FRANK SCHNEWLIN — Born 1951, Swiss national Second Vice Chairman of the Board of Directors
Other appointments: – Vontobel Holding Ltd, Zurich, Member of the Board of Directors/Chairman of the Audit Committee – Drosos Foundation, Zurich, Member of the Board of
The performance of the Corporate Executive Board and the contributions made by the individual members are regularly discussed and evaluated by the Chairman’s and
Life in 1982, initially working in group insurance marketing and later assuming various project management roles relating to strategy development and expansion of Winterthur ’s international insurance business in Europe, Canada and the USA. In 1992 he relocated to the USA, where he worked in underwriting. From 1994 to 1997 he held a number of management positions at Winterthur International in London (including that of Managing Director) before being appointed Chief Underwriting Officer of this business area in 1998. In 1999 he moved to Credit Suisse Group, where he developed and implemented an internet bank in Luxembourg and was subsequently appointed Head of e-Investment Services Europe and member of the Personal Financial Services’ management. Ivo Furrer began working for Zurich Financial Services in 2002, initially in Germany as head of the international key account business, and in 2005 as a Member of the Global Corporate Executive Committee with responsibility for the development of key account and distribution management at global level. In 2007 he was appointed CEO Life Switzerland and Member of the Global Life Executive Committee of Zurich Financial Services.
AL After completing his business administration and economics studies at the University of St. Gallen and a two-year research activity at the Institute of International Economics, Thomas Buess launched his career in insurance in 1985. From 1985 to 1993 he assumed various positions in the area of finance at the ELVIA Group. In 1994 he joined Zurich Financial Services Group as Chief Financial Officer and Member of the Executive Committee of the Swiss P&C business unit. From 1997 to 1999 he was Chief Financial Officer of all Swiss operations. In 1999 Thomas Buess moved to the USA as Chief Financial Officer of Zurich Financial Services Group’s North American business area. In 2002 he was appointed Group Chief Financial Officer and Member of the Group Management Board. Thomas Buess went on to head the reorganisation of the life insurance business before assuming the role of Chief Operating Officer of Zurich Financial Services Global Life in 2004. In January 2009 he moved to Allianz Group as Head of Operational Transformation.
As Chairman of the Board of Directors, Rolf Dörig is affiliated to the employee benefits institutions of Swiss Life for the purpose of occupational provisions. The regular annual employer contribution in the period under review amounted to CHF 195 656.
Swiss Life communicates actively and openly both within and outside the company. The Investor Relations and Public Relations areas provide up-to-date reports to private and institutional investors, financial analysts, journalists and the public.
The increase in value of new business by 70% and of the new business margin from 0.9% to 1.4% is driven by change in business mix, change to the profit sharing approach and the continuous margin management.
The assumption changes are dominated by a favourable experience driven update of demographic assumptions, the ongoing cost reduction programme, and a revised policyholder participation approach in the light of the low interest rate environment.
Closing adjustments reflect the decrease of the euro exchange rate in 2010.
For 31 December 2010 Swiss Life reassessed the property volatilities considering historical data.
Swiss Life — Financial Statements 2010 7 Glossary and List of Abbreviations
Convertible debt, reclassification of equity component at maturity – –56 – – – 56 – – –
changes to future life policyholder benefit liabilities and expected annual policyholder bonuses.
– The fair value of borrowings, which are carried at amortised cost, is estimated using discounted cash flow calculations based upon the Group’s current borrowing rates for similar borrowings with remaining maturities consistent with the debt being valued. The fair value of hybrid debt is estimated based on a discounted cash flow approach, assuming guaranteed coupon payments until maturity or until the next call date for perpetual instruments. Swap rates plus a Swiss Life-specific spread are used for discounting.
Past experience, adjusted for the effect of current developments and probable trends, is assumed to be an appropriate basis for predicting future events. Actuarial estimates for incurred but not reported losses are continually reviewed and updated and adjustments resulting from this review are reflected in income.
