Contents 4 Facts & Figures 6 Shareholders’ Letter 8 Strategy & Brand 12 Segment Reporting 14 Switzerland 16 France 18 Germany 20 International 22 Asset Managers 24 Corporate Governance 30 Board of Directors 43 Corporate Executive Board 49 Swiss Life Compensation Report for the Financial Year 2017 66 Report of the Statutory Auditor 72 Risk Management 75 Corporate Responsibility 76 CEO Foreword 77 Corporate Responsibility at Swiss Life 86 Sustainable Development Goals 88 The Longer Self-Determined Life 89 Responsibility in Business 103 Responsibility in Society 108 Responsibility for Employees 123 Environmental Responsibility 126 GRI Content Index 129 Key Sustainability Indicators 132 Consolidated Financial Statements 134 Consolidated Statement of Income 135 Consolidated Statement of Comprehensive Income 136 Consolidated Balance Sheet 138 Consolidated Statement of Cash Flows 140 Consolidated Statement of Changes in Equity 141 Notes to the Consolidated Financial Statements 283 Report of the Statutory Auditor 290 Swiss Life Holding Financial Statements 291 Management Report 292 Statement of Income 293 Balance Sheet 294 Notes to the Financial Statements 300 Appropriation of Profit 301 Report of the Statutory Auditor 305 Share Performance and Historical Comparison
Markets — In Switzerland, France and Germany, Swiss Life offers individuals and corporations comprehensive and individual advice plus a broad range of own and partner products through its sales force and distribution partners such as brokers and banks. The Swiss Life Select, Tecis, Horbach, Proventus and Chase de Vere advisors choose suitable products for customers from the market according to the Best Select approach. Swiss Life Asset Managers offers institutional and private investors access to investment and asset management solutions. Swiss Life provides multinational corporations with employee benefits solutions and high net worth individuals with structured life and pensions products. The Group also comprises the sub sidiaries Livit, Corpus Sireo and Mayfair Capital.
Thanks to a net profit of CHF 1013 million (previous year: CHF 926 million), an increase in the value of new business from CHF 296 million to CHF 351 million and a renewed increase in the fee result by 11% to CHF 442 million, Swiss Life remains on track for success. This means that the 2017 financial year saw a seamless continuation of the success story of recent years.
Our successes are the foundation on which we are building the future of Swiss Life. This coming November, we shall be unveiling a new Group-wide programme to the public. We shall be maintaining our successful strategic thrust of recent years. Our plans nevertheless include selective further developments. After all, we see the technological challenges and changes in customer behaviour as offering great opportunities to expand our range of products and services. Needless to say, we shall also be announcing new financial objectives at the Investors’ Day.
Life insurers such as Swiss Life assume long-term commitments and in doing so have a stabilising effect on the financial system as a whole. Contracts running for terms of several decades are nothing unusual for us. The oldest policy we have that is still active was written in 1918. We are proud of our ability to be there for our customers across such long cycles.
We would like to thank you, our esteemed shareholders, for the trust with which you are supporting us in this important task.
Self-determination and future provisions for a longer life are at the core of Swiss Life’s activities. The company thus addresses a fundamental human need: independence and self-determination are highly relevant to people, regardless of profession or status. Insurance companies like Swiss Life help make the unpredictable predictable, so that people can shape their own lives and make decisions freely.
Swiss Life operates in an environment heavily influenced by regulatory and political trends as well as by such socio-economic changes as increasing life expectancy. The social and economic consequences of demographic development thus exert a wide-ranging influence on human life, and are not to be underestimated.
Swiss Life must address changing customer behaviour and consistently implement any relevant findings arising from it to actively exploit market opportunities. Customers are ever better informed; they are able to compare services immediately and demand new products and services. New modes of access as well as the ability to receive all relevant information any time, any place are also de rigueur. As a consequence, innovation, process security and competence are the ingredients of a good customer relationship.
Swiss Life reports regularly on its strategic priorities and associated financial objectives. In November 2015, Swiss Life presented its current Group-wide programme, “Swiss Life 2018” (2015–2018). The Group-wide programme is based on the “Swiss Life 2015” (2012–2015) and Milestone (2009–2012) programmes, both now successfully concluded, which sustainably consolidated Swiss Life’s competitive position.
● Fee result 2018: CHF 400–450 million Ahead ● Risk result 2018: CHF 350–400 million On track ● Cumulative value of new business (2016–2018): Ahead > CHF 750 million
● Cost savings by 2018: CHF 100 million On track ● Stable operating costs¹ On track
● Dividend payout ratio: 30–50 % On track ● Return on equity²: 8–10 % On track
Swiss Life regularly provides detailed information on the current status of its strategic implementation. The company attained its target fee result in 2017, one year earlier than planned. Swiss Life is also ahead of schedule in value of new business and cash remittance to the holding company. The company is on track with its risk result and efficiency targets as well. Swiss Life achieved an adjusted return on equity of 9.3% in 2017, which was within the 8–10% target range. Swiss Life will hold an Investors’ Day on 29 November 2018 to present its new strategic targets.
Swiss Life has a strong umbrella brand. As a rule all products and services are offered under the umbrella brand.
Swiss Life protects its brands around the world. It takes vigorous action in cases of brand or copyright infringement. Our customers can be sure that the Swiss Life logo and corporate name stand for Swiss Life quality and service wherever they appear.
The brand identity is a key instrument in making the Swiss Life brand personality tangible for internal and external target groups, and in distinguishing it from the competition.
Since 2016, Swiss Life has positioned itself Group-wide with the guiding theme “The longer self-determined life”. The consequences of demographic development are insufficiently accounted for in most areas of life. Swiss Life aims to contribute to the social dialogue through a customised content programme and position itself distinctively on the market.
Swiss Life wants to be a thought leader and help its customers to envisage, prepare for and enjoy a longer self-determined life. The topic is brought home to readers, among other places, in a blog on the website www.swisslife.com/hub/en in a series of specially conceived articles, videos, guest blogs and more. Swiss Life intends to breathe fresh life into the matter of aging, otherwise subject to negative rhetoric, and to focus on opportu nities and potential in an inspiring manner, without downplaying the attendant challenges.
In its annual brand assessment, the Interbrand company has ranked Swiss Life among the 50 most valuable Swiss brands for many years. Moreover, during the period from 2013 to 2016, the company increased the value of its brand by more than 21%.
Swiss Life generated stable direct investment income from insurance business of CHF 4.3 billion in 2017. That corresponds to a direct investment return of 2.8% (previous year: 3.0%). The net investment yield came to 2.5% at the end of 2017 (previous year: 3.3%).
The Swiss Life Group increased fee income in local currency by 8% to CHF 1480 million in 2017. This growth stemmed from higher contributions from own and third-party products and services, Swiss Life Asset Managers and owned IFAs. Swiss Life posted a 6% rise in premiums in local currency to CHF 18.6 billion in 2017. Insurance reserves to the benefit of the company’s policyholders rose by 4% in local currency.
Swiss Life’s segment reporting is on a country basis: Switzerland, France and Germany. It also discloses separately the results of its cross-border segments: International and Asset Managers.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 18 565 17 366 7%
Swiss Life remains market leader in its home market. According to the Swiss Insurance Association (SIA), life insurance premiums in Switzerland fell to CHF 29.4 billion, down 3.5% on the previous year. In group life business, the market posted an overall premium decline of 3.8% and a 2.4% reduction in premiums for individual life business compared to the previous year. Swiss Life’s market share of group life business thus was down slightly at 34% (previous year: 35.1%). In individual life business, market share increased to 20.2% (previous year: 19.8%).
Against the backdrop of what remains a very challenging economic operating environment, the emphasis in individual insurance remains on capital-efficient product solutions while taking account of customers’ fundamental requirements: predictability and security. Examples of the successful new individual insurance offers include the extension of the Swiss Life Premium Comfort product family and the single allocation tranche Swiss Life Premium Assets. Swiss Life also expanded its offering with investment products for private customers as part of its “capitallight ” offer strategy. The investment products for private investors launched in autumn 2016 with Swiss Life Asset Managers posted an excellent performance in 2017: in the first 16 months following the launch, over 5000 accounts have been opened and assets under management of CHF 341 million achieved.
In the reporting year, the service offering for corporate clients was further expanded in operational health management and accounting/administration and complemented by the offering in legal security for policyholders. These offers enable insured companies to dispense with those tasks outside their core business and provide policyholders with support to lead a self-determined life.
In 2018, Swiss Life in Switzerland will continue to follow its “Swiss Life 2018” strategy and its long-term initiatives to expand the product and service range and maintain a complete customer experience via analogue and digital channels. The distribution successes in the comprehensive life and pensions provision ecosystem testify to Swiss Life’s increased customer orientation. Customers experience Swiss Life as the leading provider of comprehensive life and pensions and financial solutions for a self-determined life.
Swiss Life France grew its segment result to CHF 261 million during the year under review (previous year: CHF 244 million). This development is mainly due to the good quality of new business, increased fee income, the stable financial margin in life insurance and efficiency improvements throughout the business.
The French insurance market achieved stable growth in local currency in 2017 in a challenging environment with low interest rates and uncertainty over the national elections. Savings and retirement business decreased by 2%, while health, death and disability insurance and property and casualty business grew by 5% and 2%, respectively. Swiss Life in France increased premium volume by 18% to CHF 5.3 billion, as the focus remained on profitability of new business. Premium income in savings and retirement provisions rose by 25% in local currency. The share of premium income from unit-linked contracts was 52%, and thus well above the market average of 28%, thanks to the private insurer strategy and the bonus distribution policy for customers in the premium segment. The proportion of unit-linked contracts in new business increased to 66% (previous year: 58%). At the end of 2017, these contracts accounted for 39% of reserves. Premiums in health, death and disability business increased by 1% in local currency as rates increased and persistency improved. With its distribution of savings products, Swiss Life Banque Privée once again contributed to business with high net worth individuals. It profited significantly from the beneficial market conditions, with positive inflows and increased assets under management. Fee income grew in local currency by 23% in total to CHF 302 million, due to the increase in unitlinked life insurance and banking.
Swiss Life is positioning itself in Germany as a leading provider of pensions and financial solutions under one roof by managing all production and distribution organisations from a single source. The segment reporting comprises local insurance activities and the financial advisory companies operating in Germany under Swiss Life Select, tecis, Horbach and Proventus.
The International segment comprises cross-border business for high net worth international individuals (Global Private Wealth Solutions) and multinational companies (Global Employee Benefits Solutions), under the brand “Swiss Life Global Solutions”, 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 the year under review, the International segment achieved a result of CHF 51 million, a growth level of 14% over the previous year (2016: CHF 45 million). This improvement stems predominantly from higher fee income of CHF 225 million (previous year: CHF 213 million). Gross written premiums, policy fees and deposits received posted a 56% increase to CHF 2.7 billion (previous year: CHF 1.7 billion). This is mainly due to the strongly positive development of new private wealth business in Luxembourg and Singapore.
The Global Private Wealth Solutions business area, with carriers based in Luxembourg, Liechtenstein and Singapore, specialises in life insurance solutions for high net worth individuals. Fee income grew on the back of the comprehensive international product range and premium growth.
Fee income from the financial advisory companies rose by CHF 7 million to CHF 129 million, due mainly to improved revenues achieved by the distribution units in Austria and in the United Kingdom.
In 2018, Swiss Life International aims to pursue new insurance business development by e xtending its product range. In financial consulting the company anticipates an increase in the number of advisors and an increase in revenue per advisor. Swiss Life International aims to ensure that people can be offered suitable and high-quality financial services and advice going forward through digitalisation initiatives. Swiss Life International is also targeting an increase in fee and risk business.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 2 674 1 718 56%
In 2017, Swiss Life Asset Managers posted a segment result of CHF 258 million (previous year: CHF 243 million). This equates to a 6% increase. Commission income and other earnings rose by 11% during the year under review. Adjusted operating costs rose 11%, driven by continuing growth in third-party business, mainly in the real estate area.
Third-party business also grew: Swiss Life Asset Managers had assets of CHF 61.4 billion under management at the end of 2017, an increase of 24%. The latest expansion in third-party business enabled Swiss Life Asset Managers to achieve net new income of CHF 7.1 billion. Growth in institutional mandates, equities, mixed and fixed-income investments and real estate products made a big contribution to this growth, while money market funds experienced outflows.
Assets under management for third-party clients – breakdown by asset class 1 Real estate 2 Fixed income 5 Equity 3 Multi asset 4 Money market
Cash and cash equivalents and other Alternative investments 8 1 Corporate bonds 2 Government and supranational bonds 3 Real estate
Swiss Life stands for openness and transparency within the context of responsible corporate management and, in the interests of its shareholders, policyholders and staff, attaches great importance to the accepted standards of corporate governance and the requirements entailed in terms of the management and organisation of the Swiss Life Group.
The operational management structure as at 31 December 2017 is shown on page 43.
The purchase or sale of shares or of acquisition/disposal considerations regarding shares in companies that are domiciled in Switzerland and have their shares listed in Switzerland, must be reported to the company in question and the SIX Swiss Exchange if the shareholdings exceed, fall below or reach certain thresholds. The relevant thresholds are 3, 5, 10, 15, 20, 25, 33⅓, 50 and 66⅔% of the voting rights. The details are set out in the Financial Market Infrastructure Act (FMIA) and in the implementation provisions of the Financial Market Infrastructure Ordinance-FINMA (FMIO-FINMA) and Financial Market Infrastructure Ordinance (FMIO).
A table showing the shareholder structure is provided in the section “Share Performance and Historical Comparison” on page 306.
