Profit | With a net profit of CHF 1368 million, Swiss Life surpassed its 2008 profit target of CHF 1 billion already in 2007.
Leadership | Employee commitment continued to rise. The value ascertained for job satisfaction and employees’ identification with the company came to 77 of 100 possible index points, thus steadily approaching the 80 point target.
Swiss Life is the majority shareholder of the Hanover-based AWD Group, one of Europe’s top financial services providers for the medium- and high-income customer segments. AWD offer its clients independent f inancial advisory services. It employs over 6300 financial consultants in ten European countries.
At CHF 1368 million, the net prof it is the highest in the company’s 150-year history.
In its home market Switzerland, Swiss Life is the clear leader in the area of pensions and long-term savings.
The partnership with AWD opens up additional distribution capabilities and accelerates international growth.
In the fourth quarter of 2007 we benefited from the highly attractive market conditions to optimise our business portfolio for this next stage of development. We decided to sell our insurance operations in the Netherlands and Belgium as well as Banca del Gottardo. These two transactions announced in November 2007 are expected to generate a profit contribution of around CHF 1.8 billion. CHF 300 million of this was already included in the financial statements for 2007. In December 2007 we took a further step towards accelerated profitable growth by announcing a partnership with AWD. AWD is a successful European financial services provider with a strong distribution network in Germany, Austria and Switzerland, a promising position in the growth markets of Central and Eastern Europe, and operations in the United Kingdom. The Board of Directors is convinced that financial services providers such as AWD, who offer independent advice to clients, will in future play an increasingly important role in the distribution of life insurance and pension products.
Based on this strong result, the Board of Directors will propose an increase in the profit distribution from CHF 7 to CHF 17 per share.
We want to position Swiss Life as the leading specialist for life insurance and pension solutions and to accelerate its growth.
Besides strategic and personnel matters, the Board of Directors was also strongly concerned with the extension of Swiss Life’s risk management framework in 2007.
I would like to thank all those who have contributed to the successful development of our company and who have placed and continue to place their trust in us.
31 December 2007. Because of the negative trend in unrealised gains on investments, it was slightly below the previous year’s level. The solvency margin of the Swiss Life Group came to 162% on 31 December 2007.
It is a great honour and pleasure for me to be given the opportunity to continue my work at Swiss Life over the long term. In my new role as Delegate of the Board of Directors, I will primarily be responsible for strategy development and for overseeing strategy implementation, and will work closely with the Chairman of the Board of Directors, Bruno Gehrig, and with Group CEO, Bruno Pfister.
I wish to thank all employees very much for their commitment and contribution to Swiss Life’s progress. For myself and on behalf of my colleagues on the Corporate Executive Board, I would like to extend my thanks to Bruno Gehrig and the members of the Board of Directors for the confidence shown in us and the constructive cooperation over the past years. I am convinced that we have laid the groundwork for Swiss Life to enjoy a very successful future.
Whoever wants to ensure that they are sufficiently and securely provided for after retirement or in the event of disability must give the matter some thought and put the right measures in place well in advance. Consequently, privately funded pension solutions will gain in importance. Given the demographic trend and the condition of the state pension systems, this applies to both western industrial nations and emerging markets which have not built up their pension systems yet.
GROWTH | The Swiss Life Group posted an above-average increase in gross written premiums, with premium income coming to CHF 24 billion in 2007.
EFFICIENCY | Swiss Life sustainably improved its cost situation by reducing the operating expense ratio from approximately 10% to under 7% over a five-year period.
Strategic course set Swiss Life wants to continue along its chosen path and to carve out an even stronger position as the leading provider of life insurance and pension solutions. The company plans to continue to accelerate growth and to boost its profitability. Therefore, following a comprehensive analysis and review of the various options open to it, Swiss Life made some landmark decisions in the 2007 financial year.
In December 2006 Swiss Life announced the takeover of CapitalLeben, a Liechtensteinbased company specialising in structured life insurance solutions, and finalised this transaction in March 2007. As planned, the company was merged with Swiss Life (Liechtenstein ) AG on 1 October 2007.
In March 2007 Swiss Life communicated that it was selling its majority stakes in the French companies ERISA and ERISA IARD to HSBC France. The sale, which was concluded on market terms, enhances Swiss Life’s strategic and financial f lexibility in the French market with respect to the focus on profitable growth and high net worth individuals. Swiss Life exercised this f lexibility early on by acquiring the banking and asset management business of Banque Privée Fideuram Wargny from VIEL & Cie. and taking over Meeschaert Assurances, a subsidiary of the French Meeschaert Group.
The reason for the sale of the Dutch and Belgian business was that Swiss Life believed it would not have been possible to independently attain a sustainably profitable market position without significant investment and within a reasonable period of time. The decision to sell while market conditions were favourable optimised the value of this transaction for shareholders. The sale will be closed in the second quarter of 2008.
However, what stands out most in terms of acquisitions in the year under review is the transaction announced in December 2007, namely, the public tender offer for shares in the German firm AWD Holding AG. With AWD, the biggest independent financial services provider in Europe, Swiss Life can consolidate its distribution network and extends its options with respect to customer proximity. In addition, it provides access to growth markets in Central and Eastern Europe, and Austria. Moreover, the partnership enables Swiss Life to accelerate its growth in Germany and to strengthen its leading market position in Switzerland.
In its home market, Switzerland, Swiss Life remains the market leader in the area of private and occupational pensions. Approximately one million people are insured with Swiss Life, either directly or through their employer. By focusing on reliability and high quality services, the company clearly distinguishes itself from its competitors. Thanks to product innovations in individual and group insurance to meet customer demands for more clarity and transparency, Swiss Life can not only optimise its potential vis-à-vis existing customers, but is also better equipped to win new ones. In France Swiss Life has steadily improved its standing in recent years. The company is the preferred alternative to large national providers, especially for high net worth individuals. Another advantage is Swiss Life’s well diversified distribution network. Partnerships with private banks and independent asset managers contribute greatly to profitable growth. In Germany Swiss Life is one of the preferred partners among insurance brokers due to its professional competence and high service quality standards. Through its partnership with AWD, Swiss Life can exploit its potential even better in the long term.
In cross-border private placement life insurance Swiss Life is already the number two in the world, although it has only been operating in this segment for the last three years. From its locations in Liechtenstein, Luxembourg and Singapore, the company offers tailored concepts for high net worth individuals, combining individual asset management with attractive pension planning solutions. Swiss Life cooperates with leading private banking institutions and independent asset managers to sell these products.
The company concerns itself with the pension needs of people, not just before, but also after retirement. Swiss Life is focusing on growth opportunities in its existing markets, in international business and in attractive growth markets, and, is establishing a functional management structure to further enhance efficiency and cooperation within the Group.
To respond even better to customer requirements, the company is reinforcing its product management. Swiss Life wants to identify market needs more quickly, to inject more innovativeness into product development and to shorten time to market. It is expected that new products will generate considerably more added value for customers and shareholders. Moreover, they will bring about more clarity and transparency with respect to how this added value is generated and distributed. As regards new business, the product portfolio will move away from traditional products with fixed guarantees towards new products with either variable or no guarantees. Such products offer customers higher potential returns, on the one hand, and tie up less risk capital, on the other.
Furthermore, Swiss Life intends to shore up its distribution capability with a multi-channel distribution concept. Swiss Life has already built up a well diversified distribution network in France. It distributes its products via proprietary channels and tied agents, has established very strong relationships with brokers and independent financial consultants, and cooperates with various private banks. The company aims to diversify its distribution resources in Switzerland and Germany. In view of this and the growing significance of independent consultation services in the sale of pension products, which is also expected to persist in the future, Swiss Life decided to acquire a majority interest in AWD. In addition, Swiss Life is seeking to improve its sales in Switzerland and Germany by cooperating with banks. Products in all markets will also be sold via the internet.
FOCUS ON GROWTH OPPORTUNITIES | Swiss Life wants to seize growth opportunities more systematically in its existing markets, in international business and in attractive growth markets. The company believes that the greatest potential lies in the area of crossborder business in structured pension solutions for high net worth individuals. With its presence in Liechtenstein and Luxembourg, Swiss Life is excellently positioned in the rapidly growing global market for private placement life insurance. In March 2008 Swiss Life opened a branch in Singapore, permitting it to access the attractive Asian market more easily. Swiss Life expects the volume of premiums in this sector to increase from around CHF 3 billion in 2007 to between CHF 8 and 10 billion in 2012.
Flexible products with variable guarantees (variable annuities) represent another cross-border business segment with outstanding growth potential. Swiss Life distributes these products among various countries from a central product platform in Luxembourg. Variable annuity products offer customers an optimal combination of traditional insurance and modern investment products. Not only is there a clear demand for such products on the part of the customer, they require less risk capital than traditional products and are attractive in terms of profitability.
Moreover, Swiss Life intends to exploit growth opportunities its existing markets through acquisitions. New markets will be mainly targeted via joint ventures and partnerships.
Ambitious financial targets for 2012 The new financial goals underscore the company’s commitment to profitable growth and the efficient deployment of capital. Swiss Life has set itself the goal of increasing its earnings per share by an annual rate of at least 12% up to 2012, and to achieve a sustainable return on equity of 12% or more. Every year 40% to 60% of the profit is to be distributed to shareholders.
CONSOLIDATED RESULT | Due to the sale of its Dutch and Belgian operations and of Banca del Gottardo announced in November 2007, Swiss Life adjusted the presentation of its annual accounts in accordance with the relevant regulations, gearing them to the continuing operations. Insurance operations are broken down by country. The units sold are fully consolidated up to the completion of the transaction in question, but only their net contribution to the net profit is included in the Consolidated Statement of Income. The segment reports on the other hand contain the full results of the units sold also for 2007. The previous year’s figures have been adjusted accordingly to enhance comparability. In the Balance Sheet, too, the assets and liabilities of the units sold are stated separately.
TARGETS ACHIEVED | In its 150th year of operation, the Swiss Life Group generated a net profit of CHF 1368 million, the highest in its history. After allowing for CHF 23 million for minority interests, CHF 1345 million is available for the shareholders of Swiss Life Holding. This translates into (diluted) earnings per share of CHF 39.60 and a return on equity of 18.1%. Adjusted for the profit contribution from a reserve release of around CHF 300 million due to a change in Dutch law, the profit amounted to CHF 1064 million and the return on equity to 14.3%. The overall premium volume came to CHF 24.2 billion. This means that, already in 2007, Swiss Life achieved the financial targets originally set for 2008.
Gross written premiums, policy fees and deposits received 24 170 22 064 9.5%
For the PVFP calculations, best estimate assumptions are made regarding a number of factors, in particular returns on investment, the development of costs and claims, insurance customers’ participation in surplus and the risk discount rate. Business is also assumed to be continuing at the same level (going concern) and the current cost ratios – adjusted for inf lation – are thus assumed to hold good for the future as well. The opportunity costs of the capital to be provided by shareholders to cover the statutory solvency margin arising from the existing insurance contracts for their current maturities is charged to the PVFP.
DEVELOPMENT IN 2007 | Embedded value for the Swiss Life Group came to CHF 12 837 million as at 31 December 2007. This corresponds to an increase of CHF 2172 million compared with the previous year and an embedded value per share of CHF 367. A compilation of changes in embedded value is shown in the “Analysis of change” table on the next page. Extraordinary impacts arose in 2007 from the sales of Banca del Gottardo (effect of CHF 608 million, net of taxes and expenses) and the insurance units ERISA, Swiss Life Belgium and Swiss Life in the Netherlands (effect of CHF 59 million, net of taxes and expenses). The embedded value of the insurance companies sold was determined by their selling price. All positions in the analysis of change, except the unwind and the impact of the sales, relate solely to the continuing insurance business.
Embedded value of the Swiss Life Group as at end of 2006 10 665
Future investment return: variance from assumptions made at the end of 2006 +672
Fiscal effects: variance from assumptions made as of the end of 2006 +115
Embedded value of the Swiss Life Group as at end of 2007 4 847 4 996 2 994 12 837
Following the disposals of the Dutch and Belgian insurance business and of Banca del Gottardo, which were announced in November 2007, Swiss Life adapted its reporting to ref lect the new situation in accordance with the accounting principles. Continuing insurance operations have been broken down into Insurance Switzerland, Insurance France, Insurance Germany and Insurance Other. Insurance Other comprises the results of the countries of Liechtenstein and Luxembourg. Two further segments are Investment Management and Other, the latter containing the financing and holding companies. The areas whose disposal the company had announced in the period under review will remain fully consolidated in the statements until the respective transactions have been finalised. They are, however, disclosed separately and broken down into insurance and banking. To facilitate a year-on-year comparison, the previous year’s figures are also shown in accordance with the new structure.
In 2007 Swiss Life achieved a total segment result of CHF 1086 million for continuing operations, which represents a 12% increase on the previous year. Insurance Switzerland contributed 60% to this figure, Insurance France 30% and Insurance Germany 6%. Gross written premiums for continuing operations climbed 9% to CHF 21.2 billion. Approximately 40% of the premiums were written in Switzerland, 35% in France, 10% in Germany and 15% in Liechtenstein and Luxembourg, which mainly conduct cross-border business. The French result still includes premium income from the ERISA companies which were sold during the period under review. Without these companies’ contribution, the premium income for continuing operations amounted to CHF 19.3 million in 2007.
In its Discontinued Insurance segment, Swiss Life generated a result of CHF 471 million and gross premium income of around CHF 3.0 billion. The CHF 325 million increase in the segment result is due primarily to a dissolution of reserves amounting to roughly CHF 300 million following a change in Dutch law.
Swiss Life grew its gross premium income by 11% to CHF 8413 million. The company’s premium income for group insurance climbed 14% to CHF 6630 million. This positive development is mainly attributable to the high level of new business and the introduction of a new booking practice for participation contracts. In individual insurance, premiums declined by 2% to CHF 1715 million. The demand for traditional products fell, but there was a surge of interest in unit-linked products and account-based solutions.
At CHF 2556 million, the financial result was 8% lower than in the previous year. With regard to direct income, Swiss Life benefited from rising interest rates and higher hedge fund and dividend distribution by stocking up its bond portfolio. Realised and unrealised capital gains declined in the second half of the year because of the crisis which hit the international financial markets.
Net earned premiums and policy fees 8 200 7 373 11.2%
Insurance benefits, including changes in insurance reserves, rose by 14% to CHF 8758 million. The increase is primarily due to higher income from savings premiums in group insurance. The need for provisions for future risk remained at the previous year’s level and the favourable loss experience was also similar to that of 2006. The amount allocated to the reserves for policyholder bonuses receded to CHF 458 million due to the considerably lower financial result.
One of the company’s forward-looking product innovations is Swiss Life VitalityPlus: a unitlinked insurance financed by periodic premiums which offers policyholders the option to waive death coverage in order to receive higher savings premiums. It is available as both a tax-qualified (pillar 3a) or non tax-qualified (pillar 3b) product. In the case of pillar 3a products, Swiss Life grants its customers the option of extending the contract for up to five years after they have reached retirement age or to defer payment of their retirement pension.
INSURANCE FRANCE | Swiss Life posted a segment result of CHF 324 million. The sale of ERISA and ERISA IARD to HSBC France in 2007 renders a year-on-year comparison difficult. Both companies were fully consolidated into the results for the first half of 2007; but only the gain on disposals was included in the second half. On a comparable basis, the segment result increased from CHF 142 million to CHF 187 million (+32%).
Swiss Life is continuing to expand it distribution capabilities and service portfolio with systematic acquisitions as part of its private insurer concept. In August, Swiss Life acquired the banking and asset management business of Banque Privée Fideuram Wargny. In September, it announced that it was purchasing the insurance subsidiary of the French-based Meeschaert Group and, in January 2008, it reported that it was buying the internet brokers Placement Direct. Swiss Life has intensified its cooperation with independent financial consultants by launching a new internet platform.