Elimination of interest expense on convertible bonds – 2 – – – 2
DERIVATIVES FOR THE ACCOUNT AND RISK OF THE SWISS LIFE GROUP’S CUSTOMERS 5 – 10 – – – 36 of which derivatives designated and accounted for as hedging instruments
In 2010 and 2009 the Group entered into interest rate swaps to hedge the available-for-sale fixed-rate bond portfolios in CHF, USD and EUR against changes in the fair value attributable to interest rate risk. The fair value of the bond portfolios as at 31 December 2009 was CHF 0.8 billion in total. In 2010 hedge accounting was discontinued with regard to the interest rate risk of available -for-sale fixed-rate bond portfolios.
Interest income accrued on impaired loans from continuing operations was CHF 1 million as at 31 December 2010 (2009: CHF 2 million). The Group’s loan portfolio is monitored closely through the review of information such as debt service, annual reports and assessments. This information is evaluated in light of current economic conditions and other factors such as diversification of the property portfolio. This evaluation is part of the regular review to determine whether the allowance for potential loan losses is warranted. Management believes that the allowance for loan losses is sufficient. However, management cannot predict with assurance the impact of future economic circumstances or how the mortgage and real estate portfolios would be affected by various economic circumstances.
Crédit et services financiers (CRESERFI), Paris 239 110 129 43 56 9 3 33.4%
PRESENT VALUE OF FUTURE PROFITS (PVP) — The present value of future profits relates to portfolios of insurance contracts and investment contracts with discretionary participation acquired in a business combination or transfer of portfolios. These amounts, representing the present value of future profits amortised in proportion to gross profits over the effective life of the acquired insurance and investment contracts, relate to contracts acquired in Germany and France.
Effect of changes in actuarial assumptions and other movements 2 –4
Deposits released for payments on death, surrender and other terminations during the year –666 –716
In September 2010, the Swiss Life Group announced an amendment of the terms of two major defined benefit plans in Switzerland. The amendments mainly relate to
The liability for long-term employee benefits amounted to CHF 0.1 million as at 31 December 2010 (2009: CHF 7 million). It relates to part-time employment contracts prior to retirement and to profit-sharing arrangements for certain employees.
A share-based payment programme was established which gives the members of the Corporate Executive Board and senior employees the right to receive a certain number of Swiss Life Holding shares (performance share units, PSUs) after three years of service if certain conditions are fulfilled. The number of the shares allocated depends on two criteria. One criterion is the performance of the share price of the Swiss Life Holding share during the vesting period of three years. The other criterion is the performance of the share price of the Swiss Life Holding share during the vesting period of three years compared to the performance of the Dow Jones STOXX 600 Insurance Index. For the PSUs issued in 2010, a maximum possible factor of 2.0 applies. For the PSUs issued in 2007, 2008 and 2009, the maximum possible factor is 1.5. No minimum possible factor is applied in 2007, 2008, 2009 and 2010 so that the number of PSUs could drop to zero after three years.
Increase/reduction in taxes resulting from lower taxed income –277 –188 non-deductible expenses 104 142 other income taxes (incl. withholding taxes) 15 43 change in unrecognised tax losses 40 38 adjustments for current tax of prior periods 17 17 changes in tax rates 0 0 intercompany effects –21 –80 other –1 0
NET DEFERRED INCOME TAX ASSETS/LIABILITIES –551 25 –150 –1 1 –676
In 2009, the reduction in share premium due to the cancellation of the SLH shares bought back through a second trading line amounted to CHF 635 million.
BALANCE AS AT END OF PERIOD 32 081 054 32 081 054
Swiss Life has defined a target capitalisation in line with its rating ambition. In the Standard & Poor’s risk-based insurance capital model the total adjusted capital (TAC) is the measure used for capital available to meet a company ’s capital requirements. TAC is set against the capital required given the company’s targeted rating category (target capital). The factor-based model takes into account, among other factors, insurance risks, asset value volatility and credit risks. Within the capitalisation analysis, in addition to assessing capital adequacy, Standard & Poor’s also assesses the quality of capital in its various dimensions such as debt, hybrid and reinsurance leverage.