In 2015 there were no changes to the share capital. The distributions of CHF 5.50 and CHF 6.50 per share decided by the General Meetings of 23 April 2014 and 27 April 2015 were made out of the capital contribution reserves.
Swiss and foreign banks, securities brokers and companies acting on their behalf may be entered in the share register as nominees if they are holding shares of Swiss Life Holding in their custody for the account of the beneficial owners. Professional asset managers may also be registered as nominees if, in a fiduciary capacity, they have deposited Swiss Life Holding shares for the account of third parties with Swiss or foreign banks or securities brokers in their own name. Nominees are required to be subject to banking or financial market supervision. A request must be filed to register as a nominee. The voting right representation is restricted to 10% of the share capital over all, where by nominees who are connected with regard to capital or voting rights under uniform management or contractual agreement will be counted as a single shareholder. The Board of Directors may approve exceptions to these restrictions on registration, observing the principle of responsible judgement. No such exemptions were granted during the period under review.
The Board of Directors consists of no fewer than five and no more than 14 members in accordance with the Articles of Association. The Chairman, other members of the Board of Directors and members of the Compensation Committee of the Board of Directors are elected by the General Meeting of Shareholders on an individual basis for a one-year period. The term of one year is deemed to signify the period from one Annual General Meeting up to and including the next. Members whose terms of office are expiring are eligible to stand for immediate re-election.
Rolf Dörig — Born 1957, Swiss national Chairman of the Board of Directors bild Rolf Dörig laid the groundwork for his professional career by obtaining a doctorate in law (Dr. iur.) from the University of Zurich before being called to the bar in Zurich. He also completed the Advanced Management Program at Harvard Business School (Boston). Joining Credit Suisse in 1986, he assumed a number of executive responsibilities in various areas of banking and in different geographical markets. As a Member of the Executive Board, he was assigned responsibility for Swiss Corporate and Retail Banking from 2000 onwards. In 2002 he assumed the role of Chairman Switzerland of Credit Suisse. Following his move to Swiss Life, Rolf Dörig held the positions of Chairman of the Corporate Executive Board from November 2002 to May 2008 and Delegate of the Board of Directors from May 2008 to May 2009.
Other appointments: – Cellere AG, Member of the Board of Directors – Georg Fischer Ltd, Vice Chairman of the Board of Directors – J.P. Morgan, Member of the European Advisory Council – FehrAdvice & Partners AG, Chairman of the Board of Directors – Meier + Cie AG, Chairman of the Board of Directors
Adrienne Corboud Fumagalli — Born 1958, Swiss and Italian national Member of the Board of Directors bild Adrienne Corboud Fumagalli is a Doctor of Economics and Social Sciences and a graduate of the University of Fribourg. In 1996 she joined the PTT in the management team of Radiocom (radio, TV, mobile) in charge of New Business Development and the international market. The PTT then became Swisscom and Adrienne Corboud Fumagalli held various positions from 1997 to 2000, ultimately becoming Director of Product Marketing in Radio Broadcasting Services. In November 2000, Adrienne Corboud Fumagalli joined the Kudelski Group as Corporate Secretary and Member of the Corporate Executive Board. In January 2004, she was appointed Executive Vice President in charge of Business Development. From 2008 to 2016, Adrienne Corboud Fumagalli served as Vice President for Innovation and Technology Transfer at EPF Lausanne. As of July 2017, she is also President of the Board of Directors and Chief Executive Officer of Deeption SA (spin-off of the EPF Lausanne Social Media Lab).
Adrienne Corboud Fumagalli will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 24 April 2018.
Committee – Renaissance KMU Schweizerische Anlagestiftung, Member of the Board of Trustees – Emaform AG, Member of the Board of Directors – Mobilejobs AG, President of the Board of Directors (since July 2017) – Bomatec Holding AG, Member of the Board of Directors (since December 2017) – F&P Robotics AG, Member of the Board of Directors (since May 2017)
Damir Filipovic — Born 1970, Swiss national Member of the Board of Directors bild Damir Filipovic studied mathematics at the Swiss Federal Institute of Technology in Zurich (ETHZ), where he qualified in 1995 and gained a doctorate in financial mathematics in 2000. He then held research posts at various universities abroad, including the US universities of Stanford, Columbia and Princeton. He was appointed assistant professor at the University of Princeton in 2002, and then from 2003 to 2004 he worked on the development of the Swiss Solvency Test at the Federal Office of Private Insurance (now FINMA) in Switzerland. Damir Filipovic went on to hold the chair of
Swiss Life – Annual Report 2017 financial and actuarial mathematics at the Ludwig Maximilian University of Munich from 2004 to 2007. From 2007 to 2009 he was head of the Vienna Institute of Finance, a research institute affiliated to the University of Vienna and the Vienna University of Economics and Business. In 2010 he was appointed Swissquote Chair in Quantitative Finance and Swiss Finance Institute Professor at the Swiss Federal Institute of Technology in Lausanne (EPFL).
Frank W. Keuper — Born 1953, German national Member of the Board of Directors bild Frank W. Keuper studied social and economic sciences at Vienna University of Economics and Business and obtained a doctorate in the same subject. He started his career in the insurance sector in 1985 at the Albingia insurance group as assistant to the Management Board and later became Head of Sales and Marketing. After switching to the Zurich insurance group he returned to Albingia in 1992 and served as a Member of the Management Board from 1994 until 2000. He later assumed responsibility as a Member of the Management Board at AXA Versicherung AG for the Private and Corporate Clients division as well as Damages. From 2004 until 2007 he managed DBV Winterthur Holding AG as Chairman of the Management Board and was simultaneously a Member of the Management Board of the Winterthur Group. From 2007 until 2012 Frank W. Keuper was CEO of AXA Konzern AG and a Member of the Executive Committee of AXA Group in Paris.
Frank W. Keuper will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 24 April 2018.
Other appointments: – HanseMerkur Lebensversicherung AG, Member of the Supervisory Board – HanseMerkur Allgemeine Versicherung AG, Member of the Supervisory Board – JCK Holding GmbH Textil KG, Chairman of the Advisory Committee – HVP Hanse Vertriebspartner AG, Chairman of the Supervisory Board
Stefan Loacker — Born 1969, Austrian national Member of the Board of Directors bild Stefan Loacker studied economics at Vienna University of Economics and Business and at the University of St. Gallen (Mag. rer. soc. oec., lic. oec. HSG). He began his professional career with stints at the Institute of Insurance Economics (I.VW) at the University of St. Gallen and at the then-Rentenanstalt (now Swiss Life) before joining Helvetia Patria Versicherungen in 1997 as assistant to the
Executive Board. He was promoted to Head of Business Development, served in that capacity from 2000 to 2002 and subsequently became CFO and Head of IT at ANKER Versicherung (a subsidiary of the Helvetia Group) in Vienna from 2002 to 2005. In 2005 Stefan Loacker took over management of Helvetia Versicherungen AG (previously ANKER Versicherung). He returned to Switzerland in 2007 and, at age 38, became CEO of Helvetia Group. Stefan Loacker led Helvetia
Other appointments: – Vontobel Foundation, Member of the Board of Trustees – Institute of Insurance Economics at the University of St. Gallen, Member of the Executive
Henry Peter — Born 1957, Swiss and French national Member of the Board of Directors bild 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 an assistantship 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 Lugano law firm, currently Kellerhals
Other appointments: – Sigurd Rück Ltd, Chairman of the Board of Directors – Casino de Montreux SA, Chairman of the Board of Directors and Member of the Audit
Administration. In this function he was notably a Member of the Liechtenstein OECD delegation and Governor of the European Bank for Reconstruction and Development (EBRD) in London for four years. Klaus Tschütscher went on to start his political career as a Member of government of the Principality of Liechtenstein. Initially he was Deputy Prime Minister from 2005 to 2009, responsible in particular for Justice and Economic Affairs. From 2009 to 2013 Klaus Tschütscher was Prime Minister and Finance Minister of Liechtenstein. He has received various awards and international distinctions. Klaus Tschütscher is a delegate and Executive Board member of UNICEF Switzerland. Since his withdrawal from politics, Klaus Tschütscher has been a Member of the Board of Directors of Swiss Life Holding Ltd.
Klaus Tschütscher will be put forward for re-election as Member of the Board of Directors and for election as Member of the Compensation Committee at the General Meeting of Shareholders of Swiss Life Holding on 24 April 2018.
In accordance with the Articles of Association, the Board of Directors has issued Organisational Regulations setting forth the internal organisational structure and the duties and competencies of the Board of Directors, the Board of Directors’ committees, the Chairman of the Board of Directors and the Corporate Executive Board. The Organisational Regulations are reviewed regularly and adjusted where necessary. They can be found at www.swisslife.com, “The Swiss Life Group” area, “Corporate Governance” section, “Organisation and principles” subsection (www.swisslife.com/ en/organisation).
Eleven meetings of the Investment and Risk Committee were held in the year under review. Each session lasted for around two hours on average. All members attended all the meetings, with the exception of one meeting, where one member was excused. The Chairman of the Board of Directors attended seven meetings of the Investment and Risk Committee. The Group CEO attended eight and the Group CFO and Group CIO attended nine meetings of the Investment and Risk Committee. The Group CRO attended all the meetings.
Generally, the Group CFO and the Head of Corporate Internal Audit attend the Audit Committee meetings or parts of the meetings in an advisory capacity. The Group CEO may attend the meetings of the Audit Committee (without voting rights). Representatives from the external audit services are also regularly invited (cf. also “Supervisory and control instruments vis-à-vis the auditors”, page 70). In addition, further members of the Corporate Executive Board or in-house specialists may also be invited to attend. The Audit Committee meets at least four times a year. The frequency of meetings depends on the financial budgeting and reporting process.
In the year under review, the Audit Committee convened five times, with a meeting lasting about two hours on average. There was full attendance at all meetings, with the exception of three meetings, where one member was unable to attend. The Chairman of the Board of Directors was present at two meetings of the Audit Committee. The Group CEO attended four meetings. The Group CFO and the Head of Corporate Internal Audit, as well as representatives from the external audit services, attended all meetings. To prepare for the meetings relating to the annual and half-year reports, the Audit Committee regularly calls on the services of an independent financial and business expert.
The Organisational Regulations of Swiss Life Holding provide for the comprehensive delegation of the executive management responsibilities of the company to the Group CEO and the Corporate Executive Board, with the exception of those duties reserved for other bodies in accordance with the law, the Articles of Association or the Organisational Regulations themselves.
The Corporate Executive Board bears responsibility in particular for the implementation of the corporate strategy, for the conditions governing business operations and for financial guidance. It is further responsible for preparing the resolutions for the Board of Directors and its committees, and for monitoring the implementation of these decisions in the Group. It is vested with the authority to rule on business referred to it by the Board of Directors, the Board of Directors’ committees and the Chairman of the Board of Directors, insofar as approval or a decision is not reserved exclusively to the delegating body.
Corporate Internal Audit, which reports directly to the Chairman of the Board, represents a suitable means of independent monitoring and information gathering for the Board of Directors. Regular meetings take place between the Chairman of the Board of Directors and the Head of Corporate Internal Audit, as well as between the Chairman of the Audit Committee and the Head of Corporate Internal Audit. Implementation of the measures recommended by Corporate Internal Audit is monitored by Group Compliance and Operational Risk Management. The Audit Committee regularly receives a report on operational risk management within the Swiss Life Group. The Internal Control System (ICS) is another instrument available to the Board of Directors for information and controlling purposes. Further details are available in the “Risk Management” section on page 72.
On 31 December 2017 the Corporate Executive Board of Swiss Life Holding was composed of the following members: Member of the Corporate Executive Name Function Board since
Bond Manager, he was appointed Head of Fixed Income at Winterthur Group in 2001.
Council – Zurich Chamber of Commerce, Member of the Board of Directors – Zürcher Volkswirtschaftliche Gesellschaft, (Zurich Economic Society), Member of the Board of Directors
From April 2014 to March 2017 Markus Leibundgut was Chief Executive Officer Germany (CEO Germany) and Member of the Corporate Executive Board of the Swiss Life Group.
Other appointments: – Bexio AG, Member of the Board of Directors – Swiss Insurance Association (SIA), Member of the Board of Directors
In August 2009, Thomas Buess joined the Swiss Life Group as Group Chief Financial Officer (Group CFO) and Member of the Corporate Executive Board.
bild After completing his studies in business economics at the University of Cologne, Jörg Arnold joined what was then Colonia Versicherung (now the AXA Group) in 1991 as assistant to the CEO. Jörg Arnold worked in a variety of positions at the company, including head of the Distribution Management department and district manager of the Frankfurt branch office, and in 1998 was made sales director and Member of the Executive Committee of Colonia Versicherung at its Berlin branch office. In 2001 he was appointed Head of Sales at Deutsche Ärzteversicherung AG, joining their Management Committee. In 2010 Jörg Arnold took over as CEO of Deutsche Ärzteversicherung AG. In this capacity he was responsible for sales as well as for operations, business development and human resources. In 2014 Jörg Arnold became Global Head of Savings, Retirement & Distribution at AXA Group in Paris within the Life & Savings Global Business Line, which is responsible for the Group’s worldwide life insurance business.
Management. At the same time, he was the driving force behind the foundation of the listed real estate company Swiss Prime Site AG, where he served as Chairman of the Board of Directors until 2005. From 2005 until 2009 he worked for Deutsche Bank, initially assuming responsibility for managing family offices in Switzerland and in the final two years serving as CEO of Privatbank Rüd, Blass & Cie AG. From 2009 until 2014, Stefan Mächler was in charge of asset management at the Swiss Mobiliar Group as Chief Investment Officer and Member of the Group Executive Board.