Net earned premiums and policy fees 3 401 3 287 3.5%
Financial result (without share of results of associates) 1 326 1 719 –22.9%
Product development is shaped by current market requirements. In the year under review the company launched a new tranche of its index-linked annuity insurance and a unit-linked Riester annuity insurance with guarantees. Another new development in 2008 was a capitalisation product based on an attractive investment funded by capital not currently required. Thanks to further product innovations and the strategic partnership with AWD, Swiss Life expects a spurt in growth in the coming years.
INSURANCE OTHER | The segment Insurance Other comprises Swiss Life’s business in Liechtenstein and Luxembourg in the period under review. Both companies specialise in structured pension products for high net worth individuals. In Luxembourg Swiss Life also provides group insurance solutions for international and local corporate clients. In the previous year this segment also included the results of the Italian companies since sold.
In 2007, the segment result amounted to CHF 8 million compared to a loss of CHF 3 million the previous year, which was directly related to the sale of the Italian business. Thanks to ongoing dynamic growth and the acquisition of the Liechtenstein company CapitalLeben, gross premium income rose by CHF 1.5 billion to CHF 3.3 billion. In March 2007, Swiss Life completed the acquisition of CapitalLeben and successfully integrated it into Swiss Life (Liechtenstein) AG during the course of the year. 95% of the overall premium income in this segment stemmed from cross-border insurance policies subject to Liechtenstein or Luxembourg law, and 5% from Group business in Luxembourg.
Gross written premiums, policy fees and deposits received 3 294 1 506 n.a.
In the period under review, Swiss Life adjusted its Investment Management organisation and processes. In order to boost the earnings potential, exploit synergies and improve risk control, all units in the Investment Management segment have been reporting directly to the Group Chief Investment Officer since 1 January 2008. Investment activities are now conducted in accordance with a Group-wide standardised process. Moreover, Swiss Life is concentrating its resources for the various investment classes at two locations in Zurich and Paris, from where a uniform implementation of investment decisions throughout the Group will be ensured.
In 2008, the focus is on the full integration of the new Investment Management units, and the establishment of appropriate, modern infrastructure tailored to the requirements of present-day asset management.
Gross written premiums, policy fees and deposits received 2 957 2 643 11.9%
Net earned premiums and policy fees 2 083 1 588 31.2%
Financial result (without share of results of associates) 1 008 999 0.9%
DISCONTINUED BANKING | The Banking segment consists primarily of Banca del Gottardo and is to be discontinued following the sale of this bank to BSI, which was announced in November 2007. Banca del Gottardo will be fully consolidated in Swiss Life’s financial statements for 2007 and up to 7 March 2008.
Risk Management | Swiss Life pursues an integrated, valueoriented risk management approach ensuring the protection and the best-possible investment of the risk capital. By reducing the overall risk level and maintaining a broader spread across all risk classes, Swiss Life has created a foundation on which capital is invested efficiently and sustainable returns are achieved.
RISK BUDGETING | The key tasks of risk management comprise the breakdown of risks into risk classes and their analysis, measurement and control. Swiss Life uses the following risk classes in its risk models: – Market risks: equities, interest, & currencies – Credit risks: investments and reinsurance – Underwriting risks: mortality, longevity, disability and customer behaviour – Operational risks: people, processes, systems and external factors
MARKET RISK | The market risk stems from fluctuations on the financial markets which impact the value of capital investments and liabilities. Risk types significant for Swiss Life include primarily the risk of changes in interest rates, volatile stock markets and f luctuating rates of exchange against the Swiss franc.
The equity risk results from the f luctuations on the global stock markets. The individual business units control this risk by setting investment limits. Swiss Life invests in equity markets without actively engaging in stock picking. The Group’s equity exposure after hedging (net equity exposure) came to 7.5% (IFRS-based) at the end of 2007.
Interest rate risk Risks from equities and equity-type securities Currency risk Credit risk Underwriting risk
The currency risk concerns f luctuations in foreign currencies vis-à-vis the Swiss franc and is restricted by exchange rate hedging transactions.
Asset and Liability Management as integral process for all business units
Output: optimum congruence between: Target 2 | Distribution policy – Policy: priorisation of stakeholders, bandwidths – Bonus decision
ASSET AND LIABILITY MANAGEMENT | Asset and liability management (ALM), with its long-term approach, uses the risk evaluations made as a basis for the investment strategy. The aim is to be in a position to pay benefits whenever they fall due and always have sufficient equity to cover value f luctuations in assets and liabilities. Clearly defined criteria with regard to security, return and liquidity are taken into account when policyholder assets, free reserves and equity are invested.
DISTRIBUTION POLICY | With its distribution determined annually within the framework of the defined distribution policy, Swiss Life seeks to harmonise the interests of policyholders and shareholders. For policyholders, the accent is firmly on the need for security: They favour a guaranteed minimum interest rate coupled with regular and appropriate discretionary participation. Meanwhile, shareholders place greater emphasis on returns commensurate with the level of risk: They are looking for adequate compensation in the form of dividends and capital gains for the equity capital they provide.
PRODUCT DESIGN | Swiss Life offers its customers the products they need. These products include guaranteed commitments while allowing customers to participate in positive market trends. In designing products, Swiss Life coordinates asset and liability management and the distribution policy to ensure that future developments on the capital market have as little impact as possible on profitability. Product development guidelines have been introduced throughout the Group to make sure that the product design principles are observed. They serve as standards for the local guidelines. When business is written, therefore, the responsibility does not rest exclusively with the local business unit; in certain cases, it lies with the Corporate Executive Board as stipulated by directive.
There must always be sufficient insurance reserves to meet the contractual and regulatory requirements arising from the existing business portfolio. Consequently, not only must the regulatory constraints be observed, but internal estimates concerning specific types of risk must also be taken into consideration.
REGULATORY REQUIREMENTS | The Federal Office of Private Insurance, the Swiss supervisory authority, launched the Swiss Solvency Test (SST) project in spring 2003 with the aim of creating new solvency requirements focusing on economic and risk-related aspects.
The new SST was given a legal foundation on 1 January 2006 with the introduction of the revised supervisory law and the associated ordinance (AVO). Since then, Swiss Life has been legally obliged to implement an SST. The risk categories that Swiss Life has been using for several years to steer economic risk are congruent with the corresponding categories of the Swiss Solvency Test. In the year under review, Swiss Life again met the solvency criteria required by the SST. In the internal risk reporting, SST figures are established as estimates during the year, too. Solvency considerations are integrated in the risk management process insofar as the Group Chief Financial & Risk Officer and the Group Chief Investment Officer introduce measures to reduce the necessary risk capital if the economic solvency rate drops below a defined threshold.
In Switzerland, Swiss Life launched a modern learning management system in 2007 which promotes continuous and systematic training. “Life Learn”, the online portal, supports the entire learning process. All the requisite steps of an individual course – application, preparation, execution and evaluation – are performed electronically. Swiss Life Switzerland’s entire training programme is accessible via the intranet and currently comprises more than 200 attendance courses, online courses, or a combination of the two. Employees can consult the programme on offer independently to find out which courses are best suited to their individual development requirements and then apply online. Approximately 600 training events were carried out in the year under review.
Responsible Corporate Conduct | Trust is a key component of long-term success in the world of life insurance and pensions. The trust Swiss Life inspires is based primarily on the quality of its products and services, but is also greatly influenced by the company ’s activities beyond its actual field of operations. Swiss Life has a long tradition of commitment on behalf of society and the environment.
SOCIAL COMMITMENT | In 2007, Swiss Life celebrated its 150th anniversary. The company used the occasion not least to enhance its longstanding social commitment. Under the motto of “Perspectives for people”, Swiss Life initiated a number of projects and events in Switzerland. In cooperation with the University of Applied Sciences in Rapperswil, for instance, it launched a nationwide competition entitled “Young people design living space”, which encouraged over 1000 youngsters aged between 12 and 20 to take a close look at their residential environment. The youths analysed their surroundings and developed their own visions of urban and regional planning. Visions were then transformed into specific ideas and suggestions for a desirable and future-oriented design of their living space. Over 14 000 boys and girls between six and ten years of age took part in the Kids Festival events. Kids Festival stands for a series of forty football-related events that Swiss Life organised in cooperation with the Swiss Football Association throughout Switzerland between April 2007 and May 2008. The newly established “Perspectives” foundation promoting non-profit initiatives in the fields of health, science, education, culture and sports represents a special anniversary gift from Swiss Life. The foundation has decided to focus on integration and education. In connection with the anniversary year, it allocated approximately CHF 3 million to a number of special projects. Among the beneficiaries was the “Zurich Jobs” foundation, which helps to integrate youths and the long-term unemployed into the world of work. The “Bridge to Work” project run by the Pestalozzi Children’s Village in Trogen has similar goals. Youngsters with problems at school or in their private life are given the opportunity to do an intercultural “pre-apprenticeship”, which facilitates entry into the working world. In its anniversary year, Swiss Life also made significant contributions to Pro Juventute Switzerland to support its free emergency telephone service for children and youths, and a foundation called “Cerebral” for the procurement of special mobility aids for cerebrally impaired children.
Visions of the future at the “Young people design living space” competition
Swiss Life’s commitment to social responsibility is not limited to Switzerland. In Germany, Swiss Life has for instance been supporting the Nicolaidis Foundation since October 2007, a non-profit organisation that helps widowed mothers and fathers and their children cope with bereavement. It organises self-help groups and special projects for children and youths. Various advisory services are available to provide help in personal crisis situations. In France, one of the institutions Swiss Life supports is the “Institut Curie”, a hospital and research facility with the mission to fight cancer.
ENVIRONMENTAL MANAGEMENT | Evaluation of the Swiss Internal Services’ environmental data for 2006, which reflect the consumption of electricity, paper and water, reveals a positive overall picture compared to the internationally recognised benchmark of the environmental management association “Verein für Umweltmanagement“ (VfU). The VfU focuses on environmental management concerns in connection with financial services providers. There are a number of reasons for the positive evaluation results: Swiss Life regularly takes energy aspects into consideration when refurbishing its office buildings, its power supply in Zurich is entirely sourced from hydro-electric plants, and it has a wellestablished waste disposal system whereby two thirds of all re-usable waste is recycled. The company plans to raise its energy efficiency ratio at its Zurich location by at least another 1.5% a year. Measures to enhance the efficient use of resources will be further expanded in the coming years and are set to be introduced at Swiss Life’s units abroad too.
POLITICAL COMMITMENT | Swiss Life representatives from all areas of the Group play an active role in committees and associations to raise public awareness of pension issues and trigger political debates. In Germany, Swiss Life set up the “Salon Palais Leopold” series of events, where decision-makers from the worlds of business, politics and media hold regular discussions on key social and political subjects. Also in Munich, the first German Swiss Life Pension Day in November met with broad public appeal. Politicians and business representatives discussed the issue of retirement pensions in a European comparison and the direction that retirement provision is to take in future.
SUSTAINABLE PRODUCTS | Swiss Life Asset Management, a Swiss Life subsidiary, together with the independent asset management company for sustainable investments SAM, have been providing direct Sustainability Balanced mandates since 2005. They were in fact the first to do so. The investments – a combination of equities and bonds – are selected according to the criteria of economic, ecological and social added value. The investment volume now amounts to around CHF 125 million. In view of their long-term investment horizon, pension funds in particular show an interest in sustainable products. The track records of the Sustainable Balanced mandates demonstrate that the sustainability approach has a positive impact on the performance. From February 2005 to 31 December 2007, the return before costs exceeded the benchmark index by 0.6%.
The “Salon Palais Leopold” series of events: debating social and political issues relevant for the future
Brand Management | Swiss Life is renowned for its proven expertise in pensions and long-term savings and for the outstanding quality of its services. It is the market leader in Switzerland, a fact reflected in its self-assured marketing slogan “Provide for the future with the number one”. In 2007, Swiss Life again succeeded in enhancing the recognition value of its brand in all its markets.
In spring 2004, Swiss Life introduced a simplified brand structure and a uniform corporate identity across the Group. The brand underscores the company’s image as a specialist in financial provisions for the future and as a trustworthy partner for private individuals and companies. Swiss Life companies all operate under the same brand, which strengthens the staff’s identification with the Group and the potential for international positioning. While using the Swiss Life brand, the companies in the individual countries can nevertheless set their own priorities in advertising campaigns based on their specific market position, distribution policy and competitive situation.
At the turn of the century the design was framed by a border of various coats of arms for the first time. This stylistic component was used at home and abroad in the brochures of that time. The Canton of Zurich’s coat of arms was always located at the top.
As this special design, complete with coats of arms, indicates, our company began experimenting with its corporate identity early on, demonstrating a high level of creativity.
From the twenties to the end of the fifties, the design of promotional material was dominated by frames of coats of arms in various grades of abstraction – in black and white, red or coloured.
COMMITMENT | We work with commitment and enthusiasm to help our customers, staff and shareholders achieve their goals. This commitment forms the basis of long-term partnerships, and enables us to meet our social responsibilities.
Good corporate governance ensures responsible, risk-based and transparent management and is conducive to sustainable success. In the interests of its shareholders, policyholders and staff, Swiss Life attaches great importance to corporate governance and the requirements it entails in terms of the management and organisation of the Swiss Life Group.
This report describes the essential features of corporate governance within the Swiss Life Group. The structure below largely follows the Directive on Information Relating to Corporate Governance issued by the SWX Swiss Exchange, which came into force on 1 July 2002 and 1 January 2007, and also takes into consideration the new regulations on transparency stipulated in the Swiss Code of Obligations. Further information on the Code of Compliance and the values of the Swiss Life Group can be found in the passage “Responsible Corporate Conduct” (pages 38 to 39).
Group structure and shareholders GROUP STRUCTURE | Swiss Life Holding is a public limited company incorporated under Swiss law with its registered office in Zurich. It was established in 2002 and has been listed on the SWX Swiss Exchange since 19 November of that year. Swiss Life Holding brings together all the Swiss Life Group companies and activities under a single holding company umbrella. The holding company structure makes it easier to effect investments, enter into partnerships or cooperation agreements and execute capital market transactions. Transparency is also improved by separating the interests of shareholders from those of policyholders.
The most important companies falling within the Group’s scope of consolidation are presented in the Financial Statements (note 39) (cf. also the section “Important Changes after the Balance Sheet Date” on page 73). Details concerning the listing on the SWX Swiss Exchange and market capitalisation can be found on page 214. The organisational structure of the Group mirrors the company’s main areas of business. The resulting allocation of functional responsibilities is ref lected in the division of responsibilities in the Corporate Executive Board and can be seen in the market units. With regard to the insurance business, each country has one person with market responsibility who is also responsible for the results.
The new management structure as of May 2008 is shown in the Strategy and Markets section on page 11.
SHAREHOLDERS | In connection with the amendment to the Ordinance of the Federal Banking Commission on Stock Exchanges and Securities Trading (SESTO-SFBC), Swiss Life Holding reported on 5 July 2007 that it held 1 392 797 Swiss Life Holding shares and options on 326 653 Swiss Life Holding shares, either directly or indirectly through its Group companies and employer-sponsored foundations. This corresponded to a 5.04% share of the voting rights of Swiss Life Holding. The voting rights are held by Swiss Life Holding, General -Guisan-Quai 40, 8002 Zurich, Swiss Life Insurance and Pension Company, GeneralGuisan -Quai 40, 8002 Zurich; Banca del Gottardo, viale Franscini 8, 6900 Lugano; Welfare Foundation for the Swiss Life Insurance and Pension Company’s Internal Services at its Head Office in Zurich, c/o Swiss Life Insurance and Pension Company, General-GuisanQuai 40, 8002 Zurich; Welfare Foundation for the Swiss Life Insurance and Pension Company ’s External Sales staff in Switzerland, c/o Swiss Life Insurance and Pension Company, General-Guisan-Quai 40, 8002 Zurich; and Welfare Foundation for Internal Services and External Sales staff in Switzerland, c/o Swiss Life Insurance and Pension Company, GeneralGuisan -Quai 40, 8002 Zurich.
