Markets — As a leading European provider of comprehensive life and pensions and financial solutions, the Swiss Life Group enables people to lead a self- determined life. In Switzerland, France and Germany, Swiss Life offers individuals and corporations comprehensive and individual advice plus a broad range of own and partner products through its sales force and distribution partners such as brokers and banks. The Swiss Life Select, Tecis, Horbach, Proventus, Chase de Vere and Fincentrum advisors choose suitable products for customers from the market according to the Best Select approach. Swiss Life Asset Managers offers institutional and private investors access to investment and asset management solutions. Swiss Life provides multi national corporations with employee benefits solutions and high net worth individuals with structured life and pensions products. The subsidiaries Livit, Corpus Sireo, Mayfair Capital and Beos are also part of the Group.
In Switzerland, meanwhile, the main subject of discussion was the viability of our pension systems. The reason is obvious: people are living ever longer, and the systems are failing to keep pace. The brunt is borne by the younger generations, who must pay for the flaws. The politicians are still far from being able to present us with sustainable solutions for our pension system. Solutions palatable to the majority of the population.
Whatever the economic or socio-political climate, however – our chief duty at Swiss Life is sustainable success. For our customers, for our employees and for our investors. At Swiss Life we offer security and solutions that last for decades, even in turbulent times. And we’ve been doing it for over 160 years.
Swiss Life is in excellent shape. We have achieved all of the objectives we set ourselves in our last Group-wide programme, “Swiss Life 2018”; indeed, in many cases we even exceeded them. This means that, since 2009, we have managed to successfully complete three Group-wide programmes in a row. Our financial strength has been growing every year. We have also flourished in an area in which we have been able to leverage one of our core competencies: witness the excellent work we have been doing with long-term investments. Despite persistently low interest rates, we have managed to generate returns for our customers the equal of any benchmark. Our growth in third-party investment management also testifies to our strong performance, as we have doubled assets in this business area since 2014, from CHF 33.7 billion to CHF 71.2 billion.
Our successes have allowed the Board of Directors to propose a dividend of CHF 16.50 per share for the 2018 financial year at the Annual General Meeting – a dividend payout ratio more than double that of 2014.
Success can never be taken for granted and depends to a degree on the general operating conditions. Last year, as the capital requirements for full insurance were considered excessive by its globally active parent company, another competitor withdrew from the full insurance business in Switzerland. It was a wake-up call for the Swiss insurance sector.
Solidity and continuity become more important in times of great change. At Swiss Life we live by that maxim: our ambitious plans for the coming three years depend on our confidence in the extreme robustness of our business model. Our capacity for implementation, financial strength and outstanding employees provide the ideal basis for us to write yet another successful chapter in the Swiss Life story.
We thank you kindly, dear shareholders, for your confidence and support, and look forward to continuing to enjoy your company and interest in years to come.
With its core markets of Switzerland, France and Germany as well as the cross-border International segment and the asset management business of Swiss Life Asset Managers, Swiss Life enjoys a very strong market position: The Swiss Life product strategy is explained in the chapter on “Products and services”. In view of its varied positioning in the relevant markets, Swiss Life uses a multi-local approach: Swiss Life also reports on strategic focuses and investments by individual divisions as part of its segment information.
Swiss Life successfully completed its last two Group-wide programmes, “Milestone” and “Swiss Life 2015”. “Swiss Life 2018”, the last Group-wide programme, which the company presented in November 2015 and which comprised financial objectives until the close of financial year 2018, has also been very successfully completed: all objectives were achieved – indeed, most of them were exceeded. The fee result, for instance, and the risk result were both above their respective targets, while the value of Swiss Lifes’ new business also significantly outdid its ambitious goal over the three years of the programme. Thanks to ongoing cost discipline, Swiss Life managed to keep operating expenses practically stable and, with savings totalling over CHF 100 million, free up resources for additional investments. Finally, Swiss Life was able to increase the cash remittance to the holding company, there too exceeding its objectives as set out in the “Swiss Life 2018” Group-wide programme.
Swiss Life reports regularly in detail on the current status of strategy implementation, as for instance in the presentation of its annual or half-yearly results. The relevant documents are available on the website www.swisslife.com in the “Investors & Shareholders” section.
At the end of November 2018, Swiss Life presented its Group-wide programme, “Swiss Life 2021”. At its core is the purpose, with Swiss Life concentrating on four strategic directions for the programme: its focus on preferred segments, the promotion of attractive offers, the steady improvement of customer relations and the continuing increase of productivity.
Swiss Life focuses on continuity in its financial objectives for the period from 2019 to 2021: quality of earnings and earnings growth, operational efficiency and disciplined capital management are the leading topics. Overall, Swiss Life is striving for an adjusted return on equity of 8 to 10%.
Operational efficiency • Improvement of the efficiency ratio in the life business to below 40 basis points by the end of 2021 • In its owned IFAs, a distribution operating expense ratio below 25 percent by the end of 2021 • Cost/income ratio in third-party asset management of around 75 percent by the end of 2021
Capital management • Increase in cash remittance to the holding company to a cumulative value between CHF 2 and 2.25 billion (2019–2021) • SST ambition range of 140 to 190% • Increase in dividend payout ratio for the shareholders to 50–60% of profit • From December 2018 to December 2019, the Group will implement a share buyback programme of CHF 1 billion.
Swiss Life has a strong brand. A unique brand personality and charismatic logo prove to be crucial success factors in a competitive market environment. The brand personality reflects the focus on self-determination and resolutely places the purpose front and centre: “We enable people to lead a self-determined life.”
We know our customers. We understand their needs and empower them to make the right selection from a wide range of flexible solutions – for a self-determined life.
We serve our customers with our know-how built on long-standing experience and financial solidity. We act responsibly and want to be your trusted partner.
The purpose is supported by the three corporate values of individuality, confidence and reliability.
The corporate design is derived from the brand personality and, in addition to ensuring recognisability, contributes to a uniform brand experience. Whether they are browsing the website, reading a brochure or looking at an advert, the stakeholder groups are to receive the same strong impression at all contact points.
In 2018, the Swiss Life brand world was enhanced with two new brands: Swiss Life Asset Managers acquired Beos, the leading corporate real estate investment manager in Germany, based in Berlin, while in Fincentrum Swiss Life International acquired one of the leading financial advisory companies in the Czech Republic and Slovakia.
Brands with little relevance for core business and potential for a positive image transfer are at the third level. The umbrella brand or sub-brand serves as an additional textual identifier at this level.
This is the repository for brands whose connection to the umbrella brand is potentially the source of conflict or are kept separate for strategic reasons. These brands have an independent existence without visible relation to the umbrella brand.
In 2018, in a survey carried out by Reader’s Digest Switzerland, Swiss Life was once again voted “Most Trusted Brand” in the Life Insurance category. Numerous awards in other divisions also confirm the strength of the Swiss Life brand internationally. For example, the prominent trade magazine PropertyEU named Swiss Life Asset Managers the leading institutional real estate investor in Europe for the fourth time in a row (for 2017).
Segment Reporting Swiss Life again posted strong growth for the 2018 financial year: adjusted profit from operations increased by 4% over the previous year to CHF 1553 million and net profit rose by 7% to CHF 1080 million.
Swiss Life was able to increase its fee income by 6% to CHF 1615 million in local currency. This growth is due to higher contributions from owned IFAs (+10%), Swiss Life Asset Managers (+6%) and from own and third-party products and services (+2%). In 2018, Swiss Life saw premium growth of 2% in local currency to CHF 19.2 billion. Insurance reserves to the benefit of the company›s policyholders rose by 2% in local currency during the year under review.
As of 31 December 2018, Swiss Life Asset Managers had a total of CHF 233 billion in assets under management. Third-party assets under management at end of year were CHF 71 billion – a plus of 16% over the previous year.
In the home market of Switzerland, Swiss Life increased its segment result in 2018 by 4% to CHF 865 million (previous year: CHF 829 million). The growth was driven by the savings result and the fee result. Direct investment income was at the previous year’s level (CHF 3.0 billion).
In 2018 Swiss Life increased total premiums in Switzerland to CHF 9.5 billion (+3%), despite unchanged focus on new business profitability. Of the total premium volume, 85% came from group life business.
Insurance benefits, including changes in insurance reserves, rose by 6% to CHF 10.5 billion, due mainly to low interest rates and the concomitant greater reserving requirements. Operating expenses rose by 18% during the year under review to CHF 1.1 billion, due to higher acquisition costs from a lot of new business and higher writedowns on activated acquisition costs. Operational administrative costs in 2018 were once again slightly below the previous year.
In individual insurance the range of provisions products for private clients was further expanded, with an eye to their fundamental requirements: predictability and security. New products, such as the successfully launched Swiss Life Dynamic Elements new savings insurance, helped significantly increase the share of capital light solutions in new business in line with the Swiss Life offer strategy. The volume of new business with the new investment products for private investors launched in autumn 2016 with Swiss Life Asset Managers also increased markedly. Already, more than 10 000 private clients entrust over CHF 626 million in assets under management to the investment expertise of Swiss Life.
Growth in group life business during the year under review was shaped by significant market dynamics. Many customers reviewed their present occupational provisions solution in light of their current requirements, especially as regards risk capacity and appetite. In addition, the withdrawal of a competitor from the full insurance business led to increased activity on the market, and saw a marked rise in offer enquiries to Swiss Life. As a result, Swiss Life was able to write attractive new business, further strengthening the solidity of its portfolio.
Swiss Life France grew its segment result to CHF 277 million (previous year: CHF 261 million). This development is primarily due to the good quality of new business, a stable financial margin and improved technical margins in health, death and disability insurance. Property and casualty business incurred a particularly high claims burden in 2018 due to a large number of significant claims events. In addition, Swiss Life France emphasised cost discipline. Costs increased significantly as income and business both grew.
In 2018, the French insurance market posted 4% growth in local currency in a market environment shaped by government tax reforms and low interest rates. Savings and retirement business was up 4%, while health, death and disability insurance and property and casualty business grew by 6 % an 3%, respectively. Swiss Life in France increased premium volume significantly to CHF 5.9 billion, maintaining its focus on profitability and quality of new business and not so much on business volume. Premium income in savings and retirement provisions rose by 9% in local currency. The share of premiums from unit-linked contracts was 50%, and thus well above the market average of 28%, thanks to the private insurer strategy and bonus distribution policy for investments in the premium customer segment. The share of unit-linked contracts in new business remained stable at the very high level of 61%. At the end of 2018, these contracts accounted for 38% of reserves. In health, death and disability insurance, the focus was on profitability both in health and in death and disability insurance, which restrained volume growth. Premiums increased by 1% in local currency as rates increased and persistency im proved. With its distribution of savings products, Swiss Life Banque Privée once again contributed to business with high net worth individuals. Fee income in savings and retirement provisions was up 3% in local currency, although revenues in unit-linked life insurance suffered from the market downturn at the end of the year. Fee income increased by 1% overall, due to the weaker banking market environment.
Swiss Life in France will continue to invest in its customer segments in 2019, focusing on its multichannel distribution and expanding its product offering. Swiss Life in France wants to consistently expand and improve the customer experience by optimally increasing and supporting the personal customer relationship with digitalisation and services.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 5 859 5 310 10%
Swiss Life Germany posted premiums of CHF 1.4 billion in 2018, an increase of 2% in local currency over the previous year. The core product areas of Swiss Life Germany are employee insurance, occupational pensions, long-term care insurance and modern guarantee concepts.
Administrative costs adjusted for one-offs increased, due to investments under the new Groupwide programme, “Swiss Life 2021”, by 2% over the previous year.
In the coming three years, Swiss Life Germany will focus on the three strategic thrusts: expansion of position as biometry and occupational pensions specialist, positioning as leading advisor to German Mittelschicht companies and increase of efficiency and service quality. The focus on insurance is on biometric, sector-specific and occupational pensions solutions. Swiss Life Germany wants to leverage its competency in biometry to set insurance market standards in service as well as in the scalable application process. In financial consulting Swiss Life Germany has set its sights on becoming the «financial home” of the German Mittelschicht companies and further increasing its own distribution strength – for example through a scalable distribution platform. In order to achieve this goal, connectivity is being improved and the administration processes are being automated, in step with the systematic advance of digitalisation.
In the year under review, the International segment achieved a result of CHF 67 million, a growth rate of 32% over the previous year (2017: CHF 51 million). This improvement stems predominantly from higher fee income of CHF 260 million (previous year: CHF 225 million).
In 2019, Swiss Life International aims to pursue new insurance business development by expanding innovative solutions and digital channels. In financial consulting the company anticipates an increase in the number of advisors and an increase in revenue per advisor. Swiss Life International aims to ensure that people can be offered suitable and high-quality financial services and advice going forward through digitalisation initiatives. Swiss Life International is also targeting an increase in fee and risk business.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 2 459 2 674 –8%
Assets under management by Swiss Life Asset Managers came to CHF 232.6 billion at the end of 2018. Assets from insurance business remained virtually stable at CHF 161.5 billion. Due to the long-term nature of its liabilities, Swiss Life invests especially in fixed-income securities, which at the end of 2018 made up 58% of its portfolio. The real estate holding increased further from 18% to 20% and the net equity holding was 4% as at 31 December 2018.
With its acquisition of Beos, Swiss Life Asset Managers added the corporate property asset class to its real estate competency. The expansion of the pan-European real estate funds, investing in real estate in various European countries, was pursued. As a result, Swiss Life Asset Managers can fill a major need of institutional investors. The real estate funds for private investors, launched in the previous year, are enjoying healthy demand in France and Germany. The focus in the securities area was on bundling the product and service range into a complete package for institutional clients, which is being demanded increasingly by investors in the challenging pensions market. The strong growth and increasing demands led to the development of a Target Operating Model in 2018. The Executive Board, meanwhile, was enhanced by a Chief Technology Officer, a CEO for Germany and a Head of Sales & Marketing. The reorganisation will help Swiss Life Asset Managers continue to grow its third-party business and expand its position in its core markets.
Assets under management for third-party clients – breakdown by asset class As at 31.12.2018
Assets under management for insurance business – breakdown by asset class As at 31.12.2018
Corporate Governance Responsible and sustainable corporate governance is of central importance to the Swiss Life Group. It structures its corporate governance openly and transparently in compliance with the acknowledged national and international standards.
