Employee satisfaction and comprehensive risk management are essential requirements for sustainable success.
Thanks to its private insurer concept, Swiss Life generated prof itable growth in France.
Following four years of declining premium income in the Swiss life insurance market, which was attributable to economic factors and structural changes, the Swiss Insurance Association again reported an increase of approximately 3% to CHF 28.8 billion. Driven on by this environment, Swiss Life outperformed the market and increased its market share from 28% to 29%. With a share of 34% in group insurance and 20% in individual insurance, the company is the clear market leader in Switzerland for pensions and long-term savings.
Net earned premiums and policy fees 2 009 1 950 3.0%
The underwriting parameters such as mortality, disability and cancellation rates are determined on the basis of in-house data from the past and partly on external statistics. These parameters in turn form the basis for the setting of premium rates and the evaluation of insurance portfolios. There is currently a special focus on the future development of life expectancy, which represents a great challenge in connection with pension products and in particular occupational pension business in Switzerland. The fact that the parameters for the evaluation of future business build on historic data gives rise to a parameter risk. In order to assess this risk, various sensitivity analyses deliberately deviate from the best-possible estimates for biometric parameters so as to take into account the impact of additional factors on the evaluations. In addition, simulations are carried out applying extreme scenarios and their impact on business activities. A pandemic, for instance, is not only modelled by adjusting the relevant underwriting parameters, but also by taking into account their possible influence on the capital markets. These considerations enable the company to determine the insurance risk capital.
OPERATIONAL RISK | Operational risk is understood to be the risk of losses resulting from inadequate or failed internal processes, people and systems, or from external events. With operational risk management (ORM) in the form of an internal control system (ICS), Swiss Life aims to identify, evaluate, manage and reduce these risks. The identified risks are monitored and steered on the basis of the value chain and the defined risk tolerance with the aim of ensuring that operations run smoothly. The focus is on the effectiveness of business processes (operations), reliability of financial reporting and adherence to the relevant laws and regulations (compliance). In this connection, the Board of Directors launched the Internal Control System project in the spring of 2007, which – together with the market units – defined the framework for the ICS. At the end of 2008, the implementation of the ICS will be assessed by the external auditors for the first time.
TRAINING AND DEVELOPMENT | Swiss Life sets great store in recruiting good employees, nurturing and developing their knowledge and skills, and motivating them so that they are keen to stay with the company. Based on insights gained from earlier Employee Surveys, Swiss Life invested primarily in management development and in basic and advanced training for its staff in 2007. Overall, expenses for training and development of the entire workforce amounted to around CHF 25 million, which corresponds to nearly CHF 3000 per employee. Expressed as a ratio of the entire personnel expenses, the costs for training and development came to 3.1% (previous year: 3.4%).
er. The greatest amount of attention is no doubt generated by the company’s sponsorship of the Swiss national football team. This sponsorship agreement has been extended for another four years up to the 2012 European Championships. And of course Swiss life is especially pleased to be able to support the national side in 2008 on the occasion of the European Championships staged in Switzerland itself.
SHAREHOLDER STRUCTURE | On the balance sheet date a total of 190 956 shareholders and nominees were listed in the Swiss Life share register, of which about 4900 were institutional shareholders. Taken together, the shareholders entered in the share register held around 56% of the shares issued. Around half of these shares were owned by shareholders domiciled in Switzerland; over one quarter of the registered shares were in private hands.
Gerold Bührer will be put forward for re-election at the Swiss Life Holding Annual General Meeting of Shareholders on 8 May 2008.
PAUL EMBRECHTS | Born 1953, Belgian national Member of the Board of Directors
Henry Peter completed his studies in law at the University of Geneva in 1979, and in 1981 he was called to the Geneva bar. Following a pupillage in Geneva, a period of study as a visiting scholar at the University of California in Berkeley and legal work in Lugano, he obtained his PhD at the University of Geneva in 1988. Since 1988 he has been a partner in a law firm in Lugano, Peter, Bernasconi & Partners. In addition, he has been Professor of Business Law at the University of Geneva since 1997. Henry Peter frequently acts as arbitrator in commercial and sport cases. He has been a member of the Swiss Takeover Board since 2004, and a member of the Sanction Commission of the SWX Swiss Exchange since 2007.
