The main driver of the investment business result is our exceptional know-how in the areas of corporate and government bonds and real estate. Our experience and our reputation in the market were the basis for the very successful expansion of our services for external customer assets. At the end of 2014 we achieved a further net new asset inflow of CHF 4.5 billion. This brought total assets under management for external customers to CHF 33.7 billion, up 22%.
Swiss Life Switzerland confirmed its high earnings power of the previous year with a contribution of CHF 657 million. Changes in the accounting standards (IFRS 13) during the prior-year period had a positive impact of CHF 60 million. Adjusted for this one-off effect, the result would be on a par with the previous year. In France, Swiss Life posted an increase in profits of 13% to EUR 178 million. Swiss Life Germany contributed EUR 76 million, almost on a par with the previous year (–2%). Significant progress was made at Swiss Life International: The segment result more than doubled from CHF 16 million in the previous year to CHF 34 million. The segment result for Swiss Life Asset Managers also showed a positive trend, up 13% to CHF 188 million (2013: CHF 166 million), with CHF 14 million originating from CORPUS SIREO.
Most of the “Swiss Life 2015” goals achieved ahead of schedule
Cash and cash equivalents and other 2 819 1.9% 241 0.2%
Fee and commission income increased by 11% in 2014 to CHF 425 million, mainly due to higher advisor productivity.
In order to implement the Ordinance against Excessive Compensation in Listed Stock Companies (Compensation Ordinance, VegüV), which came into force on 1 January 2014, the General Meeting of Shareholders on 23 April 2014 approved a corresponding amendment to the Articles of Association as proposed by the Board of Directors. With reference to corporate governance and in compliance with the Compensation Ordinance, the members of the Board of Directors are to be elected for a one-year term of office, as had already been introduced by Swiss Life at the 2013 General Meeting and implemented at the General Meeting of last year. Also the Chairman of the Board of Directors, as well as the members of the Compensation Committee and the independent voting representative are now to be appointed by the General Meeting of Shareholders. As far as the Swiss Life Group’s compensation system is concerned, the principles of the existing system were incorporated into the revised Articles of Association. Furthermore, the Articles specify the maximum number of additional mandates, which members of the Board of Directors and the Corporate Executive Board are permitted to hold. They also include provisions on the granting of loans and credit to members of the Board of Directors and the Corporate Executive Board as well as further stipulations regarding corporate governance.
This report describes the essential features of corporate governance within the Swiss Life Group. The structure below largely follows the Directive on Information Relating to Corporate Governance issued by the SIX Swiss Exchange, which came into force on 1 October 2014. The compensation
Since the establishment of Swiss Life Holding on 17 September 2002, a number of capital market transactions have been conducted. A detailed description of the transactions carried out up to and including the end of 2011 can be found in the Corporate Governance section of the annual reports for the relevant years. The annual reports can be accessed at www.swisslife.com, “Investors ” area, “Results & Reports” section, “Archive Reports” and “Annual Reports” subsections (www.swisslife.com/annualreports).
Other appointments: – Büchel Holding AG, Member of the Board of Directors – Grand Resort Bad Ragaz Ltd., Member of the Board of Directors – Montfort Werbung AG, Member of the Board of Directors – Tschütscher Networks & Expertise AG, Owner and Chairman of the Board of Directors – Instinctif Partners, Senior Advisor
In April 2014 Markus Leibundgut was appointed CEO Germany and Member of the Corporate Executive Board of the Swiss Life Group.
Suisse Asset Management. At the same time, he was the driving force behind the foundation of the listed real estate company Swiss Prime Site AG, where he served as Chairman of the Board of Directors until 2005. From 2005 until 2009 he worked for Deutsche Bank, initially assuming responsibility for managing family offices in Switzerland and in the final two years serving as CEO of Privatbank Rüd, Blass & Cie AG. As Chief Investment Officer and Member of the Group Executive Board, Stefan Mächler was in charge of asset management at the Swiss Mobiliar Group from 2009 until 2014.