FMR LLC, with its main address at 82 Devonshire Street, Boston, MA 02109, USA, reported on various occasions in the period under review that it had exceeded or fallen short of the limits stipulated by the stock exchange law. FMR LLC is the parent company of Fidelity Management & Research Company, an investment manager for US investment funds, and of Fidelity Management Trust Company, a bank licensed to operate in the USA, which manages various pension savings accounts and fiduciary deposits in its role as fiduciary or investment manager. On 25 July 2007, FMR LLC reported that it and its direct and indirect subsidiaries held a total of 5.00% (1 689 510 registered shares) of the voting rights of Swiss Life Holding at that time. On 29 August 2007, FMR LLC reported that on this date it and its direct and indirect subsidiaries held a total of 4.97% (1 677 390 registered shares) of the voting rights of Swiss Life Holding. On 4 December 2007, FMR LLC reported, in compliance with the new notification limit of 3% applicable since 1 December 2007, that on this date it and its direct and indirect subsidiaries held a total of 4.54% (1 532 680 registered shares) of the voting rights of Swiss Life Holding.
Fidelity International Limited, with its main address at Pembroke Hall, 42 Crow Lane, Hamilton, Bermuda, disclosed on 4 December 2007 that it and its direct and indirect subsidiaries held 3.38% of the voting rights of Swiss Life Holding through various asset management accounts. Fidelity International Limited is a fund management company offering investment advisory and investment management services to various investment companies and funds outside the US, as well as to institutional investors.
Swiss Life Holding is not aware of any other shareholders whose stake on the balance sheet date (31 December 2007) either directly or indirectly exceeded the reportable threshold of 3% of the registered shares issued.
A table showing the shareholder structure is provided in the section “Information on Share Performance” on page 215.
Capital structure CAPITAL AND CHANGES IN CAPITAL | The capital structure of Swiss Life Holding was as follows on the balance sheet date: – Ordinary share capital: CHF 1 188 654 926, divided into 34 960 439 fully paid registered shares with a par value of CHF 34 each
– Conditional share capital: CHF 84 439 034, divided into 2 483 501 registered shares with a par value of CHF 34 each
Since the establishment of Swiss Life Holding on 17 September 2002, a number of capital market transactions have been conducted. A detailed description of the transactions carried out up to and including the end of 2004 can be found in the Corporate Governance section of the annual reports for the relevant years. The annual reports can be accessed at www.swisslife.com, “Shareholders & Analysts” area, “Archive Reports & Results” section (www.swisslife.com/en/annualreports).
As a result of the partial conversion of the 0.625% convertible bond issue (2004–2010) (cf. section on “Convertible bonds and options” on page 48), a total of 260 registered shares were created from conditional capital in 2005. The ordinary share capital thereby rose to CHF 1 553 699 588, divided into 33 776 078 fully paid registered shares with a par value of CHF 46 each, and the conditional capital fell by CHF 11 960 to stand at CHF 168 721 652, divided into 3 667 862 registered shares with a par value of CHF 46 each.
At the Annual General Meeting of 8 May 2007 it was decided to reduce the par value by CHF 7, i.e. from CHF 41 to CHF 34 per registered share, thereby decreasing the ordinary share capital to CHF 1 148 393 146, divided into 33 776 269 registered shares.
Additional information on the Swiss Life share is available in the section “Information on Share Performance” on page 214.
LIMITATIONS ON TRANSFERABILITY AND NOMINEE REGISTRATIONS | Swiss Life Holding shares are not subject to any limitations on transferability. According to the Articles of Association, resolutions for the introduction, amendment or repeal of limitations on transferability must be put before the General Meeting of Shareholders and must be approved by two-thirds of the voting shares represented and by an absolute majority of the share par value represented.
Information on options granted by Swiss Life Holding or by Group companies on rights to participate in Swiss Life Holding under equity compensation plans for employees is available in the Financial Statements (note 24).
Board of Directors FUNCTION | The Board of Directors is responsible for all matters that are not reserved for the consideration of the General Meeting of Shareholders (formally the supreme decisionmaking body of a public limited company) under the terms of the law (Art. 698 of the Swiss Code of Obligations (OR)) or by the company’s Articles of Association. In line with its nontransferable duties prescribed by law the Board of Directors is responsible, in particular, for the ultimate direction of the Group, as well as the supervision of the Corporate Executive Board.
ELECTIONS AND TERMS OF OFFICE | Pursuant to the Articles of Association, the Board of Directors shall consist of no fewer than five and no more than fourteen members. The members of the Board are elected by the General Meeting of Shareholders for a maximum term of three years, and on an individual basis. The Organisational Regulations stipulate that a member of the Board of Directors shall automatically resign from the Board at the
STAGGERED TERMS OF OFFICE | Due to the staggered terms of office introduced when the Board of Directors was reconstituted in 2003, it is ensured that, as far as possible, an equal number of members will come up for re-election every year. If a member resigns during his or her term of office, the successor will serve only for the rest of that term. Thus, with respect to the annual re-elections, an important prerequisite has been established for ensuring continuity on the Board of Directors.
COMPOSITION | In the year under review the Board of Directors of Swiss Life Holding consisted entirely of non-executive directors with no duties related to operational management within the Swiss Life Group, and who had not exercised such duties during the past three financial years.
No member of the Board has any significant business relationship with Swiss Life Holding or any other Group companies. The members of the Board of Directors of Swiss Life Holding also make up the Board of Directors of Swiss Life/Rentenanstalt.
Investment and Risk Committee 1 Member of the Board of Directors of Swiss Life/Rentenanstalt since 2000
GEROLD BÜHRER | Born 1948, Swiss national Vice Chairman of the Board of Directors
Political activities: – 1982 to 1991 Member of the Grand Council of the Canton of Schaffhausen – 1991 to 2007 Member of the Swiss Parliament (National Councillor)
Volker Bremkamp joined Albingia Versicherungs AG in Hamburg (a subsidiary of Guardian Royal Exchange plc, London) in 1963, receiving his qualifications as an insurance expert in 1965. Between 1969 and 1971 he was employed by various insurance companies and brokers in London and Paris. He returned to Albingia Versicherungs AG, Hamburg, in 1971, serving as an Executive Director from 1978 to 1989 and as Chief Executive Officer of Albingia Lebensversicherungs AG and of Albingia Versicherungs AG from 1989 to 2000. Volker Bremkamp was an Executive Director and, at the same time, Group Executive Director, Continental Europe, of Guardian Royal Exchange plc, London, from 1995 to 1999, which was taken over by the AXA Group in 1999. From 1999 to 2000 he held the position of Executive Director of AXA Colonia Konzern AG, Cologne, which is the holding company of AXA Germany. Since 2000 he has been Managing Director of BMB Bremkamp Management- und Beteiligungs-GmbH. In 2007 he assumed the role of Managing Director at Xenios Invest GmbH.
Other appointments: – AON International Insurance Broker, Hamburg, Chairman of the Supervisory Board – Everpublic AG, Hamburg, Chairman of the Supervisory Board – WAVE Management AG, Hamburg, Chairman of the Supervisory Board – UKE University Clinic Hamburg, Member of the Supervisory Board
Paul Embrechts received his master’s degree in mathematics from the University of Antwerp (Belgium) in 1975 and his doctorate (Dr. sc. [Math.]) from the Catholic University of Leuven (Belgium) in 1979. Between 1975 and 1983 he held a post as Research Assistant at the Catholic University of Leuven. From 1983 to 1985 he was a Lecturer in Statistics at the Imperial College, University of London, before taking up a position as Lecturer at the University of Limburg (Belgium), which he held from 1985 to 1989. In 1989 he was appointed Professor of Mathematics at the Swiss Federal Institute of Technology (ETH) in Zurich.
Paul Embrechts will be put forward for re-election at the Swiss Life Holding Annual General Meeting of Shareholders on 8 May 2008.
Other appointments: – Casino de Montreux SA, Montreux, Vice Chairman of the Board of Directors – Otis, Fribourg, Member of the Board of Directors – Autogrill Switzerland LTD, Olten, Member of the Board of Directors – Ferrari (Suisse) SA, Nyon, Member of the Board of Directors – Swiss Olympic Association, Berne, Vice Chairman of the disciplinary chamber in charge of doping cases
Other appointments: – Vontobel Holding AG, Zurich, Member of the Board of Directors – Bühler AG, Uzwil, Member of the Board of Directors – Zurich Chamber of Commerce, Chairman – economiesuisse, Zurich, Member of the Board
Pierfranco Riva studied at the universities of Fribourg, Munich and Berlin between 1960 and 1966, and received his Doctorate in Law in 1968. He became a member of the bar in 1970. He has been an attorney and notary with the law firm Felder Riva Soldati in Lugano since 1970. He served as Chairman of the Council of the Bar Association for the Canton of Ticino between 1987 and 1989, and from 1995 to 1999 was a member of the supervisory authority, Council of Magistrates for the Canton of Ticino.
RESIGNATIONS | There were no resignations from the Board of Directors during the period under review.
INTERNAL ORGANISATIONAL STRUCTURE | In line with the Articles of Association and in observance of local and international standards for corporate governance, the Board of Directors decided to introduce a revision of the Organisational Regulations, effective 1 December 2003. These regulations are reviewed regularly in line with national and international best practice, and are updated whenever necessary. They govern the internal organisation and set forth the tasks 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 can be accessed on the internet at www.swisslife.com, “About Swiss Life” area, “Organisation” section (www.swisslife.com/en/organisation).
Three standing committees support the work of the Board of Directors as a whole: the Chairman’s Committee – which also assumes the functions of a corporate governance committee, a compensation committee and a nomination committee – the Investment and Risk Committee, and the Audit Committee. The Board of Directors may establish other committees to be entrusted with special tasks.
INVESTMENT AND RISK COMMITTEE | The Investment and Risk Committee assists the Board of Directors in matters concerning investment management, financial management and risk management within the Group. The tasks of the Investment and Risk Committee include, among others, drafting proposals on the principle features of asset and liability management (ALM) and submitting them to the Board of Directors, determining the investment policy, assessing capital adequacy, verifying compliance with guidelines on investments, and establishing the risk tolerance in insurance and investment operations. The Investment and Risk Committee is vested with the authority to define various regulations and directives pertaining to the investment activities of the Swiss Life Group and must inform the Board of Directors accordingly. In addition, the Investment and Risk Committee is free to decide itself on investments at a particular level and specifies the terms of significant intra-Group financing.
Five meetings of the Investment and Risk Committee were held in the year under review; each session lasted for around two hours on average. There was full attendance at all meetings.
DELINEATION OF COMPETENCIES BETWEEN THE BOARD OF DIRECTORS AND THE CORPORATE EXECUTIVE BOARD | 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 Articles of Association of Swiss Life Holding can be found at www.swisslife.com, “Shareholders & Analysts” area, “Archive Reports & Results” section (www.swisslife.com/association). The Organisational Regulations are also published on Swiss Life’s internet site at www.swisslife.com, “About Swiss Life” area, “Organisation” section (www.swisslife.com/en/organisation).
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.
INFORMATION AND CONTROL INSTRUMENTS OF THE BOARD OF DIRECTORS VISÀ -VIS THE CORPORATE EXECUTIVE BOARD | The Board of Directors is continually and comprehensively briefed on the activities of the Corporate Executive Board. The Group CEO keeps the Chairman of the Board of Directors, as well as the Board of Directors and its committees, regularly informed about the course of business, new business activities and significant projects. The Group CEO informs the Chairman of the Board of Directors immediately about extraordinary matters. Considerable expenditure which is unbudgeted for and amounts to more than 10% of the relevant budget must be submitted to the Chairman’s Committee for approval. Similarly, significant investments and divestments require the approval of the Investment and Risk Committee or, when they reach a certain level, the approval of the Board of Directors as a whole.
The Chairman of the Board of Directors may participate (without voting rights) in the meetings of the Corporate Executive Board. He receives the invitations and the minutes of the meetings. With the exception of two occasions, the Chairman of the Board of Directors attended all of the Corporate Executive Board meetings or parts of the meetings in the year under review.
The performance of the Corporate Executive Board and the contributions made by the individual members are regularly discussed and evaluated by the Chairman’s Committee and the Board of Directors with no members of the Corporate Executive Board being present. The acceptance of directorships and senior political or military roles by members of the Corporate Executive Board is subject to the consent of the Chairman of the Board of Directors.
ROLF DÖRIG | Born 1957, Swiss national Group Chief Executive Officer (Group CEO)
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. Joining Credit Suisse in 1986, he assumed a number of executive responsibilities in various areas of banking and in different geographical markets. He subsequently became Chief of Staff and Chief Communications Officer for Credit Suisse Group. 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.
Rolf Dörig has been Chief Executive Officer (Group CEO) of the Swiss Life Group since 6 November 2002. He will be put forward for election to the Board of Directors at the Annual General Meeting on 8 May 2008.
Other appointments: – Swiss Insurance Association, Member of the Board – economiesuisse, Zurich, Member of the Board Committee – Adecco S.A.,Vice Chairman of the Board of Directors – Kaba Holding Ltd, Rümlang, Vice Chairman of the Board of Directors – Danzer AG, Baar, Chairman of the Board of Directors – Zurich Chamber of Commerce, Member of the Board of Directors – Grasshopper-Club Zurich, Chairman of the Board of Directors
Board of Directors – Swiss Insurance Association, Chairman of the Economics and Finances Committee – Member of the Admission Board and Executive Committee of the Admission Board of the
PAUL MÜLLER | Born 1950, Swiss national Chief Executive Officer Switzerland (CEO Switzerland)
RETO HIMMEL | Born 1956, Swiss national Group Chief Technology & Operations Officer (Group CTO)
Other appointments: – Swiss Financial Market Services, Member of the Board of Directors – Technopark Zurich, Member of the Board of Trustees
THOMAS MÜLLER | Born 1965, Swiss national Group Chief Financial & Risk Officer (Group CFRO)
Thomas Müller studied economics and business administration (lic. rer. pol.) at the University of Berne and earned an MBA from the IMD in Lausanne. His professional career began in 1991 at Swiss Volksbank where he was responsible for asset and liability management. Up to and after the integration of Swiss Volksbank into Credit Suisse Group, he headed the Treasury department from 1994 to 1997. In 1997 he moved to Marc Rich Holding where he was responsible for the group’s trading in interest rate instruments. Thomas Müller joined Banca del Gottardo in 2002 as Chief Financial & Risk Officer and Member of the Executive Board.
He became Group Chief Financial Officer (Group CFO) of the Swiss Life Group in January 2006. On 1 April 2008, he will also assume the role of Group Chief Risk Officer.
Other appointments: – Castle Alternative Invest AG, Freienbach, Member of the Board of Directors – Swiss Insurance Association, Member of the Economics and Finances Committee – The Sustainability Forum, Zurich, Chairman of the Board of Directors
PATRICK FROST | Born 1968, Swiss national Group Chief Investment Officer (Group CIO)
Patrick Frost has been Group Chief Investment Officer (Group CIO) of the Swiss Life Group since July 2006.