It held sixteen ordinary and extraordinary meetings during the year under review. The average duration of the ordinary meetings was around two hours. There was full attendance at all meetings, and the Group CEO was also present on each occasion.
Mr Pfister has been with the Swiss Life Group since August 2002, initially as Chief Financial Officer (Group CFO) and, as of 1 January 2006, Chief Executive Officer International (CEO International). He is designated to become the Group Chief Executive Officer (Group CEO) in May 2008 following Rolf Dörig’s appointment to the Board of Directors.
Mr Müller assumed the role of Chief Executive Officer Switzerland (CEO Switzerland) at the Swiss Life Group in January 2003.
St. Gallen, Member of the Board – Board of Trustees of WBZ Reinach, Canton of Basel-Land (Wohn- und Bürozentrum für körperlich Behinderte) – Open Systems AG Zürich, Member of the Mission Control Advisory Board
COMPENSATION PAID TO ACTING MEMBERS OF GOVERNING BODIES | Compensation paid in cash to acting members of the Board of Directors and the Corporate Executive Board during the period under review was as follows: In CHF 2007 2006
As mentioned above, Rolf Dörig was allocated 6717 Performance Share Units (PSUs) in the year under review as part of the three-year equity compensation programme, which entitle him to Swiss Life Holding shares as at 1 April 2010, provided that the relevant requirements have then been met. On the allocation date of 1 April 2007 the fair value of one PSU was CHF 189.22. Taking into account this mathematical value of the PSUs allocated, which came to CHF 1 270 991, Rolf Dörig’s total compensation for 2007 amounted to CHF 5 466 991.
With respect to the 2008 financial year, Swiss Life Holding invited tenders for its statutory auditor and Group auditor mandate. On completion of the evaluation process, the Board of Directors, in accordance with the proposal of the Audit Committee, has agreed to again nominate PwC as its statutory auditor and Group auditor at the Annual General Meeting on 8 May 2008.
Options on own shares – –7 – – – – –7 – –7
FUTURE LIFE POLICYHOLDER BENEFIT LIABILITIES | For participating life insurance contracts for which the contribution principle applies to the allocation of the policyholder bonus, future life policyholder benefit liabilities are determined by using the net-level-premium method based on actuarial assumptions as to mortality, persistency, expenses and interest assumptions, including a margin for adverse deviation. These assumptions are based on the figures at the time the policy is issued. In most instances a liability for terminal bonuses is accrued in the liability for future policyholder benefits, in proportion to the estimated gross margins.
Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will f low to the Group and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to the income statement during the financial period in which they are incurred. Borrowing costs directly attributable to the construction or acquisition of a qualifying asset are capitalised as part of the cost of that asset. Realised gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in the income statement.
Costs associated with developing or maintaining computer software programs are recognised as an expense as incurred. Development costs that are directly associated with identifiable software products controlled by the Group, and that will probably generate future economic benefits, are capitalised. Direct costs include the software development team’s employee costs.
2.22 Provisions and contingent liabilities Provisions are liabilities with uncertainties as to the amount or timing of payments. Provisions are recognised if there is a present obligation that probably requires an outflow of resources and a reliable estimate can be made at the balance sheet date and be measured on a best-estimate basis. Contingent liabilities are disclosed in the Notes if there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources or the amount of the obligation cannot be measured with sufficient reliability.
POLICYHOLDER OPTIONS | In certain contracts, the policyholder has the option to choose a guaranteed annuity at maturity of an endowment contract. The value of the option depends on how the guaranteed mortality tables and guaranteed interest rates differ from actual mortality and interest rates. The influence on the insurance liabilities may therefore depend on the behaviour of the policyholders.
INVESTMENT RETURNS | Assumptions relating to investment returns are based on the strategic asset allocation. For certain asset classes, a fixed return is used, centrally set by the Group. From this gross investment return, projected asset management fees are deducted to obtain a net investment return.
Benefits and claims under investment contracts with discretionary participation –106 –18 – –
Additions to non-current assets 175 121 9 2 4 Segment Information (continued)
The Swiss Life Group operates in selected European countries. The Group’s income and non-current assets by geographical location are detailed below.
