Rolf Dörig Bruno Pfister Chairman of the Board of Directors CEO
According to the Swiss Insurance Association (SIA), life insurance premiums in Switzerland rose by 5.5% to CHF 32.0 billion compared with the previous year, with 7.7% of growth coming from occupational pensions business. Individual life business, on the other hand, fell by 0.9%. Swiss Life significantly outperformed the market, increasing its premium volume by 9% in total to CHF 9.0 billion, 84% of which was attributable to occupational pensions business. Swiss Life’s market share of occupational pensions business thus grew to 30.3% (2012: 28.8%), while individual life business fell to 18.5% (2012: 20.1%).
In 2014 Swiss Life Switzerland will continue to pursue its long-term initiatives of increasing customer orientation, broadening its service and advisory offering, enhancing its distribution capacity and achieving further efficiency gains.
Swiss Life achieved a segment result in 2013 of CHF 96 million in Germany due to a good financial result, cost savings and more or less steady premium income. The previous year was particularly impacted by one-off impairments of intangible assets.
Aggregate total compensation in cash and in shares and occupational Regular Extraordinary provisions expense contributions 4 contributions (amount) 5
2 The bonus paid in 2013 relates to the 2012 financial year result. 3 Child allowances (CHF 2400), allowance for years of service (CHF 15 625), company cars (CHF 83 391), premium contributions to 3rd pillar pension plans (CHF 99 056), other (CHF 4828), each in total.
Swiss Solvency Test The Swiss Solvency Test (SST) is recent legislation which governs the capital requirements of insurance companies and groups and their reporting to the regulator. It was enacted in 2006 with the revised Insurance Supervision Law and corresponding Insurance Supervision Ordinance and constituted a reporting requirement during a five-year transition period before the capital requirements ultimately became binding from 1 January 2011. The SST is a principlesbased framework where the main objective is the alignment of the required capital with the underlying risks. The SST capital requirement underpins a high level of confidence that insurers will meet their obligations towards policyholders even in adverse circumstances. Swiss Life uses an internal model to calculate the available and the required capital for the SST. Based on this internal model, which has been partially approved by FINMA, Swiss Life meets the capital requirements.
Other movements in IFrS net equity n/a 1 –12 –12 –2 1 n/a: not applicable
The other movements in IFRS net equity (non-covered business only) include the sale and purchase of treasury shares, effects from changes in unrealised gains and losses, effects from equity-settled share-based payments and currency exchange rate effects on goodwill.
The graph and table below show the analysis of earnings for the covered business in 2013:
Transfers from VIF and required capital to free surplus 604 –111 –493 – –
Swiss Life – Annual Report 2013 3 Information by Market Unit 3.1 Market units
The continued positive development of the new business margin is driven by comprehensive repricings and products with new guarantee concepts in individual life, initiated in 2012 and showing the full effect in 2013. In addition to positive impacts from the capital market environment, the successful placement of real estate funds as well as favourable persistency experience in group life contributed positively.
The positive other operating variances relate to the aforementioned handling of bond realisations and disciplined surplus sharing.
Swiss Life – Annual Report 2013 5.1.1.1 Swap rates as at 31 december 2013
5.1.2 Volatility assumptions Volatility assumptions for the year-end 2013 and 2012 calculations are derived from market data as at 31 December 2013 and 2012.
Basis of preparation Without modifying our opinion, we draw attention to sections 4 and 5 of the MCEV Report, which describe the basis of MCEV methodology and assumptions.
Average annual premium multiplier The average annual premium multiplier is determined as the difference between PVNBP and the new business single premiums, divided by new business annual premiums.