On 1 September 2014 Stefan Mächler was appointed Group Chief Investment Officer and Member of the Corporate Executive Board of the Swiss Life Group.
Other appointments: – Stiftung Technopark Zürich, Member of the Board of Trustees – Inter-Community School Foundation, Member of the Board of Trustees
bild Nils Frowein is an economics graduate with German and American accountancy certification. He is a skilled banker and has extensive expertise in the financial services sector and many years of capital market experience. From 1997 until 2004 he worked at the auditing firm BDO Deutsche Warentreu hand AG, where he was responsible for the Financial Advisory Services division, most recently as partner. From 2004 to 2007 Nils Frowein was CFO of financial services provider MLP. There he was significantly involved in laying the strategic foundations for the company. Nils Frowein joined AWD as deputy Chief Executive Officer in January 2008. He was initially Chief Financial Officer and was appointed Chief Operating Officer on 1 September 2008. Between 2009 and 2010 he additionally took charge of the Swiss business of AWD as acting CEO. Nils Frowein has been Chairman of the Swiss Life subsidiary Chase de Vere in the UK since 2010 and since 2011 Chairman of the Supervisory Board of Swiss Life Select Austria. Since 2017 he has also been Chairman of Swiss Life Singapore, Swiss Life Luxembourg and Swiss Life Liechtenstein.
Ivo Furrer, CEO of Swiss Life Switzerland until 30 March 2017, was succeeded with effect from 1 April 2017 by Markus Leibundgut, previously CEO of Swiss Life Germany. Jörg Arnold succeeded Markus Leibundgut as CEO Germany with effect from 1 July 2017.
At the General Meeting of Shareholders of 25 April 2017, the following compensation was approved for the Board of Directors and Corporate Executive Board: – For the Board of Directors: The maximum total amount of fixed compensation until the next ordinary General Meeting in 2018 in the amount of CHF 3 200 000 in total.
In the same way, the General Meeting on 24 April 2018 will be asked to approve the exclusively fixed compensation for the Board of Directors until the 2019 ordinary General Meeting, the short-term variable compensation component for the Corporate Executive Board for the 2017 financial year and the maximum total amount of fixed compensation (basic salary incl. ancillary costs and occupational provisions) and of the long-term variable compensation component (equity compensation plan) for the 2019 financial year.
The information on compensation granted to Corporate Executive Board mem bers also includes the variable compensation, which was determined by the Board of Directors at the beginning of 2018 and is published on an accrual basis as compensation for the 2016 financial year. The members of the Board of Directors are granted exclusively fixed compensation, payable 70% in cash and 30% in Swiss Life Holding shares; the allocated shares are subject to a three-year blocking period.
The compensation received by each member of the Board of Directors, and that of the acting Chairman of the Corporate Executive Board (Group CEO), who in the period under review received the highest compensation of the members of the Corporate Executive Board, is disclosed on an individual basis.
The variable compensation components are linked to the strategic objectives of the Group and the individual divisions, and the associated financial and HR-related targets. They are based on the achievement of annual objectives defined in advance for a period of three years as part of medium-term planning and determined on the basis of the actual performance of individuals or teams in relation to the objectives set (performance-linked payment) and on the degree of achievement of the Swiss Life Group targets as reflected in its annual result (share in the company ’s success). Quantitative and qualitative performance is also always assessed on the basis of the competencies required for the function held, such as professional expertise, entrepreneurship, task fulfilment, cooperation and leadership. The percentage weighting between the individual and/or team performance and the share in the company’s success depends on the position and responsibilities of the function holder.
The share in the company’s success is measured using quantitative Group targets (Key Performance Indicators, KPIs), which are defined in advance for the following three years as part of medium-term planning. The main KPIs for the medium-term planning are, besides the annual profit, payout capacity, the planned cost savings, the risk and fee result, new business profitability, the return on equity and solvency (Swiss Solvency Test, SST). In order to avoid conduct aimed at the short-term achievement of key indicators with a higher weighting, the individual KPIs are not mechanistically weighted in advance. Based on the generally identical weighting of all the KPIs, their individual weighting is determined at the end of each financial year by the Board of Directors as a whole on the basis of a proposal by the Compensation Committee taking all developments into account and consideration (discretionary decision).
Permanent employment contracts in Switzerland contain notice periods of between three and twelve months, depending on position and seniority. All employment contracts with members of the Corporate Executive Board specify a notice period of twelve months. Members of the Corporate Executive Board have no contractual entitlements to severance payments. Likewise members of the Board of Directors have no such entitlements.
For the period from the 2017 ordinary General Meeting to the 2018 ordinary General Meeting, the General Meeting of Shareholders of 25 April 2017 approved a maximum amount of fixed compensation for the Board of Directors totalling CHF 3 200 000. In 2017, the Board of Directors determined the compensation for the members of the Board of Directors unchanged at the same level as in the previous year.
The compensation paid to members of the Board of Directors in the 2017 financial year is shown on an individual basis in the 2017 compensation table below. For comparison purposes, the compensation for the 2016 financial year is shown again after the 2017 compensation table.
Swiss Life – Annual Report 2017 40% of the variable compensation 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.
Swiss Life successfully continued its operational progress of previous years during the year under review in spite of the persistently extremely demanding economic environment and clearly exceeded its medium-term targets: IFRS net profit increased over the previous year by 9% to CHF 1013 million and adjusted profit from operations also rose by 5% to CHF 1475 million. Likewise, insurance reserves were again significantly strengthened in favour of policyholders. Payout capacity again improved; the CHF 625 million cash remittance to Swiss Life Holding significantly exceeded the target. The value of new business increased by 18% from CHF 296 million to CHF 351 million and the new business margin increased to 2.5% thanks to disciplined margin management and a further improvement in the new business mix. The solvency target was, based on the internal SST model approved with conditions, again achieved from a quantitative and qualitative perspective in 2017. Finally, targets for cost savings and the risk and fee result as well as the adjusted return on equity were within the target range.
For the 2017 financial year, the General Meeting of Shareholders of 26 April 2016, as mentioned at the start of the present Compensation Report, had approved a maximum total amount of the fixed compensation and the long-term variable compensation component (equity compensation plan) for the Corporate Executive Board of CHF 13 700 000, based on the Articles of Association applicable on 1 January 2015. In line with this, the Board of Directors set a fixed compensation at the beginning of 2017 (basic salary incl. ancillary costs and occupational provisions) of CHF 9 438 612 in total for the members of the Corporate Executive Board. It also granted future subscription rights worth CHF 3 431 479, as long-term variable compensation under the 2017 RSU plan, to the members of the Corporate Executive Board, on 1 March 2017, for the extraordinarily good performance in 2016, when Swiss Life again had increased its operational effectiveness and achieved profitable growth. Moreover, under the 2017 RSU plan, a new member of the Corporate Executive Board was granted future subscription rights as of the end of July 2017 to the value of CHF 385 221 as compensation for foregone equity-based compensation from the previous employer. The subscription rights allocated under the 2017 RSU plan entitle the holder to receive Swiss Life Holding shares following a three-year vesting period, provided the requirements are satisfied at that point. The approved budget for the 2017 financial year was applied to the sum of CHF 13 255 312 in view of the excellent business development; it includes a one-off payment to offset disadvantages in connection with the change of job by a new member of the Executive Board.
At the General Meeting of Shareholders of 24 April 2018, the Board of Directors will again submit for approval the maximum amount of the fixed compensation and long-term variable compensation component (equity compensation plan) for the Corporate Executive Board for the 2019 financial year.
The compensation for members of the Corporate Executive Board for the 2017 financial year is reported in detail in the 2017 compensation table below. Patrick Frost, Chairman of the Corporate Executive Board (Group CEO) since 1 July 2014, received the highest compensation of the members of the Corporate Executive Board in the 2017 financial year; accordingly his compensation is disclosed individually.
In addition to Group CEO Patrick Frost, seven persons were members of the Corporate Executive Board for all or part of the year under review, as reported in the compensation table below. For Ivo Furrer, CEO Switzerland until 30 March 2017, the compensation both during his membership of the Corporate Executive Board and up to the termination of his employment relationship on 30 June 2017, is taken into account.
The short-term variable compensation component for the Corporate Executive Board of a total CHF 3 698 750 (cash bonus of CHF 3 213 750 and deferred compensation in cash of CHF 485 000), which was determined by the Board of Directors at the beginning of 2018 for the 2017 financial year and will be proposed to the General Meeting of Shareholders on 24 April 2018 for approval, is disclosed in the following compensation table on an accrual basis as compensation for the 2017 financial year (accrual method). The members of the Corporate Executive Board did not receive any compensation in shares for the 2017 financial year; they are participating in the current equity compensation plan that provides for the allocation of so-called Restricted Share Units (RSUs).
Expenditure for occupational provisions for members of the Corporate Executive Board in the period under review amounted to CHF 1 720 381. This includes the ordinary annual employer contribution of CHF 273 146 for the occupational benefits of Patrick Frost, Group CEO.
The stated amounts do not include social security contributions (AHV/IV/ALV/FAK) payable by the employer under the law. The respective expenditure is shown in footnote 6 of the 2017 compensation table.
Following the 2017 compensation table, the details of the compensation for 2016 are stated in a separate table for comparison.
Total Total compensation Bonus for 2017 Other compensation in cash and Salary paid in 2018 3 compensation 4 in cash Number Amount shares (amount)
Other members of Corporate Executive Board 235 000 8 626 2 978 714 13 563 368 7 The variable deferred compensation in cash is paid out after a deferral period of three years, provided the requirements are satisfied at that point.
Other members of Corporate Executive Board 1 427 915 0 10 507 365 5 Pursuant to the pension fund regulations, occupational provisions were financed by the employer and the employee at a ratio of 70% to 30%.
6 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV/FAK amounted to a total of CHF 1 028 335 in the year under review.
No compensation was paid to former members of governing bodies in the year under review.
SLH shares 1 Total number of RSUs allocated in the years 2015, 2016 and 2017 in connection with the relevant equity compensation plan. The RSUs represent future subscription rights that entitle the individuals concerned to receive SLH shares after a period of three years, provided that the relevant conditions are met at that point.
of which total variable compensation (total pool) 2 149 717 404
Total outstanding deferred compensation 12 074 874 of which cash payment 1 439 808 of which shares 0 of which options 0 of which others (Restricted Share Units, RSU) 10 635 066
Charges and credits in the financial year from compensation for previous financial years 3 367 270
3 In particular increase in expenses affecting net income for variable compensation in Germany for the 2016 financial year. 4 Compensation which is agreed on the conclusion of an employment agreement to be paid or be due once. Also deemed to constitute a sign-on payment shall be compensation for benefits foregone vis-à-vis a previous employer. 5 Compensation which is agreed in connection with the termination of an employment relationship.
Report of the statutory auditor to the General Meeting of Swiss Life Holding AG
We have audited the sections on pages 57 and 61 to 63 of the accompanying compensation report of Swiss Life Holding Ltd for the year ended 31 December 2017.
In addition to the resolutions provided for by law, a qualified majority (corresponding to at least two thirds of the voting shares represented and an absolute majority of the share par value represented) is required to: – change provisions concerning restrictions on voting rights – dissolve the company (liquidation) – dismiss more than one third of the members of the Board of Directors – change these provisions of the Articles of Association
The role of lead auditor rotates 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. Accordingly, the partner at PwC in charge of auditing the Swiss Life Holding annual financial statements and consolidated financial statements (lead auditor), who has exercised this function since 2011, will be replaced by another partner for the 2018 financial year.
In 2017 the auditing fees credited to Pricewaterhouse Coopers came to CHF 8.1 million (prior year: CHF 8.4 million). This includes the fees for reviewing the 2017 half-year accounts.
Risk Management A further pillar of Swiss Life’s responsible, sustainable business is its integrated, value-oriented risk management involving both quantitative and qualitative elements. The goal is to protect customers’ funds and ensure the best possible investment of risk capital, while complying with regulatory requirements and taking into account persistently challenging capital market environment.
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 of strategic risks, as well as the evaluation of operational risks and the internal control system (ICS). On the other hand, they also cover quantitative elements, such as risk appetite at Group level, risk budgeting for the insurance units and Asset Liability Management’s investment strategy. The Board of Directors uses a solvency ratio limit to determine Swiss Life’s risk appetite. Limits for the financial risks taken by the individual business units are based on local regulatory provisions and risk appetite at Group level, and are used to determine their investment objectives.
Economic and regulatory capital requirements and the profit target are the main elements determining the risk budgets. Based on the overall risk budget set by the Investment and Risk Committee of the Board of Directors, the Group Risk Committee of the Corporate Executive Board defines the risk limits for the business areas. Adherence to these limits is checked continuously.
In view of Swiss Life’s further operational progress, Standard & Poor’s increased its rating to “A with outlook stable” in May 2015 and confirmed this rating in 2017.
In our core business, life and pensions, our employees contribute directly to society. With our help, people are able to protect themselves against risk and take precautions so that they can lead their lives in as self-determined a manner as possible at every age. That is our raison d’être.
“a longer self-determined life”, and are involved in many charitable initiatives and foundations as well as the promotion of culture, health and sport.
We consider environmental and climate protection as a priority. We support energy-saving measures, renewable energy sources and the sparing use of resources in our own business and in our position as a property investor with a view to consistently reducing our ecological footprint.
Target groups Employees and potential employees, general public New starters | 30 –45 | 45+| 65+
As a co-founder of modern occupational provisions, Swiss Life believes it has a responsibility towards current and future generations. As a result, the company plays an active role in the public debate about a longer self-determined life and made it a guiding theme in 2016.