Additional information on compensation and benefit expenditure for the management and employees of the Swiss Life Group can be found in the Consolidated Financial Statements (notes 23 and 29) on pages 210 to 219 and 231 to 232. The information according to Art. 663c of the Swiss Code of Obligations regarding the shareholdings of members of the Board of Directors and the Corporate Executive Board is shown in the Notes to the Swiss Life Holding Financial Statements on pages 265 to 267.
The 2013–2015 equity compensation plans are based on the Group-wide programme “Swiss Life 2015”, which was announced at the Swiss Life Group’s Investors’ Day on 28 November 2012 (see www.swisslife.com/investorsday2012). On the basis of the medium-term planning 2013–2015 (2013 equity compensation plan) and 2014–2016 (2014 equity compensation plan), performance criteria relating to cost efficiency (50% weighting), the risk and fee result (25% weighting) and IFRS profit (25% weighting) have been determined by the Board of Directors. With regard to the 2015 equity compensation plan, the Board of Directors has set the following performance criteria on the basis of the medium-term planning 2015–2017: IFRS profit (50% weighting), the risk and fee result (25% weighting) and Cash to Swiss Life Holding for further strengthening of the financial substance and payout capacity (25% weighting). After expiry of the thee-year period of the RSU plan, the target value for each performance criterion according to the medium-term planning is compared with the actual result achieved. The share allocation corresponds to the number of allocated RSUs (1 RSU = 1 share) if all three performance criteria have been achieved or exceeded after the three-year period has elapsed; overperformance does not lead to a higher share allocation. If the targets are only partly achieved, the share allocation is correspondingly reduced in accordance with the weighting of the performance target concerned or the RSUs expire worthless.
Other members of Corporate Executive Board 1,2 5 615 374 2 793 081 115 167 8 523 622 0 0 8 523 622 1 Seven individuals were taken into account in the period under review. For Bruno Pfister, Group CEO until 30 June 2014, and Manfred Behrens, CEO Germany until 31 March 2014, compensation is disclosed for both the period of their membership of the Corporate Executive Board and the period until termination of their employment relationship on 30 November 2014 and 31 December 2014 respectively. For Markus Leibundgut (appointed on 1 April 2014) and Stefan Mächler (appointed on 1 September 2014), compensation is reported pro rata for the period of their membership of the Corporate Executive Board in 2014.
On the balance sheet date of 31 December 2014, acting members of the Board of Directors and the Corporate Executive Board (including closely linked parties) held the following number of Swiss Life Holding registered shares and future subscription rights to Swiss Life Holding shares in the form of Restricted Share Units (RSUs): Board of Directors
Swiss Solvency Test The Swiss Solvency Test (SST) is the Swiss 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 principles-based 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.
Swiss Life – Annual Report 2014 1 Copyright © Stichting CFO Forum Foundation 2008 1 Introduction 1.1 Basis of preparation
1 New business strain represents the effect on the net asset value from writing new business.
The graph and table below show the analysis of earnings for the covered business in 2014.
The higher free surplus (and similarly the net assets) results from a considerable annual profit achieved despite further balance sheet strengthening, financing new business production and a dividend payment.
Germany The MCEV increased by CHF 114 million mainly due to favourable biometric experience and updated expense assumptions. On the other hand, the Life Insurance Reform Act negatively affected the MCEV as a result of the higher policyholder participation in the risk result.
New business annual premium equivalent (aPE) 487 522 72 223 1 304 1 New business strain represents the effect on the net asset value from writing new business.
Value of new business by market unit – premiums and margins for the year 2013 amounts in CHF million
The spread (over swap rates) applied for the valuation of the hybrid debt was updated based on a subordinated bond index and amounts to 287bp as at 31 December 2014. For the opening MCEV the spread amounted to 96bp.