The operational management structure as at 31 December 2018 is shown on page 46.
The disclosures of shareholdings that exceed the disclosure threshold on the balance sheet date of 31 December 2018 are shown below. In accordance with the disclosure requirements, the percentage figures given relate to the share capital and number of outstanding shares pursuant to the Articles of Association applicable at the time of the relevant disclosure.
On the balance sheet date some 159 000 shareholders and nominees were listed in the Swiss Life Holding share register, of which about 4300 were institutional shareholders. Taken together, the shareholders entered in the share register held around 50% of the shares issued. Over half of these shares were owned by shareholders domiciled in Switzerland. Approximately a third of the registered shares were in private hands.
A table showing the shareholder structure is provided in the section “Share Performance and Historical Comparison” on page 321.
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 2015 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, “Investors & Shareholders” area, “Results & Reports” section (www.swisslife.com/annualreports).
In 2017, the convertible bond (2013–2020) issued by Swiss Life Holding Ltd in the amount of CHF 500 000 000 was almost entirely converted, whereby another 2 141 905 new registered shares were created. The ordinary share capital thus increased by CHF 10 923 715.50 from CHF 163 614 125.10 to CHF 174 537 840.60. There were no further changes with regard to equity capital; the distribution of CHF 11.00 per share approved by the General Meeting on 25 April 2017 was made from the capital contribution reserves.
Shares 34 223 106 fully paid Swiss Life Holding registered shares with a par value of CHF 5.10 each were outstanding on the balance sheet date. Subject to the ten per cent limit on voting rights set out in the Articles of Association (cf. the section on “Shareholders’ participation rights” on page 71), each share grants the right to one vote at the General Meeting of Shareholders.
In the year under review, no member of Swiss Life Holding’s Board of Directors exercised any duties relating to operational management within the Swiss Life Group. Furthermore, no such duties were exercised by any Board members during the three financial years preceding the reporting period.
The Articles of Association and Organisational Regulations of Swiss Life Holding can be seen at www.swisslife.com, “The Swiss Life Group” area, “Corporate Governance” section, “Organisation and principles” subsection (www.swisslife.com/en/organisation).
Rolf Dörig — Born 1957, Swiss national Chairman of the Board of Directors bild Rolf Dörig laid the groundwork for his professional career by obtaining a doctorate in law (Dr. iur.) from the University of Zurich before being called to the bar in Zurich. He also completed the Advanced Management Program at Harvard Business School (Boston). Joining Credit Suisse in 1986, he assumed a number of exe cutive responsibilities in various areas of banking and in different geographical markets. As a Member of the Executive Board, he was assigned responsibility for Swiss Corporate and Retail Banking from 2000 onwards. In 2002 he assumed the role of Chairman Switzerland of Credit Suisse. Following his move to Swiss Life, Rolf Dörig held the positions of Chairman of the Corporate Executive Board from November 2002 to May 2008 and Delegate of the Board of Directors from May 2008 to May 2009.
Frank Schnewlin will be put forward for re-election as Member of the Board of Directors and as Member of the Compensation Committee at the General Meeting of Shareholders of Swiss Life Holding on 30 April 2019.
Director of Product Marketing in Radio Broadcasting Services. In November 2000, Adrienne Corboud Fumagalli joined the Kudelski Group as Corporate Secretary and Member of the Corporate Executive Board. In January 2004, she was appointed Executive Vice President in charge of Business Development. From 2008 to 2016, Adrienne Corboud Fumagalli served as Vice President for Innovation and Technology Transfer at EPF Lausanne. As of July 2017, she is also President of the Board of Directors and Chief Executive Officer of Deeption SA (spin-off of the EPF Lausanne Social Media Lab).
Adrienne Corboud Fumagalli will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 30 April 2019.
Frank W. Keuper — Born 1953, German national Member of the Board of Directors bild Frank W. Keuper studied social and economic sciences at Vienna University of Economics and Business and obtained a doctorate in the same subject. He started his career in the insurance sector in 1985 at the Albingia insurance group as assistant to the Management Board and later became Head of Sales and Marketing. After switching to the Zurich insurance group he returned to Albingia in 1992 and served as
Frank W. Keuper will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 30 April 2019.
Board. He was promoted to Head of Business Development, served in that capacity from 2000 to 2002 and subsequently became CFO and Head of IT at ANKER Versicherung (a subsidiary of the Helvetia Group) in Vienna from 2002 to 2005. In 2005 Stefan Loacker took over management of Helvetia Versicherungen AG (previously ANKER Versicherung). He returned to Switzerland in 2007 and, at age 38, became CEO of Helvetia Group. Stefan Loacker led Helvetia Group for nine years before handing over his function as CEO to a successor in 2016. Since October 2016 he has been managing partner of DELOS Management GmbH.
Stefan Loacker will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 30 April 2019.
Other appointments: – Vontobel Holding AG and Bank Vontobel Ltd, Member of the Board of Directors and Member of the Risk and Audit Committee – Institute of Insurance Economics at the University of St. Gallen, Member of the Executive
Henry Peter — Born 1957, Swiss and French national Member of the Board of Directors bild Henry Peter completed his studies in law at the University of Geneva in 1979, and in 1981 he was called to the Geneva bar. Following an assistantship in Geneva, a period of study as a visiting scholar at the University of California in Berkeley and legal work in Lugano, he obtained his PhD at the University of Geneva in 1988. Since 1988 he has been a partner in a Lugano law firm, currently Kellerhals Carrard
Martin Schmid will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 30 April 2019.
Administration. In this function he was notably a Member of the Liechtenstein OECD delegation and Governor of the European Bank for Reconstruction and Development (EBRD) in London for four years. Klaus Tschütscher went on to start his political career as a Member of government of the Principality of Liechtenstein. Initially he was Deputy Prime Minister from 2005 to 2009, responsible in particular for Justice and Economic Affairs. From 2009 to 2013 Klaus Tschütscher was Prime Minister and Finance Minister of Liechtenstein. He has received various awards and international distinctions. Klaus Tschütscher is a delegate and Executive Board member of UNICEF Switzerland and Liechtenstein. Since his withdrawal from politics, Klaus Tschütscher has been a member of the Board of Directors of Swiss Life Holding Ltd. Since January 2014 he has been Owner and Chairman of the Board of Directors of Tschütscher Networks & Expertise AG.
Changes in the Board of Directors with effect from the 2019 General Meeting of Shareholders
As communicated in the media release of 26 October 2018, Thomas Buess, until 28 February 2019 CFO of the Swiss Life Group, will be proposed to the shareholders for election to the Board of Directors at the next Annual General Meeting on 30 April 2019.
The Chairman of the Board of Directors presides over meetings. As a rule, the Group CEO attends the Chairman’s Committee meetings or parts of the meetings in an advisory capacity. Other members of the Corporate Executive Board and in-house or external specialists may also be invited. The Chairman’s Committee meets at least six times a year.
At the General Meeting of Shareholders on 30 April 2019, Frank Schnewlin, Franziska Tschudi and Klaus Tschütscher will be proposed as Members of the Compensation Committee. It is planned that Frank Schnewlin will again take over as Chairman of the Compensation Committee following the 2019 General Meeting.
It is planned that the Investment and Risk Committee will be constituted as follows once voting has been completed at the General Meeting of 30 April 2019: Ueli Dietiker as Chairman, Thomas Buess, Damir Filipovic, Frank W. Keuper, Stefan Loacker and Frank Schnewlin as Members.
Other appointments: – Palladio Foundation, Member of the Board of Trustees – SOBRADO Software AG, Member of the Board of Directors – Swiss Insurance Association (SIA), Member of the Board of Directors – Society for the Promotion of the Institute of Insurance Economics of the University of St. Gallen, Member of the Board
Thomas Buess will hand over his executive function in the Corporate Executive Board to Matthias Aellig, currently Group Chief Risk Officer, on 1 March 2019. As communicated in the media release of 26 October 2018, Thomas Buess will be proposed for election to the Board of Directors at the Annual General Meeting on 30 April 2019.
bild After studying law at the University of St. Gallen, Stefan Mächler (lic. iur. HSG) spent 18 years working for the Credit Suisse Group in the capital market and asset management areas. After nine years abroad and various posts in Tokyo, Osaka, Seoul and Frankfurt, he returned to Switzerland in early 1999 and was appointed Managing Director of Sales & Marketing Europe and Switzerland at Credit
bild Nils Frowein is an economics graduate with German and American accountancy certification. He is a skilled banker and has extensive expertise in the financial services sector and many years of capital market experience. From 1997 until 2004 he worked at the auditing firm BDO Deutsche Warentreuhand AG, where he was responsible for the Financial Advisory Services division, most recently as partner. From 2004 to 2007 Nils Frowein was CFO of financial services provider MLP. There he was significantly involved in laying the strategic foundations for the company. Nils Frowein joined AWD as deputy Chief Executive Officer in January 2008. He was initially Chief Financial Officer and was appointed Chief Operating Officer on 1 September 2008. Between 2009 and 2010 he additionally took charge of the Swiss business of AWD as acting CEO.
Since 2017 he has in addition been Chairman of Swiss Life Singapore, Swiss Life Luxembourg and Swiss Life Liechtenstein. In October 2018 Nils Frowein became Chairman of the Supervisory Board of Fincentrum, in the Czech Republic and Slovakia.
As announced in the media release of 14 August 2018, Matthias Aellig, currently Group Chief Risk Officer, will take over the duties of Group Chief Financial Officer (Group CFO) on 1 March 2019 and become a Member of the Corporate Executive Board.
Since 2009, Swiss Life has given shareholders the opportunity to hold a separate advisory vote at the General Meeting on the compensation report for the relevant financial year. The outcome of the vote is of material importance for the Board of Directors in their assessment and structuring of compensation. This vote on the compensation report will continue to be held in the future in line with good corporate governance practice.
On the basis of the powers of the General Meeting of Shareholders in relation to compensation under the Articles of Association, which came into effect on 1 January 2015, the General Meeting of Shareholders had approved the compensation for the Board of Directors and the Corporate Exe cutive Board on 25 April 2017 as follows: – For the Board of Directors: The maximum total amount of fixed compensation until the next ordinary General Meeting in 2018 in the amount of CHF 3 200 000 in total.
The Articles of Association of Swiss Life Holding can be seen and printed out at www.swisslife.com, “The Swiss Life Group” area, “Corporate Governance” section, “Organisation and principles” subsection (www.swisslife.com/articles). For stipulations on compensation and on the approval of compensation for the Board of Directors and the Corporate Executive Board, particular reference is made to Articles 14–16 of the Articles of Association.
Additional information on compensation and benefit expenditure for the management and employees of the Swiss Life Group can be found in the Consolidated Financial Statements (notes 23 and 29) on pages 249 to 258 and 274 to 275. The information according to Art. 663c of the Swiss Code of Obligations regarding the shareholdings of members of the Board of Directors and the Corporate Executive Board is shown in the Notes to the Swiss Life Holding Financial Statements on pages 312 to 314.
The information on compensation granted to Corporate Executive Board mem bers also includes the variable compensation, which was determined by the Board of Directors at the beginning of 2019 and is published on an accrual basis as compensation for the 2018 financial year. The members of the Board of Directors are granted exclusively fixed compensation, payable 70% in cash and 30% in Swiss Life Holding shares; the allocated shares are subject to a three-year blocking period.
The Board of Directors carries out an annual performance assessment of all members of the Corporate Executive Board, based on preparatory work by the Compensation Committee. In addition, current aspects of HR policy and, in particular, succession planning are regularly discussed at meetings of the Compensation Committee and the Board of Directors as a whole.
Within the framework of the compensation arrangements for members of the Corporate Executive Board, “deferred compensation in cash” was introduced as a new compensation component linked to short-term variable compensation on 1 January 2012. On the basis of the corresponding regulations, a portion of the short-term variable cash compensation determined by the Board of Directors is not paid immediately but after a period of three years has elapsed and provided that the regulatory requirements are satisfied at that point. The allocated deferred compensation in cash represents an entitlement during the three-year deferral period. The underlying “deferred cash plan” also provides for adjustment and reclaiming mechanisms (clawback). A full or partial reduction of the deferred compensation is provided for in the following cases: negative impact of the key figures applying to the allocation of deferred compensation due to a restatement of the annual accounts or damage to Swiss Life as a result of a violation of statutory, regulatory or compliance standards by participants in the plan. If the employment relationship is terminated by a participant during the three-year deferral period for deferred compensation in cash, the entitlements expire worthless (retention component). For the 2018 financial year, the Board of Directors has determined that, as from a variable compensation amount in cash of CHF 500 000, 23% (or 33% for the Group CEO) of the total variable compensation in cash is to be allocated as deferred compensation.
With regard to the 2015 equity compensation plan, the Board of Directors has set the following performance criteria on the basis of the medium-term planning 2015–2017: IFRS profit (50% weighting), the risk and fee result (25% weighting) and Cash to Swiss Life Holding for further strengthening of the financial substance and payout capacity (25% weighting). The 2016, 2017 and 2018 equity compensation plans are based on the “Swiss Life 2018” Group-wide programme, which was announced at the Swiss Life Group’s Investor Day on 25 November 2015 (see www.swisslife.com/investorday2015). The following performance criteria were set on that basis: IFRS profit (50% weighting), the risk and fee result (25% weighting) and Cash to Swiss Life Holding (25% weighting). The 2019 equity compensation plan is based on the new Group-wide programme, “Swiss Life 2021”, which was announced at the Swiss Life Group’s Investor Day on 29 November 2018 (see www.swisslife.com/investorday2018). For the purpose of supporting the achievement of the respective corporate goals, for the 2019 RSU plan performance criteria have been determined by the Board of Directors analogously to the previous year’s objectives (IFRS profit, 50% weighting; risk and fee result, 25% weighting; Cash to Swiss Life Holding, 25% weighting ).
After expiry of the thee-year period of the RSU plan, the target value for each performance criterion according to the medium-term planning is compared with the actual result achieved. The share allocation corresponds to the number of allocated RSUs (1 RSU = 1 share) if all three performance criteria have been achieved or exceeded after the three-year period has elapsed; overperformance does not lead to a higher share allocation. If the targets are only partly achieved, the share allocation is correspondingly reduced in accordance with the weighting of the performance target concerned or the RSUs expire worthless. For reasons of trade secrecy, the precise target values cannot be disclosed in advance; after expiry of the equity compensation plan, the number of RSUs available for exercise according to the effective performance and, respectively, the corresponding degree of target achievement and the corresponding share allocation (vesting) will be disclosed. The corresponding information on the vesting of the various equity compensation plans and the shares allocated, is set out in Note 23 of the Consolidated Financial Statements on pages 257 and 258.