– Group CEO (Chairman) – Group Executive Board members in Switzerland – General Council
A Steering Committee (STC) was set up in 2016, to enable Swiss Life to plan its corporate responsibility activities and keep track of progress. The STC Corporate Responsibility includes representatives of Human Resources and Communications in addition to all the Group Executive Board members in Switzerland. The STC meets twice a year as a rule. The Group CEO chairs the committee.
Corporate responsibility representatives from Group Communications, Public Affairs and Human Resources, and one person from the Swiss Life “Perspectives” Foundation, form a core operational team to ensure the exchange of information in the line, propose measures to the STC and implement their mandates correspondingly in the organisation. In 2017, with the integration of ecology and sustainability, two representatives of Asset Management joined the core team.
The annual reporting on corporate responsibility helps create transparency and strengthen communication with the stakeholder groups. Swiss Life’s stakeholders include, in addition to its employees and customers, investors, legislators and representatives of the media, politics and associations, all of whom are affected either directly or indirectly by Swiss Life’s activities. Swiss Life is in regular dialogue with all of its stakeholders, which ensures that it is aware of the requirements and expectations of its stakeholder groups and is able to react to challenges or changes (G4–24, G4–25, G4–26, G4–27).
The Swiss Life Group’s Corporate Responsibility Report conforms with the EU’s CSR Directive. In this Corporate Responsibility Report, Swiss Life offers an account of environmental (pages 85–87, 101–102, 123–125), employee (pages 85–87, 108–122) and social issues (pages 84, 103–104) and reports on the observance of human rights (pages 82–83, 101–102) and combating corruption and bribery (pages 94–95, 101–102). The pages cited also provide information on the concepts and associated results, as well as on due diligence process and risk management.
The Swiss Life Sustainability Report meets the requirements of the Global Reporting Initiative (GRI), a framework for transparent sustainability reporting (www.globalreporting.org). The report on the 2017 financial year comprises the Swiss Life Switzerland, France, Germany, International and Asset Managers segments and was implemented in accordance with the GRI-G4 guidelines and sector-specific requirements for financial services providers (Financial Sector Supplements) in conformity with the “Core” option. The GRI aims to provide support to companies, governments and NGOs in focusing on those areas of interest to companies and their stakeholders. The standardised, format of the reports, based on key figures, also contributes to the comparability and transparency of sustainability reporting.
The contents of the materiality matrix were established in 2015 as part of a multi-level materiality process involving internal and external stakeholders. Based on qualitative and quantitative interviews with the Swiss Life Corporate Executive Board, a project group comprising specialists from Investor Relations, Asset Managers, Human Resources and Corporate Communication worked on selected key themes for Swiss Life, discussed them with selected stakeholders and refined them in structured interviews. Finally, the completed materiality matrix was approved and ratified by the Corporate Executive Board (G4–18). The matrix is reviewed annually and amended when necessary. No material changes were made in 2017.
Responsibility in business Customer centricity Customer centricity is a strategic thrust of Swiss Life. That’s why we regularly measure our customer’s satisfaction and incorporate the results into the way we develop our products and services.
Products and services Swiss Life has 160 years of experience in developing products and services in its life insurance and pensions business. The Swiss Life product strategy thus combines optimal customer value with profitability for the company. Its offering is subject to continuous review and refinement.
Human rights Swiss Life prioritises high social standards in its own operations and expects similar standards from its business partners and suppliers.
Responsible employer Swiss Life offers development prospects to employees of all generations, who also enjoy fair and attractive working conditions.
We guarantee all people of all ages a healty life and promote their wellbeing
The social and economic consequences of the fact that we are living longer are insufficiently accounted for in almost all areas of life. Swiss Life is committed to raising societal awareness of this topic and actively addressing the attendant challenges. Swiss Life supports its customers in preparing ahead of time so they can enjoy their longer self-determined life. Swiss Life offers its em ployees flexible working models and a wide range of health and prevention services.
Mutual respect, equality of treatment and non-discrimination are all parts of Swiss Life’s corporate culture.
In 2015, the UN member states adopted 17 Sustainable Development Goals (SDG), which constitute the centrepiece of the 2030 Agenda for Sustainable Development. Swiss Life would like to set out its contribution to attaining individual goals.
As a builder and in its own operations, Swiss Life supports the sparing use of resources. This is also true of its business premises. Swiss Life publishes current developments in its use of paper and energy and in its production of waste on an annual basis, as well as the other indicators on operational ecology.
See also “Sustainable Construction and Renovation” (pages 98 –100), “Sustainable Procurement” (pages 101–102) and “Environmental Responsibility” (pages 123–125).
Swiss Life is one of Europe’s leading real estate investors and has the biggest private real estate portfolio in Switzerland. Around 81% of its properties are in urban areas. As a builder and owner, Swiss Life aims to use ecological and economic resources with maximum efficiency and to make an active contribution to sustainable urban development.
Swiss Life actively contributes towards familiarising society with the challenges of longevity and supporting its customers to structure their pension provision accordingly. In addition, Swiss Life provides its employees with a working environment suitable for any stage of life, thus giving them the option to work for longer.
The whole concept of work needs an overhaul to reflect increased life expectancy. Swiss Life actively promotes cooperation among the generations to allow young and old to enter into dialogue and learn from each other. Training and development as well as opportunities to promote and maintain their health are available to employees of all ages. What is more, Swiss Life offers flexible working models to facilitate the compatibility of the professional and private spheres and provide adequate scope for recuperation. These conditions are conducive to keeping employees working well, motivated and healthy and able to deliver optimal performance during every phase of their life.
Customer orientation is a strategic thrust at Swiss Life and part of the Group-wide programme “Swiss Life 2018”. Swiss Life aims to improve customer satisfaction by the end of 2018, along with its offerings and its customer centric working methods.
The development of the NPS at the postal contact point in Germany
One example of this trend is provided by the customer letters in Germany, many of which had expressed dissatisfaction with the overly complicated nature of their content. As a result, the customer letters were made more comprehensible and given a better structure, which in turn had the effect of reducing calls to the Munich customer service center by 25%. The positive development of the NPS at the customer service center confirms that this measure has had a long-term positive effect on willingness to recommend.
In addition, Swiss Life annually surveys the perception of customer orientation through an online questionnaire for its employees. The Employees’ Customer Centricity Index (ECCI) summarises the results. The Index rose in 2017 by three percentage points over the previous year to 81%. Internal perception of customer centricity improved in 2017 in relation to all areas surveyed.
In Germany, focus groups comprising employees from various departments are used to continuously develop and test new services and processes. Thus in 2017, for example, a digital service point was established for sales, to allow financial advisors to order new documents or address their questions directly to the main service centre.
In France there are biannual “Innovathons” at which employees from the whole organisation propose practical improvements to processes, services or products, discuss them in mixed teams and plan their implementation. These Innovathons have led to such innovations as a guideline for call center staff and the adaptation and improvement of internal work and management tools.
Swiss Life has over 160 years of experience in developing innovative and customer-oriented products in its life insurance and pensions business. Swiss Life’s activities are always based on its customers and their needs. Swiss Life aims for its customers to lead their longer lives in an assured and self-determined way.
The Swiss Life product strategy thus combines optimal customer value with profitability for the company. Regulators’ demands, regarding such things as solvency, as well as external factors like the economic and interest rate environment or demographic trends, must also be considered. Optimising and constantly developing the existing range of offerings so as to take into account all target groups, such as customers, investors, shareholders and supervisory authorities, are crucial in this endeavour.
Product management is regulated through a number of directives at Group level. Swiss Life has established a uniform, auditable product development process to that end. This process defines the minimum requirements of local product development as well as the approval and escalation process for initiatives at Group level. The observance of laws and provisions, practical customer value and the quality of customer documentation are naturally essential criteria in the assessment process.
General information on data handling, special protection of personal data and commercial secrets, need-to-know principle, data security and use of IT resources
Customer identification and monitoring of business relationships for money-laundering purposes and the financing of terrorism
Swiss Life has a comprehensive directives system as well as a Code of Conduct. The directives contain binding Group-wide minimum standards implemented in all business units and included in the regulations for the local offices. Regular training ensures that the employees are kept informed about the relevant compliance themes and directives. New employees are trained in the Code of Conduct and essential rules of behaviour upon commencing employment, and all employees must undergo refresher training every two years. Participation in such training courses is mandatory and subject to monitoring, and the aim is a 100% success rate. Divisions for which the regulator has prescribed more frequent training must undergo refreshers more often. Swiss Life has established processes to ensure adequate identification, management and control of compliance and data protection risks. The duties, responsibilities and competencies in terms of compliance are also included in the directives system.
Group-wide standards for data protection have been defined to provide guidelines for the establishment of data classification and the management of personal data, highly sensitive information and trade secrets. The individual divisions have their own data protection officers and ensure that their employees are all regularly trained in the material. Data security is part of risk management. More information on risk management may be found in the Annual Report pages 72 to 74.
The economic performance and sustainable profitability of Swiss Life are fundamental requirements for the long-term success of its corporate management. The consistent implementation of its Group-wide programmes has allowed Swiss Life to continuously increase its operational effectiveness in past years and to further develop its business model in a difficult political, social and economic environment.
Swiss Life invests some CHF 300 million every year in its existing properties in Switzerland as part of the operational implementation of its sustainability strategy. These investments focus on operational optimisations in energy use and the identification of construction measures to improve energy efficiency. Swiss Life thus deals responsibly with resources and takes steps to meet the challenges arising from climate change. What is more, such active property management allows Swiss Life to harmonise the utilisation options and quality of its buildings with market requirements, and thus to minimise vacancies.
When it comes to new construction projects in Switzerland, Swiss Life aims to achieve the Minergie® standard (or other sustainable construction standards) and indeed significantly exceeds legal stipulations on most projects. Switzerland’s first certified 2000-watt area is being constructed in Zurich under the name of “Greencity”. The easily accessibly neighbourhood in the city’s Leimbach district uses energy from renewable sources, and its residential properties meet the Minergie® P-Eco standard. Swiss Life owns a residential and commercial development on two lots in “Greencity” with 204 apartments and some 1000 m2 of commercial space.
Sustainability strategies and activities are also being implemented in Germany and France. The business unit in France publishes its efforts in the name of sustainable investing in the form of a semi-annual report in cooperation with the independent rating agency EthiFinance. It is also a member of a working group within ASPIM (Association française des sociétés de placement immobilier) currently evaluating the development of a sustainability certificate for real estate funds in France. The Swiss Life subsidiary Corpus Sireo, a real estate service provider in Germany, works with a handbook containing recommendations for saving on resources in everyday business. The French and German branches are members of national committees for sustainable real estate.
The Swiss Life Group’s need for external products and services in the insurance field comprises mainly the following areas: – Advisory services (inc. management and IT consulting) – Recruiting (head-hunting, brokering of temporary labour) – IT infrastructure (e.g. software and hardware as well as IT services) – Facility-management services (security personnel, building maintenance, cleaning etc.) – Office and advertising supplies – Long-term lease of cars (especially in France) – Refreshments – Travel – Gas and electricity
✔ Satisfaction of Swiss Life’s general expectations regarding the people, the environment and compliance
In its own operations, Swiss Life sets great store by high ecological and social standards and expects its business partners and suppliers to likewise meet high sustainability standards, and to fulfil their responsibility to their employees and society. In its contracts with service providers, Swiss Life France explicitly requires compliance with human rights and the prevention of clandestine employment and child labour. This is also the case at other locations of the Swiss Life Group, thanks to legal provisions. All companies in all locations that wish to work with Swiss Life must have a system ensuring compliance with all applicable laws.
Swiss Life prefers products and services from companies that have implemented a certified environmental protection system (ISO 14001 or EMAS).
Swiss Life in Germany and France currently does not request a certified environmental management system according to ISO 14001 or EMAS from its partners. Swiss Life Germany does, however, review products procured for their environmental compatibility and recyclability.
The Swiss financial sector represents a substantial portion of the Swiss economy: with its contribution of just under 10% to overall Swiss gross added value, the sector is among the country’s economic powerhouses. And with direct value creation of CHF 29.5 billion, insurance companies contribute almost as much as the banks. The insurance sector employs about 50 000 people in Switzerland and offers 2000 young people the opportunity to embark on a rewarding career.
Political work and communication are closely coordinated with trade associations in Switzerland, France and Germany. Moreover, a number of company executives are members of various national trade associations. In the year under review, Swiss Life Chairman of the Board of Directors Rolf Dörig was elected chairman of the Swiss Insurance Association (SIA).
Swiss Life is committed to promoting a competitive business location and appropriate regulation density in all markets. That includes adequate capital requirements: excessive capital requirements are forcing Swiss Life insurers to accept significantly higher capital costs for their operations than their foreign competitors.
Swiss Life supports projects and institutions in the fields of culture, science, education and the environment and research. The focus is on institutions promoting confidence and self- determination.
A further foundation Swiss Life runs in its home market is the Anniversary Foundation for Public Health and Medical Research, founded in 1957 on the occasion of the company’s centenary. The Foundation supports medical research projects and specific charitable organisations for people with physical and mental disabilities.
With its “Stiftung für Chancenreichtum und Zukunft” (Foundation for Opportunities and the Future), newly founded in December 2016, Swiss Life Germany consciously commits itself to values shared by its employees, its national context and the umbrella brand. The Foundation is committed to knowledge, social innovation and equal opportunity. It works towards having as many people as possible in Germany – regardless of their social background – remain curious, acquire knowledge and, as a result, lead a longer self-determined life. The Foundation is mainly financed with donations from employees and financial consultants. Swiss Life Germany covers staff and administrative costs, thus allowing 100% of donation revenues to go towards project work. Before the creation of the Stiftung für Chancenreichtum und Zukunft, Swiss Life Germany lent its support to the Foundation Confidence for Children (beginning in 1991). This engagement is now being continued and social responsibility taken.
