Already in 2009, our employees have succeeded in substantially improving the company’s economic potential. This deserves recognition. We would like to extend our thanks to all our employees for their hard work and dedication. Rest assured that we, on the Board of Directors
Swiss Life generated an excellent result in the high net worth individual business, achieving premium volume of CHF 5 billion (2008: CHF 2.4 billion). Swiss Life in France put in a solid performance, particularly in the second half of 2009. Although total premium volume fell by 3% to CHF 5.3 billion, an increase of 5% in local currency was actually realised, after adjustment for a one-off impact. In Switzerland, premium income declined by 8% to CHF 7.5 billion which, adjusted for a one-off effect, represented a fall of 2%. AWD recorded a decline in sales of 17% – mainly due to the reorganisation of business in Austria and the reluctance of clients to invest in life and pensions solutions in the wake of the financial market crisis.
Swiss Life launched an array of attractive products in 2009: The unit-linked endowment insurance Swiss Life Champion Invest was introduced in the fourth quarter, as were Swiss Life Protection – a life insurance and/or disability insurance with an individual risk premium rate – and Swiss Life Active Win – a pure endowment insurance combined with a fixed-term deposit. In the second quarter, the company also added a variant of Swiss Life Champion Duo to its portfolio, offering policyholders the option of waiving the guaranteed lump-sum death benefit to receive higher savings premiums. In group life, Swiss Life met the requirement for a more diverse and flexible product portfolio by offering inexpensive standard products and customised solutions. In addition, it
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 5 297 5 763 –8.1%
Regional Advisory Committee North – tecis Finanzdienstleistungen AG, Hamburg, Chairman of the Supervisory Board
The compensation reported for the Board of Directors in 2009 includes the entire compensation received by Rolf Dörig as Delegate of the Board of Directors until 7 May 2009 and as Chairman of the Board of Directors from that date on. In view of the fact that Rolf Dörig held the positions of Group CEO until the Annual General Meeting of Swiss Life Holding on 8 May 2008 and Delegate of the Board following his election to the Board of Directors, his compensation in the period under review is shown in its entirety under the compensation to the Corporate Executive Board.
Net result from discontinued operations –47 1 488 6421 378 n/a
Swiss Life Holding Ltd, General-Guisan-Quai 40, 8002 Zurich, Switzerland, reported in a publication of 28 August 2009 that its stake of registered shares had fallen below the reportable threshold of 3% due to the cancellation of the proprietary shares repurchased under the share buyback programme. Until this date the shares were held by: Swiss Life Holding Ltd, General-Guisan-
The conditional share capital is at the disposal of the holders of conversion or option rights granted by the company or by companies belonging to the Group in connection with existing and new loan debentures or similar bonds issued by Swiss Life Holding or companies belonging to the Group. The shareholders are excluded from subscription rights, but their preemptive subscription rights remain safeguarded. The Board of Directors sets the conversion and option conditions.
ELECTIONS AND TERMS OF OFFICE — Pursuant to the Articles of Association, the Board of Directors shall consist of no fewer than five and no more than fourteen members. The members of the Board are elected by the General Meeting of Shareholders for a maximum term of three years, and on an individual basis. The Organisational Regulations stipulate that a member of the Board of Directors shall automatically resign from the Board at the Annual General Meeting of Shareholders in the year in which the member reaches the age of 70.
Eight meetings of the Investment and Risk Committee were held in the year under review. Each session lasted for around two and a half hours on average. The attendance rate was 90%. The Chairman of the Board of Directors attended all meetings with the exception of two. The Group CEO, Group CFO and Group CIO were present at all meetings.
