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2002 |
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82nd
Annual Report
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Board of Directors Lucien Tissot, President, La Chaux-de-Fonds Isabelle Durafourg, La Conversion Dominique Guenat, Les Breuleux Jean-Pierre Mœsch, La Chaux-de-Fonds Werner Wettstein, Magden Jörg Wyssbrod, Biel-Bienne |
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| Executive
Management Edouard Fragnière, Chief Executive Officer Patrick Mattenberger, Chief Financial Officer Colette Schärer, Executive Assistant Peter Hofmeester, Deputy Manager, Head of ZBU Marine Reginald Aspinall, Head of Special Lines and Guarantees |
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| Support
Management Philippe Gozel, Underwriting Manager, Head Office Markus Hürlimann, Underwriting Manager, ZBU Marine Nadège Aebischer, Accounting Manager Maria-Bélen Cambeiro, Claims Manager Stefano Fenini, Assistant, ZBU Marine Henriette Mischler, Subcontracting activities Manager Marco Di Giacomo, Assistant, Special Lines |
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| Regional
Offices Eric Pachoud, Renens VD, Manager, French-speaking cantons and Ticino Robert Steffen, Zurich, Manager, German-speaking cantons Frédéric Morel, Biel, Regional Representative Madeleine Hess, Basel, Regional Representative |
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| Auditors PricewaterhouseCoopers SA, Lausanne |
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| The
centre photos on pages in this report are the expression of photographer David Kocher’s perspective on transportation insurance. In his words: – Goods, in our society, are highly prized assets. What could be more terrible than to lose or break them… Touch the customer through his concerns about what may happen to his “goods on the move”. Illustrate the risk. Show the terrible fate. David Kocher, is a graduate in photographic studies from the College of Applied Arts in Vevey, and now lives in St. Aubin, in the canton of Neuchâtel, Switzerland. Although just starting out in his career, he has already taken part in several Swiss and international exhibitions. Working in his studio or in the field for a diversified clientele, particularly in industry, he is also experienced as a press photographer and official photographer of cultural events. Among his other talents, he spent time in Paris, where he concentrated on the human form and beauty. |
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OUTLINE•Against a backdrop of crises of confidence, a persistently depressed economy, turmoil on the stock markets, corporate defaults, financial scandals and job cuts, TSM reported a highly satisfactory performance, reflecting the soundness of its financial policy and consolidating its position.
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GENERAL SITUATIONAs the year progressed, and the equity markets plummeted, the economy deteriorated, defaults increased, financial scandals continued unabated and massive layoffs hit the headlines, it became evident that not everything was due to the «September-eleventh-effect». The shock waves triggered by the terrorist attacks in the United States in the autumn of 2001 had merely served as a smokescreen to cover a number of management errors, but the economic downturn that had started well before that time turned into a full-fledged recession. In the insurance industry in particular, its effects were serious and the spectacular tightening of the reinsurance market is still being felt. The only positive signs amid this general stagnation were the very low inflation levels, and perhaps a certain return to true values. The weakness of the markets meant it was no longer possible to gloss over negative technical results with excessive financial returns. It highlighted the fragility of certain assets, and imposed draconian financial reorganisation. The situation also starkly revealed the lack of transparency in certain giant corporate structures, and the degree of complacency, and of amateurism that all too often reigned at the every highest levels of «management». Without generalising or patting ourselves on the back, these developments have shown the wisdom and consistency of TSM’s policy. We were also pleased to note the return of several of our «traditional» customers, who we had previously lost to the major consolidation movements. The fruits of our strong management policy and the pertinence of our development strategy are reflected in the financial results. Although with the morose climate TSM did not manage to reach the ambitious targets it had set for itself (before Sept. 11, 2001!), it performed well, confirming the solidity of its position. At year-end, its solvency margin, established in line with European standards imposed by the regulatory body, the Federal Office of Private Insurance, exceeded 1000%. A new stage in our strategy once again turned out to be TSM’s «event of the year». In 2001, it had been the official opening of the new Zurich Business Unit (ZBU) in December, but which really began to show its first effects in 2002. This year it is the second step of the launch, which should be put into orbit in 2003 - the creation of a new «Special Lines» department within the ZBU. It is being headed by Reginald Aspinall, whose expertise in this highly specialised area is recognised and respected by the entire market, as well as reinsurers. TSM is continuing to expand its product base, moving from a single sector to a niche market. |