In 2013 employees of Swiss Life International in Luxembourg initiated “Rock Against Cancer”, an annual benefit concert sponsored by Swiss Life Global Solutions that raises money for two foundations devoted to fighting cancer: Fondation Cancer Luxembourg and Fondation Kriibs krank Kanner (children with cancer).
Swiss Life has been an active supporter of film-making in Switzerland for many years. The films usually centre around people and their stories – just as Swiss Life does. For example, Swiss Life is committed to the Solothurn Film Festival, the Locarno Festival and the Zurich Film Festival. Moreover, Swiss Life in Switzerland supports classical music through its financial commitment to Tonhalle-Orchester Zurich, Zurich Opera House and the Lucerne Festival.
Swiss Life Germany sponsors an event venue in Hanover, the Swiss Life Hall, where there have been up to 100 concerts, sporting and corporate events every year since 2005. The Swiss Life Hall has become a popular venue over the years and its reputation extends beyond Hanover.
The success of Swiss Life is based on the skills and performance of its staff. That is why Swiss Life wants to find the most suitable employees, get them interested in working for the company, retain them and support their further development.
Essential pillars of Swiss Life’s successful performance culture are respectful interaction and trustworthy cooperation within the company, which in turn enable open dialogue among employees at all management levels. This foundation of trust makes it possible to question current practice and to develop and implement new ideas. So as to anticipate and respond to the constant flux, there is an emphasis on life-long learning plus the professional and personal development of all employees. The recognition and appreciation of performance ensure above-average employee engagement, which benefits customers, shareholders and investors.
Swiss Life’s management and leadership culture is a product of its corporate values (“Support individuality”, “Create confidence” and “Prove reliability”), which are based on its brand promise; this last expresses the way employees and management at Swiss Life think, feel and act. The resulting successful management and communication style is set out in the Swiss Life Group’s leadership priorities. Proceeding from this foundation, management and communication in day-to-day work mean the creation of credibility and trust, showing direction and providing perspective, and making goals reality together. In addition, managers must set an example.
The Swiss Life Group performs an Employee Survey every two years in cooperation with an independent research institute1. The participation rate in 2017 was above average, at 87% (+1% compared to the most recent survey, in 2015). The results remained stable at high overall values at the Swiss Life Group level.
Eighty-seven percent (+1% over 2015) of employees agree that they are encouraged to take initiative in their work, 17 percentage points over the external benchmark.
The following points are among the steps taken at the various locations: “Ensuring employability through constant development” – Continuous training and development for employees of all ages – Systematic career analyses and situation reviews for all ages – Enabling part-time work in old age
“Valuing and exploiting diversity” – Flexible working hours and sites offered to all generations – Promoting cooperation among generations – Childcare offerings and support for those caring for relatives
“Maintaining long-term work ability” – Offering time-out models – Diverse range of offerings for the promotion and maintenance of health – Social counselling offers
Investments in training and development 1 Apprentices and trainees 2 Management and talent development 3 Specialist training course, social and methodological skills
Young employees with potential have the opportunity to undertake all sorts of vocational courses, apprenticeships, placements, graduate programmes and combined university degrees. In 2017, 340 employees (apprentices and trainees) took advantage of these educational offerings. The Swiss Life Group employs these measures to help ensure its future management and professional requirements. In 2017, the rate of transfers to a continuing employment relationship was 80%.
Swiss Life provides targeted support to junior staff with potential. For example, employees displaying a high level of performance and potential are nominated each year for a talent programme. The initiative supports efforts to open up career paths within the company – in management, project management or specialist functions. On this basis, key positions can be filled with budding and qualified young managers from within the company.
The Key Persons Programme (KPP) is intended for Swiss Life Group management, specialists and project managers who are already in a central function or show potential for such a function. The aim of the Group-wide programme is to prepare people who show the desire and ability to help shape the company’s future in their own areas for a key position so they can live up to their role as decision maker. The programme also plays a role in employee and succession planning. Within a 12-month period, the participants acquire a detailed insight into the Swiss Life Group and its individual divisions, give and receive new impulses and apply what they have learnt to their daily work. The programme is based on the following four modules: – Leadership (communication) – Finance – Innovation, including dealing with competition and trends – Corporate strategy
The Swiss Life competency model valid for all employees is applied to the Group-wide management processes. It explicitly defines, among other things, responsible behaviour, particularly as regards compliance standards, laws and risks. Employees are regularly informed about the legal framework in which they operate, backed up by training courses to ensure they behave with integrity and in conformity with the law. Swiss Life has established management processes and informal channels (e.g. an Ombudsman managed by a third party) for reporting and dealing with cases of discrimination or complaints.
Absences by segment 1 Switzerland 2 France 3 Germany 4 International 5 Asset Managers 6 Other 7 Total
The nine-person “Europa Forum”, a committee comprising delegates from four countries, meets regularly with representatives of the Corporate Executive Board at ordinary and extraordinary meetings. It deals with transnational information and consultation on topics which affect all Swiss Life employees. Focal points in 2017 were: corporate strategy and strategy development, prevention and health maintenance, making work flexible, continuing education and e-learning, and intergenerational dialogue.
France A total of nine agreements were reached in 2017: – Agreement on employment and competence planning (Gestion prévisionnelle des emplois et des compétences, GPEC) – Second addendum to the hotline agreement to ensure attention to the special requirements of
Customer Services – Mobile Office agreement – Agreement on distribution of profits – Agreement on mandate extension for employee representatives
– Work agreement on “Rollout and use of the LOGA personnel administration software”. – Work agreement on “Basic salary increases in 2017 for non-management, non-pay-scale employees for the purposes of retaining high performers at Swiss Life Germany and creating performance incentives”.
– Work agreement on “Regulations concerning working hours”: employees are given the opportunity to donate the net amount resulting from payment of time credits from their accumulated flextime or long-term account to the Swiss Life “Stiftung für Chancenreichtum und Zukunft” (Foundation for Opportunities and the Future).
Corpus Sireo, Germany Works agreements 2017: – Group works agreement on “Enterprise organisational change” – Group works agreement “One Company works council structure” – Group works agreement “Transitional arrangements (works council structure)”
Switzerland Nine members; the chairwoman enjoys up to 20% work dispensation for work on the staff committee, the vice chairwoman up to 15% and the members up to 10%.
Corpus Sireo, Germany – Corpus Sireo Real Estate GmbH Works Council (re-election in September 2017): Eleven
Asset Managers Luxemburg Swiss Life Fund Management (LUX) S.A. (SLFM) The first election of an employee delegation at SLFM was held on 15 February 2017: – Two active delegates working full time – Two deputy delegates working full time – One security delegate working full time
TOTAL GREENHOUSE GAS EMISSIONS (IN T) 27 750 26 230 27 560
2 The data-collection processes were refined in 2017; to improve comparability, the 2015 and 2016 values were retroactively surveyed with the new processes and adapted accordingly.
Since 2011, the Swiss Life Group has taken part in the Carbon Disclosure Project (CDP) survey. CDP is an independent charitable organisation which holds the world’s most comprehensive collection of corporate information on climate change. In its first submission, Swiss Life scored 70 out of 100 index points for transparency (climate disclosure score). Swiss Life was awarded a “C” in 2017, a slight drop over the previous year (B). The lower grade can be ascribed to an adjustment in CDP’s valuation matrix.
Swiss Life also wants to make an active contribution to climate protection through operational ecology. It is for this reason that in 2008 it set up the Swiss Climate Foundation together with other Swiss companies. The foundation supports SMEs in becoming more energy efficient and reducing their CO2 emissions.
G4-4 Primary brands, products and services p. 4, p. 8–11, p. 92–93
G4-16 Memberships p. 44–47, p. 100, p. 103–104 IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES
G4-23 Significant changes in scope as well as report boundaries from No significant changes the previous period STAKEHOLDER ENGAGEMENT
Page number in SPECIFIC STANDARD DISCLOSURES Annual Report 2017 Reasons for omission
G4-EN7 Reduction of energy requirements for products and services Emissions p. 123–125
G4-EN21 NOx, SOx and other significant emissions LABOUR PRACTICES AND DECENT WORK Employment from p. 108
G4-LA8 Health and safety topics p. 118 Training and Education p. 113–114
G4-LA12 Staff and management structure p. 32–38, p. 44–47, p. 109, p. 115 Equal Remuneration p. 116
G4-HR3 Total number of incidents of discrimination and actions taken Other key figures being established
G4-PR2 Violation of regulations and codes of conduct concerning product p. 92–95 guidelines for health and safety Product and Service Labelling p. 92–93
G4-PR9 Fines due to non-compliance with respect to the provision of products p. 95 and services FINANCIAL SECTOR SPECIFIC INDICATORS Active Ownership p. 83, p. 97
Targets to reduce energy consumption yes yes yes yes AR, p. 123
Total water use (in 1000 m3) 1 72.20 79.62 120.92 AR, p. 123
Share of paper with FSC label 1 60% 54% 39% AR, p. 123
Participation Carbon Disclosure Project (CDP) yes yes yes yes AR, p. 123–125
Risks of climate change discussed yes yes yes yes AR, p. 82, p. 98–100, p. 123–125
Health and safety policy yes yes yes yes AR, p. 118–119
Health and safety policy is group-wide yes yes yes yes AR, p. 118–119
Workforce absences employees, total 3.1% 2.8% 2.7% n/a AR, p. 119
Major merger or acquisition in the last no no no no three years (affecting large proportion of staff)
Job-specific development training programs yes yes yes yes AR, p. 113
Leadership training and skills development yes yes yes yes AR, p. 113–114
Social supply chain management yes yes yes no AR, p. 101–102
Total foundation spending (in CHF million) 1.4 1.4 1.5 1.5 AR, p. 105
Employee training on anti-corruption/ethics yes yes yes yes AR, p. 94–95
Aging population and demographic yes yes yes yes AR, Notes of the Consolidated Financial Statements, change listed as a business risk factor Note 5 “Risk management policies and procedures” and Note 5.5 “Insurance risk management objectives
Provide means for verifying and correcting yes yes yes yes Applicable law and internal guidelines
CEO total summary compensation (in CHF million) 3.4 3.8 3.6 2.9 AR, p. 61–62
Clawback policy yes yes yes yes AR, p. 53–55, p. 246–248
Company has a risk management framework yes yes yes yes AR, p. 72–74
Risk management framework covers ESG risks yes yes yes yes AR, p. 97
Board oversight of risk management yes yes yes yes AR, p. 179
Consolidated Financial Statements 134 Consolidated Statement of Income 135 Consolidated Statement of Comprehensive Income 136 Consolidated Balance Sheet 138 Consolidated Statement of Cash Flows 140 Consolidated Statement of Changes in Equity 141 Notes to the Consolidated Financial Statements 141 1 General Information 142 2 Summary of Significant Accounting Policies 142 2.1 Basis of preparation 142 2.2 Changes in accounting policies 142 2.3 Reclassifications in the consolidated statement of income and consolidated balance sheet 143 2.4 Consolidation principles 144 2.5 Foreign currency translation and transactions 144 2.6 Cash and cash equivalents 146 2.8 Financial assets 147 2.9 Impairment of financial assets 149 2.10 Investment property 150 2.11 Insurance operations 155 2.12 Property and equipment 155 2.13 Inventory property 156 2.15 Investment management 156 2.16 Commission income and expense 157 2.17 Intangible assets 159 2.18 Impairment of non-financial assets 160 2.19 Income taxes 160 2.20 Assets held for sale and associated liabilities 160 2.21 Financial liabilities 162 2.22 Employee benefits 163 2.23 Provisions and contingent liabilities 163 2.24 Treasury shares 163 2.25 Earnings per share 163 2.27 Forthcoming changes in accounting policies 168 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies 172 4 Segment Information 179 5 Risk Management Policies and Procedures 180 5.1 Risk budgeting and limit setting 180 5.2 Asset and liability management (ALM) 182 5.3 Contracts for the account and risk of the Swiss Life Group’s customers
Swiss Life – Annual Report 2017 183 5.4 Financial risk management objectives and policies 199 5.5 Insurance risk management objectives and policies 204 5.6 Strategic risk management 204 5.7 Operational risk management and internal control system 205 5.8 Risk concentrations 205 5.9 Applied instruments for risk minimisation 205 5.10 Sensitivity analysis 207 6 Earnings per Share 208 7 Premiums, Policy Fees and Deposits Received 210 8 Details of Certain Items in the Consolidated Statement of Income 214 9 Derivatives and Hedge Accounting 218 10 Financial Assets at Fair Value through Profit or Loss 219 11 Financial Assets Available for Sale 219 12 Financial Assets Pledged as Collateral 220 13 Loans and Receivables 222 14 Investment Property 223 15 Investments in Associates 225 16 Property and Equipment 226 17 Intangible Assets including Intangible Insurance Assets 230 18 Other Assets and Liabilities 231 19 Investment and Unit-Linked Contracts 236 21 Other Financial Liabilities 237 22 Insurance Liabilities 239 23 Employee Benefits 249 24 Income Taxes 258 27 Capital Management 260 28 Acquisitions and Disposals of Subsidiaries 262 29 Related Party Transactions 264 30 Fair Value Measurements 275 31 Offsetting Financial Assets and Liabilities 276 32 Guarantees and Commitments 279 34 Scope of Consolidation 283 Report of the Statutory Auditor
Impairment of property and equipment and intangible assets 16, 17 0 –7
Financial assets at fair value through profit or loss 10 40 228 34 931 33 590
Premiums, policy fees and deposits received, net of reinsurance 15 522 15 380
financial instruments at fair value through profit or loss –879 –869
TOTAL CASH AND CASH EQUIVALENTS AS AT END OF PERIOD 6 611 7 333
Consolidated statement of changes in equity for the year ended 31 December 2017
Accumulated other Total Non- Share Share Treasury comprehen- Retained shareholders’ controlling Notes capital premium shares sive income earnings equity interests Total equity
Disposals of subsidiaries – – – – – – –10 –10
BALANCE AS AT END OF PERIOD 175 803 –26 3 374 11 169 15 495 88 15 583
The Swiss Life Group is one of Europe’s leading comprehensive life and pensions and financial solutions providers. In its core markets of Switzerland, France and Germany, Swiss Life offers individuals and corporations comprehensive and individual advice plus a broad range of own and partner products through its sales force and distribution partners such as brokers and banks.