Consolidated Financial Statements 110 Consolidated Statement of Income 111 Consolidated Statement of Comprehensive Income 112 Consolidated Balance Sheet 114 Consolidated Statement of Cash Flows 116 Consolidated Statement of Changes in Equity 117 Notes to the Consolidated Financial Statements 117 1 General Information 118 2 Summary of Significant Accounting Policies 118 2.1 Basis of preparation 118 2.2 Changes in accounting policies 121 2.3 Reclassifications in the consolidated statement of income, consolidated statement of comprehensive income and consolidated balance sheet 126 2.4 Consolidation principles 126 2.5 Foreign currency translation and transactions 127 2.6 Cash and cash equivalents 129 2.8 Financial assets 130 2.9 Impairment of financial assets 131 2.10 Investment property 132 2.11 Insurance operations 137 2.12 Property and equipment 138 2.14 Investment management 138 2.15 Commission income and expense 139 2.16 Intangible assets 141 2.17 Impairment of non-financial assets 141 2.18 Income taxes 142 2.19 Assets held for sale and associated liabilities 142 2.20 Financial liabilities 143 2.21 Employee benefits 144 2.22 Provisions and contingent liabilities 144 2.23 Treasury shares 144 2.24 Earnings per share 145 2.26 Forthcoming changes in accounting policies 147 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies 150 4 Segment Information
Net gains/losses on financial instruments at fair value through profit or loss 5, 8 844 580
Swiss Life Select (formerly AWD), tecis, HORBACH, Proventus and Chase de Vere advisors choose suitable products for customers from the market according to the Best Select approach. Swiss Life Asset Managers offers institutional and private investors access to investment and asset management solutions. Swiss Life provides multinational corporations with employee benefits solutions and high net worth individuals with structured life and pensions products.
The amendments to IAS 36 Impairment of Assets remove the requirement to disclose the recoverable amount of each cash-generating unit (group of units) for which the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to that unit (group of units) is significant when compared to the entity’s total carrying amount of goodwill or intangible assets with indefinite useful lives. The amendments require an entity instead to disclose the recoverable amount of an individual asset (including goodwill) or a cash-generating unit for which the entity has recognised or reversed an impairment loss during the reporting period. The amendments also require an entity to disclose additional information about the fair value less costs of disposal, if recoverable amount is based on fair value less costs of disposal, of an individual asset, including goodwill, or a cash-generating unit for which the entity has recognised or reversed an impairment loss during the reporting period.
financial assets at fair value through profit or loss (fvpl) Financial assets at fair value through profit or loss comprise financial assets held for trading and financial assets designated as at fair value through profit or loss. Financial assets which the Group buys with the intention to resell in the near term are classified as held for trading. Financial assets designated as at fair value through profit or loss are irrevocably designated as such when initially recognised. Financial assets are primarily designated as at fair value through profit or loss in the following instances: – Financial assets backing insurance liabilities and liabilities arising from investment contracts for the account and risk of the Swiss Life Group’s customers (contracts with unit-linked features, separate accounts, private placement life insurance) in order to avoid measurement inconsistencies with the corresponding liabilities.
Assets associated with separate account/unit-linked contracts and private placement life insurance are included in financial assets designated as at fair value through profit or loss, investment property, derivatives and cash and cash equivalents. The related income and gains and losses are included in the income statement under the respective line items. The Group has allocated on a rational basis the proportion of acquisition costs related to the insurance and deposit components, respectively. The accounting policy for deferred acquisition costs applies to the portion of acquisition costs associated with the insurance component and the policy for deferred origination costs applies to the other portion (see 2.16 Intangible assets).
Brands and trademarks with a definite useful life of generally 5 to 20 years are amortised using the straight-line method over their useful lives.
2.21 employee benefits post-employment benefits The Swiss Life Group provides post-employment benefits under two types of arrangement: defined benefit plans and defined contribution plans.
For insurance contracts and investment contracts with discretionary participation features with fixed and guaranteed terms, the definition of estimates occurs in two stages. At inception of the contract, estimates of future deaths, surrender, exercise of policyholder options, investment returns and administrative expenses are made and form the assumptions used for calculating the liabilities during the life of the contract. A margin for risk and uncertainty (adverse deviation ) is added to these assumptions. These assumptions are “locked-in” for the duration of the contract. Subsequently, new estimates are made each year in order to determine whether the values of the liabilities so established are adequate in the light of these latest estimates. If the valuation of the liabilities is deemed adequate, the assumptions are not altered. However, if the valuation of the liabilities is deemed inadequate, the assumptions underlying the valuation of the liabilities are altered (“unlocked”) to reflect the latest estimates; no margin is added to the assumptions in this event.
Premiums ceded to reinsurers –29 –213 –47 –11 – 0 –300 102 –198
Net result 784 additions to non-current assets 2 258 252 130 3 5 0 2 648 – 2 648
Benefits and claims under insurance contracts –9 378 –2 139 –1 722 –19 – 1 –13 257 44 –13 214
Benefits and claims recovered from reinsurers 15 104 13 1 – –9 123 –44 79
product design The targets of risk management are supported by product design principles. Product design defines which guarantees and benefits are built into a specific product to respond to the demand from and expectations of customers. The actuarial bases used for this purpose should ensure that each individual product generates a sufficient contribution margin. To ensure that the Group’s principles are observed, guidelines on product management and underwriting are in place. As the Group’s insurance entities operate in a number of different countries, the local regulatory constraints may have an impact on the business units’ product range. These constraints must always be obeyed.