For the period from the 2017 ordinary General Meeting to the 2018 ordinary General Meeting, the General Meeting of Shareholders of 25 April 2017 approved a maximum amount of fixed compensation for the Board of Directors totalling CHF 3 200 000. Effectively the fixed compensation for the Board of Directors during the period in question (2017 General Meeting to 2018 General Meeting) was CHF 3 126 121 in total.
For the period from the 2018 ordinary General Meeting to the 2019 ordinary General Meeting, the General Meeting of Shareholders of 24 April 2018 approved a maximum amount of fixed compensation for the Board of Directors totalling CHF 3 200 000. In 2018, the Board of Directors determined the compensation for the members of the Board of Directors unchanged at the same level as in the previous year.
Rolf Dörig, Chairman of the Board of Directors 840 000 1 001 360 514 1 200 514 3 The allocation of shares was effected on 18.06.2018 and 17.12.2018 at the stock exchange closing price of CHF 344.00 and CHF 377.90 respectively. Taking into account the blocking period of three years, the economic value, which is equal to the tax value, is CHF 288.8293 and CHF 317.2924 respectively. 4 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV/FAK amounted to a total of
Rolf Dörig, Chairman of the Board of Directors 840 000 1 074 360 494 1 200 494 3 The allocation of shares was effected on 16.06.2017 and 15.12.2017 at the stock exchange closing price of CHF 330.10 and CHF 341.40 respectively. Taking into account the blocking period of three years, the economic value, which is equal to the tax value, is CHF 277.1586 and CHF 286.6463 respectively. 4 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV/FAK amounted to a total of
The short-term and long-term components of the variable compensation are allocated in principle in equal amounts (1:1 ratio), whereby the deferred compensation components (RSU plan and deferred compensation in cash) are considered as a whole. The Board of Directors may determine a different ratio for the Corporate Executive Board as a whole or for the Chairman or individual members of the Corporate Executive Board (discretionary decision).
At Corporate Executive Board level, variable compensation depends 60% directly on the company’s success. The Key Performance Indicators (KPIs) used to assess company success include, as mentioned above, key figures relating to annual profit, payout capacity, cost savings, the risk and fee result, new business profitability, return on equity and solvency (Swiss Solvency Test, SST).
Swiss Life was able to significantly exceed its medium-term targets in the year under review, as in the previous year, in a persistently very demanding economic environment: net profit rose by 7% to CHF 1080 million. Likewise, insurance reserves were again significantly strengthened in favour of policyholders. The cash remittance to Swiss Life Holding was CHF 696 million. This resulted in strengthening of Swiss Life Holding’s dividend payout capacity by a cumulative total of CHF 1.9 billion (2018 ambition: CHF 1.5 billion) over the three years of the “Swiss Life 2018” Group-wide programme. The value of new business increased by 10% from CHF 351 million to CHF 386 million in the year under review. The cumulative total value of new business over three years was CHF 1033 million, well above the ambition of CHF 750 million. The new business margin rose during the 2018 financial year from an already high 2.5% to 2.6%. The solvency target was also achieved from a qualitative and quantitative perspective; based on the new regulatory solvency standard model, Swiss Life estimates its SST ratio at above 180% as of 1 January 2019. The fee result of CHF 488 million (2018 ambition: CHF 400 to 450 million) and the risk result of CHF 410 million (2018 ambition: CHF 350 to 400 million) were above target as well. The cost targets were achieved and the adjusted return on equity, at 9.1%, was within the target range of 8 to 10%.
For the 2018 financial year, the General Meeting of Shareholders of 25 April 2017, as mentioned at the start of the present Compensation Report, had approved a maximum total amount of the fixed compensation and the long-term variable compensation component (equity compensation plan) for the Corporate Executive Board of CHF 13 800 000, based on the Articles of Association applicable on 1 January 2015. In line with this, the Board of Directors accordingly set a fixed compensation at the beginning of 2018 (basic salary incl. ancillary costs and occupational provisions) of CHF 9 124 507 in total for the members of the Corporate Executive Board. It also granted future subscription rights worth CHF 3 828 981, as long-term variable compensation under the 2018 RSU plan, to the members of the Corporate Executive Board, on 1 March 2018, for the extraordinarily good performance in 2017, when Swiss Life again increased its operational effectiveness and achieved profitable growth. The subscription rights allocated under the 2018 RSU plan entitle the holder to receive Swiss Life Holding shares following a three-year vesting period, provided the requirements are satisfied at that point. The approved budget for the 2018 financial year was applied to the sum of CHF 12 953 488, in view of the excellent business development.
At the General Meeting of Shareholders of 30 April 2019, the Board of Directors will again submit for approval the maximum amount of the fixed compensation and long-term variable compensation component (equity compensation plan) for the Corporate Executive Board for the 2020 financial year.
In addition to Group CEO Patrick Frost, six persons were members of the Corporate Executive Board during the 2018 reporting period, as reported in the compensation table below.
The long-term variable compensation component in the form of the equity compensation plan (RSU plan 2018) is also reported in the compensation table for the 2018 financial year, which serves as the basis for the amount of the allocation and the corresponding number of allocated RSUs (accrual method).
Expenditure for occupational provisions for members of the Corporate Executive Board in the period under review amounted to CHF 1 717 456. This includes the ordinary annual employer contribution of CHF 273 146 for the occupational benefits of Patrick Frost, Group CEO.
Other members of Corporate Executive Board 1,2 5 669 594 2 975 000 207 895 8 852 489 0 0 8 852 489 1 6 individuals were taken into account in the period under review.
6 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV/FAK amounted to a total of CHF 896 478 in the year under review.
6 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV/FAK amounted to a total of CHF 965 412 in the year under review.
In accordance with the Articles of Association, the Company may grant members of the Board of Directors and the Corporate Executive Board secured loans and credits at usual market terms for up to CHF 10 million each and unsecured loans and credit of up to CHF 0.5 million each.
In the form of an overview, the following additional information is provided on the Swiss Life Group compensation systems for the 2018 financial year: In CHF (unless otherwise indicated)
Total outstanding deferred compensation 12 215 984 of which cash payment 700 000 of which shares 0 of which options 0 of which others (Restricted Share Units, RSU) 11 515 984
Charges and credits in the financial year from compensation for previous financial years 3 –720 362
Board of Directors, Executive Board and persons whose activities have a significant influence on the risk profile of the company:
3 In particular decrease in expenses affecting net income for variable compensation in Germany for the 2017 financial year. 4 Compensation which is agreed on the conclusion of an employment agreement to be paid or be due once. Also deemed to constitute a sign-on payment shall be compensation for benefits foregone vis-à-vis a previous employer. 5 Compensation which is agreed in connection with the termination of an employment relationship.
We have audited the compensation report of Swiss Life Holding Ltd for the year ended 31 December 2018. The audit was limited to the information contained on pages 61 and 65 to 67 of the compensation report.
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.
The role of lead auditor rotates in compliance with the term of office regulations stipulated by the Swiss Code of Obligations, the independency guidelines set forth by the Swiss Institute of Certified Accountants and Tax Consultants, and internal guidelines at PwC.
PwC invoiced additional fees of approximately CHF 1.0 million in 2018 (prior year CHF 0.9 million ), for services in the areas of risk management, fiscal and legal consulting and other advisory services. All services were performed in compliance with the relevant independency regulations set out in the Swiss Code of Obligations, the Audit Supervision Act and FINMA circular 2013/3, “Auditing”.
The Communications and Investor Relations areas provide up-to-date reports to private and institutional investors, financial analysts, journalists and the public.
On 29 November 2018, furthermore, Swiss Life presented its targets for 2021 as part of its Investor Day. The relevant information and presentations can be accessed on the internet at www.swisslife.com, “Investors & Shareholders” area, “Investor Days” section (www.swisslife.com/ investordays).
Risk management is a key component of Swiss Life’s management process. The respective committees of the Corporate Executive Board and the Board of Directors continually monitor and take decisions in the area of risk management; these are then incorporated into the annual planning process. On the one hand, they comprise qualitative assessments of strategic risks, as well as the evaluation of operational risks and the internal control system (ICS). On the other hand, they also cover quantitative elements, such as risk appetite at Group level, risk budgeting for the insurance units and Asset Liability Management’s investment strategy. The Board of Directors uses framework limits based on solvency ratios and the economic capitalisation to determine Swiss Life’s risk appetite. Limits for the financial risks taken by the individual business units are based on local regulatory provisions and risk appetite at Group level, and are used to determine their investment objectives.
Swiss Life depends on its information systems and communication technologies for the attainment of the operational goals derived from its business strategy. Ensuring availability, confidentiality and integrity of systems, data and information is an integral part of its internal control system.
Information security is closely related to locally applicable data protection provisions, such as the Swiss Federal Act on Data Protection (DSG) and the European Union’s General Data Protection Regulation (GDPR). More information on data protection is provided in the Compliance chapter of the Corporate Responsibility Report.
Monitoring solvency under the SST is conducted continuously; calibration is effected based on the full SST calculations as at the beginning of each calendar year and as at mid-year.
Economic assessment Swiss Life uses an integrated approach to risk and capital management. The economic capital of a life insurance company for its shareholders comprises its economic net worth and the present value of future profits. The economic risk capital is determined bottom-up for each large business unit and takes into account market, credit and insurance risks. These risks are calculated on the basis of loss distributions using a specified risk measure. The overall capital requirement is obtained by taking into consideration respective diversification effects.
Owing to improved diversification of profit sources and a capital position stabilised at a sound level, Standard & Poor’s raised Swiss Life’s outlook in April 2018 from “stable” to “positive”, while maintaining its “A” rating.
Corporate Responsibility Swiss Life produces the Corporate Responsibility Report to show how it puts corporate responsibility into practice. Corporate responsibility applies to business operations, the role of Swiss Life as an employer and its responsibility to society and the environment. The reporting corresponds to the standards of the Global Reporting Initiative (GRI).
– In past years we have strengthened our role as employer with our “Actively shaping your career” initiative, as well as arming ourselves for present and future challenges, and have thus established new standards. During the past year, we also continued to pursue our successful change process with an eye to further strengthening our market position as a responsible and attractive employer.
In the pursuit of its core business, financial provision and consulting, Swiss Life contributes directly to society. Swiss Life aims to act responsibly in its everyday business and as an employer as well as in relation to society and the environment.
All topics associated with corporate responsibility are summarised in the corporate responsibility framework, which was reworked in 2018 and is now valid for the entire Swiss Life Group. The purpose is the company’s core, while the individual subject areas reflect the focus topics.
– Head Group Human Resources – Head of Human Resources Switzerland – Head Group Communications & Strategic Marketing
Responsibilities The STC CR is the central steering committee for corporate responsibility at Swiss Life in Switzerland. It develops the CR strategy, approves corresponding measures and initiatives and ratifies objectives, resources and budgets.
Overall responsibility for the Corporate Responsibility committee in France lies with the CFO. Swiss Life France has been publishing its own annual Corporate Responsibility Report (Rapport RSE) since 2014. This report will also comply with the stipulations of the European CSR Directive.
A committee was formed in Germany in 2018 to advance and coordinate corporate responsibility measures in various areas of the company. The corporate responsibility work of Swiss Life Germany focuses, among other things, on foundation activities. The Stiftung für Chancenreichtum und Zukunft (Foundation for opportunities and the future), founded at the end of 2016, advocates greater educational equity and equal opportunity in Germany.
The annual reporting on corporate responsibility is intended to create transparency and strengthen communication with the stakeholder groups. Swiss Life’s stakeholders include, in addition to its employees, customers and investors, legislators and representatives of the media, politics and associations, all of whom are affected either directly or indirectly by Swiss Life’s activities. Swiss Life is in regular dialogue with all of its target groups, which ensures that it is aware of their requirements and expectations and is able to react to challenges or changes (GRI 102-40, 102-42, 102-43, 102-44).
For more information on dialogue with our stakeholders, see: www.swisslife.com/en/stakeholdercommunication www.swisslife.com/en/stakeholdercommunication
At the end of 2018 Swiss Life was a member at Group level of all sorts of organisations and networks in the area of sustainability, as well as co-signatory of initiatives. These include the following: • Principles for Responsible Investment (PRI): unpri.org, since 2018 • UN Global Compact (UNGC): unglobalcompact.org, since 2018 • Global Real Estate Sustainability Benchmark (GRESB): gresb.com, since 2018 • CDP (formerly Carbon Disclosure Project): cdp.net, since 2011 • Task Force on Climate-related Financial Disclosure (TCFD): fsb-tcfd.org, since 2018 • Institutional Investors Group on Climate Change (IIGCC): iigcc.org, since 2018 • Forum Nachhaltige Geldanlagen (Sustainable Investment Forum): forum-ng.org, since 2018 • European Sustainable and Responsible Investment Forum (Eurosif): eurosif.org, since 2018 • International Corporate Governance Network (ICGN): icgn.org, since 2018
At its Swiss, French and German locations, Swiss Life was mainly active in the following organisations: • Swiss Climate Foundation: klimastiftung.ch • Energy Model Zurich: energiemodell-zuerich.ch • Observatoire de l’immobilier durable (Green Building Observatory): o-immobilierdurable.fr • Plan Bâtiment Durable (Sustainable Building Plan): planbatimentdurable.fr • Netzwerk der Klima-Allianz der Stadt Hannover (Network of the Climate Alliance of the
Swiss Life’s Corporate Responsibility Report meets the requirements of the Global Reporting Initiative (GRI), a framework for transparent sustainability reporting. The report on the 2018 financial year comprises the Switzerland, France, Germany, International and Asset Managers segments. This report was prepared in accordance with the GRI standards in conformity with the “Core” option. The GRI aims on the one hand to provide support to companies, governments and NGOs in focusing on those areas of interest to companies and their stakeholders, while the standardised format of the reports, based on key figures, also contributes to the comparability and transparency of sustainability reporting.