For the 2016 financial year, a distribution was made to the shareholders of Swiss Life Holding Ltd (hereinafter referred to as “Swiss Life Holding”) from the capital contribution reserve instead of a dividend payment from profit. This amounted to CHF 356 million (CHF 11.00 per registered share) and was paid in the first half of 2017.
Swiss Life – Annual Report 2017 2 Summary of Significant Accounting Policies
The principal accounting policies are set out below. These policies have been applied consistently to all the periods presented unless otherwise stated.
The Group’s consolidated financial statements include the assets, liabilities, income and expenses of Swiss Life Holding and its subsidiaries. A subsidiary is an entity over which Swiss Life Holding has control. Control is achieved if Swiss Life Holding has the power over the subsidiary, is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to use its power to affect its returns. Subsidiaries are consolidated from the date on which effective control is obtained. All intercompany balances, transactions and unrealised gains on such transactions have been eliminated. Unrealised losses have been eliminated unless the transaction provides evidence of an impairment of the asset transferred. A listing of the Group’s significant subsidiaries is set out in note 34. The financial effect of acquisitions and disposals of subsidiaries is shown in note 28. Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions.
Associates for which the Group has significant influence are accounted for using the equity method. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those decisions. The investment is initially recognised at cost and subsequently adjusted to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive income of the investee in other comprehensive income. The Group’s share of net income is included from the date on which significant influence begins until the date on which significant influence ceases. Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. The carrying amount includes goodwill on the acquisition.
Foreign currency translation On consolidation, assets and liabilities of Group entities denominated in foreign currencies are translated into Swiss francs at year-end exchange rates. Income and expense items are translated into Swiss francs at the annual average exchange rate. Goodwill reported before 1 January 2005 is translated at historical exchange rates. Goodwill for which the acquisition date is on or after 1 January 2005 is carried in the foreign operation’s functional currency and is translated into Swiss francs at year-end exchange rates. The resulting translation differences are recorded in other comprehensive income as cumulative translation adjustments. On disposal of foreign entities, such translation differences are recognised in profit or loss as part of the gain or loss on the sale.
Cash amounts represent cash on hand and demand deposits. Cash equivalents are primarily short-term highly liquid investments with an original maturity of 90 days or less. Cash and cash equivalents include cash and cash equivalents for the account and risk of the Swiss Life Group’s customers.
In a qualifying cash flow hedge, the effective portion of the gain or loss on the hedging derivative is recognised in other comprehensive income. Any ineffective portion of the gain or loss is recognised immediately in profit or loss. For a hedged forecast transaction that results in the recognition of a financial asset or liability, the associated gain or loss recognised in other comprehensive income is reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss. When a hedging instrument expires or is sold, or a hedge no longer meets the criteria for hedge accounting, any cumulative hedging gain or loss at that time remains in other comprehensive income and is recognised when the forecast transaction is ultimately recognised in profit or loss. However, when a forecast transaction is no longer expected to occur, the cumulative hedging gain or loss is immediately transferred from other comprehensive income to profit or loss.
Interest, dividend income and realised and unrealised gains and losses are included in net gains / losses on financial instruments at fair value through profit or loss.
Financial assets that have been sold under a repurchase agreement or lent under an agreement to return them, and where the transferee has the right to sell or repledge the securities given as collateral, are reclassified to financial assets pledged as collateral.
Swiss Life – Annual Report 2017 interest are overdue by more than 90 days. 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 profit or loss. 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.
Available-for-sale debt instruments are assessed for impairment when a significant decrease in market value related to credit risk arises, namely after a downgrade of a debtor’s rating below single B– after initial recognition (i.e. CCC or lower according to Standard and Poor’s or equivalent ) or when payments of principal and/ or interest are overdue by more than 90 days. 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 profit or loss.
Definition of insurance contracts Insurance contracts are contracts under which one party accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. Significant insurance risk exists if an insured event could cause an insurer to pay significant additional benefits in any scenario, excluding scenarios that lack commercial substance (i.e. have no discernible effect on the economics of the transaction). The classification of contracts identifies both the insurance contracts that the Group issues and reinsurance contracts that the Group holds. By Group policy, Swiss Life considers those contracts to be insurance contracts that require the payment of additional benefits in excess of 10 % of the benefits that would be payable if the insured event had not occurred, excluding scenarios that lack commercial substance.
Contracts under which the transfer of insurance risk to the Group from the policyholder is not significant are classified as investment contracts.
France In life insurance business, 85 % of the net investment returns less 100 % of the minimum guaranteed interest on the policyholder account and 90 % of any other results are allocated to the policyholders as a minimum.
Germany A minimum of 90 % of the net investment returns less 100 % of the minimum guaranteed interest on the policyholder account (“interest result”), a minimum of 90 % of the risk result and a minimum of 50 % of the positive other result including exenses /costs are allocated to the policyholder. A negative investment result can be offset with positive other profit sources.
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. Benefits are recognised as an expense when due.
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.
Finance lease If the lease agreement transfers the risks and rewards of the assets, the lease is recorded as a finance lease and the related asset is capitalised. At inception, the asset is recognised at the lower of the present value of the minimum lease payments or fair value and is depreciated over its estimated useful life. The correspond ing finance lease obligations are recorded as liabilities.
When DAC is amortised in proportion to gross profits or gross margins on the acquired contracts, realised gains /losses are taken into account as well as gains /losses recognised in other comprehensive income (unrealised gains /losses). If these gains /losses were to be realised, the gross profits or gross margins used to amortise DAC would be affected. Therefore, an adjustment relating to these unrealised gains /losses is recognised in other comprehensive income and is also reflected in the amount of DAC in the balance sheet (“shadow accounting”).
Financial liabilities are recognised in the balance sheet when the Swiss Life Group becomes a party to the contractual provisions of the instrument. A financial liability is derecognised when the obligation specified in the contract is discharged or cancelled or expires.
In December 2017, the IASB issued their annual cycle of improvements to IFRS, annual improvements to IFRS Standards 2015–2017 Cycle. The amendments cover IFRS 3 Business Combinations and IFRS 11 Joint Arrangements – previously held interest in a joint operation, IAS 12 Income Taxes – income tax consequences of payments on financial instruments classified as equity and IAS 23 Borrowing Costs – borrowing costs eligible for capitalisation. The amendments are effective for annual periods beginning on or after 1 January 2019. The Swiss Life Group is currently not affected by the amendments.
In October 2017, amendments to IAS 28 Investments in Associates and Joint Ventures were issued. The amendments “Long-term Interests in Associates and Joint Ventures” clarify that IFRS 9 Financial Instruments should be applied to long-term interests in an associate or joint venture that form part of the net investment in the associate or joint venture but to which the equity method is not applied. An entity shall apply the amendments for annual periods beginning on or after 1 January 2019. As the Swiss Life Group will apply the temporary exemption from IFRS 9 Financial Instruments in accordance with IFRS 4 Insurance Contracts, the Group is not required to apply the amendments retrospectively. The Swiss Life Group is currently not affected by the amendments.
In December 2016, IFRIC 22 Foreign Currency Transactions and Advance Consideration was issued. This Interpretation addresses how to determine the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration in a foreign currency. The date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. An entity shall apply this Interpretation for annual reporting periods beginning on or after 1 January 2018. The Swiss Life Group is currently not affected by such transactions.
In December 2016, the International Accounting Standards Board issued amendments to IAS 40 Investment Property. The amendments clarify that an entity shall transfer a property to or from investment property when, and only when, there is a change in use. A change in use occurs when the property meets, or ceases to meet, the definition of investment property and there is evidence of the change in use. In isolation, a change in management’s intentions for the use of a property does not provide evidence of a change in use. An entity shall apply those amendments for annual periods beginning on or after 1 January 2018. The Swiss Life Group will apply the new requirements.
In June 2016, the International Accounting Standards Board issued amendments to IFRS 2 Share-based Payment in which they clarify how to account for certain types of share-based payment transactions. The clarifications relate to vesting and non-vesting conditions of cash-settled share-based payments, share-based payment transactions with a net settlement feature for withholding tax obligations and a modification to the terms and conditions of a share-based payment that changes classification from cash-settled to equity-settled. The amendments are applicable to annual periods beginning on or after 1 January 2018. The adoption of the amendment will not have a material impact on Swiss Life Group’s financial statements.
In April 2016, amendments to IFRS 15 Revenue from Contracts with Customers were issued by the International Accounting Standards Board. The amendments clarify how to identify a performance obligation in a contract, how to determine whether a company is a principal or an agent and how to determine whether revenue from granting a licence should be recognised at a point in time or over time. The amendments are effective for annual periods beginning on or after 1 January 2018. The adoption of the amendment will not have a material impact on Swiss Life Group’s financial statements.
The following amended Standards and Interpretations are not relevant to the Swiss Life Group: – Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards (Annual Improvements to IFRS Standards 2014–2016 Cycle): Deletion of short-term exemptions for first-time adopters.
For insurance contracts and investment contracts with discretionary participation features with fixed and guaranteed terms, the definition of estimates occurs in two stages. At inception of the contract, estimates of future deaths, surrender, exercise of policyholder options, investment returns and administrative expenses are made and form the assumptions used for calculating the liabilities during the life of the contract. A margin for risk and uncertainty (adverse deviation) is added to these assumptions. These assumptions are “locked-in” for the duration of the contract. Subsequently, new estimates are made at each reporting date in order to determine whether the
Swiss Life – Annual Report 2017 values of the liabilities so established are adequate in the light of these latest estimates (liability adequacy test). If the valuation of the liabilities is deemed adequate, the assumptions are not altered. However, if the valuation of the liabilities is deemed inadequate, the assumptions underlying the valuation of the liabilities are altered (“unlocked”) to reflect the latest estimates; no margin is added to the assumptions in this event.
In France, individual and group disability annuities are reserved using tables certified by an independent actuary.
Swiss Life – Annual Report 2017 statistics provided by the database of reinsurance pool results. Furthermore, own company records and occupation classes are considered. Similar to the disability insurance products for the individual life business, assumptions for pricing and valuation of nursing care insurance products are acquired in cooperation with reinsurance companies. In particular, best estimate assumptions are considered with respect to claims experience.
The carrying amounts of defined benefit liabilities and the assumptions are set out in note 23.
The carrying amounts of deferred income tax assets and liabilities are set out in note 24.
“International” comprises the cross-border insurance operations in Liechtenstein, Luxembourg and Singapore, the Swiss Life Select units operating in Austria and the Czech Republic, as well as Chase de Vere operating in the United Kingdom.
Premiums earned on insurance contracts 8 155 2 748 1 167 48 – 0 12 118 –19 12 100
Premiums ceded to reinsurers –8 –117 –43 –8 – – –176 18 –157
Policy fees earned on insurance contracts 3 7 8 0 – – 17 – 17
Share of profit or loss of associates 0 3 – – –1 – 3 – 3
Benefits and claims under investment contracts with discretionary participation –867 – – – – – –867 – –867
Benefits and claims recovered from reinsurers 2 52 19 0 – 0 73 –3 70
Net gains/losses on financial instruments at fair value through profit or loss –374 3 –23 2 0 –28 –420 – –420
Benefits and claims under investment contracts with discretionary participation –1 009 – – – – – –1 009 – –1 009
Net insurance benefits and claims –11 007 –1 759 –1 278 –20 – 0 –14 064 0 –14 064
Depreciation and amortisation expense –94 –242 –151 –5 –11 –1 –503 – –503
Additions to non-current assets 1 249 190 139 11 34 – 1 624 – 1 624
Investment and unit-linked contracts 6 897 12 201 948 21 709 – – 41 756 0 41 756
Financial assets at fair value through profit or loss 5 990 11 873 1 389 15 678 – – 34 931 – 34 931
Investment and unit-linked contracts 6 491 10 618 795 19 017 – – 36 921 0 36 920
No revenue from transactions with a single external customer amounted to more than 10 % of the Group’s revenue.
Risks must be identified, assessed, managed and monitored locally and aggregated at Group level. Monthly reports covering interest rate risk, equity and real estate price risk, currency risk, credit risk and insurance risk are prepared by the local insurance units and consolidated at Swiss Life Ltd level and at Group level. Strategic and operational risks are assessed and reported on an annual basis.
TOTAL ASSETS FOR THE ACCOUNT AND RISK OF THE SWISS LIFE GROUP’S CUSTOMERS 35 654 29 968
Share of profit or loss of associates 3 9 – – 3 9 5.4 Financial risk management objectives and policies
Interest rate risk relating to financial in stru ments and insurance contracts The Group’s primary interest rate exposure is to contracts with guaranteed benefits and the risk that the interest rates of the financial assets purchased with the consideration received from the contract holders is insufficient to fund the guaranteed benefits and expected discretionary participation payable to them.