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PREMIUMSPremiums booked totalled CHF 15,705 million, compared with CHF 10,628 in 2001, an impressive rise of 47.8%. Following on the heels of a 3.6% increase in 2000, this would seem to fully endorse our choice of development strategy. The decade-long partnership with La Mobilière insurance company to handle the «Marine» business, and the partnership between TSM and Vaudoise Assurances, set up in mid-1998, also played a role. They are continuing satisfactorily and still have strong development potential. However, if we consider TSM’s share of premiums received, which amounted to CHF 8.276 million (2001: CHF 6.768 million), this rise was 22.3%. In reality, close to half (47.3%) of total premiums booked were passed on to our reinsurers, against 36.3% in 2001. Nonetheless, we still place great importance on financial security, and will continue to do so in the future. The growth in premium volumes was achieved mainly by contracts with high insurance values, requiring substantial capacity, which is why we increasingly turned to reinsurance. In a fiercely competitive market, in which we are caught between strong market pressure on prices and a tightening of reinsurance conditions, profitability remains fragile, and maintaining healthy growth without taking excessive risks requires a great deal of vigilance. Our absolute priorities remain the stability and reliability of the Company. Finally, the slackening off in «direct» insurance contracted with our customers was reversed during the year, with this share rising to 91.05% in 2002 compared with 88.8% in 2001, an increase of 2.53%, with the balance consisting of reinsurance acceptance. |
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CLAIMSDevelopments achieved as a result of our corporate strategy make any comparison between the 2002 financial year and previous ones somewhat less pertinent. On the whole, however, 2002 was not a bad year for claims. Certainly, total payouts have increased in absolute terms, amounting to CHF 5,862 million (2001: CHF 4,583 million) after deduction of the share of co-insurers, of which CHF 3,512 million (2001: CHF 3,026 million) was borne by TSM, with the remainder being reinsured. However, when viewed in terms of the strong increase in premiums booked, this trend proportionately showed a significant decline. The gross claims rate, i.e. including the share borne by reinsurers, actually dropped from 43.0% to 37.4%, while the net rate (rate of claims paid in regard to premiums in own account) was down from 45.0% to 42.4%. The nature of the claims remained more «classical». There was no single dominant event in this regard, but there were several noticeable trends. On the positive side, jewellery-related claims retreated slightly. Although the drop was not significant, it was nonetheless welcome after two years of particularly heavy claims in this sector, where the rate is still too high. It would seem that the stringency measures taken by our customers, on the insistent advice of their insurer, have begun to bear fruit. On the negative side, there was a high claims rate in the machinery sector. Their increasing technical complexity makes them more vulnerable to accidents during transportation. There is also the economic element that cannot be ruled out either - when the market for durable goods becomes more difficult, the proportion of total damages declared increases. On the other hand, when demand for these goods is strong, the pressure on delivery schedules tends to make repairs a more satisfactory solution. We also noticed an increase in the number of claims arising from road accidents. As for the geographic breakdown of delinquency, Miami has been singled out as a particularly high-risk destination for horological shipments. In any event, we are firmly and increasingly refusing to accept the inevitability of a «normal» claims rate and, more and more, we are systematically requiring judicial inquiries and action. This is certainly proving to be in our interests, as can be seen from the following example concerning a package of diamonds that disappeared. Thanks to TSM’s insistence that the shipper and addressee file a complaint, and to the appointment of an expert to assist the investigators, the package was found. It had been hidden by a thief who had had access to it professionally, but had lost interest on discovering the contents: industrial diamond powder! Nevertheless, its recovery saved the Company a claim for CHF 400,000. Finally, we would mention hat our intransigence is also in our customers’ interests, as much from the ethical point of view as the financial. |