Other appointments: – Swiss Insurance Association (SIA), Zurich, Chairman of the Life Insurance Committe – German-Swiss Chamber of Commerce, Zurich,
The compensation reported for the Board of Directors in 2009 includes the entire compensation received by Rolf Dörig as Delegate of the Board of Directors until 7 May 2009 and as Chairman of the Board of Directors from that date on. In view of the fact that Rolf Dörig held the positions of Group CEO until the Annual General Meeting of Swiss Life Holding on 8 May 2008 and Delegate of the Board following his election to the Board of Directors, his compensation for the 2008 financial year is shown in its entirety under the compensation to the Corporate Executive Board.
1 Incl. compensation for Rolf Dörig as Delegate and Chairman of the Board of Directors in 2009. His compensation for the 2008 financial year for his positions as Group CEO and BoD Delegate is shown in its entirety under the disclosure for the Corporate Executive Board.
OPTIONS — No share options have been granted in the Swiss Life Group since 2003; there are no longer any outstanding options.
For Group CEO Bruno Pfister, a regular annual employer contribution of CHF 175 801 was assumed in the period under review.
The partner at PwC in charge of auditing the Swiss Life Holding annual financial statements and consolidated financial statements (lead auditor) has held that function since the 2004 financial year. In compliance with the term of office regulations stipulated by the Swiss Code of Obligations, the independency guidelines set forth by the Swiss Institute of Certified Accountants and Tax Consultants, and internal guidelines at PwC, this partner will be replaced by a new lead auditor after the 2010 financial year at the latest.
Swiss Life — Financial Statements 2009 2 Summary of MCEV Results
Expected existing business contribution (reference rate) 1 3 24 53 80 334
Transfers from VIF and required capital to free surplus –384 513 –129 0 0
Expected existing business contribution (reference rate) assumes average market performance of all assets at the reference rate during the reporting period. Shareholders’ results from this step are shown here, including the release from costs of residual non-hedgeable risks and look-through contributions.
Swiss Life’s covered business is subdivided according to market units as follows: – Life and pension business in Switzerland – Life, health and pension business in France – Life and pension business in Germany – Life and pension business in Luxembourg and Liechtenstein (together referred to as Insurance Other)
Value of new business before new business strain 81 114 21 28 244
Certainty equivalent value and time value of financial options and guarantees are items that involve balance sheet projections consisting of local statutory liabilities and assets in line with: – Local legal obligations – Company practice due to commercial and competitive constraints – Local market practice in the calculation of embedded values
TEES (TVOG) — The certainty equivalent value does not allow for the risk that the financial outcome for shareholders could differ from the one implied by the certainty equivalent scenario. This is of particular relevance when products or funds include guarantees or options for the policyholder such as: – Guaranteed interest rates – Profit sharing and “legal quotes” – Maturity guarantees – Guaranteed minimum death benefits – Guaranteed annuity options – Surrender options
The Group MCEV for Swiss Life comprises MCEV results for covered business and IFRS net asset values for noncovered business. Covered business comprises all relevant life insurance entities; non-covered business all other entities within the Swiss Life Group.
The market-consistent calibration of the economic scenarios is provided by Barrie & Hibbert and is based on traded market instruments at the valuation date wherever possible. This includes nominal and real yield curves, interest rate volatility and equity volatilities. Where market data has not been available or the market has not been liquid enough, the model calibration has been based on best estimate assumptions. This includes notably correlations, exchange rate volatilities and real estate volatility.
The MCEV principles permit the use of liquidity premiums. Given the continued development of a suitable methodology to quantify liquidity premiums, Swiss Life decided to set liquidity premiums at zero for the calculation of the MCEV 2009.
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.1.2 VOLATILITY ASSUMPTIONS — Volatility assumptions for the year-end 2009 calculations are derived from market data as at 31 December 2009. In the absence of deep and liquid markets as at 31 December 2008, the volatility assumptions for interest rates and equities, used for the calculation of the MCEV 2008, are based on averages of implied volatilities observed during the year 2008 at the end of each quarter.
We conducted our audit in accordance with Swiss Auditing Standards and with the International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the Embedded Value Report is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures of the Embedded Value Report. An audit also includes assessing the principles used, significant estimates made by management, as well as evaluating the overall presentation of the Embedded Value Report. We believe that our audit provides a reasonable basis for our opinion.