Do you have any questions or suggestions concerning corporate responsibility at Swiss Life? Write to us at corporate.responsibility@swisslife.ch mailto:corporate.responsibility@swisslife.ch
The contents of the materiality matrix were established as part of a multi-level materiality process involving internal and external stakeholders. Based on qualitative and quantitative interviews with the Swiss Life Corporate Executive Board, a project group comprising specialists from Investor Relations, Asset Managers, Human Resources and Corporate Communication worked on selected key themes for Swiss Life, discussed them with selected stakeholders and refined them in structured interviews. Finally, the completed materiality matrix was approved and ratified by the Corporate Executive Board (GRI 102-46). The matrix is reviewed annually and amended when necessary. There were no amendments made in 2018.
Responsibility in business Customer centricity Swiss Life places customers at the centre of its activities. Customer satisfaction is regularly measured and the results of customer feedback are incorporated into the development of products and services.
Sustainable profitability Sustainable economic performance is a fundamental requirement for the success of Swiss Life’s corporate management. In its strategic orientation, Swiss Life is closely guided by the longterm guarantee of profitability and the guidance of capital efficiency.
Demographic change The consequences of demographic change affect people in many ways. Swiss Life wants to offer its customers solutions that will allow them to lead a self-determined life in all phases of their lives. In addition, Swiss Life contributes to the public debate on longevity and securing retirement provisions. At the same time, Swiss Life creates a working environment in which its employees and management act responsibly and help to shape their career and further development in every phase of life, thus laying the groundwork for a longer professional life.
Responsibility for employees Employee commitment and development The Swiss Life corporate culture is based on mutual respect and trustworthy cooperation. Regular feedback and professional development interviews and the recognition and appreciation of performance are important prerequisites for corporate success.
Responsible employer Swiss Life provides employees of all generations with development prospects and attractive and fair working conditions.
The social and economic consequences of the fact that we are living longer are insufficiently accounted for in almost all areas of life. Swiss Life is committed to raising societal awareness of this topic and actively addressing the attendant challenges. Swiss Life supports its customers in preparing ahead of time so they can lead a self-determined life. Swiss Life offers its employees flexible working models and a wide range of health and prevention services.
See also “Social and Cultural Engagement” (pages 111–115), “Responsibility for Employees” (pages 116–129) and “Products and Services” (pages 95–96).
Swiss Life has several facilities for the generation of renewable energy among the investments in its portfolio. These facilities are widely distributed across the world. For instance, Swiss Life invests in solar power plants in Italy, Spain, Canada, Chile and Japan (c. 100 MW) and wind power stations in the UK and US (c. 235 MW), allowing Swiss Life to contribute to supplying around 100 000 households with renewable electricity.
The United Nations’ 17 Sustainable Development Goals (SDG) define social, economic and environmental milestones to be achieved worldwide by 2030. Swiss Life is transparent about which of these goals it is already making a contribution to.
Swiss Life promotes projects from the worlds of research and science. Among other things, in the Swiss domestic market it lends its support to Technopark Zürich, which brings together actors from the realms of business, technology and science. In addition, Swiss Life is Member of the Foundation Board and of the Business Council of Swiss Innovation Park and supports the research and innovation platform “NEST”.
As a builder and in its own operations, Swiss Life supports the sparing use of resources. This is also true of its business premises. Swiss Life publishes current developments in greenhouse gas emissions and its use of paper and energy, its production of waste, and the other indicators on operational ecology on an annual basis. Furthermore, Swiss Life uses Group-wide targets to ensure that the company is able to continue developing in the realm of operational ecology.
Customers are asked about their experience, satisfaction and willingness to recommend Swiss Life directly following an interaction with the company at selected contact points. Anyone who gives a negative response is contacted within 48 hours. This allows Swiss Life to ensure it has understood the reasons for a negative review and to offer the customer a solution. Customer satisfaction is surveyed in close collaboration with an independent market research institute.
Swiss Life has continuously expanded its Direct Customer Feedback programme in recent years. Since launching it in 2014, Swiss Life has received and analysed around 150 000 customer communications.
In addition, Swiss Life surveys the perception of customer orientation in-house through a biannual online questionnaire. The Employees’ Customer Centricity Index (ECCI) summarises the results. The Index rose in the last assessment, in 2017, by three index points over the previous year, to 81. Internal perception of customer centricity improved in 2017 in relation to all areas surveyed.
Swiss Life sets great store by transparent and accessible information about product and service offerings. Swiss Life supports customer-oriented advice by providing clear and comprehensive documentation. Thus there are supporting video sequences on the various insurance and provisions topics available on the local internet pages or customer portals, along with publications for download.
Swiss Life would like to help people acquire financial literacy so they can make better decisions. Trust in one’s own finances and understanding how they work are basic conditions for a selfdetermined life and financial confidence, which is why Swiss Life has supported the Swiss financial literacy platform fintool.ch for years now. The internet start-up uses short videos to get to the heart of complex economic, financial or political issues. In Germany, by way of the Swiss Life Stiftung für Chancenreichtum und Zukunft (Foundation for opportunities and the future), Swiss Life also advocates projects that promote the growth of financial literacy.
The Code of Conduct contains behavioural guidelines on the following themes: The Code of Conduct valid throughout the Group was revised in 2018 and published on 1 January 2019. It is available for consultation at www.swisslife.com/en/coc.
Swiss Life has established processes to ensure adequate identification, management and control of compliance and data protection risks. The duties, responsibilities and competencies in terms of compliance are also included in the directives system.
Data are secured and protected with the appropriate organisational and technical protection measures and are a part of risk management. More information on the subject of risk management can be found in the Annual Report in the “Risk Management” chapter.
Compliance monitors and assesses the legal and regulatory environment, taking account of local legislation. The aim is not to infringe any legal and/or regulatory requirements, and to prevent all forms of corruption and bribery. Swiss Life also considers it very important to comply with sanctions and embargos. Regular risk assessments as well as permanent and comprehensive compliance reporting to the top echelons provide support for the implementation of all requisite measures at Group level and within the business units. The compliance framework is subject to periodic review and is reworked and adapted to new prerequisites as necessary.
The economic performance and sustainable profitability of Swiss Life are fundamental requirements for the long-term success of its corporate management. The consistent implementation of its plans has allowed Swiss Life to successfully complete its last three Group-wide programmes and to continuously develop its business model in a difficult political, social and economic environment.
Swiss Life’s operations are oriented towards the long term. We must be able to keep promises we make to our customers for decades. That is why long-term investing plays a central role in the life insurance business. Swiss Life has crafted its investment strategy to ensure that the interest margin remains positive even when interest rates stay low for more than three decades. In addition, Swiss Life has continuously developed its business model in recent years. With its successful enhancement of asset management for third parties, owned IFA channels, modern products and new initiatives, Swiss Life has over the past years significantly increased the contribution made to its result by so-called fee business, and thus reduced its dependency on investment results. In addition to the focus on profitability, capital efficiency remains a relevant control parameter in new business.
As for investments in securities – including equities or corporate and government bonds – Swiss Life depends on analyses prepared by an independent international ESG research and assessment provider. This affords Swiss Life access to ESG information from over 13 000 issuers around the world, as well as early detection of risks arising from social controversy, involving such things as violations of labour law, faulty corporate governance and signs of corruption or environmental risks in relation to climate change.
As an asset manager, Swiss Life also represents its customers’ interests in the exercise of voting rights, to which end it also follows ESG criteria in its voting guidelines and subjects votes on sustainability issues to close scrutiny.
Swiss Life is one of Europe’s leading real estate investors and has the biggest private real estate portfolio in Switzerland. The long-term conservation, appreciation and protection of sustainable earnings is of central significance to Swiss Life. All decisions are thus oriented to a long-term property life cycle.
Swiss Life has tested the energy efficiency of its directly held real estate portfolio in Switzerland and aims at its continuous improvement. For the latest available accounting period, 2016/2017, the energy consumption (excl. tenant electricity) of real estate holdings amounts to 103.6 kWh/m2 energy reference area (ERA), while their CO2 emissions are 19.9 kg/m2 ERA. The proportion of renewable energy is around 7%. Thanks to strategic operations optimisation measures, such as the use of more efficient building services facilities and repairs, energy consumption and CO2 emissions are to be reduced by 2023 by some 8%. In addition, with a targeted reduction of fossil fuels (gas: 54% and oil: 29%) in favour of renewable energy sources (photovoltaic, geothermal, use of river and seawater etc.), the aim is a reduction of CO2 emissions.
The growing scarcity of available building land makes increasing density a sensible strategy from an economic and an ecological standpoint, with an eye to supplying supplementary requirements for land and realising portfolio growth. An internal analysis of around 800 properties in Swiss Life’s Swiss real estate portfolio has shown that there is sustainable consolidation potential in 15% of its real estate holdings. Some 50 properties have a reserve of more than 1000 m2 of main surface area, while the remaining properties have a reserve of 300 to 1000 m2.
An example of successful consolidation is the replacement new construction at Baslerstrasse 71 in Zurich, where an aging commercial construction of 4200 m2 from 1960 is being replaced with a new residential high-rise comprising 161 apartments and commercial space of 1100 m2. By 2021, the property will comprise over 14 000 m2 of new residential and commercial space.
A calculation of the carbon footprint of all properties is planned for 2019, alongside the launch of a reporting portal to enable a uniform and comprehensive view of the sustainability performance of individual funds and mandates.
32-storey office building in Marseille in conformity with environmental certifications such as HQE Excellent and Leed Gold © AJN
In Germany the Corpus Sireo subsidiary enjoys comprehensive expertise in sustainable property management and project development. Numerous energy-efficient new building projects have been realised, both in apartment construction and in the commercial segment. One example is the acquisition of a new construction project with LEED Platinum pre-certification in Augsburg. The property is distinguished by the following sustainability features: open-space design, a rooftop solar plant and concrete core activation to optimise heating costs. Lighting is entirely LED, while six electric filling stations are available as a contribution to ecological mobility.
The LEED Platinum pre-certified office building in Augsburg is part of a Corpus Sireo real estate fund
As a leading European provider of comprehensive life and pensions and financial solutions, the Swiss Life Group places strong emphasis on complying with environmental and social standards in its own operations. Swiss Life also demands compliance with these high sustainability standards from its external service providers and suppliers, which extends to their responsibility towards their employees, society and the environment.
Swiss Life mainly accesses products and services from the following categories: – Professional services (advisory services for example) – Marketing and public relations – Human Resources – IT services and telecoms – IT software and IT hardware – Facility management services (e.g. security personnel, building maintenance, cleaning) and general services (refreshments, electricity, gas etc.) – Travel and events
G en er al re q u ir em en ts
C a se s p ec ifi c re q u ir em en ts
Swiss Life Germany stipulates, for example, in its contracts with partners that they must guarantee all health and safety regulations and payment of the minimum annual salary. Moreover, Swiss Life Germany checks the sustainability and recyclability of purchased products.
✔ Satisfaction of Swiss Life’s general expectations regarding the person, society and the environment
All companies in all locations that wish to work with Swiss Life ensure compliance with the standard statutory provisions. Evaluation of key suppliers and service providers is integrated in the Swiss Life Group risk management framework.
In France, Swiss Life commits to monitoring its strategic suppliers’ environmental, social and ethical risks based on the EcoVadis methodology, which is derived from a framework of 21 corporate social responsibility criteria. The methodology is oriented towards leading and recognised standards, such as the Global Reporting Initiative (GRI), “UN Global Compact” and ISO 26000, and is supervised by an international scientific committee.
Swiss Life contractually asserts its right to conduct audits of suppliers and service providers. That includes requesting, for example, confirmation of ISO certification, the validity of such certification and analysis of the underlying reports.
At its Swiss location, Swiss Life also gives priority to products and services from companies that can prove they hold a certified environmental management system (ISO 14001 or EMAS) and a general quality certification (e.g. ISO 9001 or ISAE 3402).
When issuing tenders, Swiss Life France asks standard questions on any available rating results in the area of corporate responsibility and ISO certification and decides on a case-by-case basis whether certification is required as a basis for cooperation.
But Swiss Life’s economic contribution is much more than that. Swiss Life covers risks and, with its products and services, offers people the chance to focus on their strengths and skills and look to the future with confidence. At the same time, as a long-term investor, Swiss Life contributes to the stability of the financial centre. And in its role as one of Europe’s leading institutional real estate investors and owner of Switzerland’s largest private real estate portfolio, Swiss Life invests several hundred million francs every year in the renewal of its properties, and is thus also a key principal on the Swiss construction scene. By investing in its properties and with its active property management approach, Swiss Life shapes the urban character of Switzerland, creates residential and office space and makes the country an attractive place to live. As a tax payer, Swiss Life contributes to the economy and offers many people jobs and training opportunities.
Swiss Life’s operational environment is significantly defined by political and regulatory conditions. For example, legal principles and their practical application in the form of ordinances have a direct effect on product design, processes and the manner of reporting to shareholders, supervisory authorities and the public.
Public Affairs is responsible for monitoring matters of political significance, guiding and coordinating Swiss Life’s positions on such matters both internally and externally, and strategically developing and expanding a network among the involved parties. The Political Communications Steering Committee is the relevant strategic body. Its members are the Group CEO and the Group CFO, the CEOs of divisions headquartered in Switzerland, General Counsel, the Chief Risk Officer and the head of Group Communications. The Head of Public Affairs manages this STC and provides operational leadership. The Steering Committee, chaired by the Group CEO, meets four times a year and defines its political communication priorities.
Swiss Life fosters contacts with representatives from the political, administrative and business communities as well as supervisory authorities. In its direct exchanges with political groups, Swiss Life aims to better understand their opinions, expectations and perceptions while at the same time gauging how the enactment or amendment of legal principles could affect its business.
In Switzerland, parties of the political centre-right and individual politicians receive financial support mainly for their election campaigns. The total amount of support provided during the year under review was around CHF 500 000. No (significant) support was provided to parties or politicians in the markets outside Switzerland. Dealings with politicians are guided by the rules of the Swiss Life Group Code of Conduct, as specified in the internal directive “Code of Conduct ”. These rules decree, for example, that donations in the home market of Switzerland to political parties are to be free of any obligation.