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GENERAL EXPENSESThe objective we set last year, of bringing general expenses down to less than 40% of premiums booked, was almost, but not quite achieved, with this figure reaching 41.7%, against 45.7% in 2001. This is one of the effects of TSM’s new strategy - the development of our activities and business portfolio resulted in a significant increase in brokerage fees, as well as additional IT expenses. However, with a rise of 19.9%, net general expenses have risen by less than the 22.3% net increase in premiums booked, so we are on the right road, and will continue our cost-cutting efforts. |
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INVESTMENT INCOMEFor the second year running, the financial markets were sharply lower, accompanied by a fall in bond yields. Despite this difficult trading climate, TSM realised net financial income of CHF 1.7 million in 2002. Its withdrawal from the equity markets, which had continued into the early part of the year, allowed it to realise profits, which were carried to reserves. It is most satisfactory to note that the conservative policy followed by the Company over the last few years has protected it from considerable potential concerns regarding the valuation of its securities portfolio, while still allowing it to maintain a certain amount of unrealised gains on its financial assets. At 31 December 2002, the investment structure was as follows:
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RESULTSResults in 2002 were highly satisfactory, considering the extremely difficult climate for the insurance sector, and the additional investments that were committed in connection with our strategic development. The year ended with a technical profit of CHF 84,468, compared with a technical loss of CHF 192,497 in 2001. In line with our conservative management policy, the growth in business was matched by a strengthening of our technical reserves in the amount of CHF 800,000. Profit, after allocation to this reserve, amortisation and taxes reached CHF 703,800. |
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APPROPRIATION
OF INCOME
At
its meeting of 20 March 2002, the Board of Directors decided to appropriate
earnings as follows: At
31 December 2002, insurance technical reserves stood at CHF 16,000,000,
representing 193% of premiums produced on own account. After appropriation
of earnings, equity stood at CHF 16,245,294. Guarantees totalled CHF
32.2 million, representing no less than 390% of premiums in own account. |
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| OPERATING
ACCOUNT (at 31 December 2002) 
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| BALANCE
SHEET AT 31 DECEMBER 2002 (after appropriations) 
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| APPENDIX
TO FINANCIAL STATEMENTS 2002 AND 2001  Securities allocated to «tied fortune» deposited with the Credit Suisse, in compliance with the Law on Indemnity Insurance («Loi sur l'assurance dommages » - LAD) and directives of the Federal Office of Private Insurance («Office fédéral des assurances privées - OFAP»). |
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ACKNOWLEDGEMENTSThe human factor has always been and still is, now more than ever, an essential element in the corporate culture of our Company. The reorganisation and repositioning process undertaken by TSM over the past few years has particularly underscored the key value of human qualities. This is something that the figures can never express, although they are in fact the expression of it. Thanking all those who make up the TSM team for their unwavering commitment is not just a routine year-end gesture. We sincerely want to emphasise the importance of the excellent relations and the motivation that characterise the daily work, in what we consider to be a truly dependable and closely-knit team. We extend our thanks to the team of specialists who work so efficiently, and so well together, at maintaining and optimising our computer equipment. Our thoughts also go to Ms. Rita Stucki, who was prematurely struck down by illness after a devoted career with TSM. Our gratitude also goes to the members of our Board of Directors for their constant and significant involvement, support, will and insight. We would like to thank three directors in particular, who are leaving this year: Messrs. Willy Borer and Claude Ray (age limit) and Georges-Henri Meylan (resigning), for their much appreciated commitment, especially in the often trying situations that we have experienced. At the same time, we would like to welcome aboard two new directors: Ms Isabelle Durafourg and Mr. Dominique Guenat. We would also like to extend our thanks to our partners and customers, with whom we enjoy close business relations built on mutual trust. Even though a growing share of our business is handled through brokers, our customers increasingly appreciate the responsiveness of our managers and the very short decisional time lags that characterise a company of our size. Openness, mutual trust and direct dialogue are core assets for TSM, that we are committed to safeguarding and developing. This is something that we believe you already know, and that you have let others know as well. Thank you. The TSM Management Edouard Fragnière |
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