Openness: We nurture open and direct dialogue both within and outside our organisation. This approach builds trust in the work we do.
I attended a commercial school and then discovered my second passion: sales. I love convincing others of the quality of a good product. When it comes to security and financial provisions, trust is especially important. My affinity for people and their needs helps me do my job well.
Gross written premiums in the Swiss life insurance business climbed 1% to CHF 7611 million. The premium volume of CHF 7807 million published for the previous year included CHF 290 million in premiums from the non-life business, which was sold to Helsana and Vaudoise in the second half of 2005. In 2006, Swiss Life increased its gross written premiums for group insurance by 3% to CHF 5799 million. This growth is mainly attributable to the premiums fully included for the first time from the group life insurance business acquired from Vaudoise. In addition, expiring contracts were fully offset by new business, despite a shrinking market. Developments in the individual life insurance sector were shaped by trends in interest rates and the diverse reactions of market participants. The significant hike in interest rates in the first half of the year saw many competitors launch time-limited promotions or promise higher bonuses, Swiss Life, however, bided its time until August to adjust the terms of individual products to the new interest environment. When interest rates dipped unexpectedly in the second half of 2006, Swiss Life readjusted its bonus rates downward and will continue to pursue this cautious approach in 2007. Swiss Life’s policy is to promise its clients only what it can deliver. This has proven very successful in the past: Swiss Life is the only company in the Swiss market that has never had to cut its bonuses on current pensions, and clients appreciate this reliability.
Netherlands With an estimated premium volume of EUR 25 billion, the life insurance market in the Netherlands grew by 2% in 2006. Swiss Life’s share of the market stood at around 5%.
Assets under management as at 31 December 2006 amounted to CHF 36 billion, down from CHF 39 billion at the end of 2005. This reduction is largely attributable to the sale of Banca del Gottardo (Monaco). Net new customer assets in the Private Banking division amounted to CHF 240 million. Including the custody business – which mainly consists of securities held for the Swiss Life Group – total assets under management at the end of 2006 amounted to CHF 89 billion, compared to CHF 77 billion at the end of 2005.
Swiss Life Group . Review of Operations 2006 . Investment Management
On 1 January 2006, the Swiss Life Group introduced a Code of Compliance which is binding across the Group, thereby further anchoring corporate governance throughout the company. In addition to the basic values of the Swiss Life Group, the Code of Compliance describes the ethical principles and minimum standards in the key areas of compliance. It aims to ensure the legally and ethically correct conduct of business.
At the end of 2003, Swiss Life Holding simplified its shareholder structure by making an offer to purchase the minority interests remaining in its Swiss Life/Rentenanstalt subsidiary after the exchange of Swiss Life/Rentenanstalt shares for Swiss Life Holding shares in 2002. The company issued the MSC II (2003–2004) mandatory convertible securities so as to be able to purchase these Swiss Life/ Rentenanstalt shares as efficiently as possible. In conjunction with this issue, on 30 December 2003 a further 1 586 098 registered shares, with a par value of CHF 50 each, were issued from conditional capital. Ordinary share capital thus expanded by CHF 79 304 900 to CHF1 251 702 050, divided into 25 034 041 fully paid registered shares with a par value of CHF 50 each, while conditional capital fell to CHF 103 260 950 or 2 065 219 registered shares with a par value of CHF 50 each.
Switzerland from 1998 to April 2006. He now acts as a management and technology consultant.
Member of the Board of Directors – Swiss-American Chamber of Commerce,
Total compensation 2005: in cash and shares CHF 601 496 including contribution to occupational provisions CHF 693 518 1) including bonus in cash 2) The 349 allocated shares are subject to a vesting period of three years. The share price at the time of allocation was CHF 273.00; the allocation, subject to a threeyear vesting period, took place at an economic value of CHF 229.22, which corresponds to the tax value.
Entry in the share register Entries can be made in the share register up to, but not including, the day before the General Meeting of Shareholders. In all cases, however, the company reserves the right to adhere to the legal maximum period of 20 days for refusal to recognise entries in the share register in accordance with Art. 685g of the Swiss Code of Obligations. For administrative reasons (postal delivery times), the deadline for registering to participate in the General Meeting of Shareholders is usually seven calendar days before the event takes place.
Contact addresses can be found at the end of the Annual Report.
In the Netherlands, Swiss Life (Zwitserleven) is the main sponsor of the “Ronde om Texel” event and the Zwitserleven sailing team. Sailing is also instrumental in Belgium in building client relationships.
In the Netherlands, Zwitserleven underlines its commitment to society by supporting volunteer work. For instance, during their working time, employees look after severely disabled people as part of a relaxation therapy session in a swimming pool.
