Annual Report
146 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
Components of net periodic benefit cost and other amounts recognised in other compre-
hensive income:
CHF millions
Service cost
(net of participant contributions)
Interest cost
Expected return on assets
Amortisation of:
Net gain/loss
Prior service cost
Transition obligation/asset
Effect of settlement, curtailment and
termination
Net periodic benefit cost
Swiss plans
pension benefits
2006
2005
Foreign plans
pension benefits
2006
2005
Other benefits
2006
2005
96
90
–114
115
83
–126
49
80
–68
28
3
–12
91
37
3
3
115
14
2
–5
72
63
92
–76
25
1
-3
102
28
21
–2
–8
38
23
2
–8
39
55
Other changes in plan assets and benefit obligations recognised in other comprehensive
income:
CHF millions
Net loss (gain)
Prior service cost (credit)
Amortisation of
Net loss/gain
Prior service cost
Total recognised in other
comprehensive income, gross of tax
Total recognised in net periodic
benefit cost and other comprehensive
income, gross of tax
Swiss
plans
494
82
–37
–3
536
651
Foreign
plans
428
3
–25
–1
405
507
Other
benefits
62
–54
–2
8
14
69
Total
984
31
–64
4
955
1 227
The estimated net loss and prior service cost for the defined benefit pension plans that
will be amortised from accumulated other comprehensive income into net periodic be-
nefit cost over the next fiscal year are CHF 52 million and CHF 8 million, respectively. The
estimated net loss and prior service credit for the other defined postretirement benefits
will be amortised from accumulated other comprehensive income into net periodic be-
nefit cost over the next fiscal year are CHF 1 million and CHF 8 million respectively.
The accumulated benefit obligation (the current value of accrued benefits excluding fu-
ture salary increases) for pension benefits was CHF 3 973 million and CHF 4 882 million
as of 31 December 2005 and 2006, respectively.
Swiss Re 2006 Annual Report 147
Swiss Re 2006 Annual Report 147
Profile Thema
Financial statements Notes to the Group financial statements
Information for pension plans with an accumulated benefit obligation in excess of plan
assets:
CHF millions
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
2005
986
872
513
2006
2 078
1 814
1 220
Swiss plans
pension benefits
2006
2005
Foreign plans
pension benefits
weighted average
2006
2005
Other benefits
weighted average
2006
2005
Principal actuarial assumptions
Principal actuarial assumptions
a) Assumptions used to determine
obligations at the end of the year
Discount rate
3.0% 3.2%
5.2% 5.2%
3.7% 3.9%
Rate of compensation increase
2.3% 2.3%
4.8% 4.5%
4.5% 4.5%
b) Assumptions used to determine net
periodic pension costs for the year ended
Discount rate
Expected long-term return on plan assets
3.8% 3.0%
5.0% 5.0%
5.8% 5.2%
6.8% 6.5%
4.3% 3.7%
Rate of compensation increase
2.3% 2.3%
4.8% 4.8%
4.5% 4.5%
c) Assumed medical trend rates at
year end
Medical trend – initial rate
Medical trend – ultimate rate
Year that the rate reaches the
ultimate trend rate
7.0% 7.1%
4.4% 4.4%
2015 2014
The expected long-term rates of return on plan assets are based on long-term expected
inflation, interest rates, risk premiums and targeted asset category allocations. The esti-
mates take into consideration historical asset category returns.
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 had the following effects for 2006:
CHF millions
Effect on total of service and interest cost components
Effect on post-retirement benefit obligation
1 percentage
point increase
14
1 percentage
point decrease
–11
117
–89
148 Swiss Re 2006 Annual Report
148 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
Plan asset allocation by asset category
Plan asset allocation by asset category
The actual asset allocation by major asset category for defined benefit pension plans as
of the respective measurement dates in 2005 and 2006, are as follow:
Swiss plans
actual allocation
2005
2006
Foreign plans
actual allocation
2006
2005
Foreign
Swiss
plans
plans
target allocation
Asset category
Equity securities
Debt securities
Real estate
Other
Total
37%
42%
17%
4%
100%
58%
40%
34%
45%
14%
7%
2%
100% 100%
56%
42%
54%
44%
1%
1%
100% 100% 100%
35%
41%
20%
4%
2%
Actual asset allocation is determined by a variety of current economic and market condi-
tions and considers specific asset class risks.
Equity securities include Swiss Re common stock of CHF 12 million (0.3% of total plan
assets) and CHF 20 million (0.4% of total plan assets) as of 31 December 2005 and
2006, respectively.
The Group’s pension plan investment strategy is to match the maturity profiles of the as-
sets and liabilities in order to reduce the future volatility of pension expense and funding
status of the plans. This involves balancing investment portfolios between equity and
fixed income securities. Tactical allocation decisions that reflect this strategy are made
on a quarterly basis.
Expected contributions and estimated
Expected contributions and estimated
future benefit payments
future benefit payments
The employer contributions expected to be made in 2007 to the defined benefit pension
plans are CHF 211 million and to the post-retirement benefit plan are CHF 13 million.
As of 31 December 2006, the projected benefit payments, which reflect expected future
service, not adjusted for transfers in and for employees voluntary contributions, are as
follows:
CHF millions
2007
2008
2009
2010
2011
Years 2012–2016
Swiss plans
pension benefits
119
Foreign plans
pension benefits
68
Other benefits
13
123
130
128
140
715
68
73
78
85
518
14
16
17
19
110
Defined contribution pension plans
Defined contribution pension plans
The Group sponsors a number of defined contribution plans to which employees and the
Group make contributions. The accumulated balances are paid as a lump sum at the ear-
lier of retirement, termination, disability or death. The amount expensed in 2005 and in
2006 was CHF 19 million and CHF 28 million, respectively.
Swiss Re 2006 Annual Report 149
Swiss Re 2006 Annual Report 149
Financial statements Notes to the Group financial statements
Profile Thema
Effect of adoption of
Effect of adoption of
fair value recognition
fair value recognition
12. Share-based payments
As of 31 December 2005 and 2006, the Group had the share-based compensation
plans described below.
Effective 1 January 2006, Swiss Re adopted the fair value recognition provisions of the
new US GAAP accounting guidance on share-based payments. The effect of adopting
the new guidance is CHF 16 million on net income before taxes and CHF 13 million
on net income. The impact on basic earning per share is CHF 0.04 (diluted earning per
share: CHF 0.04).
Total compensation cost for share-based compensation plans recognised in net income
is CHF 8 million and CHF 58 million in 2005 and 2006, respectively. The related tax
benefit is CHF 3 million and CHF 13 million respectively.
Stock option plans
Stock option plans
Stock option plans include the long term equity award programme, the fixed option plan
and an additional grant to certain members of executive management.
The long term equity award programme was provided to members of the Executive Board
and certain members of management. Under the scheme, the beneficiary was allowed to
choose between the fixed option plan or a restricted share plan.
Under the fixed option plan, the exercise price of each option equals the market price of
the shares on the date of the grant. Options issued vest at the end of the fourth year and
have a maximum life of ten years.
A summary of the activity of the Group’s fixed stock option plan is as follows:
Outstanding, 1 January
Options granted
Options exercised
Options sold
Options forfeited or expired
Outstanding, 31 December
Exercisable, 31 December
Weighted average
exercise price in CHF
122
2006
shares
10 258 044
94
69
156
109
122
100 000
–69 840
–450 280
–775 542
9 062 382
155
5 046 282
The weighted average fair value of options granted per share was CHF 20 and CHF 13
in 2005 and 2006 respectively.
150 Swiss Re 2006 Annual Report
150 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
The following table summarises the status of fixed stock options outstanding as of
31 December 2006:
Range of
exercise price
in CHF
60–74
82–100
128–187
60–187
Number
of options
1 653 400
2 398 700
5 010 282
9 062 382
Weighted average
remaining contractual
life in years
6.9
8.5
4.5
6.0
Weighted average
exercise
price in CHF
68
89
156
122
The fair value of each option grant is estimated on the date of grant using a binomial op-
tion-pricing model, with the following weighted average assumptions used for grants in
2005 and 2006, respectively: dividend yield of 3.0% and 3.8%; expected volatility of
30.0% and 20.0%; risk-free interest rate of 1.9% and 2.4%; expected life of 6.0 and 6.0
years.
Options exercisable
Options exercisable
The status of stock options exercisable at 31 December 2006 is summarised as follows:
Range of
exercise price
60–128
133–187
60–187
Number
exercisable (vested)
1 012 540
4 033 742
5 046 282
Weighted average
remaining
contractual life
3.9
Weighted average
exercise
price in CHF
126
4.6
4.5
162
155
The Group did not recognise compensation expense at fair value for the fixed option plan
in 2005. If compensation expense had been recognised at fair value, the Group’s net in-
come and earnings per share in 2005 would approximate the pro-forma amounts in the
following table:
CHF millions
Net income, as reported
Add: stock based employee compensation cost, net of related
tax effects, included in net income as reported
Less: total stock-based employee compensation expenses determined
under the fair value method, net of related tax effects
Pro-forma net income
Earnings per share
Basic – as reported
Basic – pro-forma
Diluted – as reported
Diluted – pro-forma
2005
2 304
8
–39
2 273
7.44
7.35
7.14
7.05
The amount of cash received from exercise of the options in 2006 is CHF 8 million.
Swiss Re 2006 Annual Report 151
Swiss Re 2006 Annual Report 151
Financial statements Notes to the Group financial statements
Profile Thema
Restricted shares
Restricted shares
The Group introduced a restricted share plan during 2004 to complement the fixed opti-
on plan. No new shares were granted under this plan in 2006. In addition, restricted bo-
nus shares were issued during 2005 and 2006.
A restricted share plan was granted in 2006 to certain former GE Insurance Solutions
executives to replace their former GE plan.
Under these plans, 361 929 and 122 070 restricted shares were granted in 2005 and
2006. The shares issued vest at the end of the fourth year.
A summary of shares relating to outstanding awards granted under the foregoing plans
as of December 2006 is presented below:
Non-vested at January
Granted
Forfeited
Outstanding, 31 December
Number of shares
486 059
Weighted average
grant date fair value
83
122 070
–56 159
551 970
95
82
85
The weighted average fair value of restricted shares. which equals the market price of the
shares on the date of the grant, was CHF 83 and CHF 95 in 2005 and 2006 respectively.
Starting from 2006, the Group granted a long term incentive plan (LTI) to selected em-
ployees with a three year vesting period. The plan is expected to be settled in cash. The
requisite service periods as well the maximum contractual term is 3 years. The method to
estimate fair value is based on a risk neutral approach which uses the current share price
as an estimate of the share price at the end of the vesting period.
The Group has issued 3 million stock appreciation rights as an extraordinary grant fol-
lowing the GE Insurance Solutions acquisition. The plan will be settled in cash. The requi-
site service period is 2 years while the maximum contractual term is 5 years. The fair va-
lue of the appreciation rights is estimated at date of grant using a binomial option-pricing
model and is revised at every balance sheet date.
Long term incentive plan
Long term incentive plan
Appreciation rights
Appreciation rights
Unrecognised compensation cost
Unrecognised compensation cost
As 31 December 2006, the total unrecognised compensation cost (net of expected for-
feitures) related to non vested share based compensation awards and the weighted ave-
rage period over which that cost is expected to be recognised is as follows:
Name of plan
Stock option plans
Restricted shares
Long term incentive plan
Appreciation rights
Total
Unrecognised
compensation cost
CHF millions
20
Weighted
average period
1.4
19
41
54
134
1.4
1.6
1.4
1.4
152 Swiss Re 2006 Annual Report
152 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
The number of shares authorised for the Group’s share-based payments to employees
was 529 138 and 806 179 as of 31 December 2005 and 2006, respectively.