The financial result for the years ended 31 December for the account and risk of the Swiss Life Group and the Swiss Life Group’s customers was as follows: For the For the For the For the account and account and account and account and risk of the risk of the risk of the risk of the Swiss Life Swiss Life Swiss Life Swiss Life Group’s Group’s
Debt instruments available for sale 54 771 81 738 – – 54 771 81 738
In CHF million profit or loss for sale maturity collateral receivables Total
Balance as at losses Write-offs as assets discontinued translation Balance as at In CHF million 1 January recognised and disposals held for sale operations differences 31 December
Due to the limitations of the Swiss capital market with regard to liquidity, investments in Switzerland are also made in currencies other than the Swiss franc. The balance sheet currency gap is to a large extent hedged on an economic basis using foreign currency derivatives. In the other countries, the assets are normally denominated in euro, which is the same currency as the insurance liabilities.
At operational level, rolling forecasts are in place to address situational liquidity risk, which primarily arises on unexpected calls on cash resources from claims, amounts payable at maturity and surrenders arising from insurance and investment contracts. The investment portfolio of the Swiss Life Group consists to a large extent of very liquid assets, which can be sold anytime. To overcome unexpected liquidity shortfalls at times asset disposals are not desired, repurchase agreements are used to ensure short-term refinancing at minimal cost.
Financial liabilities at fair value through profit or loss 385 – – 385 – –
At end of accident year 535 447 454 467 427 546 501 n. a.
Effect of discounting – – – – – – – –
Liabilities for the current and previous 6 years 61 74 208 99 116 160 303 1 021
Approximately 1.8% of insurance in force from continuing operations in terms of earned insurance premiums was ceded as at 31 December 2007 (2006: 1.8%).
OTHER RISK TRANSFER | Risk transfer primarily takes the form of reinsurance. Alternative forms of risk transfer (such as securitisation) require formal approval of the Group Risk Committee. No significant alternative form of risk transfer is used by the Group at present.
financial assets available for sale 27 452 540 loans 2 –4
The financial liabilities at fair value through profit or loss in the line item “other” mainly comprise liabilities relating to certain investment funds.
Goodwill relating to investments in associates is included in the carrying amount of investments in associates in accordance with IAS 28 (revised) Investment in Associates.
Notes to the Consolidated Financial Statements 17 Property and Equipment (continued)
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, primarily relate to contracts acquired in Germany and France.
On 1 July 2005, Swiss Life/Rentenanstalt entered into a forward agreement providing for the refinancing as of 2009 of a portion of the hybrid debt facility issued in 1999 in the amount of CHF 150 million on a 20-year/10-year non call subordinated step-up loan basis.
Total gains/losses recognised directly in equity as at 31 December –809 27 Equity (continued)
Economic and statutory capital constraints are the main elements determining the risk budgets. Based on these risk budgets the Board of Directors (Investment and Risk Committee) defines the risk limits for each country and business and the parent company. The limits are monitored monthly.
Net profit from discontinued operations 470 280 172 98 642 378
Total liabilities associated with assets held for sale 25 698 – 11 804 – – – 37 502 –
1 of which can be sold or repledged by transferee: nil as at 31.12.2007 (2006: CHF 124 million)
Derivatives embedded in investment contracts amounting to CHF 1224 million and derivatives embedded in insurance contracts of CHF 221 million are now included within investment contracts and insurance liabilities, respectively.
The assets and liabilities from the acquisition, provisionally determined, are as follows: Carrying amount in accordance with IFRS before In CHF million Fair value combination
Kuhn & Seal, Nyon Ins. CH until 23.01.2006 – – full
Swiss Life Funds Business, Zürich IM 100.0% 100.0% full CHF 250
Swissville Europe Holding, Zürich Ins. CH until 01.01.2007 – – full
Oudart Gestion, Paris Bank. Dis. 100.0% 100.0% full EUR 1 000
Swiss Life Asset Management GmbH, München IM from 14.12.2006 100.0% 100.0% full EUR 1 000
Leaseberg, Bruxelles Ins. Dis. from 05.07.2007 100.0% 100.0% full EUR 1 880
Swiss Life Immo-Techno Center I, Bruxelles Ins. Dis. 100.0% 100.0% full EUR 868
Balance carried forward from previous year 3 403 418 4 252 874
Performance of Dow Jones STOXX 600 Insurance Index (in %) –12 17
Contacts | Further information can be obtained from: Swiss Life General-Guisan-Quai 40 P.O. Box 2831 CH-8022 Zurich www.swisslife.com
In September approximately 600 retirees accept Bruno Gehrig’s invitation and enjoy a varied programme of events.