RESIGNATIONS | No members of the Corporate Executive Board resigned in 2007.
Jacques Richier graduated from the University of Lyon with a degree in engineering and a master’s degree in natural sciences and physics. He went on to gain an MBA at the HEC in Paris. He began his professional career as a guest researcher at the University of Berkeley, before assuming a number of leading positions in research and development in the oil industry. Jacques Richier’s career in insurance began with Azur Assurances in 1985, where he held a number of leading roles before becoming designated Chief Executive Officer and Member of the Board of Directors. In November 2000 he joined Swiss Life in France, and was appointed Chief Executive Officer in September 2003.
Other appointments: – Member of the French Federation of Insurance Companies – Créserfi, Member of the Board of Director
MANFRED BEHRENS | Born 1955, German national Chief Executive Officer Germany (CEO Germany)
After graduating in law, Manfred Behrens initially worked as an attorney in a Hamburgbased law firm. In 1984 he moved to Hamburg Mannheimer AG, where he assumed various leading positions in the areas of law and sales and went on to become federal state manager. In May 1996 he joined Volksfürsorge Deutsche Lebensversicherungs-AG and, in 1998, was appointed Member of the Board of Directors responsible for sales and marketing. Since January 2004, Mr Behrens has been in charge of the Swiss Life branch in Munich (CEO Germany ).
Compensation, participation in equity, loans The specifications below follow the directives on information relating to corporate governance issued by the SWX Swiss Exchange and take into consideration the new transparency regulations on compensation set out in the Swiss Code of Obligations Art. 663bbis and Art. 663c. Further details on compensation and benefit expenditure for the management and employees of the Swiss Life Group can be found in the Financial Statements (notes 24 and 31). In addition, the compensation of the members of the Board of Directors and the Corporate Executive Board and their participation interests are shown in the notes to the Swiss Life Holding Financial Statements.
In this Annual Report, the information is presented in a similar way to the previous year. However, in accordance with the new transparency requirements, the compensation of each member of the Board of Directors is listed separately, and the compensation of the Chairman of the Corporate Executive Board (Group CEO) is shown individually.
The share option programme for Swiss Life Group management, which was introduced in 2000, was discontinued at the end of 2002. Accordingly, no more share options have been allocated since 2003.
Within the framework of the compensation arrangements for the members of the Corporate Executive Board and other key performers within the Swiss Life Group, which are selected by the Corporate Executive Board with the approval of the Chairman’s Committee, a long-term remuneration component was introduced in 2004 on the basis of corresponding regulations. This equity compensation programme was adjusted slightly in 2005 by defining specific performance criteria. These take account of both the performance of the Swiss Life Holding share and its performance vis-à-vis other companies. Based on the programme, participations are granted future subscription rights, in the form of Performance Share Units (PSUs) on Swiss Life Holding shares, entitling them to receive Swiss Life Holding shares free of charge after a period of three years has elapsed insofar as the relevant prerequisites have been satisfied. The number of PSUs can increase no more than by a factor of 1.5, or drop by 0.5, within three years, depending on how the performance criteria develop. In 2005, 37 members of the Swiss Life Group senior management participated in this programme. A total of 67 412 PSUs were allocated; 33 297 to the Corporate Executive Board, of which 9604 to the Group CEO.
The following compensation in cash and shares was received by acting members of the Board of Directors of Swiss Life Holding in 2007 during the period under review.
There were no resignations from the Board of Directors or the Corporate Executive Board in the period under review. In 2006, two new members were appointed to the Corporate Executive Board; one on 1 July of that year.
SHARE ALLOTMENT IN THE YEAR UNDER REVIEW | Swiss Life Holding shares were allocated to members of the Board of Directors and the Corporate Executive Board as follows during the 2007 financial year: Board of Directors 1392 shares, allocated at values of CHF 270.56, 256.08 and 243.271. They are subject to a three-year vesting period.
OPTIONS | No share options have been granted in the Swiss Life Group since 2003. At the end of 2007 there were no options outstanding. Options on shares of Swiss Life/Rentenanstalt were allocated to the members of the Board of Directors and Corporate Executive Board in 2000, 2001 and 2002 in the context of the share option programme for the entire senior management of the Swiss Life Group, and were subsequently converted into options on Swiss Life Holding shares. At the end of 2002 this share option programme was discontinued with effect from 2003. The share options allocated in the years 2000 and 2001 expired worthless at the end of March 2004 and the end of May 2006. The options allocated in 2002 were exercisable up to the end of June 2007 at a strike price of CHF 224.10. In connection with the exchange of Swiss Life/Rentenanstalt shares for shares of Swiss Life Holding and the capital increases in autumn 2002 and spring 2004 as well as the reduction in par value of Swiss Life Holding shares as at August 2005 and 2006, the parameters of the options allocated in 2001 and 2002 were adjusted in accordance with Eurex guidelines.
ADDITIONAL HONORIUMS AND REMUNERATIONS | During the period under review no additional honorarium or remuneration payments were made to the members of the Board of Directors or the Corporate Executive Board.
The same conditions apply for Bruno Gehrig as for other insured persons. In the period under review, the employer’s contribution assumed by Swiss Life on behalf of Bruno Gehrig amounted to CHF 197 992. This comprised the regular annual contribution of CHF 99 492 and a subsequent contribution of CHF 98 500 due to the increase in the insured income. In addition, Swiss Life paid CHF 652 961 to make up for a gap in full insurance coverage.
Expenditure for occupational provisions in favour of members of the Corporate Executive Board totalled CHF 825 944. The proportion allocated for Rolf Dörig as Group CEO was CHF 238 856; CHF 195 656 as the regular annual contribution and CHF 43 200 as a subsequent contribution due to the increase in the maximum insurable income (Art. 79c BVG).
HIGHEST TOTAL COMPENSATION, BOARD OF DIRECTORS | The highest total compensation for a member of the Board of Directors in 2007 was paid to Bruno Gehrig as Chairman of the Board. The total compensation paid in the form of cash, shares and contributions to occupational provisions in the year under review is as follows: Compensation in cash 1 CHF 655 000
Total compensation 2006: in cash and shares CHF 694 998 including contribution to occupational provisions CHF 787 020 1 Basic compensation and additional compensation in cash determined annually by the Board of Directors. 2 The 312 allocated shares are subject to a vesting period of three years. The share price at the time of distribution was CHF 305.00; the allocation was effected at economic value, which is equal to the tax value (CHF 256.084), taking into acccount the vesting period. 3 Subsequent contribution and payment for a gap in full insurance coverage.
Total compensation 2007: in cash and shares CHF 3 957 144 including contribution to occupational CHF 4 196 000 provisions of CHF 238 856
Total compensation 2006: in cash and shares CHF 3 759 999 including contribution to occupational provisions CHF 3 950 039 1 Including bonus in cash and other compensation in cash (child allowances, company car, premium contribution). 2 The allocated shares are subject to a vesting period of one year. The share price at the time of distribution was CHF 305.00; the allocation was effected at economic value, which is equal to the tax value (CHF 287.737), taking into account the vesting period.
RIGHT OF REPRESENTATION | The Articles of Association stipulate that a shareholder may be represented by another shareholder, a legal representative, a management representative, an independent voting representative or a representative of deposited shares. Married persons may also be represented by their spouses, who are not required to be shareholders.
CONVOCATION OF THE GENERAL MEETING OF SHAREHOLDERS AND AGENDA | The rules set out in the Articles of Association for convening a General Meeting of Shareholders and drawing up the agenda encompass the stipulations of the law. Shareholders representing shares with a par value of at least one million francs can submit a written request within a time limit published in advance by Swiss Life Holding for the inclusion on the agenda of an item for discussion, together with the relevant motions. The written application must be accompanied by a certificate issued by a bank to confirm that the shares are deposited with it until after the General Meeting of Shareholders is held.
ENTRY IN THE SHARE REGISTER | Entries can be made in the share register up to the day before the General Meeting of Shareholders. In all cases, however, the company reserves the right to adhere to the legal maximum period of 20 days for recognition of entries in the share register in accordance with Art. 685g of the Swiss Code of Obligations. For administrative reasons (postal delivery times), the deadline for registering to participate in the General Meeting of Shareholders is usually seven calendar days before the event takes place.
VOTING SYSTEM AND PROCEDURES | Based on a corresponding authorisation in the Articles of Association, the presiding officer at Swiss Life Holding’s General Meeting of Shareholders generally requests for votes to be taken electronically. Swiss Life Holding uses a certified electronic voting system which permits balloting with remote-controlled handsets and records the exact number of voting shares represented.
Changes of control and defence measures DUTY TO MAKE AN OFFER | Swiss Life Holding’s Articles of Association provide for neither an “opting up” nor an “opting out” clause within the meaning of Art. 32 and 22 BEHG (Swiss Stock Exchange Act).
Auditors PricewaterhouseCoopers (PwC) serves as external statutory auditor for 86% of the Swiss Life Group companies that are directly or indirectly held by Swiss Life Holding under its scope of consolidation. PwC is also the Group auditor for Swiss Life Holding. The remaining auditing mandates for subsidiaries are carried out by Ernst & Young (9%) and other auditing firms (5%).
The partner at PwC in charge of auditing the Swiss Life Holding annual financial statements and consolidated financial statements (lead auditor) has held that function since the 2004 financial year.
AUDITING FEES | In 2007 the auditing fees credited to PwC came to CHF 12.0 million (2006: CHF 12.0 million). This includes the fees for reviewing the 2007 half-year accounts.
SUPERVISORY AND CONTROL INSTRUMENTS VIS-À-VIS THE AUDITORS | The Audit Committee maintains regular contact with the external auditors. It assesses the quality and effectiveness of the external reporting, ascertains the independence of the statutory auditor and identifies possible conflicts of interest. Representatives from the external auditing firms may be called upon by the Audit Committee to attend any meetings it may hold. In the year under review, representatives of the external auditors attended four of the six meetings, either in their entirety or for specific items on the agenda.
In addition to its comprehensive Annual Report and Financial Statements, Swiss Life Holding also publishes its half-year results. All the Swiss Life annual and half-year reports since 1997 can be accessed on the website, “Shareholders & Analysts” area, “Archive Reports & Reports” section (www.swisslife.com/slcom/en/home/annualreports). Twice a year, a report detailing the key facts and figures about business operations is sent to all the shareholders listed in the share register. Moreover, the company’s fifth Investor’s Day was held on 4 December 2007.
Important Changes after the Balance Sheet Date The Group structure has changed since the balance sheet date (31 December 2007) or changes are pending.
AWD HOLDING AG | As part of a takeover bid, Swiss Life Beteiligungs GmbH, a whollyowned subsidiary of Swiss Life Holding, acquired either directly or indirectly around 86% of the shares in AWD Holding AG on 19 March 2008. AWD Holding AG is based in Hanover and has been listed on the German stock exchange since 20 October 2000 (International Stock Identification Number, ISIN: DE 000 508 5906). Its market capitalisation was around EUR 1.153 billion at the end of February 2008.
BANCA DEL GOTTARDO | Effective 7 March 2008, Swiss Life Holding sold its entire stake in Banca del Gottardo to the Ticino-based bank BSI, which belongs to the Generali Group.
DUTCH AND BELGIAN BUSINESS | The Dutch and Belgian business was sold to SNS REAAL. This transaction involves the operations of the Dutch branch of Rentenanstalt /Swiss Life (Zwitserleven) and the shares of Swiss Life Asset Management (Nederland) and Swiss Life (Belgium). It is expected that the transaction will be completed in the first half of 2008.
Consolidated Statement of Cash Flow . . . . . . . . . . . . . . . . .78 Consolidated Statement of Changes in Equity . . . . . . . . . .80 Notes to the Consolidated Financial Statements . . . . . . . .82 2 Summary of Significant Accounting Policies . . . . . . . .83 2.3 Reclassifications in the consolidated statement of income and consolidated balance sheet . . . . . . . . . .84 2.5 Foreign currency translation and transactions . . . . . . . .84 2.16 Impairment of non-financial assets . . . . . . . . . . . . . . . .96 2.18 Assets held for sale and associated liabilities . . . . . . . . .97 2.26 Forthcoming changes in accounting policies . . . . . . . .100 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies . . . . . . . . . . . . . . . .101 5 Risk Management Policies and Procedures . . . . . . . .117 5.1 Contracts for the account and risk of the Swiss Life Group’s customers . . . . . . . .117 5.2 Risk budgeting and limit setting . . . . . . . . . . . . . . . . . .118 5.3 Asset and liability management (ALM) . . . . . . . . . . . . .119 5.4 Financial risk management objectives and policies . . .120 5.5 Insurance risk management objectives and policies . . .133 7 Premiums, Policy Fees and Deposits Received . . . . .142 8 Details of Certain Items in the Consolidated Statement of Income . . . . . . . . . . . . .143 9 Insurance and Other Receivables and Payables . . . .145 11 Financial Assets and Liabilities at Fair Value through Profit or Loss . . . . . . . . . . . . . . . . . . . . . . . .149 12 Financial Assets Available for Sale . . . . . . . . . . . . . . .150 14 Financial Assets Held to Maturity . . . . . . . . . . . . . . .152 23 Insurance Liabilities and Reinsurance Assets . . . . . .165 29 Acquisitions and Disposals of Subsidiaries . . . . . . . .181 30 Assets Held for Sale and Discontinued Operations .183 33 Fair Value of Financial Instruments Not at Fair Value in the Balance Sheet . . . . . . . . . . . . . . .187 36 Future Minimum Lease Payments under Non-Cancellable Operating Leases – Lessor . . . . . . .190 37 Reclassifications in the Consolidated Statement of Income and Consolidated Balance Sheet . . . . . . .190 38 Events after the Balance Sheet Date . . . . . . . . . . . . .192
Notes to the Financial Statements . . . . . . . . . . . . . . . . . . .203
Impairment of property and equipment and intangible assets 17, 18 –6 –31
Insurance receivables and other receivables 9, 33 4 152 4 899
Liabilities associated with assets held for sale 30 37 502 –
Financial liabilities at fair value through profit or loss 11 11 427 9 538
Total change in cash and cash equivalents –1 148 –6 360
Cash and cash equivalents as at 1 January 7 445 13 762
Cash and cash equivalents as at 31 December 2 737 7 445
Total cash and cash equivalents as at 31 December 4 555 7 621
Acquisitions of minority interest – – – – – – – –12 –12
Purchases of treasury shares – – –175 – – – –175 – –175
Sales of treasury shares – 5 151 – – – 156 – 156
Acquisitions of minority interest – – – – – – – –45 –45
The Swiss Life Group is one of Europe’s leading providers of life insurance and pension solutions. The company offers individuals and companies a broad range of products combined with comprehensive advice through its own sales force as well as brokers and banks in Switzerland, France and Germany. It provides internationally operating corporations with employee benefits solutions from a single source, and is among the global leaders in structured life and pension products for high net worth individuals. Swiss Life is the majority shareholder of the Hanover-based AWD Group, one of Europe’s top financial services providers for the medium- and high-income customer segments. AWD offer its clients independent financial advisory services.
CONVERSION OF CONVERTIBLE DEBT | In 2007, convertible bonds were converted into 1 184 170 Swiss Life Holding shares in total with a corresponding increase in share capital and share premium (2006: conversion into 191 Swiss Life Holding shares).
APPROVAL OF FINANCIAL STATEMENTS | On 26 March 2008, the Board of Directors approved the annual financial statements and the financial report and authorised them for issue. The financial report therefore only ref lects events up to that date.