Employee participation plan
Employee participation plan
Swiss Re’s employee participation plan consists of a savings scheme lasting two or three
years. Employees combine regular savings with the purchase of either actual or tracking
options. Swiss Re contributes to the employee savings.
At maturity, the employee either receives shares or cash equal to the accumulated sa-
vings balance, or the employee may elect to exercise the options.
In 2005 and 2006, 1 068 610 and 519 991 options, respectively, were issued to em-
ployees and the Group contributed CHF 15 million and CHF 14 million, respectively,
to the plan.
Swiss Re 2006 Annual Report 153
Swiss Re 2006 Annual Report 153
Financial statements Notes to the Group financial statements
Profile Thema
13. Commitments and contingent liabilities
Leasing commitments
Leasing commitments
As part of its normal business operations, the Group enters into a number of lease agree-
ments. Such agreements, which are operating leases, total the following obligations for
the next five years and thereafter:
As of 31 December 2006
2007
2008
2009
2010
2011
After 2011
Total operating lease commitments
Less minimum non-cancellable sublease rentals
Total net future minimum lease commitments
CHF millions
84
64
55
50
44
190
487
–137
350
The following schedule shows the composition of total rental expenses for all operating
leases as of 31 December (except those with terms of a month or less that were not re-
newed):
CHF millions
Minimum rentals
Sublease rental income
Total
2005
47
–10
37
2006
66
–9
57
As a participant in limited investment partnerships, the Group commits itself to making
available certain amounts of investment funding, callable by the partnerships for periods
of up to 10 years. The total commitments remaining uncalled as of 31 December 2005
and 2006 were CHF 869 million and CHF 891 million, respectively.
The Group enters into a number of contracts in the ordinary course of reinsurance and fi-
nancial services business which, if the Group’s credit rating and/or defined statutory
measures decline to certain levels, would require the Group to post collateral or obtain
guarantees. The contracts typically provide alternatives for recapture of the associated
business.
In the normal course of business operations, the Group is involved in various claims, law-
suits and regulatory matters. In the opinion of management, the disposition of these or
any other legal matters, except as disclosed in this note, is not expected to have a materi-
al adverse effect on the Group’s business, consolidated financial position or results of
operations.
The Group directly underwrote approximately 25% of USD 3.5 billion in excess property
insurance coverage for the World Trade Center (“WTC”). Following the WTC’s destruc-
tion, the insured lessees of the complex claimed entitlement to two policy limits for a to-
tal of USD 7 billion in coverage. The Group initiated litigation in the United States District
Court for the Southern District of New York for a declaration that Swiss Re could only be
Other commitments
Other commitments
Legal proceedings
Legal proceedings
11 September 2001
11 September 2001
154 Swiss Re 2006 Annual Report
154 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
liable for its share of a maximum of one policy limit and to determine the rights and obli-
gations of all parties in interest.
On 3 May 2004, a jury found in favour of Swiss Re that the insureds are only entitled to
recover a maximum of Swiss Re’s 25% share of one policy limit. On 18 October 2006,
the U.S. Court of Appeals for the Second Circuit affirmed the jury’s verdict in favour of
Swiss Re. As a result, the Group’s exposure for claims related to the WTC terrorist attack
remains consistent with existing loss estimates.
The insureds have claimed entitlement to receive Swiss Re’ share of one policy limit in an
immediate lump sum distribution rather than as rebuilding costs are incurred, plus ap-
proximately USD 250 million in prejudgment interest. On 8 June 2005, the US District
Court denied the insureds’ motion for summary judgment that they are entitled to a lump
sum payment from Swiss Re. Swiss Re subsequently moved for summary judgment that
the insureds are only entitled to collect insurance proceeds as rebuilding costs are in-
curred. Swiss Re’s motion is fully submitted to the court and awaits a decision.
The Group also provided approximately 25% of a USD 1.5 billion excess property insur-
ance program obtained by the Port Authority of New York and New Jersey. The Port Au-
thority is the lessor of the WTC and owns additional property in the vicinity. Its property
damage claim was being adjusted in the ordinary course when, in March 2005, the Port
Authority indicated that it intended to claim entitlement to two policy limits in connection
with the same WTC property that had been leased and separately insured under the
USD 3.5 billion program. On 27 September 2005, Swiss Re filed suit against the Port
Authority for a declaration that the WTC property insured under the USD 3.5 billion pro-
gram is not also covered by the Port Authority’s program and that Swiss Re’s liability is
limited to a single policy limit. The litigation is in the earliest stages and the parties have
yet to appear before the court. The Port Authority has filed a motion to dismiss the case
as unripe. No hearing date has been set for the motion.
On 9 June 2006, Swiss Re completed the acquisition of GE Insurance Solutions, which
included the acquisition of GE Insurance Solutions affiliate Industrial Risk Insurers (“IRI”).
IRI provided USD 237 million of the USD 3.5 billion WTC insurance program. On 6 De-
cember 2004, a jury found that nine insurers, including IRI, bound coverage on terms
that treated the WTC terrorist attack as two occurrences, subject to a maximum of two
policy limits of coverage. On 18 October 2006, the U.S. Court of Appeals for the Second
Circuit affirmed the jury’s verdict. The amount of the loss and IRI’s proportionate share
will be determined by separate appraisal proceedings which remain in progress. The
Group has recorded its best estimate of ultimate liability, which it will update as further
information becomes available.
Swiss Re 2006 Annual Report 155
Swiss Re 2006 Annual Report 155
Financial statements Notes to the Group financial statements
Profile Thema
14. Information on business segments
The Group provides reinsurance, insurance and financial services throughout the world
through three business segments. The business segments are determined by the organi-
sational structure. The business segments in place are Property & Casualty, Life & Health
and Financial Services. The other section includes items which are not allocated to oper-
ating segments.The main items are foreign exchange remeasurement, the mark to mar-
ket of trading portfolios designated to match foreign currency reinsurance net liabilities,
financing costs for financial debt and corporate centre expenses. The comparative busi-
ness segment information is represented accordingly.
Net investment income and realised investment gains are allocated to the business seg-
ments based on the net investment income and realised investment gains of the legal
entities that are operated by these business segments. Where one entity is utilised by two
or more business segments, the net investment income and realised investment gains are
allocated to these business segments using technical reserves and other information as a
key for the allocation. The Financial Services business segment provides investment man-
agement services to the other business segments, and includes the fees charged in net
investment income. These fees are based on service contracts.
Financial Services provides structuring support for certain transactions, for example insur-
ance-linked securities, issued on behalf of the business segments. The Financial Services
business segment includes the fees charged in net investment income. The business seg-
ments provide origination services for certain transactions underwritten and accounted
for within another business segment. The commissions are included in acquisition costs.
The accounting policies of the business segments are in line with those described in the
summary of significant accounting policies (see Note 1)
156 Swiss Re 2006 Annual Report
156 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
a) Business segment results
2005
CHF millions
Revenues
Premiums earned
Fee income
Net investment income
Net realised investment gains
Trading revenues
Fees, commissions and other revenues
Total revenues
Expenses
Claims and claim adjustment expenses; life and health benefits
Interest credited to policyholders
Acquisition costs
Other operating costs and expenses
Total expenses
Operating income/loss
2006
CHF millions
Revenues
Premiums earned
Fee income
Net investment income
Net realised investment gains/losses
Trading revenues
Fees, commissions and other revenues
Total revenues
Expenses
Property & Casualty
Life & Health
Financial
Services
Other
Total
9 638
881
4 000
1 799
16 346
1 988
1 188
27
46
907
85
29
319
220
19 595
16 318
1 560
–14 430
–3 411
–924
–8 668
–3 019
–2 221
–765
–328
–295
–558
–18 765
–14 673
–1 181
830
1 645
379
26 891
881
6 137
3 474
346
283
38 012
–23 426
–3 019
–5 927
–3 081
–35 453
2 559
64
458
17
539
-834
–834
–295
Property & Casualty
Life & Health
Financial
Services
Other
Total
17 441
10 974
1 100
879
3 946
1 521
2 883
752
4
74
79
27
573
184
82
–352
77
22
29 515
879
6 990
1 948
654
280
21 154
17 320
1 963
–171
40 266
Claims and claim adjustment expenses; life and health benefits
–11 306
Interest credited to policyholders
Acquisition costs
Other operating costs and expenses
Total expenses
Operating income/loss
–9 594
–2 827
–2 256
–961
–493
–364
–646
–3 459
–1 373
–16 138
–15 638
–1 503
5 016
1 682
460
–21 393
–2 827
–6 079
–4 111
–34 410
5 856
–1 131
–1 131
–1 302
Swiss Re 2006 Annual Report 157
Swiss Re 2006 Annual Report 157
Financial statements Notes to the Group financial statements
Profile Thema
b) Property & Casualty business segment – by line of business
2005
CHF millions
Revenues
Premiums earned
Net investment income
Net realised investment gains
Trading revenues
Fees, commissions and other revenues
Total revenues
Expenses
Property
Traditional
Liability
Traditional
Motor
Traditional
Accident
Traditional
Specialty Lines
Traditional
Total
Traditional
Non-
Traditional
5 095
319
188
4 095
781
461
2 070
210
124
812
149
88
2 785
264
155
14 857
1 723
1 016
5 602
5 337
2 404
1 049
3 204
17 596
1 489
265
172
27
46
1 999
Total
16 346
1 988
1 188
27
46
19 595
Claims and claim adjustment expenses
–4 419
–4 486
–1 648
Acquisition costs
Other operating costs and expenses
Total expenses
–967
–282
–803
–166
–400
–110
–5 668
–5 455
–2 158
–564
–172
–38
–774
–2 153
–13 270
–1 160
–14 430
–608
–141
–2 950
–737
–461
–187
–3 411
–924
–2 902
–16 957
–1 808
–18 765
Operating income/loss
–66
–118
246
275
302
639
191
830
Claims ratio in %
Expense ratio in %
Combined ratio in %
2006
CHF millions
Revenues
Premiums earned
Net investment income
Net realised investment gains
Trading revenues
Fees, commissions and other revenues
Total revenues
Expenses
86.7
24.5
111.2
109.5
23.7
133.2
79.6
24.7
104.3
69.4
25.9
95.3
77.3
26.9
89.3
24.8
104.2
114.1
Property
Traditional
Liability
Traditional
Motor
Traditional
Accident
Traditional
Specialty Lines
Traditional
Total
Traditional
Non-
Traditional
6 063
466
130
4 563
1 160
323
1 923
1 057
3 251
16 857
328
91
319
89
278
77
2 551
710
52
52
584
332
42
4
22
Total
17 441
2 883
752
4
74
6 659
6 046
2 342
1 465
3 658
20 170
984
21 154
Claims and claim adjustment expenses
Acquisition costs
Other operating costs and expenses
–2 781
–1 074
–433
–3 721
–1 448
–1 051
–1 808
–10 809
–497
–11 306
–794
–387
–394
–148
–216
–85
–674
–231
–3 152
–1 284
–307
–89
–3 459
–1 373
Total expenses
–4 288
–4 902
–1 990
–1 352
–2 713
–15 245
–893
–16 138
Operating income
2 371
1144
352
113
945
4 925
91
5 016
Claims ratio in %, excluding unwind of discount
Expense ratio in %
Combined ratio in %, excluding unwind
45.3
24.8
80.0
25.9
74.6
28.2
98.1
28.5
55.4
27.8
63.3
26.3
of discount
70.1
105.9
102.8
126.6
83.2
89.6
158 Swiss Re 2006 Annual Report
158 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
c) Life & Health business segment – by line of business
2005
CHF millions
Revenues
Premiums earned
Fee income
Net investment income
Net realised investment gains
Total revenues
Expenses
Claims and claim adjustment expenses; life and health benefits
Interest credited to policyholders
Acquisition costs
Other operating costs and expenses
Total expenses
Operating income
Operating result, excluding non-participating net realised investment gains
Net investment income - unit-linked
Net realised investment gains - unit-linked
Net realised investment gains - non-participating
Traditional
Life
Traditional
Health
Total
traditional
Admin ReSM
Total
6 982
34
1 015
277
8 308
–5 276
–333
–1 520
–348
–7 477
831
742
101
188
89
1 612
590
82
2 284
–1 453
–445
–92
–1 990
294
212
82
8 594
34
1 605
359
10 592
–6 729
–333
–1 965
–440
–9 467
1 125
954
101
188
171
1 044
847
2 395
1 440
5 726
–1 939
–2 686
–256
–325
9 638
881
4 000
1 799
16 318
–8 668
–3 019
–2 221
–765
–5 206
–14 673
520
379
650
1 208
141
1 645
1 333
751
1 396
312
Operating revenues1
7 930
2 202
10 132
3 727
13 859
Management expense ratio in %
Return on operating revenues in %
4.4
9.4
4.2
9.6
4.3
9.4
8.7
10.2
5.5
9.6
1 Operating revenues exclude net investment income and net realised investment gains from unit-linked business as these are passed through to contract holders via interest
credited to policyholders and therefore do not have an impact on the operating result.