The liquidity analysis of financial liabilities and commitments is based on undiscounted cash flows by remaining contractual maturities, whereas insurance and policyholder participation liabilities are analysed by estimated timing of net cash outflows. For derivative financial instruments, the maturity analysis shows the fair values by contractual maturity. The analysis is made for amounts for the account and risk of the Swiss Life Group.
In CHF million life annuities – in payment 595 604 life annuities – deferred 637 652 annuities certain – in payment 10 17 annuities certain – deferred 43 45
In CHF million whole life and term life 25 484 11 330
The sensitivity analysis with regard to insurance risk is as follows: Higher overall mortality would have a significant positive effect on the embedded value of life annuities (survival risk) whereas the negative effect on the embedded value of contracts with mortality risk is comparatively limited due to corresponding reductions in policyholder bonuses. Therefore, this sensitivity is considered not significant as an adverse risk for the embedded value.
At 31 December 2013, if the interest rates had been 100 basis points lower, the embedded value would have been CHF 700 million lower (2012: CHF 567 million lower).
Financial instruments for the account and risk of the Swiss life group’s customers –2 –49
Swiss Life – Annual Report 2013 17 Intangible Assets including Intangible Insurance Assets
No impairment losses on the goodwill relating to “Swiss Life Select” were recognised in 2013.
Investment contracts without discretionary participation at amortised cost 30 36 43
Swiss life ag CHF 500 CHF 500 5.250% 2011 2016 494 492
BalaNCe aS aT eND oF PerIoD 54 32 146 156 200 188 restructuring provisions
Foreign currency translation differences – –2 0 – –1 – – – –3
Neue warenhaus ag, Zürich CH 100.0% 100.0% real estate oscar weber ag, Zürich CH 100.0% 100.0% real estate oscar weber Holding ag, Zürich CH 100.0% 100.0% asset management & real estate
Swiss life International Services ag, Schaan IN 100.0% 100.0% Services fraNCe
Swiss life Partner Service- und Finanzvermittlungs gmbH, münchen De 100.0% 100.0% Services
Swiss life Products (luxembourg) S.a., Strassen IN 100.0% 100.0% life insurance/reinsurance
(formerly awD gesellschaft für wirtschaftsberatung gmbH), wien IN 100.0% 100.0% Services
Swiss life gIo Canada group ltd, québec am from 14.11.2013 100.0% 100.0% asset management
Swiss Life Holding took advantage of the attractive market environment in 2013 to issue three financial instruments. Two senior bonds in the total amount of CHF 422 million (nominal CHF 425 million) were placed in May, comprising a tranche of CHF 225 million with a six-year maturity (coupon 1.125%) and a tranche of CHF 200 million with a ten-year maturity (coupon 1.875%). In addition, an unsecured, seven-year convertible bond in the amount of CHF 493 million (nominal CHF 500 million) was placed in November (coupon 0%). The proceeds of the transactions will be used for general corporate purposes. Interest on the bonds in 2013 amounted to CHF 3.8 million. As a result of the additional finance charges, total expenses increased from CHF 13 million in the previous year to CHF 18 million.
Reserve for treasury shares 26 17 balance carried forward from previous year 2 2 total profit shown in the balance sheet 91 107 totAl liABilitieS AND equity 5 635 4 762
The description of the compensation received by the members of the Board of Directors and the Corporate Executive Board and the tables showing the relevant amounts are generally based on those of previous years. The variable compensation to the Corporate Executive Board members for the 2013 financial year, which was determined by the Board of Directors at the beginning of 2014 and is paid or allocated as a bonus in cash and deferred compensation as well as in the form of future subscription rights to Swiss Life Holding shares (equity compensation plan, RSU plan), is published on an accrual basis as compensation for the 2013 financial year (accrual method). The members of the Board of Directors are granted exclusively fixed compensation, payable 70% in cash and 30% in Swiss Life Holding shares; the allocated shares are subject to a three-year blocking period.
4 pursuant to the pension fund regulations, occupational provisions were financed by the employer and the employee at a ratio of 70% to 30%.
Dow Jones STOXX 600 Insurance Index (in EUR) 31.12. 228.22 177.11 133.25 154.45 152.08