EARLY ADOPTION OF IFRS 8 OPERATING SEGMENTS | In November 2006, IFRS 8 Operating Segments was issued by the International Accounting Standards Board. The new Standard replaces IAS 14 Segment Reporting. IFRS 8 Operating Segments requires disclosure of information about an entity’s operating segments and about the entity’s products and services, the geographical areas in which it operates and its major customers. IFRS 8 Operating Segments was adopted early by the Swiss Life Group for the current period in advance of the effective date. The adoption of IFRS 8 Operating Segments has no financial impact on the consolidated statement of income and the consolidated balance sheet of the Swiss Life Group. It has resulted in a re-designation of the reportable segments and disclosures required by the Standard.
2.4 Consolidation principles 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 in which Swiss Life Holding owns directly or indirectly more than 50% of the voting rights, or in which it otherwise has the power to exercise control over operations. Subsidiaries are consolidated from the date on which effective control is obtained. All intercompany balances, transactions and unrealised gains and losses on such transactions have been eliminated. A listing of the Group’s principal subsidiaries is set out in note 39. The financial effect of acquisitions and disposals of subsidiaries is shown in note 29. Associates for which the Group has between 20% and 50% of the voting rights and/or exercises significant influence are accounted for using the equity method. The Group’s share of net income for the year is recognised as a share of results of associates and the ownership interest in the investment is recorded in the balance sheet at an amount that reflects its share of the net assets. The Group’s share of net income is included from the date that significant influence begins until the date that 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. A listing of the Group’s principal associates, partnerships and joint ventures is shown in note 39.
2.7 Derivatives The Group enters into forward contracts, futures, forward rate agreements, currency and interest rate swaps, options and other derivative financial instruments for hedging risk exposures or for trading purposes. The notional amounts or contract volumes of derivatives, which are used to express the volume of instruments outstanding and to provide a basis for comparison with other financial instruments, do, except for certain foreign exchange contracts, not represent the amounts that are effectively exchanged by the parties and, therefore, do not measure the Group’s exposure to credit risk. The amounts exchanged are calculated on the basis of the notional amounts or contract volumes and other terms of the derivatives that relate to interest or exchange rates, securities prices and the volatility of these rates and prices.
All derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair value as assets when favourable to the Group and as liabilities when unfavourable. Gains and losses arising on remeasurement to fair value are recognised immediately in the income statement, except for derivatives that are used for cash f low hedging.
Derivatives embedded in other financial instruments or in insurance contracts which are not closely related to the host contract are separated and measured at fair value, unless they represent surrender options with a fixed strike price embedded in host insurance contracts and host investment contracts with discretionary participation features.
2.8 Financial assets “Regular way” purchases and sales of financial assets are recorded on the trade date. The amortisation of premiums and discounts on investments is computed using the effective interest method and is recognised in income as an adjustment of yield. Dividends are recorded as revenue on the ex-dividend date. Interest income is recognised on an accrual basis.
A financial asset is derecognised when the contractual rights to the cash f lows from the financial asset have expired or substantially all risks and rewards of ownership have been transferred or the risks and rewards have neither been transferred nor retained, but control of the asset has been transferred.
FINANCIAL ASSETS AVAILABLE FOR SALE (AFS) | Financial assets classified as available for sale are carried at fair value. Financial assets are classified as available for sale if they do not qualify as held to maturity, held for trading, loans and receivables or if they are not designated as at fair value through profit or loss. Gains and losses arising from fair value changes, being the difference between fair value and cost/amortised cost, are reported in equity. On disposal of an AFS investment, the cumulative gain or loss is transferred from equity to income for the period. Gains and losses on disposal are determined using the average cost method.
FINANCIAL ASSETS HELD TO MATURITY (HTM) | Financial assets which the Group has the ability and positive intent to hold to maturity are carried at amortised cost, using the effective interest method.
FINANCIAL ASSETS CARRIED AT FAIR VALUE (AVAILABLE FOR SALE) | At each balance sheet date and interim reporting date, an assessment is made whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of an equity instrument classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the asset is impaired. If any such evidence exists, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the income statement. Available-for-sale investments in equity securities and investment funds are assessed for impairment when the market value as at the balance sheet date is 30% or more below cost, or the market value remained below cost for the previous 12 months or longer. Impairment losses on equity instruments recognised in the income statement are not reversed through income.
2.10 Investment property Investment property consists of investments in residential, commercial and mixed-use properties primarily located within Switzerland. Property held for investment purposes includes both land and buildings.
The accounting policies for insurance contracts and investment contracts with discretionary participation features have been modified as appropriate to be consistent with the IFRS requirements. Guidance dealing with similar and
related issues, definitions, recognition and measurement criteria for assets, liabilities, income and expenses as set out in the IASB Framework for the Preparation and Presentation of Financial Statements has been considered.
DISCRETIONARY PARTICIPATION FEATURES (DPF) | Discretionary participation features are defined in IFRS 4 Insurance Contracts as contractual rights to receive, as a supplement to guaranteed benefits, additional benefits which are likely to be a significant portion of the total contractual benefits and whose amount or timing is contractually at the discretion of the issuer. These DPF are contractually based on the performance of a specified pool of contracts or a specified type of contract or on the realised and unrealised investment returns on a specified pool of assets held by the issuer or on the profit or loss of the company. The unrealised investment returns comprise gains/losses recognised directly in equity.
In other jurisdictions, a statutory minimum distribution ratio (“legal quote”) exists for certain types of business. Geographical areas in which the Swiss Life Group is present and in which such a statutory minimum distribution ratio (“legal quote”) exists are as follows: Switzerland (only group business subject to “legal quote”), France and Germany. For these contracts the Swiss Life Group defines DPF as the policyholder bonus reserve set up in the statutory accounts and the amount of temporary valuation differences between the IFRS basis and statutory basis on the assets and liabilities relating to the respective insurance portfolio measured using the statutory minimum distribution ratio (“legal quote”). The policy of the Swiss Life Group is to classify as a liability the entire DPF as defined.
When such temporary valuation differences disappear (e.g. management decides to realise certain unrealised gains and losses on assets), additional benefits which arise from the application of the statutory minimum distribution ratio (“legal quote”) are allocated to the policyholders and become part of their guaranteed benefits. These amounts are always accounted for as liabilities.
INCOME AND RELATED EXPENSES FROM INSURANCE CONTRACTS AND INVESTMENT CONTRACTS WITH DISCRETIONARY PARTICIPATION FEATURES | Premiums from traditional life insurance contracts are recognised when due from the policyholder. Insurance liabilities are established in order to recognise future benefits and expenses. Amounts collected as premiums from investment-type contracts such as universal life and unitlinked 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.
LIABILITIES FOR CLAIMS AND CLAIM SETTLEMENT COSTS | Liabilities for unpaid claims and claim settlement costs are for future payment obligations under insurance claims for which normally either the amount of benefits to be paid or the date when payments must be made is not yet fixed. They include claims reported at the balance sheet date, claims incurred but not yet reported and claim settlement expenses. Liabilities for unpaid claims and claim settlement costs are calculated at the estimated amount considered necessary to settle future claims in full, using actuarial methods. These methods are continually reviewed and updated. Claim reserves are not discounted except for claims with determinable and fixed payment terms.
Reinsurance contracts that do not transfer insurance risk are accounted for as financial reinsurance and are included in financial assets or liabilities. A deposit asset or liability is recognised based on the consideration paid or received, less any explicitly identified premiums or fees retained by the reinsured. These contracts are primarily mea2 Summary of Significant Accounting Policies (continued)
sured at amortised cost using the effective interest method with future cash f lows being estimated to calculate the effective interest rate.
2.12 Property and equipment Property and equipment are carried at cost less accumulated depreciation. Land is carried at cost and not depreciated. Depreciation is principally calculated using the straight-line method to allocate their cost to their residual values over the assets’ estimated useful life as follows: buildings 25 to 50 years; furniture and fixtures five to ten years; computer hardware three to five years.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
2.14 Investment management Revenue consists principally of investment management fees, commission revenue from distribution, sales of investment fund units and custody account fees. Such revenue is recognised when earned, i.e. when the services are rendered.
2.15 Intangible assets GOODWILL | The Group’s acquisitions of other companies are accounted for under the purchase method. Goodwill acquired prior to 1995 was charged directly to equity.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities, if applicable, at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on associates and joint ventures is included in the carrying amount of the investment.
Assumptions used to estimate the future value of expected gross margins and profits are evaluated regularly and adjusted if estimates change. Deviations of actual results from estimated experience are ref lected in income.
PVP is subject to recoverability tests. The effect of changes in estimated gross profits or margins on unamortised PVP is ref lected as an expense in the period in which such estimates of expected future profits or margins are revised.
OTHER INTANGIBLE ASSETS | Other intangible assets primarily consist of contractual trademarks and brand names.
2.17 Income taxes Current and deferred income taxes are recognised in income except when they relate to items recognised directly in equity. Income taxes are calculated using the tax rates enacted or substantively enacted as of the balance sheet date.
BORROWINGS | Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings.
The assets of these plans are generally held separately from the Group’s general assets in trustee-administered funds. Defined benefit plan contributions are based upon regulatory requirements and/or plan terms. The Group’s defined benefit obligations and the related service costs are determined at each balance sheet date by a qualified actuary, using the Projected Unit Credit Method.
The Group recognises the contribution payable to a defined contribution plan in exchange for the services of the employees rendered during the period as an expense. The Group’s contributions to the defined contribution plans are charged to income in the reporting period to which they relate.
2.26 Forthcoming changes in accounting policies In November 2006, IFRIC 12 Service Concession Arrangements was issued. The Interpretation is not relevant to the Group’s operations.
In March 2007, the International Accounting Standards Board issued a revised IAS 23 Borrowing Costs which removes the option of immediately recognising as an expense borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. The revised Standard applies to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009. The revised Standard is not expected to have any impact on the Swiss Life Group as the Group’s current accounting policy is to capitalise borrowing costs directly attributable to the construction or acquisition of a qualifying asset as part of the cost of that asset.
In September 2007, the International Accounting Standards Board issued a revised version of IAS 1 Presentation of Financial Statements. The revised Standard gives preparers of financial statements the option of presenting items of income and expense and components of other comprehensive income either in a single statement of comprehensive income with subtotals, or in two separate statements (a separate income statement followed by a statement of comprehensive income). The revised Standard will enable readers to analyse changes in equity resulting from transactions with owners in their capacity as owners (such as dividends) separately from “non-owner” changes (such as transactions with third parties). The revisions include changes in the titles of some of the financial statements to reflect their function more clearly (for example, the balance sheet is renamed a statement of financial position). The revised Standard will come into effect for the annual periods beginning on or after 1 January 2009. The Swiss Life Group is currently analysing the impact of these changes on its financial statements.
In January 2008, the International Accounting Standards Board issued a revised version of IFRS 3 Business Combinations and related revisions to IAS 27 Consolidated and Separate Financial Statements. One of the main changes is an option which is added to IFRS 3 Business Combinations to permit the acquirer in business combinations in which control is achieved without buying all of the equity of the acquiree to recognise 100% of the goodwill, not just the acquirer’s portion of the goodwill (“full goodwill method”). The revised Standard requires that acquisition -related costs are expensed. Another change relates to partial disposals of an investment in a subsidiary while control is retained and to the acquisition of additional shares in a subsidiary after control was obtained. Such transactions are accounted for within equity. The amendments will be effective for annual periods beginning on or after 1 July 2009. The Swiss Life Group is currently analysing the impact of these changes on its financial statements.
The principal methods and assumptions used by the Group in estimating the fair value of the following financial instruments are as follows: – Fair values for debt and equity securities are generally based upon quoted market prices. – Fair values for derivative financial instruments are obtained from quoted market prices and/or option pricing models as appropriate.
– The fair value of investment contracts and deposits, which are carried at amortised cost, is estimated using discounted cash f low calculations based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. The fair values of demand or savings deposits are equal to the amount payable on demand or the carrying amount. The carrying amounts of variable-rate deposits approximate their fair values at the reporting date.
Fair value of non-financial instruments The fair value of investment property is based on current prices in an active market for properties of a similar nature, condition or location – suitably adjusted. Recent prices for similar properties on less active markets, with suitable adjustments for differences, are also used for the estimation of the fair values. Furthermore, investment property is valued using discounted cash f low projections if reliable estimates and reasonable assumptions can be made, based on external evidence. Future expenditure that will improve the property is not included in the fair value. The riskadjusted discount rates used in the cash f low projections ref lect the specific nature and location of the individual properties. The cash f lows used in the projections are based on actual rental income on a sustainable basis. Cost is ref lected in the cash f lows based on experience and budgets approved by management. The cash f lows include inflation. External valuations for individual real estate assets are performed on a rotating basis, but at a minimum each property is evaluated every three years.
Insurance liabilities Past experience, adjusted for the effect of current developments and probable trends, is assumed to be an appropriate basis for predicting future events. Management’s estimates for incurred but not reported losses are continually reviewed and updated and adjustments resulting from this review are ref lected in income.
Insurance liabilities are established by using appropriate estimates and assumptions on mortality, morbidity, surrender, exercise of policyholder options and interest rates. With regard to mortality these estimates are typically based on standard industry tables. Management makes allowance for expected improvements due to continued advances in medical science and social conditions. An increase in morbidity results in higher benefits for contracts where disability is the insured risk. The most significant factors which could increase the frequency of such claims are epidemics or widespread changes in lifestyle, such as eating, smoking and exercise habits, resulting in more claims than expected.
MORTALITY AND LONGEVITY | The main source of uncertainty is that epidemics such as AIDS, SARS, avian f lu and wide-ranging lifestyle changes, such as in eating, smoking and exercise habits, could result in future mortality being significantly worse than in the past for the age groups in which significant exposure to mortality risk exists. However, continuing improvements in medical care and social conditions could result in improvements in longevity in excess of those allowed for in the estimates used to determine the liability for contracts where exposure to longevity risk exists.
The mortality and annuity tables used generally ref lect the experience in the market or ref lect own company records. Recent historical mortality experience as well as expected future trends in mortality are ref lected. For longevity, the trend of the recent decades is considered.
Notes to the Consolidated Financial Statements 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies (continued)
MORBIDITY AND DISABILITY | For individual and group life business in Switzerland internal tables are in place. In the individual life business, for certain contracts tariffs can be adjusted with regard to disability. The internal tables ref lect the loss experience of the past. In individual life, only reactivation is considered, whereas increased mortality is also taken into account in the group life business. In the individual business the disability tables ref lect the average situation of the past in the Swiss market based on Swiss Insurance Association statistics. In the individual life business disability tables are usually reviewed every five years when new statistics from the Swiss Insurance Association become available. The tables are updated for significant changes.
Disability coverage mainly comprises annuities and waiver of premiums. Benefits are typically paid after a waiting period.
In certain countries, the benefits are paid based on medical examinations and on different levels of disability (ranging from fully disabled with no expectations of recovery to partially disabled with full recovery expected).
Impairment of goodwill Goodwill is tested for impairment annually (in autumn), or more frequently, if events or changes in circumstances indicate that goodwill might be impaired. The recoverable amounts of the business relating to the goodwill have been determined based on value-in-use calculations. These calculations require the use of estimates which are set out in note 18.
Provisions The recognition of provisions involves assumptions about the probability, amount and timing of an outflow of resources embodying economic benefits. To the extent that an outflow of resources embodying economic benefits is probable and a reliable estimate can be made, a provision is recognised.
The accounting policies for the segments are the same as those described in the summary of significant accounting policies. Inter-segmental services and transfers of assets and liabilities are treated as if the transactions were with third parties, i.e. at market prices applicable at the time of the transaction.
Non-life operations consist of operations in France and Belgium and principally include property and casualty, liability and motor insurance. The non-life operation in Italy was sold in December 2006.