Swiss Re 2006 Annual Report 159
Swiss Re 2006 Annual Report 159
Financial statements Notes to the Group financial statements
Profile Thema
2006
CHF millions
Revenues
Premiums earned
Fee income
Net investment income
Net realised investment gains
Total revenues
Expenses
Claims and claim adjustment expenses; life and health benefits
Interest credited to policyholders
Acquisition costs
Other operating costs and expenses
Total expenses
Operating income
Operating result, excluding non-participating net realised investment gains
Net investment income – unit-linked
Net realised investment gains – unit-linked
Net realised investment gains – non-participating
Traditional
Life
Traditional
Health
Total
traditional
Admin ReSM
Total
7 851
38
1 127
498
9 514
–6 081
–569
–1 607
–481
–8 738
776
688
109
410
88
2 243
625
87
2 955
–1 763
–550
–161
10 094
38
1 752
585
12 469
–7 844
–569
–2 157
–642
880
841
2 194
936
4 851
–1 750
–2 258
–99
–319
10 974
879
3 946
1 521
17 320
–9 594
–2 827
–2 256
–961
–2 474
–11 212
–4 426
–15 638
481
394
87
1 257
1 082
109
410
175
425
435
561
909
–10
1 682
1 517
670
1 319
165
Operating revenues1
8 907
2 868
11 775
3 391
15 166
Management expense ratio in %
Return on operating revenues in %
5.4
7.7
5.6
13.7
5.5
9.2
9.4
12.8
6.3
10.0
1 Operating revenues exclude net investment income and net realised investment gains from unit-linked business as these are passed through to contract holders via interest
credited to policyholders and therefore do not have an impact on the operating result.
d) Net premiums earned and fees assessed against policyholders by country
CHF millions
United States
United Kingdom
Germany
Canada
France
Australia
Italy
Switzerland
Netherlands
Other
Total
160 Swiss Re 2006 Annual Report
160 Swiss Re 2006 Annual Report
2005
12 175
2 614
1 830
989
1 223
853
849
750
647
2006
12 320
3 513
2 560
1 235
1 137
979
804
705
646
5 842
27 772
6 495
30 394
Financial statements Notes to the Group financial statements
Profile Thema
15. Subsidiaries, equity investees and variable interest entities
Subsidiaries and equity investees
Subsidiaries and equity investees
Share capital
(CHF millions)
Affiliation in %
as of 31.12.2006
Method of
consolidation
Europe
Denmark
Swiss Re Denmark Holding ApS2
Swiss Re Denmark Reinsurance A/S2
France
329
193
100
100
Frasecur Société d’Investissement à Capital Variable¹
147
100
Germany
Swiss Re Germany AG
Swiss Re Germany Holding AG
Swiss Re Frankona Holding GmbH2
Swiss Re Frankona Rückversicherungs AG2
Swiss Re Frankona Management Service GmbH2
72
80
43
558
0
100
100
100
100
100
Hungary
Swiss Re Treasury (Hungary) Ltd.
0
100
Ireland
Swiss Re International Treasury (Ireland) Ltd.
Swiss Re Ireland Ltd.
Swiss Re Life & Health (Ireland) Ltd.
Swiss Reinsurance Ireland Limited2
Luxembourg
Swiss Re Management (Luxembourg) S.A.
Swiss Re Treasury (Luxembourg) S.A.
Swiss Re Finance (Luxemburg) S.A.
Luxembourg European Reinsurance S.A.2
Netherlands
Algemene Levensherverzekering Maatschappij N.V.
Atradius
Calam C.V.
Reassurantie Maatschappij Nederland N.V.
Swiss Re Life & Health Nederland N.V.
Swiss Re Nederland Holding B.V.
0
135
1
151
320
169
0
197
8
91
0
12
6
1
100
100
100
100
100
100
100
100
100
34.95
100
100
100
100
Method of consolidation:
f
full
e equity
1 Net asset value instead of share capital
2 From acquisition of GE Insurance
Solutions
Malta
3 From acquisition of GE Life
Swiss Re Finance (Malta) Ltd.
3 086
100
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
e
f
f
f
f
f
Swiss Re 2006 Annual Report 161
Swiss Re 2006 Annual Report 161
Financial statements Notes to the Group financial statements
Profile Thema
Share capital
(CHF millions)
Affiliation in %
as of 31.12.2006
Method of
consolidation
Switzerland
Diax Holding
European Reinsurance Company of Zurich
SR Institutional Funds¹
Swiss Re Asset Management (Switzerland) AG
Swiss Re Partnership Holding AG
9
312
16 882
15
0
37.26
100
99.68
100
100
United Kingdom
Banian Investments UK Ltd.
Calico Leasing (GB) Ltd.
Cyrenaic Investments (UK) Ltd.
Dex Hold Ltd.
European Credit and Guarantee Insurance PCC Ltd.
GE Life Group Limited and group companies3
Life Assurance Holding Corporation Ltd.
Palatine Insurance Company Ltd.
Reassure UK Life Assurance Company Ltd.
SR Delta Investments (UK) Ltd.
SR International Business Insurance Company Ltd.
Swiss Re Capital Markets Ltd.
Swiss Re Financial Services Ltd.
Swiss Re GB Plc
Swiss Re Life & Health UK Ltd.
Swiss Re Properties Ltd.
Swiss Re Services Ltd.
Swiss Re Specialised Investments Holdings (UK) Ltd.
Swiss Reinsurance Company UK Ltd.
The Mercantile & General Reinsurance Company Ltd.
XSMA Ltd.
Windsor Life Assurance Company Ltd.
Swiss Re Frankona Reinsurance Ltd.²
Swiss Re Frankona LM Limited²
Swiss Re Specialty Insurance (UK) Ltd.²
North America and Caribbean
Barbados
Accra Holdings Corporation
Atlantic International Reinsurance Company Ltd.
European Finance Reinsurance Company Ltd.
European International Holding Company Ltd.
European International Reinsurance Company Ltd.
Gasper Funding Corporation
Stockwood Reinsurance Company, Ltd.
Underwriters Reinsurance Company (Barbados) Ltd.
1
84
1 435
0
10
358
175
18
914
16
294
73
17
1 526
454
0
5
2
1 132
334
36
7
0
17
43
20
5
6
200
195
0
1
20
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
e
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
162 Swiss Re 2006 Annual Report
162 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
Bermuda
30 St Mary Axe (Bermuda) L.P.
Englewood Ltd.
Life Re International, Ltd.
Old Fort Insurance Company Ltd.
Securitas Allied (Bermuda), L.P.
SwissRe Capital Management (Bermuda) Ltd.
SwissRe Finance (Bermuda) Ltd.
SwissRe Investments (Bermuda) Ltd.
Canada
Swiss Re Holdings (Canada) Inc.
Swiss Re Life & Health Canada
Swiss Reinsurance Company Canada
Cayman Islands
Ampersand Investments (UK) Ltd.
Dunstanburgh Finance (Cayman) Ltd.
Farnham Funding Ltd.
SR Cayman Holdings Ltd.
SR York Limited
SV Corinthian Investments Ltd.
Swiss Re Dorus Investment Ltd.
Swiss Re Funding (UK) Ltd.
Swiss Re Hedge Funds SPC
Swiss Re Strategic Investments (UK) Ltd.
Cobham Funding Ltd.
Kilgallon Finance Ltd.
United States
Conning & Company and group companies
Facility Insurance Corporation
Facility Insurance Holding Corporation
Life Re Capital Trust I
North American Capacity Insurance Company
North American Elite Insurance Company
North American Specialty Insurance Company
Reassure America Life Insurance Company
Sage Life Holdings of America Inc.
Southwestern Life Insurance Company
Swiss Re Alternative Assets LLC
Swiss Re America Holding Corporation
Swiss Re Asset Management (Americas) Inc.
Swiss Re Atrium Corporation
Swiss Re Capital Markets Corporation
Swiss Re Financial Products Corporation
Swiss Re Financial Services Corporation
Share capital
(CHF millions)
Affiliation in %
as of 31.12.2006
Method of
consolidation
0
0
0
0
0
0
0
0
123
119
11
0
0
6
0
119
5
5
0
84
0
24
24
0
1
0
4
5
4
6
3
3
4
0
0
9
1
0
0
0
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
Swiss Re 2006 Annual Report 163
Swiss Re 2006 Annual Report 163
Profile Thema
Financial statements Notes to the Group financial statements
Swiss Re Life & Health America Holding Company
Swiss Re Life & Health America Inc.
Swiss Re Management Corporation
Swiss Reinsurance America Corporation
Valley Forge Life Insurance Company
Washington International Insurance Company
SR PA Finance Inc
Swiss Re Funding Inc.
Swiss Re Treasury (US) Corporation
Swiss Re Solutions Holding Corp²
Core Insurance Holdings Inc.²
Coregis Insurance Company²
Employers Reinsurance Corporation²
First Specialty Insurance Coporation²
Industrial Risk Insurers²
Westport Insurance Corporation²
Australia
Swiss Re Australia Ltd.
Swiss Re Life & Health Australia Ltd.
The Mercantile and General Reinsurance
Company of Australia Ltd.
South Africa
Swiss Re Life & Health Africa Ltd.
Swiss Re Africa Ltd.
Share capital
(CHF millions)
Affiliation in %
as of 31.12.2006
Method of
consolidation
5
5
0
7
3
4
0
0
0
11
0
0
41
6
0
6
19
0
14
0
2
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
f
The Group holds a variable interest in various entities due to a modified coinsurance
agreement, certain insurance-linked and credit-linked securitisations, private equity limit-
ed partnerships, hedge funds, debt financing and other entities, which meet the definition
of a variable interest entity (VIE).
The insurance-linked and credit-linked securitisations transfer pre-existing insurance or
credit risk to the capital markets through the issuance of insurance-linked or credit-linked
securities. In insurance-linked securitisations, the securitisation vehicle initially assumes
the insurance risk through insurance contracts. In credit-linked securitisations, the securi-
tisation vehicle initially assumes the credit risk through credit default swaps.
The securitisation vehicle generally retains the issuance proceeds as collateral. The
Group’s variable interests arise through ownership of insurance-linked and credit-linked
securities, or through protection provided for the value of the collateral held. The Group’s
maximum exposure to loss equals the higher of the carrying amount of the collateral pro-
Variable interest entities
Variable interest entities
164 Swiss Re 2006 Annual Report
164 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
tected or the carrying amount of the insurance-linked or credit-linked securities held. The
collateral held usually consists of investment grade securities.