Swiss Life is committed to promoting a competitive business location and appropriate regulation density in all its markets. That includes adequate capital requirements: excessive capital requirements are forcing Swiss life insurers to carry significantly higher operational capital costs than their foreign competitors.
Renato Piffaretti, Head of Real Estate Switzerland at Swiss Life Asset Managers, gave his views on regulation in the residential market at the annual event for insurance professionals with public and political mandates.
Swiss Life supports projects and institutions in the fields of culture, science, education and the environment and research, and operates seven of its own foundations. In all social activities of the Swiss Life Group, the focus is on projects that promote self-determination and confidence.
In 2005, Swiss Life founded the “Perspectives” Foundation, which supports charitable initiatives in the fields of health, science, education, culture and sport and spends CHF 1.3 to 1.5 million every year on sociable-charitable projects in Switzerland. In 2018, 142 projects were supported with around CHF 1.4 million. All funds are made available in their entirety by the founder, Swiss Life.
Swiss Life Asset Managers has sponsored the “Swiss Life Thesis Award” for the past five years. The Award, presented in cooperation with the Institute for Financial Services Zug (IFZ), part of Lucerne University of Applied Sciences and Arts, and the business paper Finanz und Wirtschaft, provides a platform for innovative and practice-oriented research work at Swiss institutes of higher education. The best theses in the fields of financial investments, financial markets, financial services companies, financial instruments and corporate finance are singled out for awards each year. The Swiss Life Thesis Award comes to CHF 20 000 in total.
In France, the company gives support to the Fondation Swiss Life, which supports among other groups France Alzheimer, an association that organises museum and concert visits for Alzheimer patients and their carers. Furthermore, thanks to a sizeable solidarity network within the company, it also finances cancer research carried out by the Institut Curie.
Alzheimer patients visit an exhibition at the Palais de Tokyo in Paris.
The Fondation Swiss Life supports culture and artistic work as well, with the “Prix Swiss Life à 4 mains” (Swiss Life Prize for 4 Hands), which brings together a photographer and a musician, or with concerts by young artists in the various regions of France. The Foundation also supports projects and associations in which Swiss Life employees are actively involved. The Fondation Swiss Life donated a total of around EUR 291 000 to all initiatives during 2018.
With the Swiss Life Stiftung für Chancenreichtum und Zukunft (Foundation for opportunities and the future), Swiss Life Germany does its part for educational equity and equal opportunity in Germany. It works towards having as many people as possible – regardless of their social background – remain curious, acquire knowledge and, as a result, lead a self-determined life. The Foundation is mainly financed with donations from employees and financial consultants. Swiss Life Germany covers staff and administrative costs, thus allowing 100% of donation revenues to go towards pure project work. In 2018, in the second year of its existence, the Foundation was already able to donate EUR 120 500 to various initiatives.
In Luxembourg, employees of Swiss Life International initiated “Rock Against Cancer” five years ago, a benefit concert sponsored by Swiss Life Global Solutions. This annual event raises money for two foundations: Fondation Cancer Luxembourg and Fondation Kriibskrank Kanner (children with cancer). Both foundations are committed to fighting cancer. Although they were not founded by Swiss Life International, the foundations have been supported with donations for years.
The success of Swiss Life is based on the skills and performance of its staff. Swiss Life wants to find the most suitable employees on the labour market, get them interested in working for the company, retain them and support their further development.
The following behavioural principles are valid for all Swiss Life Group employees as of January 2019: – I think consistently from the customer’s perspective. – I collaborate effectively in the best interests of the company. – I act in an efficient and goal-oriented way. – I work in a committed and agile manner. – I build trust.
The following principles are valid for management as of January 2019: – I think and act in an exemplary manner and in the best interests of the company. – I create meaning and understanding within the context of our purpose. – I trust my employees.
The Swiss Life Group performs periodic employee surveys in cooperation with an independent research institute.1 The last survey was carried out in 2017 and enjoyed a participation rate of 87% (+1 percentage point compared to the 2015 survey). At 86%, employee engagement at the Swiss Life Group is above average (+1 percentage point compared to the 2015 survey), 14 percentage points over the “Financial industry in Europe” external benchmark.
Supplementary to the classic training options, learning content is also offered on a digital platform to allow management and employees to add to their training without regard to time or place. The platform permits quick access to standardised management processes, skills-oriented training and other topics associated with social and methodological skills. Swiss Life enhances these offerings with customised training, advising and coaching.
Swiss Life provides targeted support to junior staff with potential. For example, employees displaying a high level of performance and potential are nominated each year for a talent programme. The initiative supports efforts to open up career paths within the company – in management, project management or specialist functions. This lays the groundwork for key positions to be filled with budding and qualified young managers from within the company.
Employees with management functions by gender Total 1 568 as at 31.12.2018
Mutual respect is the precondition for a work environment based on trust, in which employees are comfortable. Personal well-being, which includes the aspects of diversity and inclusion, worklife balance, mutual respect, workload and workplace atmosphere, was also a topic of the last Employee Survey, carried out in 2017. 83% of employees gave these factors an overall positive rating. This value is 11 percentage points over the “Financial industry in Europe” external benchmark.
The fostering of both female and male employees as part of diversity activities is thus reflected not only in the careers of managers, but also in those of specialists.
The Swiss Life Group aims to ensure and maintain a safe and healthy working environment for all employees. The nature of the work it performs as a service provider means that general health and safety risks are relatively low in a service provider like Swiss Life. The framework conditions for health and security at the workplace are provided by the local regulatory measures governing each Swiss Life company. Furthermore, all companies implement measures and initiatives aimed at preserving employee health.
Security at the workplace (fittings, work stations, instructions) is continuously monitored and adapted to changing requirements.
– The regulations of the staff committee of Swiss Life Ltd in Switzerland were specified in certain particulars and amended as needed, at the behest of the staff committee. They enter into effect on 1 January 2019.
– The staff committee initiated the revision and expansion of the guideline for the protection of non-smokers (entry into force on 1 January 2019), proposed building measures to better define smoking areas and supported raising awareness of the issue among employees.
Customer Services – Addendum to the agreement on trade union rights – Agreement on the reimbursement of healthcare costs – Agreement on distribution of profits – Agreement on the functioning of employee representation bodies – Agreement on trade union rights – Agreement on the recognition of an economic and social entity (UES) – Pre-electoral agreement
Swiss Life Real Estate Management SA – Agreement on distribution of profits – Confirmation of the staff committee
Germany Swiss Life Germany In spring 2018, cyclical elections were held in Germany for the various Works Council committees. – In addition to various adjustments to the works agreements due to the GDPR, the Works
– As part of the principles of remuneration, the Works Council and the employer renegotiated salary adjustments. The result of the negotiations reflects both the cost factor and the salary adjustment due to cost of living.
– The VertriebsWerk programme in intermediary distribution takes strategic challenges of the future into account. It was necessary to conclude a reconciliation of interests and a redundancy agreement in order to implement the measures. The parties carried out negotiations and implementation constructively and with an eye to the relevant requirements.
Corpus Sireo Works agreements 2018: – Regulation concerning working hours at Corpus Sireo – Dealing with working time regulations from old contracts prior to 1 July 2017 – Mobile Office – Supplementary framework conditions for employment relationships at Corpus Sireo – Voluntary social security benefits – Spendit Card – MITE project time recording – Deployment and use of “Competence Booster” at Corpus Sireo – Company framework agreement IT
– Ensuring appropriate investment in the retraining of insurance workers and adapting skills to future workplace demands
Number of Works Council members broken down by full-time and part-time
Swiss Life Real Estate Management SA Eleven members since 27 April 2018, of whom none has dispensation.
Swiss Life set out Group-wide goals for operational ecology in 2018. This measure is intended to shore up Swiss Life’s efforts to make an active contribution to climate protection and to the reduction of CO2 contamination. At the same time, the company also wants to further increase employee awareness of environmental and climate protection and has introduced measures to enhance operational ecology and environmental management in its own activities.
Greenhouse gas Swiss Life wants to reduce its greenhouse gas emissions by 10% by 2021.
France Theme days are held regularly in France, with an eye to sensitising employees to environmental protection. In 2018, employees were urged to take part in campaigns focusing on waste sorting.
The greatest proportion of greenhouse gas emissions in France is still from business travel. An Employee Survey was carried out in 2018 on the topic, whose findings have been evaluated by working groups and transformed into proposed measures. Thus for instance the working groups have proposed in future setting greater store by video conferences and “Mobile Office” and suggested enlarging the proportion of ecologically friendly vehicles in the company’s fleet. The measures proposed are being subjected to more detailed analysis in 2019 and implemented where possible.
Moreover, in November 2018, Swiss Life France switched to 100% electricity from renewable energy sources in all its business premises (previous year: 0%).
Germany In Germany, the two main Swiss Life branch offices, in Garching near Munich and in Hanover, have repeatedly been awarded the ECOPROFIT seal for their outstanding commitment to corporate environmental protection. The seal rewards efforts to reduce CO2 emissions and save resources. Swiss Life uses green electricity at both branches.
Swiss Life International At Swiss Life International, with offices in Liechtenstein, Luxembourg, the UK, Austria, the Czech Republic and Singapore, all areas work in modern, energy-efficient office buildings. Optimal workspace occupancy and digitalisation measures help to consistently reduce the company’s environmental impact. Employees are sensitised about keeping their paper consumption and generation of waste to a minimum. Furthermore, the number of parking spaces is limited to encourage staff to use public transport, and thus to help reduce CO2 emissions.
GRI 102-16 Values, principles, standards and norms of behaviour p. 87–89
GRI 102-45 Entities included in the consolidated financial statements p. 86
GRI 203-1 Infrastructure investments and services supported p. 90–91, p. 111–115
GRI 403-1 Workers representation in formal joint management-worker p. 126, p. 128–129 health and safety committees
GRI 403-2 Injuries, occupational diseases, lost days and work-related fatalities p. 125 Other key figures being established
GRI 403-4 Health and safety topics covered in formal agreements with p. 124 trade unions
GRI 404-3 Percentage of employees receiving regular performance and career p. 117 development reviews
GRI 406-1 Incidents of discrimination and corrective actions taken Key figures being established
GRI 416-1 Assessment of the health and safety impacts of product p. 95–96 and service categories
GRI 416-2 Incidents of non-compliance concerning the health and safety p. 99 impacts of products and services
GRI 419-1 Non-compliance with laws and regulations in the social and economic area p. 99
Total energy consumption (in 1000 MWh) 49.50 47.82 49.08 1 52.28 AR, p. 131
Renewable energy used (in MWh) 15.89 17.87 13.91 1 15.63 AR, p. 131
Total water use (in 1000 m3) 100.94 84.36 73.68 1 79.62 AR, p. 131
Share of paper with FSC label 66% 63% 60% 1 54% AR, p. 131
Climate change listed as a business risk factor yes yes yes yes AR, p. 86, p. 100–104, p. 130–133
Participation CDP (formerly Carbon Disclosure Project) yes yes yes yes AR, p. 130–133
1 Following the recording of environmental data in 2018, minor corrections were also made to the assessment of the 2016 data.
Health and safety policy is group-wide yes yes yes yes AR, p. 124–125
Workforce absences per segment yes yes yes yes AR, p. 125
Total number of employees 9298 8457 7801 7595 AR, p. 117
Company monitors employee satisfaction on a yes yes yes yes AR, p. 119
UN Global Compact Signatory yes no no no AR, p. 80, p. 84
Human rights policy yes yes yes yes AR, p. 80, p. 84, p. 86–87, p. 97–99, p. 100–101,
Costs spent for training per employee (in CHF) 2080 2082 2034 1749 AR, p. 120
Formal talent pipeline development strategy yes yes yes yes AR, p. 121 (forecasts hiring needs, actively develops new pools of talent)
Job-specific development training programs yes yes yes yes AR, p. 120–121
Sustainable supplier guidelines encompassing yes yes yes yes AR, p. 105–107 ESG areas that are publicly disclosed
Total Group-wide spending on foundations 2.6 2.5 1 AR, p. 111–115 (in CHF million)
Anti-bribery/pecuniary policy yes yes yes yes Anti-bribery policy: Code of Conduct
Board oversight of anti-corruption/ethics yes yes yes yes AR, p. 33 and Swiss Life Holding Ltd, Articles of Association, Article 11
Employee training on anti-corruption/ethics yes yes yes yes AR, p. 97–99
Principles for Responsible Investment (PRI) yes no no no AR, p. 80, p. 84
Aging population and demographic change listed yes yes yes yes AR, Notes of the Consolidated Financial Statements, as a business risk factor Note 5 “Risk management policies and procedures” and Note 5.5 “Insurance risk management objectives
Provide means for verifying and yes yes yes yes Applicable law and internal guidelines correcting individuals’ data
Prevents unauthorised access to personal data yes yes yes yes AR, p. 76–78, p. 97–99
Former CEO or equivalent on Board yes yes yes yes AR, p. 34
Number of women on Board 2 2 2 2 AR, p. 33
CEO total summary compensation (in CHF million) 4.3 3.4 3.8 3.6 AR, p. 65–66
Clawback policy yes yes yes yes AR, p. 57–59, p. 257–258
Risk management framework covers ESG risks yes yes yes yes AR, p. 100–101
Consolidated Financial Statements 142 Consolidated Statement of Income 143 Consolidated Statement of Comprehensive Income 144 Consolidated Balance Sheet 146 Consolidated Statement of Cash Flows 148 Consolidated Statement of Changes in Equity 149 Notes to the Consolidated Financial Statements 149 1 General Information 150 2 Summary of Significant Accounting Policies 150 2.1 Basis of preparation 150 2.2 Changes in accounting policies 151 2.3 Consolidation principles 152 2.4 Foreign currency translation and transactions 152 2.5 Cash and cash equivalents 154 2.7 Financial assets 155 2.8 Impairment of financial assets 157 2.9 Investment property 158 2.10 Insurance operations 163 2.11 Property and equipment 163 2.12 Inventory property 164 2.14 Investment management 164 2.15 Commission income and expense 165 2.16 Intangible assets 167 2.17 Impairment of non-financial assets 168 2.18 Income taxes 168 2.19 Assets held for sale and associated liabilities 168 2.20 Financial liabilities 170 2.21 Employee benefits 171 2.22 Provisions and contingent liabilities 171 2.23 Treasury shares 171 2.24 Earnings per share 171 2.26 Forthcoming changes in accounting policies 174 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies 178 4 Segment Information
Swiss Life – Annual Report 2018 185 5 Risk Management Policies and Procedures 186 5.1 Risk budgeting and limit setting 186 5.2 Asset and liability management (ALM) 188 5.3 Contracts for the account and risk of the Swiss Life Group’s customers 189 5.4 Financial risk management objectives and policies 205 5.5 Insurance risk management objectives and policies 210 5.6 Strategic risk management 210 5.7 Operational risk management and internal control system 211 5.8 Risk concentrations 211 5.9 Applied instruments for risk minimisation 211 5.10 Sensitivity analysis 213 6 Earnings per Share 214 7 Premiums, Policy Fees and Deposits Received 216 8 Details of Certain Items in the Consolidated Statement of Income 220 9 Derivatives and Hedge Accounting 225 10 Financial Assets at Fair Value through Profit or Loss 225 11 Financial Assets Available for Sale 226 12 Financial Assets Pledged as Collateral 227 13 Loans and Receivables 229 14 Investment Property 230 15 Investments in Associates 232 16 Property and Equipment 234 17 Intangible Assets including Intangible Insurance Assets 239 18 Other Assets and Liabilities 240 19 Investment and Unit-Linked Contracts 246 21 Other Financial Liabilities 247 22 Insurance Liabilities 249 23 Employee Benefits 259 24 Income Taxes 270 27 Capital Management 272 28 Acquisitions and Disposals of Subsidiaries 274 29 Related Party Transactions 276 30 Fair Value Measurements 288 31 Offsetting Financial Assets and Liabilities 289 32 Guarantees and Commitments 291 34 Events after the Reporting Period 292 35 Scope of Consolidation 298 Report of the Statutory Auditor
Share of profit or loss of associates 5, 15 0 3
Benefits and claims under investment contracts with discretionary participation –665 –867
Impairment of property and equipment and intangible assets 16, 17 –14 0
Benefits and claims paid, net of reinsurance –14 086 –13 413
financial instruments at fair value through profit or loss –1 169 –879
Disposals of subsidiaries, net of cash and cash equivalents 28 48 101
CASH AND CASH EQUIVALENTS AS AT END OF PERIOD 8 410 6 611
Cash and cash equivalents for the account and risk of the Swiss Life Group’s customers 2 817 2 830
TOTAL CASH AND CASH EQUIVALENTS AS AT END OF PERIOD 8 410 6 611
Distribution out of capital contribution reserve 1 – –460 – – – –460 – – –460
Issuance of hybrid equity – – – – –3 –3 425 – 422
Share buyback – – –87 – – –87 – – –87
Disposals of subsidiaries – – – – – – – –5 –5
Disposals of subsidiaries – – – – – – – –10 –10
Reduction in capital – – – – – – – –2 –2
In-kind contributions from non-controlling interests – – – – – – – 11 11
BALANCE AS AT END OF PERIOD 175 803 –26 3 374 11 169 15 495 – 88 15 583
For the 2017 financial year, a distribution was made to the shareholders of Swiss Life Holding Ltd (hereinafter referred to as “Swiss Life Holding”) from the capital contribution reserve instead of a dividend payment from profit. This amounted to CHF 460 million (CHF 13.50 per registered share) and was paid in the first half of 2018.
