The successful 2016 financial year enables us to propose a dividend increase from CHF 8.50 to CHF 11.00 to the Annual General Meeting of Shareholders on 25 April 2017.
In 2016, Swiss Life earned direct investment income of CHF 4.3 billion (2015: CHF 4.3 billion). The net investment result was CHF 4.8 billion (2015: CHF 5.2 billion), which equates to a net investment yield of 3.3% (2015: 3.7%). The investment yield allowed Swiss Life to again strengthen the insurance reserves by about CHF 1 billion, and thus shore up the sustainability of its business model.
Long-term initiatives contributed to this result, such as the proven distribution strategy with the sales force channels, Swiss Life Select plus brokers and partners, the expansion of the service and product offering, increased customer orientation and a renewed reduction in operating costs.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 1 290 1 399 –8%
The International segment comprises cross-border business for high net worth international individuals (Global Private Wealth) and multinational companies (Global Employee Benefits), as well as the financial services providers Swiss Life Select in Austria and the Czech Republic, and Chase de Vere in the United Kingdom.
In November 2016 Swiss Life Asset Managers acquired London-based Mayfair Capital Investment Management Ltd., an independent real estate management company with 16 employees and some GBP 1 billion in real estate investments under management. Mayfair Capital serves a variety of customers, with a focus on British institutional investors. In Germany Swiss Life was granted approval by the supervisory authority in November 2016 to administer real estate funds via a proprietary investment management company. Swiss Life Asset Managers intends to use this company to join its German subsidiary Corpus Sireo in promoting business with institutional and private investors in one of Europe’s leading investment markets. Thanks to these new markets and customer segments, as well as increased cross-border collaboration, Swiss Life Asset Managers has been able to lay the groundwork for further growth in third-party business and the expansion of its own position in its core markets.
Shares 32 081 201 fully paid Swiss Life Holding registered shares with a par value of CHF 5.10 each were outstanding on the balance sheet date. Subject to the ten per cent limit on voting rights set out in the Articles of Association (cf. the section on “Shareholders’ participation rights” on page 69), each share grants the right to one vote at the General Meeting of Shareholders.
In September 2008, Ivo Furrer joined the Swiss Life Group as Member of the Corporate Executive Board and Chief Executive Officer Switzerland (CEO Switzerland). He will leave the company on 31 March 2017.
The 2013–2015 equity compensation plans are based on the Group-wide programme “Swiss Life 2015”, which had been announced at the Swiss Life Group’s Investors’ Day on 28 November 2012 (see www.swisslife.com/investorsday2012). With regard to the 2013 and 2014 equity compensation plans, the Board of Directors set the following performance criteria on the basis of the medium-term planning 2013–2015 (2013 equity compensation plan) and 2014–2016 (2014 equity compensation plan): cost efficiency (50% weighting), risk and fee result (25% weighting) and IFRS profit (25% weighting). 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). The 2016 and 2017 equity compensation plans are based on the new Group-wide programme “Swiss Life 2018”, which was announced at the Swiss Life Group’s Investors’ Day on 25 November 2015 (see www.swisslife.com/investorsday2015 ). For the purpose of supporting the achievement of the respective corporate goals, performance criteria have been determined by the Board of Directors analogously to the previous year’s objectives (IFRS profit, 50% weighting; risk and fee result, 25% weighting; Cash to Swiss Life Holding, 25% weighting).
The compensation paid to members of the Board of Directors in the 2016 financial year is shown on an individual basis in the 2016 compensation table below. For comparison purposes, the compensation for the 2015 financial year is shown again after the 2016 compensation table.
Other members of Corporate Executive Board 1,2 6 044 401 2 925 500 109 549 9 079 450 0 0 9 079 450 1 6 individuals were taken into account in the period under review who were on the Corporate Executive Board during the full reporting year.
Aggregate total compensation incl. deferred compensation in cash and RSUs Amount 8 Number Amount (amount)
10 For the 2016 RSU plan beginning 01.03.2016 the 2015 financial year forms the basis for the amount of the allocation and the corresponding number of allocated RSUs. The allocation of RSUs on 01.03.2016 was effected at a fair value of CHF 215.66, as calculated by an independent consultancy firm.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Risk management is a key component of Swiss Life’s management process. The respective committees of the Corporate Executive Board and the Board of Directors continually monitor and take decisions in the area of risk management; these are then incorporated into the annual planning process. On the one hand, they comprise qualitative assessments from a strategic perspective, taking into consideration operational risks and the internal control system (ICS). On the other hand, quantitative elements, such as risk appetite at Group level or risk budgeting and investment strategy for the insurance units are included in Asset Liability Management. Based on overall risk capacity and risk appetite and taking account of regulatory provisions, limits are set in the individual units for the financial risks incurred, according to which the investment targets are set in the individual units for the financial risks incurred, according to which the investment targets are set.
Following the rating upgrade to “A–” in May of 2012 and the raising of the outlook from “stable” to “positive” in May 2014, Standard & Poor’s recognised Swiss Life’s further operational progress and increased its rating to “A with outlook stable” in May 2015.