Commercial paper conduit vehicles issue commercial paper to finance the purchase of
assets. The Group assumes the risks and rewards of a portion of the assets held by the ve-
hicle through a total return swap. The maximum exposure to loss equals the carrying
amount of the assets underlying the total return swap.
Other investment vehicles consist of private equity limited partnerships and hedge funds.
The Group’s variable interests arise through an ownership interest in the vehicle or a guar-
antee of the value of the assets held by the vehicle. The maximum exposure to loss equals
the carrying amount of the ownership interest or the maximum amount payable under the
guarantee.
Debt financing is a loan from a bank which the Group uses to invest in an investment
company. The maximum exposure to loss is equal to the credit default of the loan from
the bank.
The following table shows the total assets of VIEs of which the Group is the primary bene-
ficiary, but does not hold a majority voting interest:
As of 31 December
CHF millions
Modified coinsurance agreement
Other investment vehicles
Other
Total
2005
4 848
804
228
5 880
2006
5 324
447
6
5 777
The consolidation of the VIEs resulted in a minority interest in the balance sheet of CHF
702 million in 2006 (2005: CHF 586 million). The minority interest is included in ac-
crued expenses and other liabilities. The net minority interest in income was CHF 39 mil-
lion in 2006 (2005: CHF 16 million) net of tax. The income statement impacts are gen-
erally included in the relevant segment with the underlying movement in income or
expenses.
The following table shows the total assets of and maximum exposure to loss in VIEs in
which the Group holds a significant variable interest:
As of 31 December
CHF millions
Insurance-linked/Credit-linked securitisations
Commercial paper conduit vehicles
Other investment vehicles
Debt financing
Other
Total
Total
Assets
4 372
2 245
1 777
1 397
160
9 951
2005
Maximum
exposure to loss
4 327
2 245
1 305
226
68
Total
Assets
7 861
3 699
3 487
2 683
795
2006
Maximum
exposure to loss
7 786
3 699
1 952
250
777
8 171
18 525
14 464
Swiss Re 2006 Annual Report 165
Swiss Re 2006 Annual Report 165
Financial statements Notes to the Group financial statements
Profile Thema
16. Restructuring provision
The Group has recognised restructuring provisions for the acquired activities of GE Insur-
ance Solutions, which is part of the allocation of the purchase price, and for the existing
activities of Swiss Re, which is a charge to earnings.
The Insurance Solutions provision includes real estate related expenses of CHF 44 mil-
lion, for planned adjustments to the properties owned or leased by the former Insurance
Solutions, and CHF 49 million for leaving benefits related to the Insurance Solutions busi-
ness. Expenses of CHF 29 million have been charged in 2006 against the provision for
Insurance Solution activities.
A provision of CHF 104 million has been recognised, for the existing Swiss Re business,
for leaving benefits associated with the realignment of the business after the acquistion.
A provision of CHF 13 million has been recognised for real estate related expenses for
the existing Swiss Re activities. Expenses of CHF 68 million have been charged in 2006
against the provision for the existing Swiss Re activities.
2006
CHF millions
Balance as of 1 January
Increase of provision
Effect of acquisition of GE Insurance
Solutions
Costs incurred
Property &
Casualty
2
63
88
–54
Life &
Health
15
24
5
–14
Effect of foreign currency translation
Balance as of 31 December
99
30
Financial
Services
41
16
–15
–4
38
Other
14
–14
0
Total
58
117
93
–97
–4
167
166 Swiss Re 2006 Annual Report
166 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
17. Change in accounting basis
Reconciliation of previously published 2005 Swiss GAAP figures to US GAAP
As of 31 December
CHF millions
Swiss GAAP
Fixed income securities marked to market
Shadow adjustment recognised on fixed income securities
Amortisation and other adjustments to goodwill
Equalisation reserve reversed
Discounting of certain property and casualty reserves reversed
Trading losses (excluding foreign exchange)
Foreign currency translation
Other impacts
Taxation
US GAAP
Reference
Net income
1 451
1)
2)
3)
4)
5)
6)
7)
8)
274
–613
34
–17
913
–5
267
Shareholders’
equity
22 929
1 912
–340
954
569
–1 030
–279
352
–674
2 304
24 393
Swiss Re 2006 Annual Report 167
Swiss Re 2006 Annual Report 167
Financial statements Notes to the Group financial statements
Profile Thema
References
1)
2)
3)
4)
5)
6)
7)
Under Swiss GAAP, available-for-sale fixed income securities are carried at amor-
tised cost. Under US GAAP, available-for-sale fixed income securities are carried at
fair value with changes in fair value recognised in shareholders’ equity.
US GAAP requires adjustment to unrealised gains and losses which, when realised,
would be credited to policyholders. The adjustment affects the PVFP balance, poli-
cyholder liabilities and unrealised gains and losses in shareholders’ equity. Under
Swiss GAAP, shadow PVFP adjustments are not recognised because available-for-
sale fixed income securities are carried at amortised cost.
Under Swiss GAAP, goodwill is amortised using the straight-line method over peri-
ods that correspond to the benefits expected to be derived from the related acquisi-
tions. Under US GAAP, effective 1 January 2002, goodwill is no longer amortised
but is tested for impairment annually.
Under Swiss GAAP, reserves prescribed by local regulatory authorities for future
claims fluctuations and for large and catastrophic losses are established and inclu-
ded in the unpaid claims and claim adjustment expenses liability. Under US GAAP,
equalisation reserves are not recognised as a liability.
Under Swiss GAAP, Swiss Re discounted certain property and casualty reserves,
principally provisions which are discounted under US statutory accounting policies.
This approach is permitted but not required under US GAAP. Swiss Re has adopted
a policy not to discount property and casualty reserves under US GAAP. Purchase
GAAP accounting is not affected by this policy and requires acquired assets and lia-
bilities to be recognised at fair value.
With the adoption of US GAAP the Group designated certain fixed income securi-
ties as trading. Trading securities are remeasured through earnings rather than
shareholders’ equity, including the associated foreign exchange effect. Future mark-
to-market movements on such trading securities will be reflected in earnings.
Under Swiss GAAP, entities generally treated foreign currencies as functional. Un-
der US GAAP, certain entities have now changed to a single functional currency.
Non-monetary assets and liabilities, except for those carried at fair value, are re-
measured at historical rates. Fixed income and equity securities available-for-sale
are remeasured at current rates through unrealised gains/losses in shareholders’
equity.
8)
Represents the effect on income tax expense and deferred tax assets/liabilities of
the adoption of the new accounting basis.
168 Swiss Re 2006 Annual Report
168 Swiss Re 2006 Annual Report
Financial statements Notes to the Group financial statements
Profile Thema
Report of the Group auditors
Report of the Group auditors
To the Annual General Meeting of
Swiss Reinsurance Company
Zurich
As auditors of the Group, we have audited the consolidated financial statements (income
statement, balance sheet, statement of shareholders’ equity, statement of comprehen-
sive income, statement of cash flow and notes to the Group financial statements /pages
109 to 168) of the Swiss Re Group for the year ended 31 December 2006.
These consolidated financial statements are the responsibility of the Board of Directors.
Our responsibility is to express an opinion on these consolidated financial statements
based on our audit. We confirm that we meet the legal requirements concerning profes-
sional qualification and independence.
Our audit was conducted in accordance with Swiss Auditing Standards and with the
International Standards on Auditing, which require that an audit be planned and per-
formed to obtain reasonable assurance about whether the consolidated financial state-
ments are free from material misstatement. We have examined on a test basis evidence
supporting the amounts and disclosures in the consolidated financial statements. We
have also assessed the accounting principles used, significant estimates made and the
overall consolidated financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements give a true and fair view of the finan-
cial position, the results of operations and the cash flows in accordance with accounting
principles generally accepted in the United States of America and comply with Swiss law.
We recommend that the consolidated financial statements submitted to you be approved.
PricewaterhouseCoopers AG
David JA Law
Auditor in charge
Dawn M Kink
Zurich, 28 February 2007
Swiss Re 2006 Annual Report 169
Swiss Re 2006 Annual Report 169
Profile Thema
170 Swiss Re 2006 Annual Report
170 Swiss Re 2006 Annual Report
Profile Thema
Financial statements
Annual report
Swiss Reinsurance Company, Zurich
Reinsurance and holding company
Reinsurance and holding company
Swiss Reinsurance Company, Zurich, performs a dual role within the Swiss Re Group as
both a reinsurance company and a holding company. The assessment of the market
position, profitability and financial strength of Swiss Re’s worldwide organisation must
focus primarily on the consolidated financial statements.
The following commentary on the 2006 financial year of the parent company therefore
complements the review of the financial year of the Swiss Re Group.
Financial year 2006
Financial year 2006
The after-tax profit for the financial year based on the Swiss legal accounting regulations
amounted to CHF 2.1 billion, compared to CHF 1.1 billion in the previous year.
Accounting policy
Accounting policy
Reinsurance result
Reinsurance result
Investment result
Investment result
The business year was characterised by a substantially improved reinsurance result
mainly due to the lower natural catastrophe claims compared with the previous year. The
investment result in contrast decreased mainly as a consequence of lower realised gains
on sale of investments.
In the year under report Swiss Re completed the acquisition of GE Insurance Solutions.
This transaction had a significant impact on the balance sheet and income statement
2006.
Swiss Reinsurance Company, Zurich, modified its accounting policy in 2006, with respect
to the valuation methodology for determining liabilities for life and health policy benefits.
For details on the accounting policy refer to page 177. The transition impact and the
prior-year comparative figures are disclosed in note “Change of accounting policy for
liabilities for life and health policy benefits” on page 184.
Gross premiums written decreased from CHF 23.1 billion to CHF 19.9 billion. The 2005
premium peak resulted mainly from the portfolio transaction with Swiss Reinsurance
Company’s life and health subsidiaries in connection with the ALPS II securitisation. In
the year under report, the absence of this one-off effect was partly compensated by the
extension of Group internal retrocession as a result of the acquisition of GE Insurance
Solutions.
Claims and claim adjustment expenses decreased by 10% to CHF 11.2 billion, reflecting
mainly the quiet hurricane season in the United States as well as lower catastrophes in
Europe.
Life and health benefits and acquisition costs were affected by the change in the valua-
tion methodology for determining the liabilities for life and health policy benefits. In
addition, the reduction of life and health benefits reflects the non-recurring impact of the
portfolio transaction in connection with the ALPS II securitisation in 2005.
The investment result decreased slightly to CHF 1.7 billion. The significantly increased
income from subsidiaries and affiliated companies was offset by the absence of the large
net realised gains achieved in 2005 on the sale of investments. The investment result
includes the impact of derivative financial instruments to cover certain reinsurance expo-
sures. These contracts predominantly refer to insurance-linked securities, which provide
protection against lower-layer earnings volatility events as well as higher-layer capital
events.
Swiss Re 2006 Annual Report 171
Swiss Re 2006 Annual Report 171
Profile Thema
Financial statements Swiss Reinsurance Company, Zurich
Other income and expenses
Other income and expenses
Other interest income and expenses both increased due to financing transactions in
connection with the acquisition of GE Insurance Solutions.
Assets
Assets
Liabilities
Liabilities
Shareholders’ equity
Shareholders’ equity
Total assets rose by 10% to CHF 92.2 billion. This increase is reflected in the higher invest-
ments in equity and fixed income securities. Higher investments in subsidiaries and
affiliated companies and other receivables resulted from the acquisition of GE Insurance
Solutions.
Liabilities increased by CHF 2.5 billion to CHF 73.8 billion reflecting the issuance of man-
datory convertible instruments and hybrid debt due to the financing of the GE Insurance
Solutions acquisition.
An equalisation reserve of CHF 250 million was established for future claims fluctuations
and for large and catastrophe losses.