Swiss Life – Annual Report 2014 5.1.4 Inflation assumptions The inflation assump tions have been derived from inflation-linked bond prices, where inflationlinked bonds are traded. For the Swiss economy, the real interest rate model is calibrated on the inflation forecast by Consensus Economics, an international economic survey organisation.
5.2.1 Tax assumptions 1 Following French legislation the tax rate assumption applied for 2015 is 38.0%. 2 Following French legislation the tax rate assumption applied for 2014 is 38.0%.
The consolidated financial statements of Swiss Life have been prepared in accordance and comply with International Financial Reporting Standards (IFRS). The consolidated financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which are stated at their fair value: derivatives, financial assets and liabilities at fair value through profit or loss, financial assets classified as available for sale and investment property.
“Regular way” purchases and sales of financial assets are recorded on the trade date. The amortisation of premiums and discounts is computed using the effective interest method and is recognised in profit or loss as an adjustment of yield. Dividends are recorded as revenue on the ex-dividend date. Interest income is recognised on an accrual basis.
Investment property is carried at fair value and changes in fair values are recognised in profit or loss. Fair values are determined either on the basis of periodic independent valuations or by using discounted cash flow projections. The valuation of each investment property is reviewed by an independent recognised valuer at least once every three years. Rental income is recognised on a straight-line basis over the lease term. The fair value of an investment property is measured based on its highest and best use. The highest and best use of an investment property takes into account the use of the asset that is physically possible, legally permissible and financially feasible.
Swiss Life – Annual Report 2014 at the discretion of the issuer. These DPF are contractually based on the performance of a specified pool of contracts or a specified type of contract or on the realised and unrealised investment returns on a specified pool of assets held by the issuer or on the profit or loss of the company. The unrealised investment returns comprise gains/losses recognised in other comprehensive income.
Swiss Life – Annual Report 2014 reinsurance The Group assumes and/or cedes insurance in the normal course of business. Reinsurance assets principally include receivables due from both insurance and reinsurance companies for ceded insurance liabilities. Amounts recoverable or due under reinsurance contracts are recognised in a manner consistent with the reinsured risks and in accordance with the terms of the reinsurance contract. Reinsurance is presented in the consolidated balance sheet and income statement on a gross basis unless a right and the intention to offset exist.
– Amendments to IAS 27 Separate Financial Statements (Equity Method in Separate Financial Statements)
Swiss Life – Annual Report 2014 5.2 risk budgeting and limit setting
Financial guarantees Debt loans and Cash and cash Derivatives reinsurance and loan securities receivables equivalents (assets) assets commitments Total
The Swiss Life Group’s European insurance and investment operations (excluding Switzerland) generally invest in assets denominated in the same currency as their insurance and investment contract liabilities, which mitigates the currency risk for these operations. As a result, currency risk arises from recognised assets and liabilities denominated in other currencies and net investments
Financial assets at fair value through profit or loss 1 420 3 534 1 994 1 892 28 975 26 059 32 389 31 486
estimate of ultimate claim costs by year of loss occurrence at end of year of loss occurrence 384 447 416 345 392 323 311 303 335 342 n/a
Depreciation of property and equipment 16 26 25 amortisation of present value of future profits (PvP) 17 1 1 amortisation of deferred acquisition costs (DaC) 17 314 474 amortisation of deferred origination costs (DoC) 17 11 11 amortisation of other intangible assets 17 32 27
Swiss Life – Annual Report 2014 9 Derivatives and Hedge Accounting
Investment funds – balanced 59 14 real estate funds 389 338 assets attributable to non-controlling interests of investment funds 1 090 2 358 assets for the account and risk of the Swiss life group’s customers 5 28 975 26 059
BalaNCe aS aT eND oF PerIoD 1 843 191 190 23 2 247 aCCumulaTeD amorTISaTIoN aND ImPaIrmeNT
BalaNCe aS aT eND oF PerIoD 6 193 6 270 85 90 6 108 6 180
Swiss Life – Annual Report 2014 period). In reality, it is unlikely that a change in assumption would happen in isolation. Some assumptions may well be correlated. In addition, the net effect in the consolidated balance sheet would also be driven by the change in the value of the plan assets.