Swiss Life Group . Financial Statements 2006 . Consolidated Statement of Income
Financial assets at fair value through profit or loss 12 29 437 23 653
Financial assets held to maturity 15, 35 4 090 4 256
Insurance payables and other payables 10, 39 4 268 4 093
Swiss Life Group . Financial Statements 2006 . Notes to the Consolidated Financial Statements 2 Summary of Significant Accounting Policies . . . . . . . . . 89 2.3 Reclassifications in the consolidated statement of income and consolidated balance sheet. . . . . . . . . . . 91 2.5 Foreign currency translation and transactions . . . . . . . . 91 2.12 Separate account/unit-linked contracts . . . . . . . . . . . . . 99 2.17 Impairment of non-financial assets . . . . . . . . . . . . . . . 103 2.19 Assets held for sale and associated liabilities . . . . . . . . 104 2.26 Forthcoming changes in accounting policies . . . . . . . . 106 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies . . . . . . . . . . . . . . . . . . . 107 6 Risk Management Policies and Procedures . . . . . . . . . 119 6.1 Contracts for the account and risk of the Swiss Life Group’s customers . . . . . . . . 119 6.2 Risk budgeting and limit setting . . . . . . . . . . . . . . . . . . 121 6.3 Asset and liability management (ALM) . . . . . . . . . . . . . 121 6.4 Financial risk management objectives and policies. . . . 122 6.5 Insurance risk management objectives and policies . . . 131 8 Premiums, Policy Fees and Deposits Received. . . . . . . 140 9 Details of Certain Items in the Consolidated Statement of Income . . . . . . . . . . 141 10 Insurance and Other Receivables and Payables . . . . . 144 12 Financial Assets and Liabilities at Fair Value through Profit or Loss . . . . . . . . . . . . . . . 148 13 Financial Assets Available for Sale . . . . . . . . . . . . . . . . . 149 15 Financial Assets Held to Maturity . . . . . . . . . . . . . . . . . 151 24 Insurance Liabilities and Reinsurance Assets. . . . . . . . 163 30 Acquisitions and Disposals of Subsidiaries . . . . . . . . . 177 32 Assets Held for Sale and Associated Liabilities . . . . . . 178 35 Fair Value of Financial Instruments
Financial assets at amortised cost The Group assesses at each balance sheet date if there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
Financial assets carried at fair value (available for sale) At each balance sheet date and interim reporting date, an assessment is made whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of an equity instrument classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the asset is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement. As a Group policy, available-for-sale investments in equity securities and investment funds are assessed for impairment when the market value as at the balance sheet date is 30% or more below cost, or the market value remained below cost for the previous 12 months or longer. Impairment losses on equity instruments recognised in the income statement are not reversed through income. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event after the impairment loss was recognised, the impairment loss is reversed through the income statement.
Income and related expenses from insurance contracts and investment contracts with discretionary participation features Premiums from traditional life insurance contracts are recognised when due from the policyholder. Insurance liabilities are established in order to recognise future benefits and expenses. Amounts collected as premiums from investment-type contracts such as universal life and unit-linked contracts are reported as deposits. Only those parts of the premiums used to cover the insured risks and associated costs are treated as premium income. These include fees for the cost of insurance, administrative charges and surrender charges. Benefits recognised under expenses include claims for benefits incurred in the period under review that exceed the related deposits under policyholder contracts and interest that is credited to the appropriate insurance policy accounts.
Present value of future profits (PVP) arising from acquired insurance contracts and investment contracts with discretionary participation features On acquisition of a portfolio of insurance contracts or a portfolio of investment contracts with discretionary participation features (DPF), either directly from another insurer or through the acquisition of a subsidiary undertaking, the Group recognises an intangible asset representing the present value of future profits (PVP) embedded in these contracts acquired. The PVP is determined by estimating the net present value of future cash flows from the contracts in force at the date of acquisition. For acquired insurance and investment contracts with DPF, future positive cash flows generally include net valuation premiums while future negative cash flows include policyholders’ benefits and certain maintenance expenses.
A financial liability is derecognised when the obligation specified in the contract is discharged or cancelled or expires.
Financial liabilities at fair value through profit or loss Financial liabilities at fair value are irrevocably designated as at fair value at initial recognition. Financial liabilities are designated as at fair value through profit or loss in the following instances: – Financial liabilities for the account and risk of the Swiss Life Group’s customers where the insurance benefits are linked to unit values of investment funds.
In November 2006, IFRS 8 Operating Segments was issued by the International Accounting Standards Board. The new Standard replaces IAS 14 Segment Reporting. IFRS 8 Operating Segments requires disclosure of information about an entity’s operating segments and about the entity’s products and services, the geographical areas in which it operates, and its major customers. In pursuit of the objective to achieve convergence with the US generally accepted accounting principles (US GAAP), the content and the wording of IFRS 8 Operating Segments is essentially the same as that of SFAS 131 Disclosures about Segments of an Enterprise and Related Information except for changes necessary to make the terminology consistent with that in other IFRS. IFRS 8 Operating Segments will be effective for periods beginning on or after 1 January 2009. No financial impact will arise on the consolidated balance sheet and consolidated statement of income of the Swiss Life Group. The Swiss Life Group is currently analysing the impact of IFRS 8 Operating Segments on its disclosure.