Shareholders’ equity at 31 December 2005 amounted to CHF 12.8 billion before alloca-
tion of profit. After the dividend payment of CHF 776 million for 2005, the issuance of
new shares, and the inclusion of the profit for the 2006 financial year, shareholders’
equity increased to CHF 18.4 billion at year-end 2006. Other reserves increased from
CHF 11.0 billion to CHF 15.5 billion in 2006, due to the newly issued shares, mainly in
connection with the acquisition of GE Insurance Solutions.
The nominal share capital of the company amounted to CHF 37 million on 31 December
2006, following the new share issuance.
172 Swiss Re 2006 Annual Report
172 Swiss Re 2006 Annual Report
Financial statements Swiss Reinsurance Company, Zurich
Profile Thema
Income statement
Swiss Reinsurance Company, Zurich
For the years ended 31 December
CHF millions
Reinsurance
Premiums earned
Claims and claim adjustment expenses
Life and health benefits
Change in equalisation reserve
Acquisition costs
Other reinsurance result
Operating costs
Allocated investment return
Reinsurance result
Investments
Investment income
Investment expenses
Allocated investment return
Investment result
Other income and expenses
Other interest income
Other interest expenses
Other income
Other expenses
Result from other income and expenses
Income before tax
Tax
Net income
The accompanying notes are an integral part of the financial statements.
Notes
1
2005
2006
17 742
–12 434
–3 323
–
–3 284
520
–1 108
917
–970
16 083
–11 210
1 112
–250
–5 786
972
–1 379
1 095
637
2
4 485
–1 453
–917
2 115
5 431
–2 634
–1 095
1 702
120
–194
340
–200
66
1 211
–142
1 069
244
–301
122
–190
–125
2 214
–70
2 144
Swiss Re 2006 Annual Report 173
Swiss Re 2006 Annual Report 173
Financial statements Swiss Reinsurance Company, Zurich
Profile Thema
Balance sheet
Swiss Reinsurance Company, Zurich
As of 31 December
Assets
CHF millions
Invested assets
Investments
Investment real estate
Investments in subsidiaries and affiliated companies
Loans to subsidiaries and affiliated companies
Mortgages and other loans
Equity securities
Fixed income securities
Short-term investments
Assets in derivative financial instruments
Total investments
Tangible assets
Intangible assets
Total invested assets
Current assets
Premiums and other receivables from reinsurance
Funds held by ceding companies
Deferred acquisition costs
Cash and cash equivalents
Other receivables
Other assets
Accrued income
Total current assets
Total assets
Notes
2005
2006
1 024
14 326
7 411
748
6 980
17 338
968
348
970
17 249
8 859
762
8 956
19 204
1 709
562
49 143
58 271
842
69
871
59
50 054
59 201
7 411
18 908
2 515
3 489
121
746
913
7 295
17 698
1 103
2 158
3 134
677
955
34 103
33 020
84 157
92 221
3
3
3
The accompanying notes are an integral part of the financial statements.
The company has revised the classification between certain balance sheet categories, as described in the notes on page 177, and
adjusted the comparative balance sheet positions.
174 Swiss Re 2006 Annual Report
174 Swiss Re 2006 Annual Report
Liabilities and shareholders’ equity
CHF millions
Liabilities
Technical provisions
Unpaid claims
Liabilities for life and health policy benefits
Unearned premiums
Provisions for profit commissions
Equalisation reserve
Total technical provisions
Non-technical provisions
Provision for taxation
Provision for currency fluctuation
Other provisions
Total non-technical provisions
Debt
Debentures
Loans
Total debt
Funds held under reinsurance treaties
Reinsurance balances payable
Liabilities from derivative financial instruments
Other liabilities
Accrued expenses
Total liabilities
Shareholders’ equity
Share capital
Reserve for own shares
Other legal reserves
Other reserves
Retained earnings brought forward
Profit for the financial year
Total shareholders’ equity
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of the financial statements.
Financial statements Swiss Reinsurance Company, Zurich
Profile Thema
Notes
2005
2006
4
4
4
4
4
4
4
5
39 245
13 153
4 172
516
–
57 086
42 972
11 459
4 248
552
250
59 481
356
1 101
274
1 731
2 464
663
3 127
2 885
5 115
667
630
114
205
905
570
1 680
4 319
620
4 939
2 574
2 851
939
1 193
155
71 355
73 812
32
19
650
11 017
15
1 069
12 802
37
31
650
15 539
8
2 144
18 409
84 157
92 221
Swiss Re 2006 Annual Report 175
Swiss Re 2006 Annual Report 175
Profile Thema
Financial statements Swiss Reinsurance Company, Zurich
Notes
Swiss Reinsurance Company, Zurich
Significant accounting principles
The financial statements are prepared in accordance with Swiss Company Law. Swiss
Reinsurance Company, Zurich, modified the presentation of its financial information.
The previously reported 2005 financial year figures have been adapted accordingly.
Details are shown under “Balance sheet/Assets classification” on page 177.
The 2006 financial year comprises the accounting period from 1 January to
31 December 2006.
The result of property and casualty reinsurance is based on actuarial estimates over the
contract life. In addition to the recognition of the reinsurance accounts as reported by the
ceding companies, empirical experience is taken into consideration. The allocation to the
business year is in relation to the amount of reinsurance coverage provided.
The result of life and health reinsurance is the amount that has been earned over the
coverage period. Provisions for life and health business are determined by actuarial
methods.
Contracts which do not meet risk transfer requirements, defined as transferring a reason-
able probability of a significant loss to the reinsurer, are accounted for as deposit ar-
rangements. Deposit amounts are adjusted for payments received and made, as well as
for amortisation or accretion of interest.
The allocated investment return contains the calculated interest generated on the invest-
ments covering the technical provisions. The interest rate reflects the currency-weighted,
five-year average yield on five-year government bonds.
The overall management expenses are allocated to the reinsurance business and the
investment business on an imputed basis.
The taxes relate to the financial year and include taxes on income and capital as well as
indirect taxes. Value-added taxes are included in the respective expense lines in the in-
come statement.
The following assets are carried at cost, less necessary and legally permissible depreci-
ation:
– Investment real estate/own-use property (purchase or construction cost)
– Investments in subsidiaries and affiliated companies
– Equity securities and fixed income securities
– Investments in funds
– Derivative financial instruments
These assets are generally not subject to revaluation. The valuation rules prescribed by
the Swiss insurance supervisory authority are observed.
With the exception of own-use property, tangible assets are carried at cost, less individu-
ally scheduled straight-line depreciation over their useful lives. Items of minor value are
not capitalised. The same principles apply to the capitalisation of software development
expenses as intangible assets.
Basis of presentation
Basis of presentation
Time period
Time period
Income statement
Income statement
Balance sheet/Assets
Balance sheet/Assets
176 Swiss Re 2006 Annual Report
176 Swiss Re 2006 Annual Report
Profile Thema
Financial statements Swiss Reinsurance Company, Zurich
Balance sheet/Assets classification
Balance sheet/Assets classification
Other assets include deferred expenses on retroactive reinsurance policies, which are
amortised through earnings over the expected claims-paying period.
The other assets are carried at nominal value in the balance sheet, after deduction of
known credit risks if applicable.
Swiss Reinsurance Company, Zurich, has revised the classification between certain bal-
ance sheet categories. Specifically, short-term investments purchased with an original
maturity of three months or less, were reclassified from short-term investments to cash
and cash equivalents. Therefore, the previously reported 2005 figures of short-term in-
vestments (CHF –2.7 billion) and cash and cash equivalents (CHF +2.7 billion) and the
corresponding income statement positions, income from short-term investments
(CHF –40 million) and other interest income (CHF +40 million), have been changed
accordingly.
Balance sheet/Liabilities
Balance sheet/Liabilities
Technical provisions are valued in accordance with the following principles:
Unpaid claims are based on information provided by clients and own estimates of
expected claims experience, which are drawn from empirical statistics. These include
provisions for claims incurred but not reported. Unpaid insurance obligations are set
aside at the full expected amount of future payment.
Liabilities for life and health policy benefits are determined on the basis of actuarially
calculated present values taking experience into account. For external business, liabilities
are the greater of cedent-reported information and estimates of own experience drawn
from internal studies. With respect to the business ceded by the Company’s life and
health subsidiaries, a prospective gross premium valuation is applied taking into account
expected future cash flows inherent in the reinsurance contract from the valuation date
until expiry of the contract obligations. Cash flows include premiums, claims, commis-
sions, investment income and expenses, with a margin added for prudence to reflect the
uncertainties of the underlying best estimates. The gross premium valuation approach
could result in a negative liability provision which is typically set to zero.
Accounting principles for life and health business require that no contract is treated as an
asset on the balance sheet, with the exception of specific contracts (for example modi-
fied coinsurance type of treaties), where an offsetting amount has been paid and is re-
coverable from the ceding company.
Premiums written relating to future periods are stated as unearned premiums and are
normally calculated by statistical methods. The accrual of commissions is determined
correspondingly and is reported in the line item deferred acquisition costs.
Provisions for profit commissions are based on contractual agreements with clients and
depend on the results of reinsurance treaties.
The shares of technical provisions pertaining to retroceded business are determined or
estimated according to the contractual agreement and the underlying gross business
data per treaty.
Swiss Re 2006 Annual Report 177
Swiss Re 2006 Annual Report 177
Profile Thema
Financial statements Swiss Reinsurance Company, Zurich
Other provisions are determined according to business principles and are based on
estimated needs and in accordance with tax regulations. Provisions for taxation contain
prospective taxes on the basis of the financial year just ended.
Funds held under reinsurance treaties contain mainly cash deposits withheld from retro-
cessionaires which are stated at redemption value.
Debt and other liabilities are held at redemption value excluding liabilities from short
sales, which are stated at the proceeds amount or increased to the higher market value
of the underlying security.
Liabilities from derivative financial instruments are valued using the same principles
applied for the derivative financial instruments included under investments.
Foreign currency translation
Foreign currency translation
Assets and liabilities denominated in foreign currencies are translated at the rates of
exchange on the balance sheet date into Swiss francs. Participations are maintained in
Swiss francs at historical exchange rates.
Revenues and expenses are translated at average exchange rates of the year under re-
port into Swiss francs.
All currency differences arising from the revaluation of the opening balance sheet, the
adjustments from application of year-end or average rates and foreign-exchange trans-
actions are booked via a corresponding provision.
The currency exchange rates applicable for key currencies are shown on page 116.
178 Swiss Re 2006 Annual Report
178 Swiss Re 2006 Annual Report
Financial statements Swiss Reinsurance Company, Zurich
Profile Thema
Notes
Swiss Reinsurance Company, Zurich
Additional information on the financial statements
1. Reinsurance result
CHF millions
Premiums written
Change in unearned premiums
Premiums earned
Claims paid and claim adjustment expenses
Change in unpaid claims
Claims and claim adjustment expenses
Gross
23 128
–484
22 644
–8 016
–6 724
–14 740
Retro
–5 261
359
–4 902
886
1 420
2 306
2005
Net
17 867
–125
17 742
Gross
19 891
–632
19 259
–7 130
–5 304
–12 434
–8 181
–4 752
–12 933
Retro
–3 579
403
–3 176
1 796
–73
1 723
2006
Net
16 312
–229
16 083
–6 385
–4 825
–11 210
Life and health benefits
–5 381
2 058
–3 323
1 853
–741
1 112
Change in equalisation reserve
Fixed commissions
Profit commissions
Acquisition costs
Other reinsurance income and expenses
Result from cash deposits
Other reinsurance result
Operating costs
Allocated investment return
Reinsurance result
–
–3 426
–475
–3 901
–30
600
570
–
598
19
617
–10
–40
–50
–
–250
–
–250
–6 116
–370
–6 486
150
1 057
1 207
657
43
700
–69
–166
–235
–2 828
–456
–3 284
–40
560
520
–1 108
917
–970
–5 459
–327
–5 786
81
891
972
–1 379
1 095
637
Swiss Re 2006 Annual Report 179
Swiss Re 2006 Annual Report 179
Financial statements Swiss Reinsurance Company, Zurich
Profile Thema
2. Investment result
CHF millions
Income from investment real estate
Income from subsidiaries and affiliated companies
Income from equity securities
Income from fixed income securities, mortgages and other loans
Income from short-term investments
Income from investment services
Realised gains on sale of investments
Investment income
Investment management expenses
Valuation adjustments on investments
Realised losses on sale of investments
Investment expenses
Allocated investment return
Investment result
2005
95
710
639
660
8
60
2 313
4 485
–125
–1 137
–191
–1 453
–917
2 115
2006
90
2 234
574
789
47
66
1 631
5 431
–195
–695
–1 744
–2 634
–1 095
1 702
The company has revised the classification between certain balance sheet categories, as described in the notes on page 177, and
adjusted the comparative income statement positions.