Responsibilities The STC CR is the central steering committee for Corporate Responsibility at Swiss Life in Switzerland: it develops the CR strategy, approves corresponding measures and initiatives and ratifies objectives, resources and budgets.
Swiss Life is one of Europe’s leading institutional real estate investors and has the biggest private real estate portfolio in Switzerland. The long-term maintenance and increase of real estate value is a key component of Swiss Life’s portfolio management. This includes outfitting buildings for the future. That is why Swiss Life invests several hundred million francs a year in the renovation of its properties, ensuring the responsible use of resources and active environmental management in doing so.
That is why Swiss Life needs to know what topics are being discussed in political circles, so it can better understand the opinions, expectations and perceptions of political groups. It is also important to gauge how the enactment or amendment of legal principles could affect Swiss Life’s business. Swiss Life is committed to promoting a competitive business location and appropriate regulation density in all its core markets.
Employee engagement is strengthened by a range of local initiatives: – Enhanced communications measures, such as regular townhall meetings, “Meet the CEO” events, team meetings and specific online communication regarding corporate strategy and its implementation
Switzerland – One agreement concerning “simplified recording of working hours”, which entered into force on
Page number in GENERAL STANDARD DISCLOSURES Annual Report 2016 Reasons for omission STRATEGY AND ANALYSIS
G4-LA3 Post parental leave retention Labour/Management Relations p. 73, p. 108–109
G4-LA9 Average annual number of hours for education and training p. 112
G4-PR1 Product and service categories tested for safety and health implications p. 95
Workforce absences employees, total 2.8% 2.7% n/a n/a AR, p. 117
Health impact of environmental changes listed as a business risk factor yes yes yes yes
Company has a risk management framework yes yes yes yes AR, p. 74
In 2016, in a survey carried out by Reader’s Digest Switzerland, Swiss Life was once again voted “Most Trusted Brand” in the Life Insurance category. Furthermore, in 2016 the “Best Swiss Brands” study, conducted for the past several years by Interbrand, again lists Swiss Life, with a brand value of CHF 299 million (+7%), among the 50 most valuable brands in Switzerland.
The value of new business and margin increased as a result of active new business steering across the Group, offsetting the overall decreased volumes and the negative effect from capital market interest rate development.
–239 296 –53268 2.3 Value of new business 2.3.1 Value of new business, premiums and margins
Value of new business Value of new business contributions from free surplus and required capital sum up to the new business strain of CHF –131 million (2015: CHF –165 million). This represents the shareholders’ share in acquisition expenses for new business. The VIF component of CHF 428 million (2015: CHF 433 million) is the value of future profits from new business.
10% decrease in equity / property market values –882 –8% 1 1
Reconciliation of IFRS net assets to Group MCEV as at 31 December 2016
Germany The MCEV increased by CHF 156 million. The substantially higher value of the in-force business results mostly from the move to the Solvency II valuation curve and the refined interest rate model as well as from a substantially increased value of new business.
Economic variances are positive, mainly influenced by the strong real estate performance and lower credit spreads, which more than compensated for the negative interest rate effect.
Required capital (RC) The required capital is the market value of assets, attributed to the covered business – over and above that required to back liabilities for covered business – whose distribution to shareholders is restricted. For comparability with prior years, Swiss Life continues to base the amount of required capital on 150% of the level according to Solvency I, except for assumed external reinsurance where an economic approach is used instead.
5.1.1 Reference rates The reference rates used for the calculation of the MCEV 2016 are based on the swap rates as at 31 December 2016 and include, where appropriate, a credit risk adjustment (CRA) and a volatility adjustment (VA). As some of Swiss Life’s liabilities are running longer than asset durations are available on financial markets in sufficient depth and liquidity, an extrapolation of yields is applied to assess swap rates beyond this horizon. Extrapolation of the yield curves, including ultimate forward rate and last liquid point, and determination of CRA and VA follow the Solvency II principles. EIOPA’s technical specifications are applied, with refinements for Swiss franc regarding the last liquid point and the volatility adjustment.
United States 50bp 84bp 5.1.1.4 Credit risk adjustment as at 31 December 2016
Liability adequacy test If the actual results show that the carrying amount of the insurance liabilities together with anticipated future revenues (less related deferred acquisition costs [DAC] and related intangible assets) are not adequate to meet the future obligations and to recover the unamortised DAC or intangible assets, the entire deficiency is recognised in profit or loss, either by reducing the unamortised DAC or intangible assets or by increasing the insurance liabilities. The liability adequacy test is performed at portfolio level at each reporting date in accordance with a loss recognition test considering current estimates of future cash flows including those resulting from embedded options and guarantees.
Revenue from sales is recognised when construction is complete and legal title to the property has been transferred to the buyer. Revenue and related costs of sales are presented in other income as net income on property development.