Swiss Life Group . Financial Statements 2006 . Notes to the Consolidated Financial Statements 108 – The fair value of investment contracts with discretionary participation features cannot reliably be determined. It is impracticable to determine the fair value of such instruments due to the lack of a reliable basis to measure such supplemental discretionary returns. IFRS 4 Insurance Contracts is silent on the measurement of the amounts identified as DPF.
Insurance liabilities Past experience, adjusted for the effect of current developments and probable trends, is assumed to be an appropriate basis for predicting future events. Management’s estimates for incurred but not reported losses are continually reviewed and updated and adjustments resulting from this review are reflected in income.
The accounting policies for the segments are the same as those described in the summary of significant accounting policies. Inter-segmental services and transfers of assets and liabilities are treated as if the transactions were with third parties, i.e. at market prices applicable at the time of the transaction. The statement of income and balance sheet for the primary segments are given on the pages below:
Impairment of property and equipment and intangible assets –32 – – – – –32
Benefits and claims under insurance contracts –13 944 – – – – –13 944
Swiss Life Group . Financial Statements 2006 . Notes to the Consolidated Financial Statements 115Balance sheet as at 31 December 2005
Financial liabilities at fair value through profit or loss 6 115 715 – – – 6 830
Net insurance benefits and claims –7 719 –2 268 –1 988 –1 512 –314 –26 –14 1 –13 840
Depreciation and amortisation expense –49 –287 –83 –81 –7 –1 0 – –508
Premiums earned on insurance contracts 7 203 2 816 1 999 1 155 303 39 20 –16 13 519
Other expenses –294 –202 –66 –54 –40 –4 –8 5 –663
Group risk management produces a consolidated risk report which consolidates the main elements of the risk management of the Swiss Life Group’s insurance operations and of the risk management of Banca del Gottardo.
Share of results of associates 1 3 – – 1 3
The ALM process has successfully been applied in all relevant insurance operations of the Swiss Life Group.
Swiss Life Group . Financial Statements 2006 . Notes to the Consolidated Financial Statements 6 Risk Management Policies and Procedures (continued)
In Switzerland, the Swiss occupational pensions (BVG) segment of the group life insurance business is subject to guaranteed minimum interest and annuity conversion rates. Following the decision of the Swiss Federal Council on 10 September 2003, a reduction in the guaranteed interest rate for the mandatory BVG business from 3.25% to 2.25% took effect on 1 January 2004. The rate was subsequently raised to 2.50% with effect from 1 January 2005 and confirmed at this level for 2006 and 2007. The guaranteed annuity conversion rate for the Swiss Life Group’s mandatory BVG business is set at the rate of 7.2%. Under an amendment to the BVG legislation, which took effect on 1 January 2005, this rate will be reduced in stages to 6.8% until 2015.
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 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 in foreign operations.
Financial assets held to maturity 34 4 046 10 – – – 4 090
In certain other countries, the assets are normally denominated in euro, which is the same currency as the insurance liabilities. The remaining foreign currency exposure is primarily in the US dollar, the British pound and the Swiss franc associated with investments in equity securities, unit trusts and cash in these currencies. US dollar exposure is partially hedged on an economic basis using derivatives.
At end of accident year 592 504 513 522 498 638 n. a.
Current estimate of cumulative claims 641 548 535 524 547 638 3 433
LGT Swiss Life Non Traditional Advisers, Vaduz 26 17 9 4 10 8 3 43.4%
Deferred origination costs (DOC) These costs are recoverable and are directly attributable to securing investment management contracts. They primarily relate to costs deferred in the Netherlands, Belgium and Luxembourg.
Due to banks Due to banks outstanding as at 31 December are repayable as follows: Medium and long-term due to banks include various mortgage loans with the following interest rates and maturities: In CHF million 31.12.2006 31.12.2005
Swiss Life Group . Financial Statements 2006 . Notes to the Consolidated Financial Statements 28 Equity (continued)
Financial liabilities at fair value through profit or loss 6 830
In order to present policy fees earned on investment and unit-linked contracts separately, policy fees earned on investment and unit-linked contracts totalling CHF 280 million, which were previously included in fee income, are now presented in a separate line item.
Dreieck Equipment Leasing, Zürich – until 27.01.2006 – – full CHF 100
Swiss Life Holding, Zürich Other – – full CHF 1 384 827
Swissville Centers Holding, Zürich Insurance 100.0% 100.0% full CHF 7 100 1) Segment (IM = Investment Management)
Bureau Maron, Verviers Insurance from 21.12.2006 100.0% 100.0% full EUR 20
Swiss Life Group . Financial Statements 2006 . Notes to the Consolidated Financial Statements 41 Significant Subsidiaries and Associates (continued)