Some life insurance products with a savings component and investment contracts are subject to minimum guaranteed interest rates. The guaranteed rate differs according to the type of contract. In Switzerland for instance the minimum guaranteed interest rate for the occupational pensions segment (mandatory BVG savings account) stood at 1.00 % in 2017 and 2018 (2016: 1.25 %).
Swiss Life monitors spread risks through exposure limits as outlined in relation to the credit risk and described below.
Equity price risk A decline in the equity market may lead to a reduction of the Swiss Life Group’s realised and unrealised gains /losses, which also negatively affects the Swiss Life Group’s results of operations and financial condition.
A portion of Swiss Life’s investment portfolio comprises investments in funds which hold securities issued by non-public companies (private equity, infrastructure, hedge funds). These investments may be illi quid or may only be disposed of over time or at a loss, and they may not produce adequate returns or capital gains.
Debt securities at fair value through profit or loss 545 581 6 647 5 738 7 192 6 319
Debt securities classified as loans 2 202 3 443 – – 2 202 3 443
Senior loans available for sale 2 649 2 058 – – 2 649 2 058
Credit risk mitigation – collateral held and other credit enhancements as at 31 December 2017
To mitigate specific credit risk, the Group purchases credit risk protection in the form of credit default swaps and credit default swap indices. As at 31 December 2017, these derivative contracts provided a notional principal protection of CHF 3894 million (2016: CHF 4554 million).
TOTAL OTHER LOANS AND RECEIVABLES 3 242 2 505 1 558 5 931 1 745 16 14 997
The criteria used for the assessment of financial assets for impairment are described in note 2.9.
At 31 December 2017 and 2016, no reinsurance assets were past due or impaired.
The following table shows the Group’s sensitivity of monetary items to foreign currency exchange rate fluctuations.
Liquidity risk Liquidity risk is the risk that not enough cash resources may be available to pay obligations when due (primarily obligations arising from the insurance business and debt) at a reasonable cost. The Swiss Life Group is exposed to liquidity risk which primarily arises on calls on its cash resources from claims, amounts payable at maturity and surrenders arising from insurance and investment contracts. The Swiss Life Group faces the risk of not being able to refinance its debt obligations due to unexpected long-term market disruptions.
Derivatives designated as cash flow hedges – 10 139 728 45 468 1 390 135
Investment and unit-linked contracts 314 272 11 438 10 509 30 005 26 140 41 756 36 920
Hedging The Swiss Life Group uses derivatives within the strict limits set by the applicable insurance legislation and by internal guidelines. Derivatives are primarily used to manage the exposure to foreign exchange rates, interest rates, equity securities and counterparties. The main instruments include index futures and option structures in stock markets, bond futures and swaps in order to manage duration, currency forwards and options in order to manage currency risk and credit default swaps or credit default swap indices and options on credit default swap indices in order to manage counterparty risk. Within certain limits, derivatives are used to enhance returns on the existing portfolio. The types of derivatives generally permitted for usage within the Swiss Life Group, as well as the list of allowed over-the-counter trading partners, have been approved by the Group Risk Committee.
With regard to mortality, morbidity and longevity risk, the most important annuities payable (annuities in payment phase) or insured (annuities in deferral phase) as well as sums insured are as follows.
Disability income and other annuities – deferred 15 582 15 460
Underwriting strategy Underwriting is the process of selecting and classifying insurable risks. The underwriting strategy attempts to ensure that the risks underwritten are profitable and well diversified in terms of type of risk and level of insured benefits. Life insurance underwriting is performed to ensure that the premiums and the general conditions of the insurance policies are adequate for the risks to be insured. The first step in the underwriting process is to determine which individual risks can be accepted. The second step is to place the accepted risks into groups of similar levels of risk. Both processes must be conducted objectively and consistently. The Group sets limits for the acceptance of insurance coverage arising from new and renewal business. Medical selection is part of the Group’s underwriting procedures, whereby premiums are charged to reflect the health condition and family medical history of the applicants. The limits relate to sums at risk, maximum insured losses or present value of premiums at the contract or insured person level. Depending on the type of business and the limit exceeded, the new or renewed contract must be approved by the corresponding risk committee or senior management. Contracts exceeding the set limits are tested individually for profitability according to predefined procedures before approval. Certain contracts which include specific risks relating to derivatives or demographic risk factors for which no reliable data is available must be submitted for approval irrespective of the amount of coverage offered. Insurance coverage exceeding set limits is subject to regular internal reporting requirements. Additionally, the underwriting practices must be in line with local laws.
CURRENT ESTIMATE OF CUMULATIVE CLAIMS 241 280 279 313 297 299 324 322 331 297 2 983
LIABILITIES FOR THE CURRENT AND 9 PREVIOUS YEARS 17 26 26 58 54 52 80 99 136 171 720
The development of claims under non-life insurance contracts comprises the non-life business in France. A minor part of the non-life business is very short-tailed. The claims incurred for this minor part are almost completely settled within one year. The amount of unpaid claims as at the balance sheet date is therefore not material and does not underlie any significant variation in its temporal development. The claims data regarding this type of business are not included in the figures above.
Derivative financial market instruments Derivatives held for risk management purposes primarily comprise derivatives sharing a risk with other financial instruments and lead to opposite changes in fair value, which normally cancel each other out (economic hedges), although the cancellation effect is not always simultaneous.
RESULT USED TO DETERMINE DILUTED EARNINGS PER SHARE 1 013 929
Assumed conversion of convertible bonds 1 570 409 2 100 018
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING FOR DILUTED EARNINGS PER SHARE 34 169 909 34 080 594
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 18 565 17 366
Swiss Life – Annual Report 2017 8 Details of Certain Items in the Consolidated Statement of Income
TOTAL NET GAINS/LOSSES ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 5 –1 181 –420 1 includes interest and dividend income of CHF 145 million (2016: CHF 119 million).
Net benefits and claims under insurance contracts 12 322 13 055
Amortisation of present value of future profits (PVP) 17 0 3
Derivatives held for risk management 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”). The timing of the offset does not match in all cases.
TOTAL DERIVATIVES DESIGNATED AS CASH FLOW HEDGES 304 135 5 222 –23 – n/a n/a
TOTAL DERIVATIVES DESIGNATED AS CASH FLOW HEDGES 444 94 3 922 66 – n/a n/a
Swiss Life – Annual Report 2017 10 Financial Assets at Fair Value through Profit or Loss
TOTAL FINANCIAL ASSETS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS 40 228 34 931
TOTAL FINANCIAL ASSETS AVAILABLE FOR SALE 92 447 88 578 12 475 11 677 104 922 100 256
BALANCE AS AT END OF PERIOD 5 5 14 14 19 18
Gains (+)/losses (–) recognised in profit or loss (including impairment) –1 13
Rental income from investment property was CHF 1018 million for the period ended 31 December 2017 (2016: CHF 920 million). Operating expenses arising from investment property that generated rental income amounted to CHF 225 million for the period ended 31 December 2017 (2016: CHF 251 million).
Later than 1 year and not later than 5 years 1 444 1 284
Crédit et services financiers (CRESERFI), Paris 33.4% 50 0 2 – 2
Share of net assets (carrying amount) 50 44 15 14 n/a n/a n/a n/a
No borrowing costs were capitalised in property and equipment in 2017 and 2016.
Effect of shadow accounting 0 0 –16 –65 – – –16 –65
TOTAL OTHER INTANGIBLE ASSETS AS AT END OF PERIOD 1 318 62 46 24 1 449 1 includes elimination of fully amortised/impaired assets
BALANCE AS AT END OF PERIOD 1 754 147 188 22 2 110
In October 2017, the Swiss Life Group acquired Medical Money Management Ltd., Liverpool. The goodwill relating to this acquisition amounted to CHF 23 million and has been allocated to the “International” segment.
The acquisition of MAYFAIR CAPITAL INVESTMENT MANAGEMENT LIMITED, London, in November 2016 led to the recognition of goodwill of CHF 17 million. The goodwill has been allocated to the “Asset Managers” segment.
Goodwill relating to Lloyd Continental has been allocated to the “France” segment. Goodwill relating to CapitalLeben has been allocated to the “International” segment. Goodwill relating to Corpus Sireo has been allocated to the “Asset Managers” segment. Of the goodwill relating to other acquisitions, CHF 21 million (31.12.2016: CHF 18 million) have been allocated to the “France” segment, CHF 26 million (31.12.2016: CHF 25 million) to the “Asset Managers” segment and CHF 23 million to the International segment as at 31 December 2017.
Net carrying amount of goodwill 287 287 149 149 113 104 70 43
As at 31 December 2017, customer relationships comprise customer relationships relating to Swiss Life Select: CHF 3 million (31.12.2016: CHF 4 million), which were allocated to the “Switzerland ” segment. The “France” segment comprises customer relationships of CHF 13 million (31.12.2016: CHF 15 million) and the “Asset Managers” segment of CHF 45 million (31.12.2016: CHF 51 million). Customer relationships were included in the impairment test of the respective cash-generating unit.
Swiss Life – Annual Report 2017 18 Other Assets and Liabilities
Swiss Life – Annual Report 2017 19 Investment and Unit-Linked Contracts
Investment contracts with discretionary participation features (DPF) 16 243 14 642 130 105 16 113 14 537
Investment contracts without DPF at fair value through profit or loss 30 383 330 – – 383 330
TOTAL INVESTMENT AND UNIT-LINKED CONTRACTS 41 756 36 920 130 105 41 626 36 815 of which for the account and risk of the Swiss Life Group’s customers
Effect of changes in actuarial assumptions and other movements 522 333
BALANCE AS AT END OF PERIOD 3 152 – 424 1 3 577
On 27 September 2016, ELM B.V., a Dutch repackaging vehicle, issued EUR 600 million in fixed to floating rate subordinated perpetual notes (at an issue price of 99.707 %) secured by loan notes granted to Swiss Life Ltd, which are guaranteed by Swiss Life Holding. Swiss Life Ltd may repay the loan notes in full on 19 May 2027 or on any interest payment date thereafter, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The interest has been fixed at 4.50 % p.a. until 19 May 2027. If the notes are not redeemed on 19 May 2027, the interest will be the aggregate of the three-month Euribor and a margin of 5.10 % p.a.
On 16 June 2015, Demeter Investments B.V., a Dutch repackaging vehicle, issued EUR 750 million in fixed to floating rate subordinated perpetual notes (at an issue price of 99.105 %) secured by loan notes granted to Swiss Life Ltd, which are guaranteed by Swiss Life Holding. Swiss Life Ltd may repay the loan notes in full on 16 June 2025 or on any interest payment date thereafter, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The interest has been fixed at 4.375 % p.a until 16 June 2025. If the notes are not redeemed on 16 June 2025, the interest will be the aggregate of three-month Euribor and a margin of 4.30 % p.a.
On 22 October 2012, Swiss Life Ltd issued subordinated perpetual callable bonds in the amount of CHF 300 million. The bonds are guaranteed by Swiss Life Holding, have no fixed maturity date and are first callable on 22 August 2018 or at each interest payment date thereafter at the option of the issuer, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The interest has been fixed at 5.50 % p.a. until 22 August 2018. If the bonds are not redeemed on 22 August 2018, the interest resets at a rate fixed for the subsequent five years, consisting of the aggregate of the then-prevailing five-year CHF swap rate and the initial margin of 5.091 % p.a.
On 4 April 2011, Swiss Life Ltd issued subordinated perpetual callable bonds in the amount of CHF 325 million. CHF 75 million were additionally issued in June 2011 and CHF 100 million in October 2011. The bonds were guaranteed by Swiss Life Holding, had no fixed maturity date and were first callable on 4 October 2016 upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The interest has been fixed at 5.25 % p.a. until 4 October 2016. The bonds were redeemed on the first call date on 4 October 2016.
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 EUR 600 EUR 600 4.500% 2016 2027 695 637
Swiss Life AG CHF 450 CHF 450 3.750% 2016 2021 448 447
Swiss Life AG EUR 750 EUR 750 4.375% 2015 2025 866 793
Swiss Life AG CHF 471 CHF 471 +4.200% 2012 2022 469 468
Swiss Life AG EUR 443 EUR 192 +2.050% 1999 2019 225 207
In September 2017, Swiss Life Holding announced its intention to use its right to redeem the convertible bonds at par on 27 December 2017. Bondholders could convert their bonds into shares until 11 December 2017. In 2017, convertible bonds with a nominal value of CHF 499 million (2016: CHF 35 000.00) were converted into 2 141 905 (2016: 147) Swiss Life Holding shares with a corresponding increase in share capital of CHF 11 million (2016: CHF 749.70) and an increase in share premium of CHF 462 million (2016: CHF 31 552.91). The remaining amount of the convertible bonds of CHF 0.8 million was repaid on 27 December 2017.
Swiss Life Holding AG CHF 225 1.125% 2013 2019 225 224
Claims under non-life insurance contracts 924 851 176 164 748 687
Claims under life insurance contracts 6 219 6 078 88 97 6 131 5 981 of which for the account and risk of the Swiss Life Group’s customers 5 462 3 692 – – 5 462 3 692
Insurance liabilities linked to assets for the account and risk of the Swiss Life Group’s customers 5 462 3 692
Other benefits comprise survivors’/orphans’ pensions and/or lump-sum payments in case of death as well as disability pensions (if disabled before retirement age) and transfer of vested bene fits in case of job changes. In these plans, which cover nearly all of the Group’s employees in Switzerland, the cost of the benefits is funded by payment of insurance premiums to group insurance contracts issued by Swiss Life Ltd (self-insurance) and is borne by the employer. In addition, the administration expenses of the plans are also borne by the employer, since the personnel managing the plans are Swiss Life employees.