The Swiss Life Group announced the sale of Banca del Gottardo, Lugano, which was completed on 7 March 2008. For the purposes of segment reporting Banca del Gottardo, Lugano, is presented as a separate segment “Banking (Discontinued)”.
Net gains/losses on financial instruments at fair value through profit or loss –402 222 –11 1
Net gains/losses on investment property 182 38 10 0 of which inter-segment 100 0 –1 –5
Benefits and claims under insurance contracts –8 658 –2 467 –2 190 –21
Net insurance benefits and claims –8 758 –2 372 –2 119 –20
Impairment of property and equipment and intangible assets –5 – –1 –
Additions to non-current assets 432 70 83 187 4 Segment Information (continued)
Premiums earned on insurance contracts 7 301 3 055 2 022 62
Premiums earned on investment contracts with discretionary participation 65 13 – –
Policy fees earned on investment and unit-linked contracts 15 283 7 13
Net gains/losses on financial instruments at fair value through profit or loss –52 352 –48 0
Other income –26 14 16 –17 of which inter-segment 102 0 –2 –12
Benefits and claims under insurance contracts –7 651 –2 325 –2 062 –45
Benefits and claims under investment contracts with discretionary participation –76 –15 – –
Financial liabilities at fair value through profit or loss 1 345 385
Financial liabilities at fair value through profit or loss 1 280 1 534
The Group’s core business is life insurance and pensions. A life insurance and pensions contract represents a longterm promise to the policyholder. To fulfil its future payment obligations to the policyholders, the insurance entities of the Group must be financially sound over an extended period of time. The ability to remain financially healthy and strong depends on a number of risk factors. The Group risk map can be broadly divided into financial, insurance, strategic and operational risks. All of these risk categories can impact the financial stability of the Group.
The risk appetite for the largest operations in the insurance business is defined with the help of local risk budgets which are used as a basis for the determination of the individual risk limits. These limits are used as a framework for the asset and liability management process, the objective of which is to define a strategic asset allocation and distribution scheme for all stakeholders.
5.1 Contracts for the account and risk of the Swiss Life Group’s customers Certain life insurance and investment contracts are managed for the account and risk of the Swiss Life Group’s customers (separate account/unit-linked contracts, private placement life insurance). The assets relating to these contracts are segregated and managed to meet specific investment objectives of the policyholders. These assets back the insurance liabilities and the financial liabilities arising from these contracts. The fair values of the liabilities reflect the fair values of the assets. Certain contracts with unit-linking features contain guaranteed minimum insurance benefits. The liabilities relating to this part are included in the insurance liabilities.
Net gains/losses on financial assets –5 885 – – –5 885
Net gains/losses on financial instruments at fair value through profit or loss (FVPL) –229 188 50 68 –179 256
5.3 Asset and liability management (ALM) The main objective of the ALM process is to ensure that the Swiss Life Group’s insurance operations can meet their commitments to policyholders at all times while also adequately compensating shareholders for making risk capital available. Based on the economic principles of risk management and on the risk appetite definition applied in the risk budgeting process, ALM comprises the following main activities: strategic asset allocation, distribution policy with regard to surplus generated on investments and product design.
PRODUCT DESIGN | Product design defines which guarantees and benefits are built into a specific product to respond to the demand from and expectations of customers. The actuarial bases used for this purpose should ensure that each individual product generates a sufficient contribution margin. To ensure that the Group’s principles are observed, guidelines on underwriting have been introduced to harmonise the local guidelines and to ensure that they are in line with the guidelines of the Group.
Insurance liabilities for the account and risk of the Swiss Life Group’s customers 931 1 897
INTEREST RATE RISK RELATING TO FINANCIAL INSTRUMENTS AND INSURANCE CONTRACTS | The Group’s primary interest rate exposure is on 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.
The Group manages interest rate risk by managing the interest rate sensitivity of key rate exposures of its investment portfolio against the interest sensitivity of key rate exposures of liabilities issued. The key rate exposure of the liabilities is determined by projecting the expected cash f lows from the contracts using best estimates of mortality, disability, expenses, surrender and exercise of policyholder options. The ALM process defines the strategic asset allocation optimising the net interest rate sensitivity of the investment and liability portfolios. To the extent that this is not practicable, swap contracts and other instruments are used to hedge interest risk. In certain markets receiver swaptions are used to hedge the risk of interest rates decreasing below guaranteed interest rates. Payer swaptions are used to hedge the risk of fair value changes of interest-sensitive financial assets. Strategically a minimum interest rate risk will remain, since a perfect interest rate hedge can either not be achieved or would not be aimed at.
In Switzerland, the Swiss occupational pensions (BVG) segment of the group life insurance business is subject to guaranteed minimum interest and annuity conversion rates. Following the decision of the Swiss Federal Council on 10 September 2003, a reduction in the guaranteed interest rate for the mandatory BVG business from 3.25% to 2.25% took effect on 1 January 2004. The rate was subsequently raised to 2.50% with effect from 1 January 2005 and confirmed at this level for 2006 and 2007. With effect from 2008, the rate was raised to 2.75%. The guaranteed annuity conversion rate for the mandatory BVG business was originally set at the rate of 7.2%. Under an amendment to the BVG legislation, which took effect on 1 January 2005, this rate will be reduced in stages to 6.8% by 2015.
CREDIT RISK | The Group is exposed to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the Group is exposed to credit risk are: – Counterparty risk with respect to bonds purchased – Counterparty risk with respect to loans and mortgages granted – Counterparty risk with respect to money market and cash positions – Counterparty risk with respect to derivative transactions – Reinsurance share of insurance liabilities – Amounts due from reinsurers in respect of claims already paid – Amounts due from insurance contract holders – Amounts due from insurance intermediaries
Insurance receivables and other receivables 4 152 4 899 – – 4 152 4 899
Debt instruments at fair value through profit or loss 1 814 4 913 2 825 2 800 4 639 7 713
Financial assets held to maturity 3 624 4 090 – – 3 624 4 090
Debt instruments pledged as collateral – 85 – – – 85
At fair value through Available Held to Pledged as Loans and
Below BBB Past due or In CHF million AAA AA A BBB or not rated impaired Total
Financial assets with renegotiated terms 6 5 Risk Management Policies and Procedures (continued)
Equity instruments available for sale 904 114 –196 –136 24 5 715
Credit rating as at 31 December 2006 of which collateralised 155
The Swiss Life Group is further required to bear expenses and costs in establishing such hedging arrangements.
Group’s In CHF million CHF EUR USD GBP Other customers Total
Financial assets held to maturity 2 3 622 – – – – 3 624
LIQUIDITY RISK | Liquidity risk is the risk that not enough cash resources may be available to pay obligations (primarily obligations arising from the insurance business and debt) when due 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 not to be able to refinance its debt obligations due to unexpected long-term market disruptions.
Liquidity risk is considered in the strategic asset allocation. At a strategic level, the Swiss Life Group holds sufficient liquidity and uses proactive debt maturity planning to ensure full financial f lexibility and an efficient liquidity management.
The liquidity analysis of financial liabilities and commitments is based on undiscounted cash f lows by remaining contractual maturities, whereas insurance and policyholder participation liabilities are analysed by estimated timing of net cash outflows. The analysis is made for amounts for the account and risk of the Swiss Life Group.
Carrying More than In CHF million amount Up to 1 month 1–3 months 3–12 months 1–5 years 5 years
Insurance payables and other payables 4 268 935 370 2 089 870 6
Financial liabilities at fair value through profit or loss 2 363 833 – 151 – 1 382
CURRENT AND NON-CURRENT ASSETS AND LIABILITIES | The table below shows the expected recovery or settlement of assets and liabilities. Assets are classified as current if they are expected to be realised within twelve months after balance sheet date. Liabilities are classified as current if they are due to be settled within twelve months after balance sheet date. All other assets and liabilities are classified as non-current.
Financial assets at fair value through profit or loss 14 261 9 777 5 138 19 660 19 399 29 437
Insurance payables and other payables 3 299 3 369 51 899 3 350 4 268
5.5 Insurance risk management objectives and policies 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).
Insurance risk is measured as the negative deviation of (the realisations of) the insurance risk factors from the corresponding best-estimate values. Insurance risk factors include mortality rates, disability rates and longevity, among others.
The nature of insurance risk can be summarised as follows: MORTALITY AND LONGEVITY | Increasing mortality rates result in higher benefits for contracts where death is the insured risk. On the other hand, decreasing mortality rates lead to higher annuity payments (longevity risk). The most significant factors resulting in an increase of longevity are continued improvement in medical science and social conditions.
The BVG business (Swiss occupational plans) is a significant part of the Group’s life insurance business in Switzerland. The guaranteed annuity conversion rate for the mandatory BVG business was originally set at the rate of 7.2%. Under an amendment to the BVG legislation, which took effect on 1 January 2005, this rate will be reduced in stages to 6.8% by 2015. The prevalent guaranteed annuity conversion rates for retirements beginning in 2007 are set at 7.15% (women) and 7.1% (men). The Swiss Life Group has taken the reduction into account in the pricing and structure of its life insurance products in Switzerland (including a phased reduction of the conversion rate on its supplementary BVG business to 5.835% over 4 years).
Risk concentration per product category with regard to mortality and longevity is as follows: ANNUITIES PAYABLE PER ANNUM BY TYPE OF ANNUITY – INDIVIDUAL LIFE
Disability income and other annuities – deferred 14 511 13 539
MORBIDITY AND DISABILITY | An increase in morbidity results in higher benefits for contracts where disability is the insured risk. The most significant factors which could increase the frequency of such claims are epidemics (such as AIDS, avian f lu or SARS) or widespread changes in lifestyle, such as eating, smoking and exercise habits, resulting in more claims than expected. Additionally, the termination rate with regard to disability (death or reactivation) has a significant impact on the benefits paid.
Non-life | The Swiss Life Group has non-life operations in France covering risks associated with accident and health (disability) as well as property and casualty.
6 years later 530 – – – – – – n. a.
Current estimate of cumulative claims 530 470 563 447 440 457 501 3 408
The underwriting guidelines exclude certain risks from coverage. For certain businesses reinsurance limits are in place.
UNDERWRITING STRATEGY | Underwriting is the process of selecting and classifying insurable risks. The underwriting strategy attempts to ensure that the risks underwritten are 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 consistent with 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 roughly equivalent levels of risk. Both processes must be conducted objectively and consistently. The Group sets limits for the acceptance of insurance risk arising from new and renewal business. Medical selection is part of the Group’s underwriting procedures, whereby premiums are charged to ref lect 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 a specific investment and risk committee or senior management. Contracts exceeding the set limits must be tested 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 risks exceeding set limits are subject to regular internal reporting requirements. Additionally, it must be ensured that the underwriting practices are in line with local laws.
In addition, the Group holds substantial collateral under related reinsurance agreements in the form of deposited funds and securities. Amounts recoverable from reinsurers are estimated in a manner consistent with the assumptions used for the underlying policy benefits and are presented in the balance sheet as a component of the reinsurance assets.
The life insurance operations limit exposure to loss on any single life. Retention limits vary by country. For the coverage of loss accumulation in the life insurance business, reinsurance contracts covering catastrophe risk are in place. This type of reinsurance cover is organised at Group level. In the non-life insurance business, reinsurance coverage of loss accumulation is organised at the level of the individual insurance operations.
The embedded value has certain limitations mainly arising from the fact that it is calculated as a single best estimate that does not ref lect the full range of possible outcomes (e.g. to address embedded options and guarantees).
For the model PVFP calculations, the best possible assumptions were made regarding a number of factors, in particular returns on investment, development of costs and claims, policyholder participation and risk discount rate. Business is also assumed to be continuing at the same level (going concern) and the current cost ratios – adjusted for inflation – are thus assumed to hold good for the future as well. Future costs for maintaining classic solvency capital funded by the shareholders and which underpins the insurance business, are charged to the PVFP. The Swiss Life Group calculates the embedded value for all its life insurance companies. All other companies are taken into account at their statutory carrying amount. As a consequence, risk factors applied to these types of business have no effect on the value.
At 31 December 2007, if morbidity had been higher by 10%, the embedded value would have been CHF 29 million lower in Switzerland (2006: CHF 53 million lower) and CHF 30 million lower in the other countries (2006: CHF 23 million lower).
At 31 December 2007, if morbidity had been lower by 10%, the embedded value would have been CHF 29 million higher in Switzerland (2006: CHF 53 million higher) and CHF 30 million higher in the other countries (2006: CHF 23 million higher).
At 31 December 2007, if the new money rate with regard to bonds had been lower by 100 basis points, the embedded value would have been CHF 162 million lower in Switzerland (2006: CHF 286 million lower) and CHF 247 million lower in the other countries (2006: CHF 283 million lower).
At 31 December 2007, if the fair value of equity securities and property had been higher by 10%, the embedded value would have been CHF 307 million higher in Switzerland (2006: CHF 723 million higher) and CHF 84 million higher in the other countries (2006: CHF 60 million higher).
At 31 December 2007, if the fair value of equity securities and property had been lower by 10%, the embedded value would have been CHF 377 million lower in Switzerland (2006: CHF 759 million lower) and CHF 83 million lower in the other countries (2006: CHF 60 million lower).
At 31 December 2007, if the investment returns for equity securities and property had been higher by 100 basis points, the embedded value would have been CHF 181 million higher in Switzerland (2006: CHF 183 million higher) and CHF 119 million higher in the other countries (2006: CHF 99 million higher).
In CHF million (if not noted otherwise) 2007 2006 2007 2006 2007 2006
Basic earnings per share for the net profit attributable to equity holders of Swiss Life Holding (in CHF) 21.33 16.59 19.43 11.28 40.76 27.87
Net profit attributable to equity holders of Swiss Life Holding 704 555 641 378 1 345 933
Elimination of interest expense on convertible bonds 8 12 – – 8 12
Assumed conversion of convertible bonds 986 830 1 511 806 986 830 1 511 806 986 830 1 511 806
Gross written premiums, policy fees and deposits received 21 213 19 421
Interest income on financial assets held to maturity and available for sale 2 615 2 307
financial assets available for sale 27 –744 –12 loans 13 –1 –6 receivables –7 0
Total net gains/losses on financial instruments held for trading –527 –655
Total net gains/losses on financial instruments designated as at fair value through profit or loss 348 911
Total net gains/losses on financial instruments at fair value through profit or loss –179 256
Total employee benefits expense 870 848 8 Details of Certain Items in the Consolidated Statement of Income (continued)
Total insurance payables and other payables 33 3 350 4 268
Total precious metal derivatives – 23 – 26 – 1 373
Total derivatives held for trading 414 748 201 753 42 087 70 106
Derivatives designated as fair value hedges 49 107 12 56 6 493 5 719
In CHF million assets liabilities in equity profit or loss statement amount to occur profit or loss
Total derivatives designated as cash flow hedges – – – – – – n. a. n. a.
The effective portion of the fair value changes on the interest rate swaps designated as hedging instruments is recognised directly in equity and reclassified to the income statement when the hedged cash f lows affect profit or loss. The ineffective portion of the fair value changes is recognised immediately in the income statement.
All amounts transferred to the income statement are included in the net profit from discontinued operations.
Held for Held for through through trading trading profit or loss profit or loss Total Total
Financial assets at fair value through profit or loss 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 financial assets given as collateral, were reclassified to financial assets pledged as collateral.
Money market instruments and loans 21 105 – 0 21 105
Based on detailed assessments with regard to indications of impairment, impairment losses from continuing operations totalling CHF 744 million were recognised in the period under review (2006: CHF 12 million). The impairment losses in 2007 primarily related to debt and equity securities (2006: primarily equity securities).