In November 2018, the Group announced its CHF 1 billion share buyback programme which was set to commence in December 2018 and end in December 2019. By the end of December 2018, 227 700 Swiss Life Holding shares were repurchased for CHF 87 million under the share buyback programme.
On 12 March 2019, the Board of Directors approved the annual financial statements and the financial report and authorised them for issue. The financial report, therefore, only reflects events up to that date.
In September 2016, the IASB amended IFRS 4 (applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts) by introducing an optional temporary exemption from applying IFRS 9 for companies whose activities are predominantly connected with insurance. At its meeting on 14 November 2018, the IASB tentatively decided to extend the use of the deferral approach to IFRS 9 for a further year, so that qualifying insurance entities would only be required to apply IFRS 9 for annual periods beginning on or after 1 January 2022.
The Group has elected to measure the performance of certain associates that are held by the insurance business at fair value through profit or loss instead of applying the equity method. Changes in the fair value of such investments are included in net gains /losses on financial instruments at fair value through profit or loss.
A listing of the Group’s principal associates is shown in note 15.
Financial assets at fair value through profit or loss (FVPL) Financial assets at fair value through profit or loss comprise financial assets designated as at fair value through profit or loss. Financial assets are irrevocably designated as such on initial recognition in the following instances: – Financial assets backing insurance liabilities and liabilities arising from investment contracts for the account and risk of the Swiss Life Group’s customers (contracts with unit-linked features, separate accounts, private placement life insurance) in order to avoid measurement inconsistencies with the corresponding liabilities.
Swiss Life – Annual Report 2018 transferred from other comprehensive income to profit or loss for the period. Gains and losses on disposal are determined using the average cost method.
Financial assets pledged as collateral Transfers of securities under repurchase agreements or under lending agreements continue to be recognised if substantially all the risks and rewards of ownership are retained. They are accounted for as collateralised borrowings, i.e. the cash received is recognised with a corresponding obligation to return it, which is included in other financial liabilities.
Swiss Life – Annual Report 2018 incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
Investment property includes completed investment pro perty and investment property under construction. Completed investment property consists of investments in residential, commercial and mixed-use properties primarily located within Switzerland.
Definition of insurance contracts Insurance contracts are contracts under which one party accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. Significant insurance risk exists if an insured event could cause an insurer to pay significant additional benefits in any scenario, excluding scenarios that lack commercial substance (i.e. have no discernible effect on the economics of the transaction). The classification of contracts identifies both the insurance contracts that the Group issues and reinsurance contracts that the Group holds. By Group policy, Swiss Life considers those contracts to be insurance contracts that require the payment of additional benefits in excess of 10% of the benefits that would be payable if the insured event had not occurred, excluding scenarios that lack commercial substance.
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 in other comprehensive income.
Germany A minimum of 90% of the net investment returns less 100% of the minimum guaranteed interest on the policyholder account (“interest result”), a minimum of 90% of the risk result and a minimum of 50% of the positive other result including expenses /costs are allocated to the policyholder. A negative investment result can be offset with positive other profit sources.
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 mea sured at amortised cost using the effective interest method with future cash flows being estimated to calculate the effective interest rate.
The introduction of IFRS 15 has not led to any changes in the revenue recognition method.
PVP is amortised in proportion to gross profits or gross margins over the effective life of the acquired contracts, which generally ranges from 20 to 30 years. Realised gains /losses are thereby taken into account as well as gains /losses recognised in other comprehensive income (unrealised gains /losses). If these unrealised gains /losses were to be realised, the gross profits or gross margins used to amortise PVP would be affected. Therefore, an adjustment relating to these unrealised gains /losses is recognised in other comprehensive income and is also reflected in the amount of PVP in the balance sheet (“shadow accounting”).
For participating life insurance contracts, where the contribution principle applies to the allocation of the policyholder bonus, the deferred acquisition costs are amortised over the life of the contract based on the present value of the estimated gross margin amounts expected to be realised. Expected gross margins include expected premiums and investment results less expected benefit claims and administrative expenses, anticipated changes to future life policyholder benefit liabilities and expected annual policyholder bonuses.
Goodwill The Group’s acquisitions of other companies are accounted for under the acquisition method.
A disposal group consists of a group of assets to be disposed of, by sale or otherwise, together as a group in a single transaction, and liabilities directly associated with these assets. Non-current assets classified as held for sale and disposal groups are measured at the lower of the carrying amount and the fair value less costs to sell. The carrying amount will be recovered through a highly probable sale transaction rather than through continuing use. Assets held for sale and the associated liabilities are presented separately in the balance sheet.
Swiss Life – Annual Report 2018 a modification was clarified (in the Basis for Conclusions). An entity recognises any adjustment to the amortised cost of the financial liability arising from a modification or exchange in profit or loss at the date of the modification or exchange. The amendments will be effective for annual periods beginning on or after 1 January 2019. However, as set out below, the Swiss Life Group will defer the application of IFRS 9 and continue to apply IAS 39 Financial Instruments: Recognition and Measurement, as its activities were predominantly connected with insurance on 31 December 2015.
In May 2017, IFRS 17 Insurance Contacts was published and replaces IFRS 4 insurance contracts, which currently permits a wide variety of practices. IFRS 17 will fundamentally change the accounting by entities that issue insurance contracts, reinsurance contracts and investment contracts with discretionary participation features. IFRS 17 requires a current measurement model, where estimates are remeasured in each reporting period. The measurement is based on the building blocks of discounted, probability-weighted cash flows, a risk adjustment and a contractual service margin (“CSM”) representing the unearned profit of the contract. The standard provides a simplified accounting approach for certain short-duration contracts. At initial recognition, insurance contracts are grouped into contracts of similar risks which are managed together and further into three groups of profitability, whereby each group is limited to contracts written in one year. Changes in cash flows related to future services should be re cognised against the CSM, which cannot be negative, so any excess is recognised in profit or loss. The CSM is released to profit or loss based on the transfer of services in each period. IFRS 17 provides an accounting policy choice to recognise the impact of changes in discount rates and other assumptions that relate to financial risks either in profit or loss or in other comprehensive income. The variable-fee approach is required for insurance contracts that specify a link between payments to the policyholder and the returns on underlying items. Requirements in IFRS 17 align the presentation of revenue with other industries. Revenue is allocated to periods in proportion to the value of expected coverage and other services that the insurer provides in the period, and claims are presented when incurred. The disclosure requirements are more detailed than currently required under IFRS 4. On transition to IFRS 17, an entity applies the standard fully retrospectively to groups of insurance contracts, unless it is impracticable, in which case there is a choice between a modified retrospective approach and the fair value approach. IFRS 17 is effective for annual periods beginning on or after 1 January 2021. In November 2018, the IASB tentatively decided to defer the effective date of IFRS 17 by one year to reporting periods beginning on or after 1 January 2022. The Swiss Life Group is currently assessing the impact on its financial statements, which will be significant.
In July 2014 the International Accounting Standards Board completed IFRS 9 Financial Instruments. The new standard replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 covers classification and measurement of financial instruments, impairment of financial assets and hedge accounting. Classification determines how financial assets and financial liabilities are accounted for in financial statements and how they are measured on an ongoing basis. Financial assets are classified on the basis of the business model within which they are held and their contractual cash flow characteristics. An expected-loss impairment model is introduced. Under the new model, it is no longer necessary for a credit event to have occurred before an impairment loss is recognised. The new model for hedge accounting aligns accounting treatment more closely with risk management activities. IFRS 9 is effective for annual periods beginning on or after 1 January 2018. However, as set out above, the Swiss Life Group will defer the application of IFRS 9 and continue to apply IAS 39 Financial Instruments: Recognition and Measurement, as its activities were predominantly connected with insurance on 31 December 2015.
Certain reported amounts of assets and liabilities are subject to estimates and judgements. Estimates and judgements by management are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Swiss Life – Annual Report 2018 statistics provided by the database of reinsurance pool results. Furthermore, own company records and occupation classes are considered. Similar to the disability insurance products for the individual life business, assumptions for pricing and valuation of nursing care insurance products are acquired in cooperation with reinsurance companies. In particular, best estimate assumptions are considered with respect to claims experience.
The carrying amount of insurance liabilities is set out in note 22.
The carrying amount of goodwill is set out in note 17.
The segments “Switzerland”, “France”, “Germany” and “International” primarily consist of life insurance operations and distribution units. The life insurance operations offer a broad range of life, pension, health, annuity and investment-type policies to both groups and individuals, including disability coverage. The Group’s strategy focuses primarily on life and pensions in Switzerland, France and Germany and on cross-border business from Liechtenstein, Luxembourg and Singapore. These segments also include a number of companies which hold investments mainly pertaining to life insurance.
“International” comprises the cross-border insurance operations in Liechtenstein, Luxembourg and Singapore, the Swiss Life Select units operating in Austria and the Czech Republic, Fincentrum in the Czech Republic and Slovakia, as well as Chase de Vere operating in the United Kingdom.
Policy fees earned on investment and unit-linked contracts 39 180 7 87 – – 313 0 313
Net gains/losses on investment property 582 78 66 – – – 725 – 725
Employee benefits expense –258 –211 –152 –59 –257 –5 –943 –3 –947
Impairment of property and equipment and intangible assets –1 – – – –13 – –14 – –14
Employee benefits expense –281 –195 –140 –57 –243 –1 –918 0 –917
Impairment of property and equipment and intangible assets 0 – – – – – 0 – 0
Financial assets available for sale 69 533 18 762 9 188 1 502 1 1 451 100 437 – 100 437
Swiss Life – Annual Report 2018 5 Risk Management Policies and Procedures
Swiss Life – Annual Report 2018 5.1 Risk budgeting and limit setting
The assets and liabilities from separate account/unit-linked contracts and private placement life insurance are generally excluded from the Swiss Life Group’s financial risk management consider ations to the extent that the risks are borne by the customers.
Assets for the account and risk of the Swiss Life Group’s customers
TOTAL ASSETS FOR THE ACCOUNT AND RISK OF THE SWISS LIFE GROUP’S CUSTOMERS 34 414 35 654
TOTAL INTEREST-SENSITIVE INSURANCE LIABILITIES 73 004 25 076 69 98 149
Some life insurance products with a savings component and investment contracts are subject to minimum guaranteed interest rates. The guaranteed rate differs according to the type of contract. In Switzerland for instance the minimum guaranteed interest rate for the occupational pensions segment (mandatory BVG savings account) stood at 1.00% in 2018 and 2019 (2017: 1.00%).
Real estate price risk Due to the long-term nature of its liabilities, Swiss Life invests in direct residential, commercial and mixed-use property investments. In addition to direct investments, Swiss Life invests in real estate funds and real estate companies.
To reduce the credit exposure relating to derivatives a collateral management process is in place. Clearly defined processes ensure that exposure concentrations and limit utilisations are appropriately monitored and managed. Counterparties for derivative transactions, over-the-counter and exchange-traded, have to be approved by both the Group Chief Risk Officer and the Group Chief Investment Officer. The minimum rating for a counterparty is generally A– (Standard & Poor’s or equivalent) for the Swiss Life Group’s insurance operations. During periods of market turmoil reliance on ratings is of limited value; therefore an additional qualitative and quantitative counter party monitoring process has been established to allow for immediate proactive measures.