3. Assets from reinsurance
CHF millions
Premiums and other receivables from reinsurance
Funds held by ceding companies
Deferred acquisition costs
Assets from reinsurance
Gross
7 274
18 833
2 829
28 936
Retro
137
75
–314
–102
2005
Net
7 411
18 908
2 515
28 834
Gross
7 039
17 698
1 256
25 993
Retro
256
–
–153
103
2006
Net
7 295
17 698
1 103
26 096
180 Swiss Re 2006 Annual Report
180 Swiss Re 2006 Annual Report
Financial statements Swiss Reinsurance Company, Zurich
Profile Thema
4. Liabilities from reinsurance
CHF millions
Unpaid claims
Liabilities for life and health policy benefits
Unearned premiums
Provisions for profit commissions
Equalisation reserve
Funds held under reinsurance treaties
Reinsurance balances payable
Liabilities from reinsurance
Gross
43 074
14 981
4 741
523
–
–
3 654
66 973
Retro
–3 829
–1 828
–569
–7
–
2 885
1 461
–1 887
2005
Net
39 245
13 153
4 172
516
–
2 885
5 115
65 086
Gross
46 777
12 449
5 202
565
250
–
1 217
66 460
Retro
–3 805
–990
–954
–13
–
2 574
1 634
–1 554
2006
Net
42 972
11 459
4 248
552
250
2 574
2 851
64 906
5. Shareholders’ equity
Change in shareholders’ equity
CHF millions
Shareholders’ equity on 31 December (previous year)
Dividend paid for the previous year
Capital increase including premium
Profit for the financial year
Shareholders’ equity on 31 December before allocation of profit
Dividend payment
Shareholders’ equity on 31 December after allocation of profit
¹ Board of Directors’ proposal to the Annual General Meeting of 20 April 2007 subject to the actual number of shares outstanding and eligible for dividend.
Sources of shareholders’ equity (after allocation of profit)
CHF millions
From nominal capital
From share premium
From profit allocation
From other allocations
Shareholders’ equity on 31 December after allocation of profit
2005
12 227
–497
3
1 069
12 802
–776
12 026
2006
12 802
–776
4 239
2 144
18 409
–1 2181
17 191
2005
32
5 774
5 921
299
2006
37
10 008
6 847
299
12 026
17 191
Swiss Re 2006 Annual Report 181
Swiss Re 2006 Annual Report 181
Profile Thema
Financial statements Swiss Reinsurance Company, Zurich
Contingent liabilities
Contingent liabilities
Contingent liabilities, mainly towards Group companies, amounted on 31 December 2006
to CHF 3 076 million (2005: CHF 3 027 million). In addition, there were 24 unlimited
guarantees; 21 of these are for obligations of Group companies. No payments are ex-
pected under these guarantees.
Leasing contracts
Leasing contracts
Off-balance sheet commitments from operating leases for the next five years and there-
after totalled in the following amounts:
CHF millions
2006
2007
2008
2009
2010
After 2011
2005
14
10
7
4
3
1
2006
–
13
8
3
2
1
These commitments pertain to the non-cancellable contract periods and refer primarily
to office and apartment space rented by the company.
In addition, a financial lease of IT hardware is recognised on the balance sheet. The cor-
responding assets and liability of CHF 19 million (2005: CHF nil) are included in the posi-
tions tangible assets and other liabilities respectively.
To secure the technical provisions on the 2006 balance sheet date, securities of
CHF 11 286 million (2005: CHF 11 112 million) were deposited in favour of ceding
companies, of which CHF 6 906 million (2005: CHF 6 758 million) was to Group
companies.
Under securities lending agreements, on 31 December 2006, securities of CHF 5 503
million (2005: CHF 6 048 million) were lent with the right to be sold or pledged by the
borrowing entity, of which CHF 3 362 million (2005: CHF 4 542 million) was to Group
companies. The securities which were held and lent by the Swiss Re Institutional Fund,
a separate legal entity, are excluded.
Equity securities of CHF 5 789 million (2005: CHF 4 325 million) and fixed income
securities of CHF 4 607 million (2005: CHF 5 199 million) were held in investment
funds, which are fully owned by Swiss Re Group companies and the Swiss Re Pension
Fund. The securities in these funds and their revenues continue to be reported in the cor-
responding asset category.
Security deposits
Security deposits
Securities lending
Securities lending
Investment funds
Investment funds
Fire insurance value of tangible assets
Fire insurance value of tangible assets
The insurance value of tangible assets, comprising the real estate portfolio and
other tangible assets, amounted on 31 December 2006 to CHF 2 364 million
(2005: CHF 2 453 million).
Obligations towards employee
Obligations towards employee
pension funds
pension funds
Other liabilities include CHF 6 million (2005: CHF 6 million) payable to the employee
pension funds.
182 Swiss Re 2006 Annual Report
182 Swiss Re 2006 Annual Report
Financial statements Swiss Reinsurance Company, Zurich
Profile Thema
Debentures
Debentures
In addition, a provision of CHF 37 million (2005: CHF nil) was established as of
31 December 2006 for transitional obligations concerning the change in the pension
plan structure from a defined benefit scheme to a defined contribution scheme effective
1 January 2007.
As of 31 December 2006 the following debentures were outstanding:
3¾% interest, CHF 500 million, 2 July 1997–2007.
3¾% interest, CHF 600 million, perpetual from 15 June 1999 but not less than 12 years.
Investments in subsidiaries
Investments in subsidiaries
Details on the Swiss Re Group‘s subsidiaries are disclosed on pages 161 to 165.
Treasury shares
Treasury shares
As of 31 December 2006 the Group held 287 624 treasury shares (2005: 206 449). In
the year under report, 2 262 854 treasury shares (2005: 2 948 105) were purchased at
an average price of CHF 95.21 (2005: CHF 81.41) and 2 181 679 treasury shares
(2005: 3 674 784) were sold at an average price of CHF 94.50 (2005: CHF 83.27).
Deposit account
Deposit account
Deposit arrangements generated the following balances which are included in:
CHF millions
Reinsurance result
Premiums and other receivables from reinsurance
Funds held by ceding companies
Funds held under reinsurance treaties
Reinsurance balances payable
Claims on and obligations towards
Claims on and obligations towards
Group companies
Group companies
CHF millions
Premiums and other receivables from reinsurance
Funds held by ceding companies
Other receivables
Funds held under reinsurance treaties
Reinsurance balances payable
Loans
Other liabilities
2005
10
378
1 151
64
1 580
2005
2 510
2006
31
287
182
–
566
2006
2 569
14 243
13 714
13
315
2 535
332
165
2 996
331
1 198
345
673
Conditional capital and
Conditional capital and
authorised capital
authorised capital
The Extraordinary General Meeting held on 27 February 2006 approved the creation
of authorised capital of CHF 9 000 000 and an increase of conditional capital by
CHF 2 000 000.
As of 31 December 2006, Swiss Reinsurance Company‘s total conditional capital out-
standing amounted to CHF 4 649 560 (2005: CHF 2 659 565). CHF 4 000 000 was re-
served for the exercise of conversion rights and warrants granted in connection with
bonds and similar instruments, CHF 900 000 thereof was reserved for General Electric
Company, and CHF 649 560 for employee participation purposes.
In addition, authorised capital with shareholders’ subscription rights amounted to
CHF 1 105 337 at year-end 2006.
Swiss Re 2006 Annual Report 183
Swiss Re 2006 Annual Report 183
Financial statements Swiss Reinsurance Company, Zurich
Profile Thema
Change in undisclosed reserves
Change in undisclosed reserves
The undisclosed reserves on investments and on provisions decreased by a net amount
of CHF 159 million in the year under report (2005: no net release).
Major shareholders
Major shareholders
As of 31 December 2006, there were two shareholders with a participation exceeding
the 5% threshold of Swiss Reinsurance Company’s share capital.
General Electric Company, Fairfield, Connecticut, held, directly or indirectly through
group subsidiaries, 33 300 957 Swiss Re shares on 31 December 2006, representing
8.89% of Swiss Reinsurance Company’s voting rights.
The Capital Group Companies, Inc., Los Angeles, informed SWX Swiss Exchange on
22 November 2005 that its holdings increased to 5.10% of Swiss Reinsurance Company’s
voting rights.
As these shares have mostly not been registered under General Electric Company or
Capital Group Companies or any of their respective group companies, Swiss Re is unable
to track, on its own, changes in these shareholders’ aggregate holdings.
Franklin Resources, Inc., Ft. Lauderdale, Florida, known as Franklin Templeton Investments,
announced on 20 March 2006 that its aggregate holdings in Swiss Re shares fell below
the threshold of 5% of Swiss Reinsurance Company’s voting rights.
Personnel information
Personnel information
Swiss Reinsurance Company, Zurich, employed a worldwide staff of 3 745 on the balance
sheet date (2005: 3 696). Personnel expenses for the 2006 financial year amounted to
CHF 1 187 million (2005: CHF 871 million).
Management fee contribution
Management fee contribution
Change of accounting policy for liabili-
Change of accounting policy for liabili-
ties for life and health policy benefits
ties for life and health policy benefits
In connection with the integration of GE Insurance Solutions, restructuring charges of
CHF 59 million were recognised in 2006. As at 31 December 2006 a respective restruc-
turing provision of CHF 34 million remained on the Company’s books.
In 2006, management expenses of CHF 170 million (2005: CHF 194 million) were
recharged to Group companies and reported net in the positions operating costs and
investment expenses. In previous years, such recharges were additionally recorded on
a gross basis in other income and other expenses.
The valuation methodology for determining the liabilities for life and health policy bene-
fits was modified in 2006 to ensure consistency of the Company’s liabilities and thus to
improve accuracy and comparability of valuations among different lines. The transition
impact of CHF 92 million is included in the 2006 income statement. On a comparative
basis, the previous year’s balance sheet positions for deferred acquisition costs
and liabilities for life and health policy benefits amounted to CHF 916 million and
CHF 11 356 million respectively. The corresponding gross amounts were CHF 1 215 million
for deferred acquisition costs and CHF 12 591 million for liabilities for life and health
policy benefits.