(PVNBP) — Volume measure for new business. It represents the present value of premiums from new business. It is the sum of single premiums and the present value of periodic premiums from new business.
CASH AND CASH EQUIVALENTS AS AT END OF PERIOD 8 683 9 408
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2009
The revised version of IAS 1 Presentation of Financial Statements requires the presentation of the balance sheet as at the beginning of the earliest comparative period when an entity reclassifies items in the financial statements. Therefore, the reclassifications have been presented as at 1 January 2008 and as at 31 December 2008.
The Group enters into forward contracts, futures, forward rate agreements, currency and interest rate swaps, options and other derivative financial instruments for hedging risk exposures or for trading purposes. The notional amounts or contract volumes of derivatives, which are used to express the volume of instruments outstanding and to provide a basis for comparison with other financial instruments, do not, except for certain foreign exchange contracts, represent the amounts that are effectively exchanged by the parties and, therefore, do not measure the Group’s exposure to credit risk. The amounts exchanged are calculated on the basis of the notional amounts or contract volumes and other terms of the derivatives that relate to interest or exchange rates, securities prices and the volatility of these rates and prices.
Swiss Life — Financial Statements 2009 benefits which are likely to be a significant portion of the total contractual benefits arises when management ratifies the allocation of policyholder bonuses. When ratified by management, a corresponding liability is set up. To the extent discretion with regard to amount and/or timing is involved, these amounts are included within policyholder participation liabilities. In that respect the policyholder bonus reserve set up in the statutory accounts for these contracts is regarded as discretionary. For these contracts the entire DPF is classified as a liability.
Incremental costs that are directly attributable to securing an investment management contract are recognised as an asset if they can be identified separately and measured reliably and if it is probable that they will be recovered. Such deferred origination costs are included in intangible assets. Deferred investment management fees are included in other liabilities.
Deferred acquisition costs for investment-type contracts such as universal life contracts are amortised over the life of the contract based on the present value of the estimated gross profits or gross margins expected to be realised. The estimated gross profits are made up of margins available from mortality charges and contractadministration costs, investment earnings spreads, surrender charges and other expected assessments and credits.
DEFERRED ORIGINATION COSTS (DOC) — Incremental costs directly attributable to securing investment management contracts are recognised as an asset if they can be identified separately and measured reliably and if it is probable that they will be recovered.
CUSTOMER RELATIONSHIPS — Customer relationships consist of established relationships with customers through contracts that have been acquired in a business combination or non-contractual customer relationships that meet the requirement for separate recognition. They have a definite useful life of generally 5 to 20 years. Amortisation is calculated using the straight-line method over their useful lives.
In Switzerland, mortality tables are usually reviewed every five years when new statistics from the Swiss Insurance Association become available. The tables are updated for significant changes.
Premiums earned on insurance contracts 7 167 2 982 1 744 109
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 have been introduced to harmonise the local guidelines and to ensure that they are in line with the guidelines of the Group. As the Group’s insurance entities operate in a number of different countries, the local regulatory constraints may have an impact on the business unit organisation and product range. These constraints must always be obeyed.
TOTAL EXPOSURE TO CREDIT RISK 99 114 96 163 6 997 4 413 106 111 100 576
The sensitivity analysis with regard to market risk is as follows: The MCEV calculations of the Swiss Life Group are based on economic scenarios which are calibrated to market conditions at valuation date. At 31 December 2009, if the interest rates had been 100 basis points higher, the embedded value would have been CHF 982 million higher (2008: CHF 1020 million higher).
At 31 December 2009, if the equity securities and property implied volatilities had been 25% higher, the embedded value would have been CHF 392 million lower (2008: CHF 274 million lower).
