Duration of the mandate and term of office of the lead auditors
PricewaterhouseCoopers Ltd (PwC) was appointed as the external auditor of Swiss Re Ltd when the company was founded on 2 February 2011. PwC had been elected as the external auditor of the previous parent company of the Group, Swiss Reinsurance Company Ltd, at its Annual General Meeting of 22 November 1991 and had been re-elected annually since then. The Annual General Meeting of 13 April 2012, following the proposal of the Board of Directors based on the recommendation of the Audit Committee, re-elected PwC for a term of one year as Swiss Re Ltd’s auditor.
Dawn M. Kink and Alex Finn became lead auditors responsible for the auditing mandate of the former parent company, Swiss Reinsurance Company Ltd, on 1 September 2006 and 23 September 2011, respectively. With Swiss Re Ltd becoming the new holding company of the Group, they also became lead auditors for the Swiss Re Ltd audit mandate.
PwC fees (excluding VAT) for professional services during the year ended 31 December 2012 were:
- Audit fees: USD 26.8 million
- Audit-related fees: USD 5.0 million
Audit-related fees include, among other tasks, review of the Economic Value Management report, Solvency II model validation, comfort letters, accounting advice and regulatory reports.
In addition to the auditing fees, PwC billed an aggregate amount of USD 6.6 million during the year ended 31 December 2012, primarily relating to:
- Income tax compliance and related tax services: USD 2.3 million
- Other fees: USD 4.3 million
Other fees include permitted advisory work related to a range of projects, but are primarily related to corporate realignment activities and accounting advice.
Information tools pertaining to the external audit
The external auditor is accountable to the Audit Committee, the Board of Directors and ultimately to the shareholders. The Board of Directors reviews the external auditor’s professional credentials, assisted in its oversight by the Audit Committee.
Cooperation and flow of information between the auditor and the Audit Committee
The Audit Committee liaises closely with the external auditor; the lead auditors participate as advisers at all the Audit Committee’s meetings. For more information on these, see chapter Work methods. The external auditor provides the Audit Committee with regular updates on the audit work and related issues as well as with reports on topics requested by the Audit Committee.
The Audit Committee reviews and approves in advance all planned audit services and any non-audit services provided by the external auditor. It discusses the results of annual audits with the external auditor, including reports on the financial statements, necessary changes to the audit plans and critical accounting issues.
The external auditor shares with the Audit Committee its findings on the adequacy of the financial reporting process and the efficacy of the system of internal controls. It informs the Audit Committee about any differences of opinion between the external auditor and management encountered during the audits or in connection with the preparation of the financial statements.
Evaluation of the external auditor
The Audit Committee, which is responsible for recommending an audit firm to the Board of Directors for election at the Annual General Meeting of shareholders, assesses the performance of the external auditor annually and presents its findings to the Board. This assessment is based on the external auditor’s qualifications, independence and performance.
At least once a year, the external auditor submits a report to the Audit Committee describing the external auditor’s own quality control procedures, including any material issues raised by its most recent internal reviews or inquiries or investigations by governmental or professional authorities within the preceding five years, as well as any steps taken to deal with any such issues.
At least once a year, the external auditor provides a formal written statement delineating all relationships with the company that might affect its independence. Any disclosed relationships or services that might bear on the external auditor’s objectivity and independence are reviewed by the Audit Committee, which then recommends appropriate action to be taken by the Board.
In accordance with the Swiss Federal Act on the Licensing and Oversight of Auditors, and to foster external auditor independence, the lead audit partner rotates out from his or her role after seven years.
This assessment measures the external auditor’s performance against a number of criteria, including: understanding of Swiss Re’s business; technical knowledge and expertise; comprehensiveness of the audit plans; quality of the working relationship with management; and clarity of communication. It is compiled based on the input of key people involved in the financial reporting process and the observations of the Audit Committee members.
The Audit Committee reviews annually the audit fees as well as any fees paid to the external auditor for non-audit services, based on recommendations by the Group CFO.
The Extraordinary General Meeting of shareholders of Swiss Re Ltd, held on 20 May 2011, elected OBT AG, Zurich, as special auditor for a term of three years. According to the Articles of Association, the special auditor is responsible for conducting special audits as required by law in connection with changes in capital. In line with best practice in ensuring the independence of external auditors, special audit reports are prepared by an auditor different from the external auditor responsible for the conduct of the statutory audits and the audit of the consolidated financial statements.
OBT AG had been elected the first time as special auditor by the Annual General Meeting of shareholders of the former parent company, Swiss Reinsurance Company Ltd, on 7 April 2010.
OBT AG did not prepare any audit reports under this mandate during the reporting year.