184 Swiss Re 2006 Annual Report
184 Swiss Re 2006 Annual Report
Financial statements Swiss Reinsurance Company, Zurich
Profile Thema
Proposal for allocation of profit
The Annual General Meeting, to be held in Zurich on 20 April 2007, has at its disposal
the following profit:
in CHF
Retained earnings brought
forward from the previous year
Profit for the financial year
Disposable profit
Share structure
For the financial year 2006
– eligible for dividend
– not eligible for dividend
Total shares issued
2005
2006
14 544 084
1 069 525 771
1 084 069 855
7 895 490
2 144 273 601
2 152 169 091
Number of
registered shares
Nominal
capital in CHF
358 256 229
35 825 623
16 184 149
1 618 415
374 440 378
37 444 038
The Board of Directors proposes to the Annual General Meeting to allocate this profit as
follows:
in CHF
Dividend
Allocation to reserves
Balance carried forward
Disposable profit
2005
776 174 3651
300 000 000
2006
1 218 071 1792
925 000 000
7 895 4901
9 097 912
1 084 069 855
2 152 169 091
¹
²
The number of registered shares eligible for dividend at the dividend payment date has increased since the proposal for
allocation of profit, dated 1 March 2006, due to the issuance of new registered shares from options being exercised.
This resulted in an additional dividend of CHF 139 515 compared to the Board of Directors’ proposal and in lower re-
tained earnings brought forward from the previous year by the same amount.
Board of Directors’ proposal to the Annual General Meeting of 20 April 2007 subject to the actual number of shares out-
standing and eligible for dividend.
If the Board of Directors’ proposal for allocation of profit is accepted, a dividend of
CHF 3.40 per share will be paid.
After deduction of the Federal Withholding Tax of 35%, the dividend will be paid from
25 April 2007 by means of dividend order to shareholders recorded in the Share Register
or to their deposit banks.
Zurich, 28 February 2007
Swiss Re 2006 Annual Report 185
Swiss Re 2006 Annual Report 185
Dividend
Dividend
Financial statements Swiss Reinsurance Company, Zurich
Profile Thema
Report of the statutory auditors
To the Annual General Meeting of
Swiss Reinsurance Company
Zurich
As statutory auditors, we have audited the accounting records and the financial state-
ments (income statement, balance sheet and notes/pages 173 to 184) of Swiss Reinsur-
ance Company for the year ended 31 December 2006.
These financial statements are the responsibility of the Board of Directors. Our responsi-
bility is to express an opinion on these financial statements based on our audit. We
confirm that we meet the legal requirements concerning professional qualification and
independence.
Our audit was conducted in accordance with Swiss Auditing Standards, which require
that an audit be planned and performed to obtain reasonable assurance about whether
the financial statements are free from material misstatement. We have examined on a
test basis evidence supporting the amounts and disclosures in the financial statements.
We have also assessed the accounting principles used, significant estimates made and
the overall financial statement presentation. We believe that our audit provides a reason-
able basis for our opinion.
In our opinion, the accounting records and financial statements and the proposed
appropriation of available earnings comply with Swiss law and the company’s Articles
of Association.
We recommend that the financial statements submitted to you be approved.
PricewaterhouseCoopers AG
David JA Law
Auditor in charge
Dawn M Kink
Zurich, 28 February 2007
186 Swiss Re 2006 Annual Report
186 Swiss Re 2006 Annual Report
Financial statements
Profile Thema
Financial years 1998–2006
CHF millions
Income statement
Revenues
Premiums earned
Fee income
Net investment income
Net realised investment gains/losses
Trading revenues
Other revenues
Total revenues
Expenses
19981
19991
20001
20011
20021
20031
20041
2005
2006
16 727
18 051
22 081
25 219
29 058
30 740
29 439
3 131
2 509
3 846
3 588
4 802
4 275
5 765
2 665
286
22 653
246
25 731
395
31 553
455
34 104
5 494
–730
228
365
34 415
4 606
376
472
236
36 430
4 857
1 116
438
243
36 093
26 891
881
6 137
3 474
346
283
38 012
29 515
879
6 990
1 948
654
280
40 266
Claims and claim adjustment expenses
–8 514
–9 333 –12 153 –16 266 –14 485 –14 898 –13 853 –14 758 –11 799
Life and health benefits
–4 881
–6 200
–7 478
–8 532 –10 084
–9 085
–9 331
Interest credited to policyholders
Acquisition costs
Amortisation of goodwill
–3 661
–3 973
–4 883
–5 658
–6 220
–6 854
–6 325
–91
–211
–310
–368
–350
–315
–277
–8 668
–3 019
–5 927
–9 594
–2 827
–6 079
Other operating costs and expenses
–2 698
–2 785
–3 074
–3 384
–3 240
–2 942
–2 940
–3 081
–4 111
Total expenses
–19 845 –22 502 –27 898 –34 208 –34 379 –34 094 –32 726 –35 453 –34 410
Income/loss before income tax expense
Income tax expense
Net income/loss on ordinary activities
2 808
–647
2 161
Extraordinary income
Extraordinary charges
3 229
–783
2 446
450
–450
3 655
–689
2 966
–104
–61
–165
36
–127
–91
2 336
–634
1 702
3 367
–892
2 475
2 559
–255
2304
5 856
–1 296
4 560
Net income/loss
2 161
2 446
2 966
–165
–91
1 702
2 475
2 304
4 560
Balance sheet
Assets
Investments
Other assets
Total assets
Liabilities
69 589
85 684
89 584
95 888
86 728
90 653 108 023 130 601 172 507
38 748
90 698 118 793
75 129
108 337 130 200 142 640 170 230 161 857 169 698 184 440 221 299 291 300
74 342
76 417
44 516
79 045
53 056
Unpaid claims and claim adjustment expenses 45 866
54 072
Liabilities for life and health policy benefits
15 143
23 279
Unearned premiums
3 174
4 251
59 600
29 300
6 131
68 618
41 370
6 399
62 652
37 269
6 754
63 474
37 244
6 457
61 619
43 239
5 748
71 759
31 081
6 563
95 011
44 899
8 025
Other liabilities
Long-term debt
Total liabilities
19 142
18 819
19 764
24 200
32 833
39 205
49 361
81 651 104 508
5 049
4 947
5 058
7 045
5 663
4 807
5 296
5 852
7 973
88 374 105 368 119 853 147 632 145 171 151 187 165 263 196 906 260 416
Shareholders’ equity
19 963
24 832
22 787
22 598
16 686
18 511
19 177
24 393
30 884
Earnings/losses per share in CHF
7.35²
8.55²
10.39²
–0.57
–0.29
5.48
8.00
7.44
13.49
¹ Numbers are based on the Group’s previous accounting standards
² Adjusted by 20-for-1 share split
Swiss Re 2006 Annual Report 187
Swiss Re 2006 Annual Report 187
General information
Glossary
Accident insurance
Accident insurance
Accumulation risk
Accumulation risk
Acquisition costs
Acquisition costs
Admin ReSM
Admin ReSM
Insurance of individuals or groups against economic risks in the event of death or
temporary or permanent disability by accident. A branch of non-life insurance.
Risk that arises when a large number of individual risks are correlated such that a single
event will affect many or all of these risks.
Cost of acquiring, maintaining and renewing insurance business: it includes the inter-
mediaries’ commission, the company’s sales expense, and other related expenses.
Acquisition of a closed block of in-force life and health insurance business either through
acquisition or reinsurance, typically assuming the responsibility to administer the under-
lying policies. Admin ReSM can also extend to the acquisition of an entire life insurance
company.
Asset-backed securities
Asset-backed securities
Security backed by notes or receivables against assets such as auto loans, credit cards,
royalties, student loans and insurance.
Asset-liability management (ALM)
Asset-liability management (ALM)
Management of a business in a way that coordinates decisions on assets and liabilities.
Specifically, the ongoing process of formulating, implementing, monitoring and revising
strategies related to assets and liabilities in an attempt to achieve financial objectives
for a given set of risk tolerances and constraints.
Aviation insurance
Aviation insurance
Insurance of accident and liability risks, as well as hull damage, connected with the
operation of aircraft.
Business interruption insurance
Business interruption insurance
Insurance covering the loss of earnings resulting from, and occurring after, destruction
of property; also known as “loss of profits” or “business income protection insurance”.
Capacity
Capacity
Casualty insurance
Casualty insurance
Maximum amount of risk that can be accepted in insurance. One factor in determining
capacity is government regulations that define minimum solvency requirements. Capacity
also refers to the amount of insurance coverage allocated to a particular policyholder
or in the marketplace in general.
Branch of insurance, mainly comprising accident and liability business, which is separate
from property, engineering and life insurance. In the US this term is used for non-life
insurance other than fire, marine and surety business.
Catastrophe bonds (cat bonds)
Catastrophe bonds (cat bonds)
Insurance-linked securities that allow (re)insurance companies to transfer peak insurance
risks, including natural catastrophes, to the capital markets in the form of bonds. Catas-
trophe bonds help to spread peak exposures (see insurance-linked securities).
Cession
Cession
ClaimClaim
Claims handling
Claims handling
Insurance that is reinsured: the passing of the insurer’s risks to the reinsurer against
payment of a premium. The insurer is referred to as the ceding company or cedent.
Demand by an insured for indemnity under an insurance contract.
Activities in connection with the investigation, settlement and payment of claims from
the time of their occurrence until settlement.
188 Swiss Re 2006 Annual Report
General information Glossary
Claims incurred and claim adjustment
Claims incurred and claim adjustment
expenses
expenses
All claims payments plus the adjustment in the outstanding claims provision as well
as expenses for evaluating and settling claims.
Claims ratio
Claims ratio
Sum of claims paid, change in the provisions for unpaid claims and claim adjustment
expenses in relation to premiums earned.
Coinsurance
Coinsurance
Arrangement by which a number of insurers and/or reinsurers share a risk.
Combined ratio
Combined ratio
Sum of the non-life claims ratio, acquisition ratio and the expense ratio.
Commission
Commission
Commutation
Commutation
Remuneration paid by the insurer to its agents, brokers or intermediaries, or by the
reinsurer to the insurer, for costs in connection with the acquisition and administration
of insurance business.
Transaction in which policyholders or insurers surrender all rights and are relieved
from all obligations under an insurance or reinsurance contract in exchange for a single
current payment.
Cover
Cover
Insurance and reinsurance protection based on a contractual agreement.
Credit insurance
Credit insurance
Insurance against financial losses sustained through the failure, for commercial reasons,
of policyholders’ clients to pay for goods or services supplied to them.
Directors’ and officers’ liability
Directors’ and officers’ liability
insurance (D & O)
insurance (D & O)
Liability insurance for directors and officers of an entity, providing cover for their personal
legal liability towards shareholders, creditors, employees and others arising from wrong-
ful acts such as errors and omissions.
Disability insurance
Disability insurance
Diversification
Diversification
Embedded value
Embedded value
Insurance against the incapacity to exercise a profession as a result of sickness or other
infirmity.
Risk reduction technique that limits the risk of accumulation by spreading an organisa-
tion’s risks across different geographical locations as well as across different lines of
business, in order to increase the number of mutually independent risks.
Actuarially determined estimate of the economic value of the in-force life and health
insurance operations of an insurance company (excluding any value attributable to future
new business). Embedded value earnings, defined as the change in embedded value
over the year (after adjustment for any capital movements such as dividends and capital
injections), provide a measure of the performance of the life and health operations of
an insurance company.
Employers’ liability insurance
Employers’ liability insurance
Insurance taken out by employers covering employees against injuries arising out of their
employment.
Engineering insurance
Engineering insurance
Insurance covering the construction and erection of objects, and the insurance
of machinery in operating plants.
Swiss Re 2006 Annual Report 189
General information Glossary
European Medium Term Note (EMTN)
European Medium Term Note (EMTN)
Vehicle for raising funds by borrowing from the capital markets or from private investors.
The EMTN programme itself is effectively a platform, under a standard documentation
framework, from which to launch such issues on an ongoing basis.
Expense ratio
Expense ratio
Sum of acquisition costs and other operating costs and expenses in relation to premiums
earned.
Facultative reinsurance
Facultative reinsurance
Reinsurance of the insurer’s risks on an individual basis. The reinsurance company looks
at each individual risk and determines whether to accept or decline coverage.