Effect of classification as assets held for sale –96 – –23 – –119 –
Interest income accrued on impaired loans from continuing operations was CHF 5 million as at 31 December 2007 (2006: CHF 4 million). The Group’s loan portfolio is monitored closely through the review of information such as debt service, annual reports and assessments. This information is evaluated in light of current economic conditions and other factors such as diversification of the property portfolio. This evaluation is part of the regular review to determine whether the allowance for potential loan losses is warranted. Management believes that the allowance for loan losses is sufficient. However, management cannot predict with assurance the impact of future economic circumstances or how the mortgage and real estate portfolios would be affected by various economic circumstances.
Total financial assets held to maturity 3 624 4 090 –49 103 3 575 4 193
Investment property consists of investments in residential, commercial and mixed-use properties primarily located within Switzerland. Property held for investment purposes comprises land and buildings owned by the Group to earn rentals and/or for capital appreciation. Property that is used by the Group itself or leased to, and occupied by, another entity of the Group is classified as owner-occupied property under property and equipment. Property acquired with a view to its subsequent disposal in the near future is carried under assets held for sale.
Share of Share of Direct Amounts in CHF million Assets Liabilities Net assets net assets Revenues Results results share
LGT Swiss Life Non Traditional Advisers, Vaduz 21 3 18 8 19 17 7 43.4%
No investments in associates had published price quotations as at 31 December 2007 and 2006. As at 31 December 2007 and 2006, no contingent liabilities arose from the Group’s investments in associates.
In CHF million Notes buildings construction and fixtures Hardware equipment Total
Transfers from/to investment property 15 –50 –61 – – – –111
Balance as at 31 December –185 –2 –61 –50 –13 –311
Classification as assets held for sale and other disposals 1 – 20 18 1 40
Balance as at 31 December –220 –2 –92 –111 –16 –441
Total property and equipment as at 31 December 967 114 38 32 8 1 159 of which assets held under a finance lease 41 – – 1 – 42
Additions from business combinations 29 8 – – – – – 8 –
Impairment due to liability adequacy test – 0 –1 – – – –1 0
Effect of gains/losses recognised directly in equity 27 0 0 326 284 – – 326 284
Classification as assets held for sale and other disposals – – –372 – –231 – –603 –
DEFERRED ORIGINATION COSTS (DOC) | These costs are recoverable and are directly attributable to securing investment management contracts. They primarily relate to contracts in Luxembourg.
Intangible insurance assets of CHF 600 million relating to the insurance operations in the Netherlands and Belgium were reclassified to assets held for sale.
Additions from internal development – – – – 0 0 0 0
Classification as assets held for sale and other disposals –996 –1 –19 – –52 –18 –1 067 –19
Balance as at 31 December –163 –738 –2 –11 –121 –156 –286 –905
Goodwill totalling CHF 149 million on the acquisition of CapitalLeben Versicherung AG, Schaan, was recognised in the period under review. The cost that led to the recognition of goodwill relates to the anticipated future business of the Liechtenstein operation. Goodwill on the acquisition of CapitalLeben Versicherung AG, Schaan, has been allocated to the “Insurance” segment “Other”, which in 2007 comprised the insurance business in Liechtenstein and Luxembourg.
Goodwill relating to Lloyd Continental has been allocated to the “Insurance” segment in France.
Net carrying amount of goodwill – 405 287 287 149 –
Key assumptions used for impairment tests 1 1% in 2011 and 2010 respectively, reduced by 0.25% in each subsequent year
Goodwill amounting to CHF 421 million relating to Banca del Gottardo has been reclassified to assets held for sale.
For contracts that do not have significant insurance risk but contain discretionary participation features, the Swiss Life Group primarily bases its accounting policies on the requirements of the Generally Accepted Accounting Principles in the United States (US GAAP).
Certain contracts that do not contain significant insurance risk and do not have discretionary participation features are carried at amortised cost or fair value through profit or loss.
On 16 November 2005, J.P. Morgan Bank Luxembourg S.A. issued on a fiduciary basis EUR 350 million fixed/floating rate subordinated perpetual notes at a price of 99.423% to fund a loan made by it to Swiss Life/Rentenanstalt. Swiss Life/Rentenanstalt may repay the loan in full on 16 November 2015 or on any interest payment date thereafter, upon notice and subject to the consent of the Federal Office of Private Insurance. The notes bear interest from 16 November 2005 to 16 November 2015 at a rate of 5% p.a. If the notes are not redeemed on 16 November 2015, the interest rate will be the aggregate of 2.43% and Euribor for 3-month deposits.
Also in November 2005, a nominal EUR 200 million of the EUR 215 million fixed-rate loan, issued in March 1999, was repurchased in the market.
Carrying Carrying Issuer Currency Interest rate Year of issue Maturity amount amount
Other debentures On 30 June 2004, Swiss Life Insurance Finance Ltd., Cayman Islands, issued EUR 300 million in 4.375% bonds at a price of 99.856%. The bonds mature on 30 June 2008 and are subject to redemption in whole, at their principal amount, at the option of the issuer at any time in the event of certain changes affecting taxes of the Cayman Islands or Switzerland. The payments of all amounts under the bonds are unconditionally and irrevocably guaranteed by Swiss Life/Rentenanstalt.
Banca del Gottardo – medium–term notes CHF 2.000% n. a. n. a. – 10
Later than 1 year and not later than 5 years 2 5 2 4
Claims under life insurance contracts 7 155 7 773 119 122 7 036 7 651
Claims incurred, benefits paid and surrenders –49 –61 –3 –13 –46 –48
Claims incurred, benefits paid and surrenders –8 806 –8 908 –45 –58 –8 761 –8 850
Reclassifications and other disposals –16 588 –226 –5 –18 –16 583 –208
Due to the requirements of IFRS 4 Insurance Contracts in combination with IAS 19 Employee Benefits, insurance contracts issued to defined benefit plans covering own employees are eliminated. Consequently, amounts totalling CHF 2.3 billion as at 31 December 2007 (2006: CHF 2.1 billion) relating to these insurance contracts are not included in the plan assets. Insurance contracts issued to defined benefit plans covering own employees have been issued in Switzerland and France. These defined benefit plans are typically partially funded as certain plan assets relating to these plans are not required to be eliminated. To the extent these plans are not funded by amounts included in the plan assets, the defined benefit liabilities are backed by the investments relating to the eliminated insurance contracts. These investments are part of the investments presented in the consolidated balance sheet of the Swiss Life Group.
The major part of the defined benefit liability arises from plans covering employees in Switzerland. The primary benefit of those plans is an old-age pension paid out after reaching retirement age. The amount of the pension is defined in relation to final salary and depends on completion of years of service (including years of service purchased by the employee with transferred funds from plans of former employers). There are options for early retirement (with reduction of the pension amount determined with actuarial methods) and for choosing to receive a lump-sum payment instead of a pension. Other benefits comprise widows’/orphans’ pensions in case of death as well as disability pensions (if disabled before retirement age). The plans are funded by the employer through ordinary contributions determined with actuarial methods where, under Swiss law, a part (generally less than 50% of the total contribution) is deducted from the employee’s gross salary. Further funding comprises mandatory transfers of funds made by new employees from plans of former employers, discretionary contributions by employees (within plan restrictions) and the earnings on the plan assets.
Present value of wholly and partly funded obligations –2 242 –2 625
Plan assets include own equity instruments 120 129 own debt instruments – –
Present value of defined benefit obligation –2 320 –3 065 –2 937
Other long-term employee benefits The liability for long-term employee benefits amounted to CHF 11 million as at 31 December 2007 (2006: CHF 12 million). It relates to part-time employment contracts prior to retirement and to profit-sharing arrangements for certain employees.
Termination benefits The termination benefit liability totalling CHF 0.04 million for the year ending 31 December 2007 (2006: CHF 14 million) arose as a result of early retirements and voluntary redundancies.
Equity compensation plans In 2005, a share-based payment programme was established which gives the members of the Corporate Executive Board and senior employees the right to receive a certain number of Swiss Life Holding shares (performance share units, PSUs) after three years of service, if certain conditions are fulfilled. The number of the shares allocated depends on two criteria. One criterion is the performance of the share price of the Swiss Life Holding share during the vesting period of three years. The other criterion is the performance of the share price of the Swiss Life Holding share during the vesting period of three years compared to the performance of the Dow Jones STOXX 600 Insurance Index. For the PSUs issued in 2005 and 2006, the number of PSUs can increase no more than by a factor of 1.5 or drop by 0.5, within three years, depending on how the criteria develop. For the PSUs issued in 2007, the maximum possible factor of 1.5 was maintained whereas the minimum possible factor of 0.5 was rescinded.
In 2006, the number of PSUs granted under this programme amounted to 46 651 (balance after reduction in par value). Due to the reduction in par value of the Swiss Life Holding shares in 2006, the number of PSUs granted was adjusted using the Eurex R factor of 0.9965. The fair value at the measurement date amounted to CHF 252.56. The date of grant was 1 April 2006.
In 2007, no adjustment to the number of PSUs was made due to the reduction in par value of the Swiss Life Holding shares because of changed Eurex rules.
Number of performance share units 1 January Issued in par value par value departures Vested 31 December 24 Employee Benefits (continued)
Other benefits The Swiss Life Group maintains incentive programmes for certain management and other employees. Related expenses in 2007 were CHF 14 million (2006: CHF 12 million).
Deferred tax assets are recognised for tax-loss carryforwards and unused tax credits only to the extent that realisation of the related tax benefit is probable. Swiss tax assets are calculated in accordance with cantonal and communal tax legislation. The uncertainty of the recoverability of tax losses and tax credits is taken into account in establishing the valuation allowance. For the following tax-loss carryforwards and tax credits, which will expire as follows, no deferred tax asset has been recognised: Financial Statements 2007
Restructuring costs In 2007, provisions for restructuring programmes were primarily set up in Germany (2006: Banca del Gottardo and Germany). Amounts used during the period relate to Switzerland and Germany.
In 2005, a provision totalling CHF 72 million relating to the restructuring programme of «La Suisse» in Switzerland was set up. As at 31 December 2007 the remaining provision amounted to CHF 16 million (2006: CHF 23 million) and CHF 7 million was used during the period (2006: CHF 12 million). The provision primarily relates to redundancy programmes and onerous contracts. The outflow of the remaining amounts is expected within the following one to two years.
In 2007, convertible bonds were converted into 1 184 170 SLH shares (2006: 191 SLH shares) with a corresponding increase in share capital totalling CHF 49 million (2006: CHF 8726).
As at 31 December 2007, the share capital of SLH consisted of 34 960 439 fully-paid shares with a par value of CHF 34 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. As at 31 December 2006, SLH had 33 776 269 registered shares with a par value of CHF 41 per share. Conditional share capital was CHF 84 439 034 as at 31 December 2007
Financial assets In CHF million Notes available for sale Cash flow hedges Other Total
Impairment losses transferred to the income statement 8 744 – – 744
Deferred acquisition costs and present value of future profits 18 326
Gains/losses transferred to the income statement 8 –540 – – –540
Reclassification in respect of assets held for sale – – – –
Deferred acquisition costs and present value of future profits 18 284
The Group’s risk and value management decisions are primarily based on the embedded value and economic risk capital. This capital is determined on a bottom-up basis per country and business and takes into account market risk, credit risk, insurance risk, operational risk and strategic risk. The first three risk categories are calculated using a value-at-risk approach with a 99.5 percentile and holding period of one year, whereas operational and strategic risks are charged on a size basis similar to Basel II. Following the Swiss Solvency Test (SST) approach, non-correlation is assumed between market and insurance risks while all other risk capital is cumulated. Elements of the bottom-up risk capitals per country and business are used to estimate the SST margin of the parent company on a monthly basis. The calibration is done based on the full valuation of the SST margin as at the beginning of the year.
Standard & Poor’s rating capital Swiss Life has defined a target capitalisation rating. In the Standard & Poor’s risk-based capital model the total adjusted capital (TAC) is the measure used for capital available to meet a company’s capital requirements. TAC is thereby a narrower capital measure ref lecting a nearer term view on the realisation of assets. In addition to assessing the capital adequacy, Standard & Poor’s also measures the quality of capital on its various dimensions such as debt, hybrid and reinsurance leverage. In line with its active capital management, the Swiss Life Group uses hybrid instruments to optimise its capital structure.
Core capital The Group’s capital performs several important functions, such as funding future growth and providing a protective cushion for shareholders and policyholders, as well as hedging future risks. The defined Group core capital includes equity, certain liabilities with equity characteristics (hybrid capital instruments) and deferred Grouprelated funds (theoretical policyholder participation in surplus under consideration of additional DAC amortisation and deferred taxes).
Financial assets at fair value through profit or loss 5 084 5 084 – –
In August 2007, the Swiss Life Group acquired the banking activities of Fideuram Wargny, France. The total purchase consideration amounted to CHF 29 million.
Also in November 2007, the Swiss Life Group announced the sale of its Dutch and Belgian businesses for an initial disposal consideration of EUR 1445 million and a price adjustment of up to EUR 90 million based on the increase of the local net asset values of the Dutch and Belgian businesses during 2007. The transaction is expected to be completed by the end of the first half of 2008. For the purposes of segment reporting the Dutch and Belgian businesses are presented as a separate segment “Insurance (Discontinued)”.
The consolidated statement of income has been re-presented to include Banca del Gottardo, Lugano, as well as the insurance operations in the Netherlands and in Belgium as discontinued operations.
The calculation for the impairment testing of the goodwill relating to Banca del Gottardo, Lugano, was based on the fair value less costs to sell. The fair value less costs to sell was determined based on the sale agreement to dispose of Banca del Gottardo, Lugano. No impairment loss was recognised in 2007.
Income tax expense on profit from ordinary activities from discontinued operations –11 125 –35 –27 –46 98
Financial assets held to maturity 119 – 41 – – – 160 –
Investments in associates 0 – 9 – – – 9 –
Property and equipment 104 – 138 – – – 242 –
Total assets held for sale 27 136 – 13 328 – 4 14 40 468 14
Investment contracts and other financial liabilities 6 370 – 10 770 – – – 17 140 –
Gain (+)/loss (–) recognised directly in equity relating to assets held for sale –31 – –9 – – – –40 –
Banca del Gottardo, Lugano, and the insurance operations in the Netherlands and in Belgium have been presented separately under assets held for sale and associated liabilities (disposal groups) in the consolidated balance sheet as
Net cash flows from financing activities 69 75 163 –120 232 –45
Net cash flows from discontinued operations –39 287 1 026 –914 987 –627 30 Assets Held for Sale and Discontinued Operations (continued)
Net gains/losses on financial instruments at fair value through profit or loss – – –17 –17 19
Financial assets at fair value through profit or loss 19 399 29 437
Assets under unit-linked/private placement life insurance business –9 991 –2 625
Later than 1 year and not later than 5 years 13 57
Guarantees The Group has issued financial guarantees and transaction-related guarantees and similar instruments. Financial guarantees provide for specified payments to be made to reimburse the holder for a loss incurred in the event that a client fails to make payment when due. Transaction-related guarantees such as performance bonds and bid bonds protect the holder against loss in the event of non-performance of a contract.
Operating lease commitments The Group has entered into various operating leases as a lessee. Rental expenses relating to continuing operations recognised in income for these items totalled CHF 25 million for the year ending 31 December 2007 (2006: CHF 26 million). Minimum lease payments totalled CHF 25 million in 2007 (2006: CHF 26 million).
Other contingencies and commitments Contractual obligations for repairs and maintenance of investment property amounted to CHF 16 million as at 31 December 2007, which are included in this line item (2006: CHF 57 million).