Swiss Life Holding AG, Zürich Other – – CHF 307 978
Swissville Commerce AG, Zürich Ins. CH 100.0% 100.0% CHF 150 900
Swiss Life Dynapierre, Paris Ins. FR 99.9% 100.0% EUR 7 317
AWD Gesellschaft für Wirtschaftsberatung GmbH, Wien AWD 100.0% 100.0% EUR 727
Swiss Life Products (Luxembourg) S.A., Branch Austria, Wien Ins. Other from 01.01.2010 100.0% 100.0% – –
CONTINGENCIES — Swiss Life Holding acts as warrant or for all Swiss Life Ltd liabilities with regard to the various tranches of the subordinated perpetual step-up loan (hybrid debt), which amounted to an equivalent value of CHF 1847 million at the balance sheet date.
Reserve for own shares (incl. reduction in par value) 7 976
Personal performance based on the specified quantitative and qualitative objectives is assessed annually in the employee appraisal procedure implemented throughout the Group (Group Performance System, GPS). Two assessment elements/models are used for determining objectives and evaluating performance: the Group Objectives Model (GOM) relating to qualitative and quantitative objectives and the Group Competency Model (GCM) for measuring and assessing individual competencies.
At Corporate Executive Board level, the amount of the bonus depends 60% directly on the company’s success. As mentioned above, the following key figures are included in the Key Performance Indicators (KPIs) used to assess company success: the annual profit, costs, business volume, return on equity and solvency, as well as the profitability of in-force and new business and margin performance. The weighting of the individual KPIs is determined by the Board of Directors. 40% of the bonus is based on Corporate Executive Board members’ achievement of specified personal goals. On the one hand, these personal goals are linked back to the company’s success, in that each Corporate Executive Board member has to meet personal quantitative objectives contributing to the company’s success in relation to his division. On the other hand, the personal goals cover qualitative factors, namely project targets, risk management and compliance goals, as well as requirements relating to leadership and to supporting and further developing corporate culture.
For comparison purposes, the corresponding details of the compensation for 2009, as published in the Annual Report 2009, are shown in a separate table below the compensation table for 2010.
In our opinion, the financial statements for the year ended 31 December 2010 comply with Swiss law and the company ’s articles of incorporation.
Despite a promising outlook in general, major developments will pose a challenge to our industry in the coming years. Regulatory changes will have an impact on our products and services at all levels. For example, the riskbased solvency requirements embodied by the Swiss
of major new operational improvements and a further reduction in costs of 8%. In France, thanks to a rise in productivity and a better financial margin, Swiss Life increased its result from operations by 10% (currency adjusted) to CHF 162 million and improved its new business margin. As a result of a one-off negative effect (CHF –80 million) caused by the raising of the retirement age, the segment result in France stood at CHF 82 million. Germany improved its segment result by 11% to CHF 102 million. In the Insurance Other segment, where Swiss Life made further investments last year in expanding its global business and in the product platform in Luxembourg, losses were reduced by 19% to CHF –35 million. With a 34% increase in result over the previous year, Investment Management contributed CHF 103 million to the Group result. Following its successful reorganisation, AWD posted an impressive operating profit of EUR 49 million (2009: EUR –41 million), improving its EBIT margin to 9% (2009: –7.8%).
Employee performance assessment is standardised in the Group Performance System (GPS), which systematically governs employee performance reviews, the setting of objectives, appraisals and decisions on salary and promotions within the framework of the performance culture. Particular emphasis was placed in all divisions in 2010 on an even more differentiated and performance-based employee assessment, with relevant training for all managers.