Financial reinsurance
Financial reinsurance
Reinsurance that combines risk transfer with elements of risk finance.
Fire insurance
Fire insurance
Funded cover
Funded cover
Insurance against fire, lightning or explosion; it can also include insurance against
windstorm, earthquake, flood and other natural hazards or political risks.
Reinsurance contract under which the ceding company pays premiums to build a fund
from which to pay expected claims. The premium less the reinsurance charge is
paid out to the ceding company in the future as claim payments, returned premiums,
or contingent commissions.
Guaranteed Minimum Death Benefit
Guaranteed Minimum Death Benefit
(GMDB)
(GMDB)
Feature of variable annuity business. The benefit is a predetermined minimum amount
that the beneficiary will receive upon death.
Health insurance
Health insurance
Generic term applying to all types of insurance indemnifying or reimbursing for losses
caused by bodily injury or sickness or for expenses of medical treatment necessitated
by sickness or accidental bodily injury.
Impairment charge
Impairment charge
Adjustment in the accounting value of an asset.
Incurred But Not Reported (IBNR)
Incurred But Not Reported (IBNR)
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.
Industry loss warranties (ILW)
Industry loss warranties (ILW)
Index-linked catastrophe contracts with a dual trigger that require a minimum industry
loss to occur before the coverage responds to the individual company loss.
Insurance-linked securities (ILS)
Insurance-linked securities (ILS)
In risk securitisation, bonds for which the payment of interest and/or principal depends
on the occurrence or severity of an insurance event. The underlying risk of the bond is
a peak or volume insurance risk.
Layer
Layer
Liability insurance
Liability insurance
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 of the ceding company up to the maximum limit of indemnity. Individual layers may
be placed with different (re)insurers.
Insurance for damages that a policyholder is obliged to pay because of bodily injury or
property damage caused to another person or entity based on negligence, strict liability
or contractual liability.
190 Swiss Re 2006 Annual Report
General information Glossary
Life insurance
Life insurance
Marine insurance
Marine insurance
Insurance that provides for the payment of a sum of money upon the death of the in-
sured. In addition, life insurance can be used as a means of investment or saving.
Line of insurance which includes coverage for property in transit (cargo), means of trans-
portation (except aircraft and motor vehicles), offshore installations and valuables, as
well as liabilities associated with marine risks and professions.
Mandatory convertible bond
Mandatory convertible bond
Bond that has a compulsory conversion or redemption feature. Either on or before
a contractual conversion date, the holder must convert the mandatory convertible into
the underlying stock.
Motor insurance
Motor insurance
Net reinsurance assets
Net reinsurance assets
Line of insurance which offers coverage for property, accident and liability losses involv-
ing motor vehicles.
Receivables related to deposit accounting contracts (contracts which do not meet risk
transfer requirements) less payables related to deposit contracts.
Non-life insurance
Non-life insurance
All classes of insurance business excluding life insurance.
Non-proportional reinsurance
Non-proportional reinsurance
Form of reinsurance in which coverage is not in direct proportion to the original insurer’s
loss; instead the reinsurer is liable for a specified amount which exceeds the insurer’s
retention; also known as “excess of loss reinsurance”.
Nuclear energy insurance
Nuclear energy insurance
Property and liability insurance for atomic reactors, power stations or any other plant
related to the production of atomic energy or its incidental processes.
Operating revenues
Operating revenues
Premiums earned plus net investment income plus other revenues.
Operational risk
Operational risk
Premium
Premium
Premiums earned
Premiums earned
Risk arising from failure of operational processes, internal procedures and controls lead-
ing to financial loss.
The payment, or one of the periodical payments, a policyholder makes for an insurance
policy.
Premiums an insurance company has recorded as revenues during a specific accounting
period.
Premiums written
Premiums written
Premiums for all policies sold during a specific accounting period.
Present value of future profits (PVFP)
Present value of future profits (PVFP)
Intangible asset primarily arising from the purchase of life and health insurance compa-
nies or portfolios.
Product liability insurance
Product liability insurance
Insurance of the liability of the manufacturer or supplier of goods for damage caused by
their products.
Professional indemnity insurance
Professional indemnity insurance
Liability insurance cover which protects professional specialists such as physicians,
architects, engineers, lawyers, accountants and others against third-party claims arising
from activities in their professional field; policies and conditions vary according to profes-
sion.
Swiss Re 2006 Annual Report 191
General information Glossary
Property insurance
Property insurance
Proportional reinsurance
Proportional reinsurance
Quota-share reinsurance
Quota-share reinsurance
Reinsurance
Reinsurance
Reserves
Reserves
Retention
Retention
Retrocession
Retrocession
Collective term for fire and business interruption insurance as well as burglary, fidelity
guarantee and allied lines.
Form of reinsurance in which the premiums and claims of the insurer are shared
proportionally by the insurer and reinsurer.
Form of proportional reinsurance in which a defined percentage of all risks held by the
insurer in a specific line is reinsured.
Insurance for insurance companies which spreads the risk of the direct insurer. Includes
various forms such as facultative, financial, non-proportional, proportional, quota-share,
surplus and treaty reinsurance.
Amount required to be carried as a liability in the financial statements of an insurer or
reinsurer to provide for future commitments under outstanding policies and contracts.
Amount of risk which the policyholder or insurer does not insure or reinsure but keeps
for its own account.
Amount of the risk accepted by the reinsurer which is then passed on to other reinsur-
ance companies.
Return on equity (ROE)
Return on equity (ROE)
Net income divided by time-weighted shareholders’ equity.
Return on investments (ROI)
Return on investments (ROI)
Return on operating revenues
Return on operating revenues
Return on total revenues
Return on total revenues
RiskRisk
Risk management
Risk management
Securitisation
Securitisation
192 Swiss Re 2006 Annual Report
Investment result excluding result from assets held for linked liabilities divided by average
invested assets. Invested assets include investments, funds held by ceding companies,
net cash equivalents and net reinsurances assets. Average assets are calculated as open-
ing balance plus one half of the net asset turnover at average foreign exchange rates.
Life and Health business operating result (operating income excluding non-participating
realised gains and losses) divided by operating revenues (premiums earned, fee income,
net investment income, and participating realised gains and losses excluding unit-linked
investment income and realised gains and losses).
Financial Services operating result (operating revenues less the sum of acquisition costs,
claims and claim adjustment expenses and operating costs) divided by operating reve-
nues (premiums earned and net investment income plus trading revenues and fees and
commissions).
Condition in which there is a possibility of loss; also used by insurance practitioners to
indicate the property insured or the peril insured against.
Management tool for the comprehensive identification and assessment of risks based on
knowledge and experience in the fields of natural sciences, technology, economics and
statistics.
Financial transaction, in which future cash flows from assets (or insurable risks) are
pooled, converted into tradable securities and transferred to capital market investors.
The assets are commonly sold to a special-purpose entity, which purchases them with
General information Glossary
Solvency II
Solvency II
Stop-loss reinsurance
Stop-loss reinsurance
cash raised through the issuance of beneficial interests (usually debt instruments) to
third- party investors.
Initiative launched by the European Commission to revise current EU insurance solvency
rules. Solvency II focuses on capital requirements, risk modelling, prudential rules, super-
visory control, market discipline and disclosure.
Form of reinsurance that protects the ceding insurer against an aggregate amount
of claims over a period, in excess of either a stated amount or a specified percentage
of estimated benefit costs. An example of this type of cover is Employer Stop Loss (ESL)
which is used by US companies to cap losses on self-funded group health benefit
programmes. The stop-loss can apply to specific conditions or aggregate losses.
Surety insurance
Surety insurance
Sureties and guarantees issued to third parties for the fulfilment of contractual liabilities.
Surplus reinsurance
Surplus reinsurance
Form of proportional reinsurance in which risks are reinsured above a specified amount.
Treaty reinsurance
Treaty reinsurance
Underwriting result
Underwriting result
Participation of the reinsurer in certain sections of the insurer’s business as agreed by
treaty, as opposed to single risks.
Premiums earned less the sum of claims paid, change in the provision for unpaid claims
and claim adjustment expenses and expenses (acquisition costs and other operating
costs and expenses).
Value at Risk (VaR)
Value at Risk (VaR)
Maximum possible loss in market value of an asset (or risk) portfolio within a given time
span and at a given confidence level.
Some of the terms in the glossary are explained in more detail in note 1 “Organisation
and summary of significant accounting policies” in the Financial Statements.
Swiss Re uses some of the definitions provided by the glossary of the International
Association of Insurance Supervisors (IAIS). For additional insurance terms, please refer
to Swiss Re’s online glossary of technical terms at www.swissre.com
Swiss Re 2006 Annual Report 193
General information
Profile Thema
Cautionary note on forward-looking statements
Certain statements and illustrations contained herein are forward-looking. These state-
ments and illustrations provide current expectations of future events based on certain
assumptions and include any statement that does not directly relate to a historical fact
or current fact. Forward-looking statements typically are identified by words or phrases
such as “anticipate“, “assume“, “believe“, “continue“, “estimate“, “expect“, “foresee“,
“intend“, “may increase“ and “may fluctuate“ and similar expressions or by future or
conditional verbs such as “will“, “should“, “would“ and “could“. These forward-looking
statements involve known and unknown risks, uncertainties and other factors, which
may cause Swiss Re‘s actual results, performance, achievements or prospects to be
materially different from any future results, performance, achievements or prospects
expressed or implied by such statements. Such factors include, among others:
the impact of significant investments, acquisitions or dispositions, and any delays, un-
expected costs or other issues experienced in connection with any such transactions,
including, in the case of acquisitions, issues arising in connection with integrating
acquired operations;
cyclicality of the reinsurance industry;
changes in general economic conditions, particularly in our core markets;
uncertainties in estimating reserves;
the performance of financial markets;
expected changes in our investment results as a result of the changed composition of
our invested assets or changes in our investment policy;
the frequency, severity and development of insured claim events;
acts of terrorism and acts of war;
mortality and morbidity experience;
policy renewal and lapse rates;
changes in rating agency policies or practices;
the lowering or withdrawal of one or more of the financial strength or credit ratings of
one or more of our subsidiaries;
changes in levels of interest rates;
political risks in the countries in which we operate or in which we insure risks;
extraordinary events affecting our clients, such as bankruptcies and liquidations;
risks associated with implementing our business strategies;
changes in currency exchange rates;
changes in laws and regulations, including changes in accounting standards and
taxation requirements; and
changes in competitive pressures.
These factors are not exhaustive. We operate in a continually changing environment
and new risks emerge continually. Readers are cautioned not to place undue reliance
on forward-looking statements. We undertake no obligation to publicly revise or update
any forward-looking statements, whether as a result of new information, future events or
otherwise.
194 Swiss Re 2006 Annual Report
Information
Important dates
20 April 2007
143rd Annual General Meeting
25 April 2007
Payment of dividend
8 May 2007
First quarter results
7 August 2007
Second quarter results
6 November 2007
Third quarter results
Contact addresses
Investor Relations
Susan Holliday
Telephone +41 43 285 4444
Fax +41 43 285 5555
investor_relations@swissre.com
Public Relations/ Media
Henner Alms
Telephone +41 43 285 7171
Fax +41 43 285 2023
media_relations@swissre.com
Share Register
Karl Haas
Telephone +41 43 285 3294
Fax +41 43 285 3480
share_register@swissre.com
© 2007
Swiss Reinsurance Company
Title:
2006 Annual Report
Driving Performance
Design:
Addison Corporate Marketing, London
Photographs:
Frederic Meyer (cover, inside cover)
Philip Chau (p 5)
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Original version in English
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is available at:
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Swiss Reinsurance Company
Mythenquai 50/60
P.O. Box
8022 Zurich
Switzerland
Telephone +41 43 285 2121
Fax +41 43 285 2999
www.swissre.com