France The investment risk inherent in achieving an adequate return on the plan assets in order to pay the promised benefits to employees, as well as the mortality risk, are borne by the company.
Germany According to the German BetrAVG there are no specific rules regarding funding of pension obligations. The defined benefit plans are funded by individual insurance contracts with Swiss Life Germany that cover the promised benefits. Because of tax limitations, the individual insurance contracts do not cover the whole level of the benefit promises. Therefore, Swiss Life Germany has established a contractual trust arrangement to cover the additional risks from the pension plan. Plan risks mainly arise from salary increases and from an increase in pension payments.
Insurance contracts not eligible as plan assets under IFRS 1 422 1 477
To assess the funding situation of the defined benefit plans in total, plan assets as well as insurance contracts not eligible as plan assets under IFRS must be set off against the present value of the defined benefit obligation. The total deficit taking into consideration insurance contracts not eligible as plan assets under IFRS amounted to CHF 330 million as at 31 December 2017 (2016: deficit of CHF 376 million).
Actuarial gains and losses on the defined benefit obligation –40 –193
BALANCE AS AT END OF PERIOD –3 600 –3 537 of which amounts owing to
Average life expectation at ordinary retirement age (men) 22.4–23.3 22.3–23.2 19.8–26.8 19.8–27.7
Certain subsidiaries sponsor various defined contribution plans. Participation in the various plans is based either on completion of a specific period of continuous service or on the date of hire. The plans stipulate contributions by both employers and employees. The expenses under these plans amounted to CHF 1 million in 2017 (2016: CHF 1 million).
For 2017, 2016, 2015, 2014 and 2013 participants in the share-based payment programme are allocated restricted share units (RSUs). RSUs grant the holder future subscription rights, entitling him or her to receive Swiss Life Holding shares free of charge after a three-year period has elapsed and if certain conditions are fulfilled.
Income tax calculated using the expected weighted-average tax rate 309 285
NET DEFERRED INCOME TAX ASSETS/LIABILITIES –1 673 –83 –203 – –3 3 –1 959
Unwinding of discount and effect of change in discount rate 0 0 0 0 – – 0 0
As at 31 December 2017, the share capital of Swiss Life Holding consisted of 34 223 106 fully-paid shares with a par value of CHF 5.10 each (2016: 32 081 201 fully-paid shares with a par value of CHF 5.10 each). In exercising voting rights, no shareholder can collect more than 10 % of the total share capital directly or indirectly in respect of own shares or shares they represent. Conditional share capital was CHF 19 675 534.80 as at 31 December 2017 (2016: CHF 30 599 250.30).
The conversion of convertible debt into Swiss Life Holding shares and the corresponding impact on share capital and share premium is described in note 20.
The following table shows the development of Swiss Life Holding shares issued and treasury shares held by the Swiss Life Group during the period.
SHARES ISSUED AS AT END OF PERIOD 34 223 106 32 081 201
Reclassification of policyholder participation and income tax effects – 2 – – 2 –2 – – –2 –
Reclassification to profit or loss – gross – –433 –26 45 1 –414 – – – – –414
Net other comprehensive income before non-controlling interests –1 832 28 23 883 –1 –59 – –59 824 1 Amount relates to debt securities reclassified to loans in 2008 (note 13).
Profit or loss allocated to non-controlling interests 3 1 2 2
The Swiss Solvency Test (SST) is the Swiss legislation which governs the capital requirements of insurance companies and groups. It 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.
Swiss Life – Annual Report 2017 28 Acquisitions and Disposals of Subsidiaries
In November 2016, MAYFAIR CAPITAL INVESTMENT MANAGEMENT LIMITED, London, an FCA-regulated real estate investment management company, was acquired. The transaction strengthens Swiss Life’s regional position in one of the most important and liquid European real estate markets with attractive growth potential.
Assets for the account and risk of the Swiss Life Group’s customers 28 885 23 840 1 318 1 323 2 622 2 316 32 824 27 479
Associates at fair value through profit or loss – – 34 0 52 22 86 23
Investment contracts without discretionary participation – – 383 330 – – 383 330
Alternative investments: Alternative investments classified as level 2 assets comprise hedge funds of funds and leveraged loans funds based on third-party quotes substantiated by observable market data, such as recent transactions or valuation techniques that reflect the market participant’s assumptions. The level 2 classification is chosen because those funds maintain an irregular basis of price and are evaluated with some time lag.
Interest rate derivatives: – Interest rate swaps are valued on a discounted cash flow basis. Main inputs used to derive the discount factors are the overnight index/deposit/swap rates.
Investments in associates: The associate is categorised as level 2 of the fair value hierarchy as the entity holds investments that qualify inherently as level 1 financial instruments.
Significant increases or decreases in estimated rental value and rent growth per annum would result in a higher or lower fair value of the properties. Significant decreases or increases in long-term vacancy rate and discount rate would result in a higher or lower fair value.
Transfers out of level 3 – – – –11 – – – –11
Total gains/losses recognised in profit or loss – 1 2 34 29 –53 763 776
for assets held at the end of the period – 0 – 29 –19 –53 763 721 1 including associates at fair value through profit or loss
Transfers out of level 3 – – – – –11 – –11 –
for liabilities held at the end of the period – – 0 0 6 12 6 12
Gains /losses recognised in profit or loss Gains /losses on level 3 fair value measurements recognised in profit or loss are presented in the income statement as follows.
Total gains/losses recognised in profit or loss 27 31 –38 –18 651 763
Total gains/losses recognised in profit or loss – – –6 –12 – –
Swiss Life – Annual Report 2017 30.2 Fair value of financial instruments carried at amortised cost
Level 2: Privately placed hybrid debt, the liability component of the convertible debt and bank loans are categorised as level 2. The fair value of Swiss Life’s privately placed hybrid debt (subordinated step-up loans) is calculated as the present value of the prospective cash flows to the lenders. The discount rate used for the calculation consists of a relevant government bond rate plus a credit spread. The fair value of the liability component of the convertible debt is calculated as the present value of the prospective cash flows to the bondholders. The discount rate used for the calculation is based on the yield-to-maturity of outstanding straight senior bonds issued by Swiss Life Holding. The fair value of the bank loans secured by mortgage 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 Swiss Life Group enters into separate collateral management and netting agreements with counterparties to manage the credit risks associated with repurchase and reverse repurchase transactions, securities lending and over-the-counter and exchange-traded derivatives transactions. These agreements and similar arrangements generally enable the counterparties to set off liabilities in connection with the respective agreement against assets received in the event that the counterparty to the transaction is unable to fulfill its contractual obligations. The right to setoff is a legal right to settle or otherwise eliminate all or a portion of an amount due by applying an amount receivable from the same counterparty against it to reduce credit exposure.
Gross amounts of recognised financial liabilities before offsetting 1 619 1 648 3 662 2 970 5 281 4 618
Gross amounts of recognised financial assets set off – – – – – –
Contractual obligations to purchase or construct investment property 1 367 1 380
The total amount of credit commitments includes commitments to lend at fixed rates, which expose the Group to interest rate risk. These commitments are entered into for restricted periods of time. As at 31 December 2017, committed principal amounts totalled EUR 17 million and CHF 180 million (2016: EUR 32 million and CHF 137 million). The range of committed interest rates is 1.8 % to 3.3 % for commitments in euro and 0.8 % to 2.1 % for commitments in Swiss francs.
Swiss Life Asset Management AG, Zürich (formerly Swiss Life Funds AG, Lugano) AM 100.0% 100.0% Finance
CORPUS SIREO Asset Management Commercial GmbH, Heusenstamm AM until 01.08.2017 – –
CORPUS SIREO Asset Management Residential GmbH, Köln AM until 14.07.2017 – –
CORPUS SIREO Projektentwicklung Köln-West GmbH, Köln AM 99.9% 100.0% Asset management & Real estate
IC Investment Commercial No. 5 GmbH, Köln AM 100.0% 100.0% Asset management & Real estate
Maicor Projektentwicklung Winterhafen GmbH, Mainz AM 74.2% 74.2% Asset management & Real estate
RheinCOR Projektentwicklung GmbH, Köln AM 55.0% 55.0% Asset management & Real estate
SL Beteiligungs-GmbH & Co. Immobilien II KG, Garching b. München DE 100.0% 100.0% Real estate
SL Beteiligungs-GmbH & Co. Immobilien III KG, Garching b. München DE 100.0% 100.0% Real estate
SL Beteiligungs-GmbH & Co. Immobilien Ost KG, Garching b. München DE 100.0% 100.0% Real estate
Swiss Life Kapitalverwaltungsgesellschaft mbH, Heusenstamm AM from 29.02.2016 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Real Estate S.à r.l. (formerly CORPUS SIREO International S.à r.l.),
MAYFAIR CAPITAL INVESTMENT MANAGEMENT LIMITED, London AM from 01.11.2016 100.0% 100.0% Asset management
MAYFAIR CAPITAL TRUST MANAGER (JERSEY) LIMITED, St. Helier AM from 01.11.2016 100.0% 100.0% Asset management
Swiss Life BelCo, Etterbeek FR from 02.11.2016 100.0% 100.0% Real estate 1 Segment (CH = Switzerland, AM = Asset Managers, IN = International, FR = France, DE = Germany)
          
Swiss Life Holding Financial Statements 291 Management Report 292 Statement of Income 293 Balance Sheet 294 Notes to the Financial Statements 297 Disclosure of compensation to the Board of Directors and the Corporate Executive Board in accordance with Art. 663bbis of the Swiss Code of Obligations (CO) and Art. 14–16 of the Federal Ordinance against Excessive Compensation in Listed Stock Companies, and disclosure of the shareholdings of members of the Board of Directors and the Corporate Executive Board in accordance with Art. 663c of the CO
Swiss Life Holding generated a profit of CHF 314 million in the 2017 financial year (2016: CHF 359 million).
All loans granted internally and external investments in foreign currencies are fully hedged with currency futures. The cost of hedging during the reporting period was CHF 18 million (2016: CHF 16 million). The investment book value decreased from CHF 3716 million to CHF 3416 million during the reporting year due to an allowance of a subsidiary.
The 2017 Financial Statements were prepared in accordance with the provisions of Swiss accounting law (Title 32 of the Swiss Code of Obligations). Swiss Life Holding’s Financial Statements are presented in millions of Swiss francs (CHF), which is the presentation currency. Figures may not add up exactly due to rounding.
Loans to Group companies CHF 544 million of the loans to Group companies is classified as subordinated.
Statutory capital reserve The statutory capital reserve consists of the capital contribution reserve of CHF 724 million (previous year: CHF 591 million). The capital contribution reserve fell by CHF 11.00 per share or CHF 356 million due to the distribution of profit during the year under review. On the other hand, the capital contribution reserve increased by CHF 488 million with the conversion of the convertible bond. As at 31 December 2017, the capital contribution reserve came to CHF 724 million. Of this amount, CHF 547 million is recognised by the Federal Tax Administration, while the legal qualification of CHF 177 million is still open and is to be reassessed according to future legal developments.
Issue of a convertible bond in 2013 On 2 December 2013, Swiss Life Holding launched a bond issue in the amount of CHF 500 million with a coupon of 0%, maturing in 2020. The bonds may be converted into registered Swiss Life Holding shares.
Swiss Life Holding further provides capital guarantees for a maximum net asset value of CHF 1100 million to Swiss Life Ltd, CHF 152 million to Swiss Life Products, CHF 7 million to Swiss Life Liechtenstein, CHF 25 million to Corpus Sireo and CHF 100 million to cover regulatory requirements at the level of subsidiaries.
Financial assets pledged as collateral In the year under review, Swiss Life Holding pledged no liquid assets as margin cover for currency forward transactions. Debt securities of CHF 42 million were pledged on the balance sheet date as part of a repurchase agreement.
Number of full-time positions As in the previous year, the number of full-time positions is not above 50 employees on average over the year.
Compensation in 2017 The Board of Directors is responsible for drawing up a written compensation report each year to include the information required by Articles 14–16 of the Federal Ordinance against Excessive Compensation in Listed Stock Companies (Compensation Ordinance). This compensation report supersedes the details in the notes to the balance sheet according to Art. 663bbis CO. Swiss Life’s compensation report for the 2017 financial year is provided on pages 49 to 66.
TOTAL CORPORATE EXECUTIVE BOARD 37 173 1 Total number of RSUs allocated in the years 2015, 2016 and 2017 in connection with the relevant equity compensation plan. The RSUs represent future subscription rights that entitle the individuals concerned to receive SLH shares after a period of three years, provided that the relevant conditions are met at that point.
TOTAL CORPORATE EXECUTIVE BOARD 40 973 1 Total number of RSUs allocated in the years 2014, 2015 and 2016 in connection with the relevant equity compensation plan. The RSUs represent future subscription rights that entitle the individuals concerned to receive SLH shares after a period of three years, provided that the relevant conditions are met at that point.
                
Performance Swiss Market Index (SMI) (in %) +14 –7 –2 +10 +20
Dividend yield on year-end price (in %) 29.12. 3.19 2.95 2.40 2.33 2.43
Gross written premiums, policy fees and deposits received 18 565 17 366 18 853 19 102 17 969
Net insurance benefits and claims –13 189 –14 064 –15 516 –15 218 –13 920
Equity holders of Swiss Life Holding 1 007 922 872 814 781