In accordance with the federal act on the supervision of insurance companies and corresponding decree, Swiss Life reports to the Swiss Financial Market Supervisory Authority FINMA. The reporting covers risk management as outlined in note 5, Group Solvency I, legal structure, management organisation and intra-group transactions. The reporting is submitted on an ad-hoc, monthly, half-yearly or yearly basis depending on the topic and is reviewed on a yearly basis by the statutory auditor according to the legal requirements. As at 31 December 2014 and 2013, Swiss Life was compliant with the legal requirements.
In addition to the Group’s solvency requirements, the Solvency I and other statutory constraints at local level are considered to address the specific situation of each country and business unit.
Financial assets available for sale – 19 loans and receivables 34 1
The details regarding key management compensation in accordance with the Swiss Code of Obligations, Article 663bbis and Article 663c and the Federal Ordinance against Excessive Compensation in Listed Stock Companies are set out in the Compensation Report, which forms part of the Corporate Governance section of the Annual Report 2014 of the Swiss Life Group.
The fair value of assets or liabilities included in level 1 is based on unadjusted quoted prices in active markets for identical assets or liabilities. The fair value of assets or liabilities that are not traded in an active market is determined using valuation techniques. If all significant inputs to these valuation techniques are observable (directly and indirectly) in the market, the assets or liabilities are included in level 2.
for assets held at the end of the period – 3 –18 25 –20 577 0 278 845 1 including assets attributable to non-controlling interests of investment funds assets measured at fair value based on level 3 for the year 2013
for liabilities held at the end of the period – – 0 –46 – –
The total amount of credit commitments includes commitments to lend at fixed rates, which expose the Group to interest rate risk. These commitments are entered into for restricted periods of time. As at 31 December 2014, committed principal amounts stood at EUR 30 million and CHF 165 million (2013: EUR 57 million and CHF 72 million). The range of committed interest rates is 2.5% to 4.7% for commitments in euro and 1.0% to 2.7% for commitments in Swiss francs.
Securities lent in exchange for securities received 4 571 3 624 4 571 3 624
Swiss life International Services ag, Schaan IN 100.0% 100.0% Services 1 Segment (CH = Switzerland, am = asset managers, IN = International, Fr = France, De = germany)
SwISS lIFe reIm (France) (formerly viveris reIm), marseille am 70.1% 70.1% asset management
(formerly Swiss life Solutions ag), garching b. münchen De 100.0% 100.0% Services
(formerly Swiss life reIm (luxembourg) S.a.), Strassen am 100.0% 100.0% Investment funds
Swiss life gIo Holdings S.à.r.l., Strassen am from 07.11.2013 100.0% 100.0% asset management
Swiss life Insurance Solutions S.a., Strassen other 100.0% 100.0% life insurance/reinsurance
Swiss life Select Cee Holding gmbH, wien IN 100.0% 100.0% Holding
Swiss life gIo Canada group ltd, montréal am from 14.11.2013 100.0% 100.0% asset management
Swiss life Select Ceska republika s.r.o., Brno IN 100.0% 100.0% Services hungary
board of Directors’ responsibility The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Swiss Life Holding’s profit distribution to shareholders in the period under review came to CHF 176 million or CHF 5.50 per share and was made out of the capital contribution reserve. The par value of the Swiss Life Holding share stands unchanged at CHF 5.10. The company’s nominal share capital at the end of the year remained at CHF 163.6 million.
Assets and liabilities are stated in the balance sheet in accordance with the provisions of the Swiss Code of Obligations (CO). The Swiss Life Holding’s Financial Statements are presented in millions of Swiss francs (CHF), which is the presentation currency. Figures may not add up exactly due to rounding.
In 2014 no convertible bonds were converted into Swiss Life Holding shares.
Gross written premiums, policy fees and deposits received 19 102 17 969 17 046 17 143 20 191