Impairment losses on debt instruments available for sale 26 6 –108 equity instruments available for sale 26 –180 –3 000 loans and receivables 12 –83 –39
Net benefits and claims under investment contracts with discretionary participation 129 184
Derivatives held for trading primarily comprise derivatives that share a risk with other financial instruments and give rise to opposite changes in fair value that tend to offset each other (“economic hedges”).
Classification as assets held for sale and other disposals 0 –
Balance as at 1 January –163 –163 –29 –2 –114 –121 –306 –286
Effect of changes in actuarial assumptions and other movements –4 –7
NET BALANCE AS AT END OF PERIOD –216 232 – –273 –41
NET BALANCE AS AT END OF PERIOD –195 –89 – –356 –445
NET CASH OUTFLOW FROM ACQUISITIONS –13 –1 4751 1 of which paid in 2007: CHF 264 million
Financial assets at fair value through profit or loss – 3 957 2 551 – 6 508
FINANCIAL ASSETS MEASURED AT FAIR VALUE BASED ON LEVEL 3 FOR THE YEAR 2009
The Group has issued financial guarantees and transaction -related guarantees and similar instruments. Financial guarantees provide for specified payments to be made to reimburse the holder for a loss incurred in the event that a client fails to make payment when due.
Securities under repurchase agreements, securities borrowing and lending arrangements – –
AWD Allgemeiner Wirtschaftsdienst AG, Zug AWD from 19.03.2008 100.0% 100.0% CHF 5 600
Swiss Life Selection AG, Zürich Ins. CH 100.0% 100.0% CHF 250
Swiss Life Prévoyance et Santé, Paris Ins. FR 99.4% 99.4% EUR 150 000
AWD Holding AG, Hannover AWD from 19.03.2008 100.0% 100.0% EUR 38 639
AWD Zweite Vermögensverwaltungsgesellschaft mbH, Hannover AWD from 19.03.2008 100.0% 100.0% EUR 25 1 Segment (Ins. CH = Insurance Switzerland, Bank. Dis. = Banking (Discontinued), IM = Investment Management, Ins. Other = Insurance Other, Ins. FR = Insurance France, Ins. DE = Insurance Germany, Ins. Dis. = Insurance (Discontinued))
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.
SHARE CAPITAL — As at 31 December 2009, the share capital of Swiss Life Holding consisted of 32 081 054 fullypaid shares with a par value of CHF 12 each. In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of their own shares and those they represent. As at 31 December 2008, Swiss Life Holding had 35 084 554 registered shares with a par value of CHF 17 per share. Conditional share capital was CHF 28 312 632
FREE RESERVES AND RETAINED EARNINGS — Free reserves and retained earnings contain accumulated retained earnings which have not been distributed to the shareholders, or which have not been allocated to the reserve for treasury shares.
Swiss Life Holding further gives several capital guarantees for a maximum net asset value of CHF 300 million to Swiss Life Funds, CHF 150 million to Swiss Life Funds (Lux) Management Company and CHF 74 million to Swiss Life Products.
COMPENSATION POLICY PRINCIPLES — Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for establishing the guidelines on the Group’s compensation policy (incl. bonuses, equity compensation plans and share option plans) and with regard to employee benefits. The compensation policy underpins the performance culture required by the corporate strategy and forms part of the HR policy. The aim is to retain well-qualified employees and gain new, highly skilled staff. The compensation system is to be competitive and in line with the market environment. The overall compensation takes into account the employees’ professional skills, engagement and personal performance.
The number of PSUs entitling the participant to receive shares after the three-year term is determined in accordance with the table below as follows: One half of the PSUs allocated is multiplied by the factor resulting from the TSR Swiss Life Holding target achievement, and the other half by the factor resulting from the TSR Outperformance target achievement. The factor equals 1, i.e.
This table still includes the variable compensation in shares received in 2008 for the 2007 financial year. The footnote stated, however, that the members of the Board of Directors would not receive any variable compensation in shares for the 2008 financial year. The remaining shares allotted were part of the basic compensation.