Securities under repurchase agreements, securities borrowing and lending arrangements 0 4 495
Securities under derivative and other transactions – 25 of which sold or repledged
37 Reclassifications in the Consolidated Statement of Income and Consolidated Balance Sheet
Reclassifications in the statement of income for the year ended 31 December 2006
In order to improve the presentation of expenses by their nature, acquisition and origination costs deferred totalling CHF 538 million were reclassified to commission expense, employee benefits expense and other expenses.
Borrowings totalling CHF 3329 million relating to repurchase agreements and bank loans were reclassified to deposits.
Notes to the Consolidated Financial Statements 37 Reclassifications in the Consolidated Statement of Income and Consolidated Balance Sheet (continued)
Adroit Private Equity, Zürich Ins. CH 100.0% 100.0% full CHF 5 000
Banca del Gottardo, Lugano Bank. Dis. 100.0% 100.0% full CHF 70 000
Dreieck Equipment Leasing, Zürich Bank. Dis. until 27.01.2006 – – full
Dreieck Industrie Leasing, Lausanne Bank. Dis. until 27.01.2006 – – full
Eaux-Vives 2000, Zürich Ins. CH 100.0% 100.0% full CHF 1 000
Gottardo Investments SA, Lugano Bank. Dis. until 11.12.2006 – – full
Livolsi e Associati Private, Lugano – 40.0% 40.0% equity CHF 1 000
Swiss Life Asset Management, Zürich IM 100.0% 100.0% full CHF 250
Swiss Life General Partners, Zürich Other until 20.08.2007 – – full
Swiss Life Holding, Zürich Other – – full CHF 1 188 655
Swiss Life Institutional Funds – SLIF 14, Lugano Ins. CH until 24.05.2006 – – full
Swiss Life International Holding AG, Zürich Other from 12.06.2006 100.0% 100.0% full CHF 1 000
Swiss Life Property Management, Zürich IM 100.0% 100.0% full CHF 250
Swissville Centers, Zürich Ins. CH 100.0% 100.0% full CHF 2 500
Swissville Commerce, Zürich Ins. CH 100.0% 100.0% full CHF 150 900
CapitalLeben Versicherung AG, Schaan Ins. Other 27.03. – 01.07.2007 – – full
Cabinet Wilhelm SA, Lons – from 01.02.2007 49.8% 49.8% equity EUR 300
Garantie Assistance, Paris Ins. FR 99.5% 100.0% full EUR 1 850
Meeschaert Assurances, Paris Ins. FR from 09.11.2007 100.0% 100.0% full EUR 5 640
SCI DYNAPIERRE, Paris Ins. FR 99.7% 100.0% full EUR 7 317
Société suisse vie, Paris (branch Swiss Life/Rentenanstalt) Ins. FR – – full – –
Swiss Life Assurances de Biens, Paris Ins. FR 100.0% 100.0% full EUR 80 000
Swiss Life Banque, Paris Ins. FR 60.0% 60.0% full EUR 29 913
Aareal Holding Verwaltungsgesellschaft mbH, Düsseldorf – 20.4% 100.0% equity EUR 25
DEPFA Holding Verwaltungsgesellschaft mbH, Düsseldorf – 20.4% 20.4% equity EUR 539
Münchner Tor, München Ins. DE 100.0% 100.0% full EUR 59 435
Schweizerische Rentenanstalt, München (branch Swiss Life/Rentenanstalt) Ins. DE – – full – –
Swiss Life Beteiligungs-GmbH & Co. Immobilien I KG, München Ins. DE from 22.10.2007 100.0% 100.0% full EUR 10
Swiss Life Beteiligungs-GmbH & Co. Immobilien Ost KG, München Ins. DE from 22.10.2007 100.0% 100.0% full EUR 50
Swiss Life Insurance Solutions AG, München Ins. DE from 04.10.2006 100.0% 100.0% full EUR 7 500
Swiss Life Asset Management (Nederland), Amstelveen Ins. Dis. 100.0% 100.0% full EUR 250
Zwitserleven, Amstelveen (branch Swiss Life/Rentenanstalt) Ins. Dis. – – full – –
Swiss Life Asset Management (Belgium), Bruxelles IM 100.0% 100.0% full EUR 500
Swiss Life Belgium SA, Bruxelles Ins. Dis. 100.0% 100.0% full EUR 88 074
Swiss Life Immo-Cross Roads, Bruxelles Ins. Dis. 100.0% 100.0% full EUR 64
Swissville Europe (Belgium), Bruxelles Ins. CH until 25.01.2006 – – full
Banque du Gothard (Luxembourg), Luxembourg Bank. Dis. 100.0% 100.0% full CHF 14 000
Gotam Fund Management Company, Luxembourg Bank. Dis. 100.0% 100.0% full EUR 125
Gottardo Strategy Fund Management, Luxembourg Bank. Dis. 100.0% 100.0% full CHF 250
Swiss Life Funds (Lux) Management, Luxembourg IM 100.0% 100.0% full CHF 400
Swiss Life Invest Luxembourg, Strassen Ins. Other from 04.12.2006 100.0% 100.0% full EUR 35 000
Swiss Life Participations Luxembourg, Strassen Ins. Other from 21.12.2006 100.0% 100.0% full EUR 70 000 1 Segment (Ins. CH = Insurance Switzerland, Bank. Dis. = Banking (Discontinued), IM = Investment Management, Ins. Other = Insurance Other, Ins. FR = Insurance France, Ins. DE = Insurance Germany, Ins. Dis. = Insurance (Discontinued))
Alpine Holdings, St. Peter Port, Guernsey Bank. Dis. until 15.08.2006 – – full
Integer Investment PCC Limited Cell 7, St. Peter Port, Guernsey Bank. Dis. until 28.02.2006 – – full
Gottardo Gestión, SGIIC, Madrid Bank. Dis. 100.0% 100.0% full EUR 1 091
Banca del Gottardo Italia, Bergamo Bank. Dis. 90.0% 90.0% full EUR 50 000
Gottardo Asset Management SGR, Milano Bank. Dis. 100.0% 100.0% full EUR 2 050
Swiss Life (Italia), Milano Ins. Other until 31.12.2006 – – full
Swiss Life (Italia) Infortuni e Malattie, Milano Ins. Other until 31.12.2006 – – full
Adroit Investment (Offshore), Grand Cayman Ins. CH 100.0% 100.0% full CHF 0
Swiss Life Private Equity Partners (Cayman), Grand Cayman IM until 31.03.2006 – – full
Banque du Gothard (Monaco), Monaco Bank. Dis. until 28.02.2006 – – full
Gothard Gestion Monaco, Monaco Bank. Dis. until 28.02.2006 – – full
As auditors of the Group, we have audited the consolidated financial statements (consolidated statement of income, consolidated balance sheet, consolidated statement of cash f low, consolidated statement of changes in equity and notes to the consolidated financial statements; pages 75 to 197) of Swiss Life Group for the year ended
In our opinion, the consolidated financial statements give a true and fair view of the financial position, the results of operations and the cash f lows in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.
The interest received on loans made to Group companies was up slightly due to a new loan to the amount of CHF 100 million to Swiss Life (Liechtenstein) AG. This represented part of the funding for the takeover of CapitalLeben. The company resulting from the merger between Swiss Life (Liechtenstein) AG and CapitalLeben was incorporated into Swiss Life International Holding AG, in which Swiss Life groups together its foreign insurance companies. With this step, Swiss Life continued to streamline the Group structure during the reporting period.
Swiss Life Holding’s liquid assets (liquid funds plus time deposits and comparable instruments) fell from CHF 649 million to CHF 159 million. Swiss Life Holding used excess liquid funds to expand its position in its own shares.
The total expenses of Swiss Life Holding, including tax expenses, rose by CHF 3 million vis-à-vis the previous year to stand at CHF 15 million. The increase was mainly due to higher commission expense in connection with the considerable rise in conversions of the convertible bond issue.
Swiss Life International Holding AG, Zürich CHF 1 000 100.0% CHF 1 000 100.0%
Swiss Life Investment Management Holding, Zürich CHF 50 000 100.0% CHF 50 000 100.0%
Swiss Life (Liechtenstein), Vaduz – – – CHF 5 000 100.0%
Swiss Life/Rentenanstalt, Zürich CHF 587 350 100.0% CHF 587 350 100.0%
OWN SHARES | In the year under review the companies in the Swiss Life Group purchased a total of 4 233 778 Swiss Life Holding shares at an average price of CHF 309.88. In the same period, they sold 2 415 493 shares at an average price of CHF 312.36. As at 31 December 2007, the Swiss Life Group held 2 153 802 own shares.
CONTINGENCIES | Swiss Life Holding acts as warrantor for all Swiss Life/Rentenanstalt liabilities with regard to the various tranches of the subordinated perpetual step-up loan (hybrid debt), which amounted to an equivalent value of CHF 2532 million at the balance sheet date.
Reserve for treasury shares (incl. reduction in par value) –542 –23
EVENTS AFTER THE BALANCE SHEET DATE | The transaction to dispose of Banca del Gottardo, Lugano, for a total consideration of CHF 1875 million (subject to adjustment) was completed on 7 March 2008.
Disclosure of compensation to the Board of Directors and the Corporate Executive Board in accordance with the Swiss Code of Obligations Art. 663bbis and Art. 663c
COMPENSATION IN 2007 | The specifications below take into consideration the new transparency regulations on compensation set out in the Swiss Code of Obligations Art. 663bbis and Art. 663c. Further information on compensation and benefit expenditure can be found in Swiss Life Group’s Annual Report 2007 (Corporate Governance and Notes 24 and 31 to the Financial Statements).
COMPENSATION TO MEMBERS OF THE BOARD OF DIRECTORS | Compensation remitted to members of the Board of Directors in the year under review comprised the basic compensation, additional compensation in cash and a variable compensation component in shares. The basic compensation covers membership of the Board of Directors of Swiss Life Holding and its subsidiary Swiss Life/Rentenanstalt as well as membership of the individual Board Committees. The additional compensation in cash is commensurate to the function and workload and is determined annually by the Board of Directors. If Swiss Life Group’s business operations have proved successful, a further, variable compensation component is remitted in the form of Swiss Life Holding shares, decided upon by the Board of Directors taking into consideration the business result. The shares are allocated at economic value, which is equal to the tax value, taking a vesting period of three years into account.
As Chairman of the Board, Bruno Gehrig is affiliated to the employee benefits institutions of Swiss Life for the purpose of occupational provisions. No such affiliation exists for other members of the Board of Directors; no contributions have been made on their behalf.
COMPENSATION TO MEMBERS OF THE CORPORATE EXECUTIVE BOARD | In the year under review, the compensation remitted to members of the Corporate Executive Board comprised the salary, a variable bonus in cash, other compensation (child allowances, allowance for years of service, company cars, premium contributions to 3rd-pillar pension plans) and variable compensation in the form of shares. The salary is determined annually by the Chairman’s Committee, in its capacity as Compensation Committee, taking into account the individual member’s function-related responsibility and workload. If Swiss Life Group’s business operations have proved successful, a variable cash bonus and variable compensation in the form of shares is added, decided upon by the Chairman’s Committee under consideration of the business results and the personal target achievement of the members of the Corporate Executive Board. In the year under review, the shares were allocated at economic value, which is equal to the tax value, taking a vesting period of one year into account.
Total sation ExtraorBasic Additional compen- in cash Regular dinary Aggregate compen- compen- sation and shares contri- contri- total Amounts in CHF sation sation in cash Number Amount (amount) butions2 bution (amount)3
Bruno Gehrig, Chairman of Board of Directors 555 000 100 000 655 000 312 79 898 734 898 197 992 652 961 1 585 851 1 The allocation of shares was effected on 30.03.2007, 25.06.2007 and 17.12.2007 at economic value, which is equal to the tax value (CHF 256.0841, CHF 270.5675 and CHF 243.2798 respectively), taking into account a vesting period of three years. The share prices (closing prices) on the days of allocation were CHF 305.00, CHF 322.25 and CHF 289.75 respectively.
3 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV amounted to a total of CHF 170 134 in the year under review.
Total sation Other compen- in cash compensa- sation and shares Amounts in CHF Salary Bonus tion1 in cash Number Amount (amount)
4 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV amounted to a total of CHF 579 310 in the year under review.
6 The allocation of PSUs as at 01.04.2007 was effected at a fair value of CHF 189.22 calculated by an independent consultancy f irm.
Balance carried forward to new account 3 047 818 3 403 418
As statutory auditors, we have audited the accounting records and the financial statements (statement of income, balance sheet and notes to the financial statements; pages 201 to 210) of Swiss Life Holding for the year ended
In our opinion, the accounting records and financial statements and the proposed appropriation of profit comply with Swiss law and the company’s Articles of Association.
Dividend yield on year-end price (in %) 28.12.2007 2.47 29.12.2006 1.64
Nominal value CHF 68 664 000 EUR 300 000 000 EUR 350 000 000 EUR 700 000 000
November 2005 April 2007 June 2004 – June 2004 – (issued), (issued),
In CHF million (if not stated otherwise) 2007 2006 2005 2004 2003 1
Gross written premiums, policy fees and deposits received (continuing operations) 21 213 19 421 n.a. n.a. n.a.
Financial result (for the account and risk of the Swiss Life Group) 4 885 5 307 6 966 6 844 5 836
Net insurance benefits and claims –13 268 –12 012 –14 040 –15 375 –15 726
Number of employees (full-time equivalents) 8 556 8 693 8 979 9 419 10 015 1 2003 figures not adjusted to the financial reporting requirements as of 1 January 2005. 2 Including reserve release of CHF 304 million due to change in Dutch law.
On 28 September, the company’s founding day, Swiss Life celebrates its off icial 150th anniversary with 500 guests in Zurich.
The national junior chef champions surprise the guests with creative culinary delights at the welcome cocktails.
Thomas Rechsteiner, Head of the Eastern Switzerland Region, welcomes 300 customers to the anniversary event at Lake Constance.
Panel discussion in Baden on the subject: What distinguishes the patriarchs of the old days from the executive managers of today?
Customers in Western Switzerland celebrate in Geneva on 31 May. Guest of honour is the top chef George Wenger.
Lutz Jäncke, Professor for neuropsychology, explains how the brain can be kept agile even in old age.
Bellinzona, 5 July: Thomas Müller, Group CFO, at a client event in Biblioteca Cantonale at Palazzo Franscini.
Customer event in Landquart: Guest speaker Hans Rickli, a cardiologist, explains how medical mishaps can be avoided.
Swiss Life sponsors the competition “Young people design living space” run by the University of Applied Sciences in Rapperswil.
National Councillor Pascale Bruderer, former National Councillor Marty Kälin, and Group CEO Rolf Dörig applaud the winners.
The third class of Scuola Media Castione scoop up the prize thanks to their creative ideas on shaping the world around them.
The Kids Festival, a tournament for up and coming football stars, was held in 40 locations throughout Switzerland.
Over 14 000 boys and girls between six and ten years of age take part in the Kids Festival events.
Bruno Gehrig and Paul Müller welcome around 200 distribution partners from all regions in Switzerland.
The guests listen to the history of the Rütli told by Josef Wiget, former state archivist of the Canton of Schwyz.
14 September: Approximately 2800 employees from the whole of Switzerland travel to Lucerne to enjoy the best work day of the year.
An evening programme with culinary delights, performances and music. Highlight: the performance of the Swiss Life Choir.
In October, staff from Luxembourg celebrate the company’s anniversary at an evening spent in a Swiss chalet.
Georg Fahrenschon, State Secretary for the Bavarian Ministry of Finance, offering congratulations in Munich.
Guests of honour in Basel: Barbara Buser, architect, and Peter Achten, journalist and longstanding Asia correspondent.