Benefits and claims under insurance contracts –10 002 –1 836 –1 298 –26 – 0 –13 163 14 –13 149
Group risk management is responsible for the definition of the Group-wide methodology for the measurement of the risks and produces a consolidated risk report which consolidates the main quantitative elements of the risk management of the Swiss Life Group’s operations. Furthermore, Group risk management also produces consolidated views on the operational and strategic risks of the Swiss Life Group.
Distribution policy The distribution policy seeks to align the interests of the different groups of stakeholders. Holders of traditional life insurance policies favour a guaranteed minimum interest rate coupled with regular and appropriate discretionary participation, whereas shareholders place greater emphasis on returns commensurate with the level of risk they are exposed to. The focus of the Swiss Life Group lies on the sustainability of the business model and should balance the policyholders’ and shareholders ’ expectations.
TOTAL EXPOSURE TO CREDIT RISK 122 897 117 470 8 227 8 410 131 124 125 880
At 31 December 2016, if the interest rates had been 100 basis points higher, the embedded value would have been CHF 740 million higher (2015: CHF 987 million higher).
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 17 366 18 853
Realised gains/losses on sales of subsidiaries and other assets 0 1
Change in liability for future life policyholder benefits, gross 2 699 4 532
Forward contracts are used as hedging instruments to protect non-monetary investments against adverse movements in euro, British pound and US dollar exchange rates. Such investments include equity securities, hedge funds and investment funds (equity funds, real estate funds and corporate loan funds).
TOTAL ALLOWANCE FOR IMPAIRMENT LOSSES 11 11 30 32 42 44
BALANCE AS AT END OF PERIOD 553 51 60 26 690
Foreign currency translation differences 0 –1 –11 –96 0 –3 –11 –101
As at 31 December 2016, customer relationships comprise customer relationships relating to Swiss Life Select: CHF 4 million (31.12.2015: CHF 4 million), which were allocated to the “Switzerland” segment. The “France” segment comprises customer relationships of CHF 15 million (31.12.2015: CHF 20 million) and the “Asset Managers” segment of CHF 51 million (31.12.2015: CHF 46 million). Customer relationships were included in the impairment test of the respective cash-generating unit.
In March 1999, Swiss Life Ltd privately placed a subordinated perpetual step-up loan comprising three simultaneous advances of EUR 443 million (at a rate of interest of Euribor plus a margin of 1.05% p.a., increased by 100 basis points as from April 2009), CHF 290 million (at a rate of interest of Libor plus a margin of 1.05% p.a., increased by 100 basis points as from April 2009) and EUR 215 million (at a rate of interest of Euribor plus a margin of 1.05% p.a., increased by 100 basis points as from October 2009). In 2009, Swiss Life Ltd renounced the right to call the loan on its first call date. Following the purchase offer by Swiss Life Insurance Finance Ltd. in 2012, EUR 192 million remain outstanding. Swiss Life Ltd renounced the right to call the loan on the second optional call date in April 2014 and can next call it in 2019 or at five-year intervals thereafter, at its discretion, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority.
Swiss Life AG CHF 450 CHF 450 3.750% 2016 2021 447 –
Employees are covered under various funded and unfunded pension plans which operate under local regulations and practice. The major part of the defined benefit liability recognised arises from the plans covering employees in Switzerland. The impact on the consolidated financial statements arising from the plans covering employees in Germany and France is far less significant. Generally, the level of benefits is based on years of service and average compensation preceding retirement, and the main benefit is a pension after retirement or a lump-sum payment at the time of retirement. Most plans are funded and the funding is governed by local requirements and with respect to the liability (determined based on actuarial methods) based on the plans’ benefit promises. For several plans, contributions are not only made by the employer, but also by the employee (generally as a part of gross salaries).
The expense recognised for share-based payment amounted to CHF 12 million in 2016 (2015: CHF 12 million).
“Litigation” relates to several proceedings in several jurisdictions with uncertain outcome including customer claims relating to the distribution units in Germany. Litigation provisions have been set up to cover legal and administrative proceedings that arise in the ordinary course of business. These provisions concern numerous cases that are not of public knowledge or whose detailed disclosure could prejudice the interests of the Group.
The Swiss Solvency Test (SST) is the Swiss legislation which governs the capital requirements of insurance companies and groups. 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 January 2011. The SST is a principle-based framework whose 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.
In 2016 and 2015, no significant disposals of subsidiaries took place.
at the end of the period –19 –12 –24 –370 763 648
Swiss Life Investment Management Holding AG, Zürich AM 100.0% 100.0% Holding
SL Beteiligungs-GmbH & Co. Immobilien VI KG, Garching b. München DE from 16.11.2016 100.0% 100.0% Real estate
We have audited the consolidated financial statements of Swiss Life Holding Ltd and its subsidiaries (the Group), which comprise the consolidated balance sheet as at 31 December 2016 and the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of cash flows, consolidated statement of changes in equity for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
Performance of Dow Jones STOXX 600 Insurance Index (in %) –6 +14 +10 +29 +33