Debt securities pledged as collateral 4 767 3 601 – – 4 767 3 601
Debt securities classified as loans 1 344 2 202 – – 1 344 2 202
Exposure to credit risk of debt instruments – credit rating by class as at 31 December 2018
Exposure to credit risk of debt instruments– credit rating by class as at 31 December 2017
Financial assets individually determined as impaired – impairment loss allowance for the year 2018
At 31 December 2018 and 2017, no reinsurance assets were past due or impaired.
The Swiss Life Group’s European insurance and investment operations (excluding Switzerland) generally invest in assets denominated in the same currency as their insurance and investment contract liabilities, which mitigates the currency risk for these operations. As a result, currency risk arises from recognised assets and liabilities denominated in other currencies and net investments in foreign operations. Although the Swiss Life Group actively engages in currency management to reduce the effect of exchange rate fluctuations on its assets and liabilities, particularly by hedging against the risk of such movements in relation to part of its investments denominated in euros and in US dollars, significant movements in exchange rates could adversely affect the Swiss Life Group’s earnings and financial position, including the value of its investment portfolio. Foreign exchange exposure is hedged in line with the strategic asset allocation. The instruments which the Swiss Life Group uses to hedge exposure may not be perfectly correlated to the related assets, so the Group will still be exposed to losses if the value of the hedge and the value of the underlying asset or liability do not correspond appropriately.
At the operational level, rolling forecasts are in place to address situational liquidity risk, which primarily arises on unexpected calls on cash resources from claims, amounts payable at maturity and surrenders arising from insurance and investment contracts. To overcome unexpected liquidity shortfalls, when asset disposals are not desired, repurchase agreements and mitigating measures on the liability side are used to ensure short-term refinancing at minimal cost.
Financial assets at fair value through profit or loss 3 139 3 542 4 420 3 862 31 597 32 824 39 155 40 228
Intangible assets including intangible insurance assets – – 3 135 2 931 – – 3 135 2 931
Liabilities associated with assets held for sale – 3 – – – – – 3
Investment and unit-linked contracts 296 314 11 125 11 438 28 316 30 005 39 738 41 756
Disability income and other annuities – deferred 7 569 7 348
Non-life The Swiss Life Group has non-life operations, mainly in France, covering risks associated with accident and health (disability), property and casualty as well as credit life business.
At end of year of loss occurrence 392 323 311 303 335 342 296 267 297 331 n/a
LIABILITIES FOR THE CURRENT AND 9 PREVIOUS YEARS 17 21 47 43 39 59 71 75 129 200 700
Swiss Life uses a structured process to ensure that strategic risks are dealt with adequately in what continues to be a very challenging economic environment. In its strategic risk management process, Swiss Life incorporates all the information on risks and corresponding return characteristics in its strategic decisions. An understanding of the interplay of individual risks is essential in order to take due account of the factors influencing risks during strategy development and address them accordingly.
At 31 December 2018, if interest rates had been 50 basis points higher, profit or loss would have been CHF 8 million higher (2017: CHF 25 million lower) and other comprehensive income would have been CHF 1236 million lower (2017: CHF 1407 million lower). If interest rates had been 50 basis points lower, profit or loss would have been CHF 11 million lower (2017: CHF 47 million higher) and other comprehensive income would have been CHF 1383 million higher (2017: CHF 1588 million higher). These impacts are net after policyholder and tax. The sensitivity includes financial assets as well as insurance liabilities. “Investment funds – debt” and investment funds with substantial investment in debt instruments are included in the analysis. This sensitivity measures the impact of a parallel shift of the bond interest rates at the closing date.
At 31 December 2018, if morbidity rates had been higher by 5%, profit or loss would have been CHF 21 million lower (2017: CHF 20 million). If morbidity rates had been lower by 5%, profit or loss would have been CHF 21 million higher (2017: CHF 20 million). These impacts are net after policyholder and tax.
BASIC EARNINGS PER SHARE FOR THE NET RESULT ATTRIBUTABLE TO EQUITY HOLDERS OF SWISS LIFE HOLDING (IN CHF) 31.58 30.98
Net result attributable to equity holders of Swiss Life Holding 1 076 1 007
Weighted average number of shares outstanding 34 059 072 32 502 204
Deposits received under insurance and investment contracts 5 527 5 298
Interest income on financial assets available for sale 2 445 2 533
Financial assets designated as at fair value through profit or loss 1 109 235
Associates at fair value through profit or loss 1 6 0
Assets for the account and risk of the Swiss Life Group’s customers 1 –2 169 1 076
1 includes interest and dividend income of CHF 150 million (2017: CHF 145 million)
Realised gains/losses on sales of subsidiaries and other assets 21 47
Net benefits and claims under insurance contracts 13 296 12 322
Change in liability for future life policyholder benefits, gross –211 194
Swiss Life – Annual Report 2018 9 Derivatives and Hedge Accounting
Derivatives designated as net investment hedges 40 19 5 14 4 217 2 057
Derivatives designated as fair value hedges as at 31 December 2018
Interest rate swaps to hedge bond portfolios 123 94 8 526 69 –78 78 –69
Currency forwards to hedge non-monetary investments 40 7 5 577 311 –350 350 –311
TOTAL DERIVATIVES DESIGNATED AS FAIR VALUE HEDGES 162 101 14 103 379 –428 428 –379
In 2018 and 2017, hybrid debt denominated in euro was used to protect non-monetary investments (hedge funds, equity securities and investment funds) against adverse movements in euro exchange rates.
Derivatives designated as cash flow hedges as at 31 December 2018
In 2018 and 2017, the Group used forward starting swaps and forward starting bonds to hedge the exposure to variability in interest cash flows arising on the highly probable purchase of bonds in order to achieve an adequate yield level for reinvestments.
Financial assets for the account and risk of the Swiss Life Group’s customers 5 31 597 32 824
TOTAL FINANCIAL ASSETS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS 39 155 40 228 11 Financial Assets Available for Sale
TOTAL FINANCIAL ASSETS AVAILABLE FOR SALE 91 605 92 447 8 832 12 475 100 437 104 922
Debt securities previously classified as available for sale 1 133 1 932 – – 1 133 1 932
Interest income accrued on impaired loans was CHF 0.08 million as at 31 December 2018 (2017: CHF 0.04 million). The Group’s loan port folio 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.
Further details with regard to the financial assets reclassified are as follows.
Fair value as at end of period 1 345 2 323
Later than 1 year and not later than 5 years 1 376 1 444
Crédit et Services Financiers (CRESERFI), Paris 33.4% 48 0 1 – 1
Crédit et Services Financiers (CRESERFI), Paris 33.4% 50 0 2 – 2
Non-current liabilities –38 –42 –1 –1 –127 – –45 –117 –39 –41
Share of net assets (carrying amount) 48 50 14 15 16 – n/a n/a n/a n/a
In March 2018, the asset management and real estate company Artemis Acquisition Germany S.à r.l, Luxembourg, was acquired. Due to loss of control in the second half of 2018, Artemis Acquisition Germany S.à r.l., Luxembourg, is accounted for as an investment in associates.
BALANCE AS AT END OF PERIOD 558 64 67 40 729
Swiss Life – Annual Report 2018 17 Intangible Assets including Intangible Insurance Assets
BALANCE AS AT END OF PERIOD –547 –95 –170 –1 –812
In October 2018, the Swiss Life Group acquired Fincentrum a.s., one of the leading independent financial advisors in the Czech Republic, domiciled in Prague, and Slovakia, domiciled in Bratislava. The goodwill relating to this acquisition amounted to CHF 41 million and has been allocated to the “International” segment.
The calculations relating to the recoverable amounts, which have been determined on a value-inuse basis, use cash flow projections based on financial budgets approved by management. The projection covers a three-year period for Lloyd Continental, Corpus Sireo and Beos. Due to the duration of the insurance and investment contracts a five-year period was used for Capital Leben. The calculations for Lloyd Continental, Corpus Sireo and Capital Leben are based on present values that traditionally use a single set of estimated cash flows and a single discount rate.
Net carrying amount of goodwill 287 287 149 149 101 113 136 – 106 70
Customer relationships The acquisition of BEOS AG, Berlin, in August 2018 led to the recognition of customer relationships of CHF 68 million.
Brands and other Comprises the brands Corpus Sireo, Mayfair, Beos and Fincentrum and a performance fee related to the acquisition of Beos, which is recognised as intangible assets. At acquisition date the performance fee had a fair value of CHF 38 million. Subsequent to the acquisition date, but before year end, the condition for receiving most of the performance fee was met. Therefore, CHF 35 million resulted in a disposal as of year end. The brands of Beos, with a fair value of CHF 2 million, and Fincentrum, with a fair value of CHF 4 million, have a definite useful life of approximately eight years each.
Investment contracts with discretionary participation features (DPF) 15 102 16 243 110 130 14 992 16 113
Investment contracts without DPF at fair value through profit or loss 30 514 383 – – 514 383
TOTAL INVESTMENT AND UNIT-LINKED CONTRACTS 39 738 41 756 110 130 39 628 41 626 of which for the account and risk of the Swiss Life Group’s customers
In March 1999, Swiss Life Ltd privately placed a subordinated perpetual step-up loan comprising three simultaneous advances of EUR 443 million (at a rate of interest of Euribor plus a margin of 1.05% p.a., increased by 100 basis points as from April 2009), CHF 290 million (at a rate of interest of Libor plus a margin of 1.05% p.a., increased by 100 basis points as from April 2009) and EUR 215 million (at a rate of interest of Euribor plus a margin of 1.05% p.a., increased by 100 basis points as from October 2009). In 2009, Swiss Life Ltd renounced the right to call the loan on its first call date. Following the purchase offer by Swiss Life Insurance Finance Ltd. in 2012, EUR 192 million remain outstanding. Swiss Life Ltd renounced the right to call the loan on the second and third optional call dates, in April 2014 and April 2019, respectively, and can next call it in 2024 or at five-year intervals thereafter, at its discretion, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority.
Swiss Life AG EUR 600 EUR 600 4.500% 2016 2027 669 695
Swiss Life AG CHF 150 CHF 150 4.375% 2016 2026 149 149
Swiss Life AG CHF 450 CHF 450 3.750% 2016 2021 448 448
Swiss Life Holding AG CHF 225 1.125% 2013 2019 225 225
In December 2013, Swiss Life Holding issued CHF 500 million in senior unsecured convertible bonds due in 2020. The coupon was set at 0%. The bonds were convertible into registered shares of Swiss Life Holding at the option of the holder. The initial conversion price was set at CHF 243.97 (in 2017 adjusted to CHF 232.13, valid since 27 April 2017). The proceeds from the issue of the convertible bonds have been split between a liability component and an equity component. The fair value of the liability component at issue date amounted to CHF 450 million and was calculated using a market interest rate for an equivalent non-convertible bond. The residual amount of CHF 50 million represented the value of the option to convert the instrument into Swiss Life Holding shares and was included in share premium. Transaction costs of CHF 6 million were deducted from the liability and costs of CHF 1 million were recognised in share premium.
In September 2017, Swiss Life Holding announced its intention to use its right to redeem the convertible bonds at par on 27 December 2017. Bondholders could convert their bonds into shares until 11 December 2017. In 2017, convertible bonds with a nominal value of CHF 499 million were converted into 2 141 905 Swiss Life Holding shares with a corresponding increase in share capital of CHF 11 million and an increase in share premium of CHF 462 million. The remaining amount of the convertible bonds of CHF 0.8 million was repaid on 27 December 2017.
Insurance liabilities linked to assets for the account and risk of the Swiss Life Group’s customers 5 905 5 462
France Pension plans in France are covered by various national agreements. Defined benefit plans in France cover retirement benefits for employees, including executive officers, based on the last salary, length of service, cause of termination and the respective national agreement. Furthermore, service anniversary bonuses are based on employee category and length of service.
For some plans, the level of the pension benefits is determined by the years of service and the last salary before retirement according to the benefit formula as defined in the pension plan. Other benefits comprise widows’/widowers’ pensions in case of death as well as disability pensions
(if disabled before retirement age). The levels of these benefits are determined similar to the old-age pensions assuming service up to normal retirement age. Widows’/widowers’ pensions are 60% of the old age/disability pension benefits.
Risks covered With respect to its defined benefit plans the Group faces the risks of adverse development of the prominent actuarial/financial assumptions, such as discount rates, mortality assumptions and future salary growth, inherent in the measurement of plan liabilities. If the high-quality corporate bond yields (which are the basis for assessing the discount rate) decrease, the present value of the defined benefit obligation would increase, which would lead to a higher defined benefit liability in the consolidated balance sheet. However, this effect would be partly offset by the increase in the value of bonds in the plan assets. A higher defined benefit obligation would also result if the average life expectancy (longevity) or the rate of future salary growth were higher than the corresponding values reflected in the financial/actuarial parameters.
Insurance contracts not eligible as plan assets under IFRS 1 319 1 422
BALANCE AS AT END OF PERIOD –3 554 –3 600 of which amounts owing to
Average life expectation at ordinary retirement age (women) 25.5 25.4 23.2–30.2 23.2–29.9
The contributions expected to be paid for the year ending 31 December 2019 are CHF 67 million. These contributions include amounts payable under insurance contracts issued to defined benefit plans covering own employees.
For 2018, 2017, 2016, 2015 and 2014 participants in the share-based payment programme are allocated restricted share units (RSUs). RSUs grant the holder future subscription rights, entitling him or her to receive Swiss Life Holding shares free of charge after a three-year period has elapsed and if certain conditions are fulfilled.
The expense recognised for share-based payment amounted to CHF 12 million in 2018 (2017: CHF 12 million).
Equity Foreign Other component currency Balance as at comprehensive convertible Acquisitions translation Balance as at 1 January Profit or loss income debt and disposals differences end of period
NET DEFERRED INCOME TAX ASSETS/LIABILITIES –1 959 –78 –123 4 2 –21 –2 176
Unused amounts reversed 0 0 –7 –10 –3 –5 –10 –16
Unwinding of discount and effect of change in discount rate – 0 0 0 – – 0 0
Provisions for restructuring were set up in 2018 in Switzerland and Germany (2017: Switzerland ). The outflow of the amounts is expected within the following one to two years.