ECOLOGICAL BALANCE SHEET — Reducing energy consumption and emissions — Swiss Life’s specialist unit for environmental management has produced an annual environmental data report for the company in Switzerland since 2006 and for the whole Swiss Life Group since 2008. In accordance with the standard set by the Association for Environmental Management and Sustainability in Banks, Savings Banks and Insurance Companies, the report collects and analyses data on electricity, heating, paper, transport, water and waste disposal and proposes measures for improvement. The Association’s standardised key figures make for fair comparison of the results for the different companies.
The results achieved by the Swiss Life Group are encouraging. In 2009, energy consumption (electricity and heating ) went down by about 1.7 million kWh by comparison with the previous year’s figure. The results for 2010 are not yet available. While the overall distance travelled for business purposes remained the same, there was a shift from air travel to trains and motor vehicles. Thanks mainly to improvements in the categories of energy and transport, the main causes of greenhouse gas (GHG) emissions, a reduction of about 1000 tonnes of such emissions was achieved in 2009. Total GHG emissions in 2009 amounted to 12 700 tonnes. For the first time, the 2010 report, which appears in mid 2011, will contain the data from all divisions, including the subsidiary AWD.
“Surprise” is the leading Swiss street magazine. Appearing every two weeks and characterised by the high quality of its journalism, it is sold almost exclusively on the streets. The 300 or so street vendors are all socially marginalised and unable to enter the jobs market. Their work for “Surprise” enables them to structure their day, to regain self-confidence and to earn a modest wage through their own efforts. For many of them this constitutes the first step back into society and gives them hope of leading a normal working life again. For a number of its people, Surprise has created part-time “lucky-break jobs” that pay them enough to live on. In this way, Surprise is taking effective action to combat poverty and social exclusion in Switzerland, and Swiss Life’s Perspectives Foundation is supporting them financially in their endeavours.
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 July 2002, and was revised on 1 January 2007 and 1 July 2009, and also takes into consideration the regulations on transparency stipulated in the Swiss Code of Obligations with regard to the compensation of members of the Board of Directors and the Corporate Executive Board and FINMA circular 2010/1 on minimum standards for remuneration schemes of financial institutions. Further information on the Code of Compliance and the values of the Swiss Life Group can be found in the “Values” section on page 38.
AL Franziska Tschudi graduated in law at the University of Berne and passed her bar exam there in 1984.
She studied law at Georgetown University, Washington DC, earning an LL.M., and passed the bar exam for the US states of New York and Connecticut in 1987. Franziska Tschudi completed postgraduate studies at the University of St. Gallen (1991 to 1993), receiving an Executive MBA. After initially working as an Assistant for Media Law at the Institute for Constitutional and Administrative Law at the University of Berne, and practising business and media law in Zurich, Washington DC and Geneva, she served as Secretary General at SIG Holding AG from 1992 to 1995. She then became a Member of the Executive Board of WICOR HOLDING AG (“WEIDMANN Group”), Rapperswil in 1995, where she was Head of Corporate Development and, from 1998, Head of the
Other appointments: – BIOMED AG, Dübendorf, Member of the Board of Directors – Swiss-American Chamber of Commerce, Zurich,
Compensation Committee and the Board of Directors, with no members of the Corporate Executive Board being present. The acceptance of directorships and senior political or military roles by members of the Corporate Executive Board is subject to the consent of the Chairman of the Board of Directors.
Life in 1982, initially working in group insurance marketing and later assuming various project management roles relating to strategy development and expansion of Winterthur ’s international insurance business in Europe, Canada and the USA. In 1992 he relocated to the USA, where he worked in underwriting. From 1994 to 1997 he held a number of management positions at Winterthur International in London (including that of Managing Director) before being appointed Chief Underwriting Officer of this business area in 1998. In 1999 he moved to
Board – Commerzbank, Frankfurt am Main, Member of the Regional Advisory Committee North
Dividend yield on year-end price (in %) 30.12. 1.78 30.12. 3.79