Net balance as at 1 January –888 4 127 410 –22 3 626 72 –325 – –252 3 374
Reclassification to retained earnings – – – – – –25 – – –25 –25
Reclassification to profit or loss – gross 0 257 –66 30 1 221 – – – – 221
Profit or loss allocated to non-controlling interests 2 3 2 2
Continuous monitoring of solvency under the SST is conducted on an ongoing basis and calibration is updated based on the full SST calculations as at the beginning of each calendar year and as at mid-year.
Swiss Life – Annual Report 2018 28 Acquisitions and Disposals of Subsidiaries
The assets held for sale and associated liabilities as at 31 December 2017 mainly consist of investment property to be sold.
For the years ended 31 December 2018 and 2017, no impairment allowance has been made for doubtful debts in respect of the amounts owed by related parties. This assessment is undertaken each financial year by examining the financial position of the related party and the market in which the related party operates.
Associates at fair value through profit or loss – – 31 34 52 52 84 86
Non-controlling interests in investment funds – – 2 089 2 349 1 611 933 3 700 3 282
Unit-linked contracts: The fair value of liabilities arising from unit-linked insurance and investment contracts is measured by reference to the fair value of the underlying assets. Unit-linked contract liabilities are generally categorised as level 2, except for contracts that are backed predominantly by assets categorised within level 3 of the fair value hierarchy.
Market rental value p.a. (price/m²/year) CHF 252–304 CHF 231–288 EUR 87–377 EUR 85–928
Total gains/losses recognised in profit or loss – 0 0 132 54 339 725 1 249
BALANCE AS AT END OF PERIOD – 14 107 2 770 1 179 2 622 27 946 34 637
During 2018, debt securities of CHF 36 million (2017: CHF 120 million) were transferred from level 1 into level 2 due to reduced frequency of price quotations, and debt securities of CHF 23 million (2017: CHF 114 million) were transferred from level 2 into level 1 due to available quoted prices. Changes in fund pricing frequency (daily/weekly) resulted in the following transfers of investment funds during 2018: CHF 19 million (2017: nil) from level 1 into level 2, and nil (2017: nil) from level 2 into level 1.
BALANCE AS AT END OF PERIOD – – 161 152 1 611 933 1 772 1 085
Net gains/losses on financial assets through profit or loss investment property
Total gains/losses recognised in profit or loss 54 27 471 –38 725 651
Total gains/losses recognised in profit or loss – – –60 –6 – –
at the end of the period – – –59 –6 – –
Swiss Life – Annual Report 2018 30.2 Fair value of financial instruments carried at amortised cost
Investment contracts without discretionary participation 1 0 0 0 0 1 Carrying amount approximates fair value. 2 excluding non-controlling interests in investment funds
Level 3: The fair values of mortgages and other loans are estimated using the discounted cash flow method.
Gross amounts of recognised financial assets before offsetting 2 140 1 675 – – 19 – 2 159 1 675
Gross amounts of recognised financial liabilities set off – – – – 0 – 0 –
Contractual obligations to purchase or construct investment property 862 1 367
The total amount of credit commitments includes commitments to lend at fixed rates, which expose the Group to interest rate risk. These commitments are entered into for restricted periods of time. As at 31 December 2018, committed principal amounts totalled EUR 5 million and CHF 223 million (2017: EUR 17 million and CHF 180 million). The range of committed interest rates is 1.78% to 3.31% for commitments in euro and 0.8% to 2.19% for commitments in Swiss francs.
LIVIT AG, Zürich AM 100.0% 100.0% Asset management & Real estate
Sobrado Software AG, Cham CH until 27.03.2018 – – Information technology
Swiss Life Asset Management AG, Zürich AM until 09.06.2017 – –
(Branch Swiss Life International Services AG), Zürich IN 100.0% 100.0% Services
Swiss Life REF (CH) European Properties , Zürich CH from 30.11.2017 69.1% 69.1% Investment funds
Swiss Life REIM (Switzerland) AG, Zürich AM until 09.06.2017 – –
SCI SWISSLIFE 148 UNIVERSITE, Paris FR from 01.01.2017 100.0% 100.0% Real estate
SwissLife Prévoyance et Santé, Levallois-Perret FR 99.8% 99.8% Non-life insurance 1 Segment (CH = Switzerland, AM = Asset Managers, IN = International, FR = France, DE = Germany)
CitCor Residential Verwaltungs GmbH, Düsseldorf AM 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Projektentwicklung Düsseldorf GmbH, Köln AM 99.9% 100.0% Asset management & Real estate
SL Beteiligungs-GmbH & Co. Immobilien VII KG, Garching b. München DE 100.0% 100.0% Real estate
Swiss Life Vermittlungs GmbH, Garching b. München DE 100.0% 100.0% Services
(formerly Vestas Germany ACB GmbH & Co. KG), Köln CH until 29.06.2017 – –
CORPUS SIREO Investment Residential No. 24 S.à r.l., Luxembourg AM until 05.06.2018 – –
CORPUS SIREO Real Estate S.à r.l., Luxembourg AM 100.0% 100.0% Asset management & Real estate
CORPUS SIREO RetailCenter-Fonds Deutschland SICAV-FIS, Luxembourg DE 57.0% 57.0% Asset management & Real estate
SchwabenGalerie Stuttgart S.C.S., Munsbach DE 100.0% 100.0% Asset management & Real estate
SL Fixed Income Fund SICAV-SIF SA, Luxembourg CH 100.0% 100.0% Investment funds
Swiss Life Immo-Arlon, Société Anonyme, Strassen Other until 15.12.2017 – –
Swiss Life Products (Luxembourg) S.A., Luxembourg CH 100.0% 100.0% Life insurance/Reinsurance
Swiss Life REF (LUX) German Core Real Estate SCS, Société en Commandite simple CH/FR/
SwissLife LuxCo S.à r.l., Luxembourg FR from 24.02.2017 100.0% 100.0% Holding
MAYFAIR CAPITAL INVESTMENT MANAGEMENT LIMITED, London AM 100.0% 100.0% Asset management
Swiss Life Select Österreich GmbH, Wien IN 100.0% 100.0% Services 1 Segment (CH = Switzerland, AM = Asset Managers, IN = International, FR = France, DE = Germany)
Fincentrum Reality s.r.o., Bratislava IN from 19.10.2018 100.0% 100.0% Services 1 Segment (CH = Switzerland, AM = Asset Managers, IN = International, FR = France, DE = Germany)
We concluded full scope audit work at 10 reporting units in 5 countries. Our audit scope addressed over 90% of the Group's total assets and 99% of the Group's total net earned premiums. In addition, specified procedures were performed on a further 3 reporting units.
We continuously adjusted our audit approach to the developments of the Swiss Life Group and its subsidiaries. While all material positions of the consolidated financial statements are audited, emphasis is placed on matters identified during our risk assessment process. We have described such matters further below in section “Key audit matters”.
As set out in note 22 – Insurance Liabilities – Net future life policyholder benefits amount to CHF 102’210 million.
Our audit procedures relating to actuarially determined liabilities primarily consist of testing the models used in developing these balances, reviewing management’s assumptions in light of current economic conditions, industry developments and policyholder behaviour, and performing proce-
How our audit addressed the key audit matter policies and include the value of accumulated declared bonuses or dividends that have vested to policyholders. The reserves for life benefits for participating traditional life insurance policies are calculated using a net level premium valuation model. The actuarially determined liabilities depend on the type of profit participation and is based on actuarial assumptions, such as guaranteed mortality benefits, interest rates, persistency, expenses and investment return, plus a margin for adverse deviations.
We consider the future life policyholder benefits in Switzerland as key audit matter, as these make up 76% of the future life policyholder benefits on the Group’s balance sheet.
dures over the completeness and accuracy of underlying data used in the calculations. We were supported by actuaries in our audit work.
We examined if the models used in the valuation of actuarially determined future life policyholder benefits are reasonable and in line with financial reporting requirements and industry accepted practice.
The future life policyholder benefits are calculated using a discount rate. We have reviewed significant assumption changes made during the year with a focus on the interest rate used in the traditional life insurance policies. In assessing the interest rate used, we confirmed that the interest rates are supported by the anticipated economic performance of the assets backing the liability when considering any planned changes in asset strategy and reinvestment. In particular, we assessed the different components of the discount rate on a portfolio level (“individual life” and “group life”). Our audit procedures for the discount rate included, but were not limited to: • Assessment of the estimated future expected returns for all major investment classes, such as bonds, investment property, loans, mortgages, equity, and alternative investments
As elaborated in note 17 - Intangible Assets including Intangible Insurance Assets - Goodwill represents the excess of the fair value of the consideration transferred and the amount of any noncontrolling interest recognised, if applicable, over the fair value of the assets and liabilities recognised at the date of acquisition.
As the actual cash flows naturally vary from planned projections, management have created detailed sensitivity analysis. The sensitivity analysis provide insights as to the recoverability of goodwill when the assumptions used in the planned projections, individually or as a whole, are not met.
We focused on goodwill, since the cash flow projections extending into the future are based on significant management judgement, as to the development of the acquired businesses.
Further evidence of reasonableness of planned cash flows was to validate if these were met in the past. Where actual results deviated from planned results, we inquired as to the reasons and potential impact they may have, in reaching future goals. We critically assessed the deviations from planned results.
The fair value is usually derived using the generally accepted discounted cash flow method. Ordinarily the valuation of each investment property is determined on an annual basis by an independent recognised valuation expert. Consideration is given to the assumed expected rental revenue, over the period in use, and discounted using a rate which reflects the risk assessment of the investment property, such as location and market value. The fair value of investment property is essentially sensitive to a) the development of the investment property market for residential, commercial, and mix-use properties in general, to b) the expected rental revenue, and c) the discount rate.
Based on the overall risk assessment, we selected investment property for an individual valuation review. Our sample selection was conducted using specified criteria, such as location, market value, market value deviation compared to the previous year, type of use, and acquisitions of investment property during the reporting period.
• examined the valuation assumptions for example expected rental income, with regards to reasonableness and market conformity
• reviewed the mathematical correctness of fundamental calculation steps through the reperformance of a sample of such calculation steps
• examined the valuation parameters (discount rate and operating costs) and compared these to market data.
We compared the booked values with the valuation results of the valuation experts. We examined if valuation adjustments (if applicable) were correctly booked.
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Swiss Life Holding Financial Statements 306 Management Report 307 Statement of Income 308 Balance Sheet 309 Notes to the Financial Statements 312 Disclosure of compensation to the Board of Directors and the Corporate Executive Board in accordance with Art. 663bbis of the Swiss Code of Obligations (CO) and Art. 14–16 of the Federal Ordinance against Excessive Compensation in Listed Stock Companies, and disclosure of the shareholdings of members of the Board of Directors and the Corporate Executive Board in accordance with Art. 663c of the CO
The annual profit of Swiss Life Holding in 2018 mainly consisted of dividends and investment income. Dividend payments from subsidiaries to the holding company increased from CHF 555 million to CHF 623 million during the year under review. New loans totalling CHF 203 million were awarded to Group units for the acquisition of Fincentrum and Beos. In addition, new loans totalling EUR 75 million were awarded to Group units in Germany and France to finance new real estate projects. Less repayments, loans to Group companies increased from CHF 758 million in the previous year to CHF 986 million.
The new loans caused interest income to rise from CHF 24 million to CHF 27 million and earnings from investments in bonds and fund units rose from CHF 44 million to CHF 46 million. Overall, other finance income rose from CHF 68 million to CHF 74 million. All loans granted internally and external investments in foreign currencies are fully hedged with currency futures. The cost of hedging during the reporting period was CHF 30 million (2017: CHF 18 million). The investment book value decreased from CHF 3416 million to CHF 3216 million during the reporting year due to an allowance of a subsidiary.
The long-term debt capital remained unchanged during the reporting year at CHF 424 million. This consists of two senior bonds in the total nominal amount of CHF 425 million, comprising a tranche of CHF 225 million with a six-year maturity (coupon 1.125%; maturing 2019) and a tranche of CHF 200 million with a ten-year maturity (coupon 1.875%; maturing 2023). These debt financing instruments were issued in 2013. Interest on the bonds came to CHF 7 million.
A value adjustment totalling CHF –200 million was made to Swiss Life Deutschland Holding GmbH following the annual assessment of participations.
In 2017, Swiss Life exercised its right to conclude an early buyback of the convertible bond issued in 2013 and due to mature in 2020. Almost all the bond holders exercised their right to convert their bonds into Swiss Life Holding shares. Bonds with a principal of CHF 499 160 000 were converted, which led in turn to the issue of 2 141 905 new shares in Swiss Life Holding from conditional capital. The remaining convertible bonds with a principal of CHF 805 000 were repurchased on 27 December 2017.
Treasury shares The Swiss Life Group companies purchased a total of 110 000 treasury shares during the year under review at an average price of CHF 358.42. In the same period, they did not sell any shares. As at 31 December 2018, the Swiss Life Group held 191 199 treasury shares which are not part of the share buyback programme.
In addition, Swiss Life Holding grants lines of credit totalling CHF 64 million to Swiss Life Products, a line of credit in the amount of CHF 6 million to Swiss Life Schweiz Holding, a line of credit of CHF 10 million to Pierre Capitale and lines of credit totalling CHF 236 million to companies of Corpus Sireo.
Financial assets pledged as collateral In the year under review, Swiss Life Holding pledged no liquid assets as margin cover for currency forward transactions. Debt securities of CHF 105 million were pledged on the balance sheet date as part of a repurchase agreement.
Statement of changes in equity for the years ended 31 December
Compensation in 2018 The Board of Directors is responsible for drawing up a written compensation report each year to include the information required by Articles 14–16 of the Federal Ordinance against Excessive Compensation in Listed Stock Companies (Compensation Ordinance). This compensation report supersedes the details in the notes to the balance sheet according to Art. 663bbis CO. Swiss Life’s compensation report for the 2018 financial year is provided on pages 53 to 70.
TOTAL CORPORATE EXECUTIVE BOARD 35 776 1 Total number of RSUs allocated in the years 2016, 2017 and 2018 in connection with the relevant equity compensation plan. The RSUs represent future subscription rights that entitle the individuals concerned to receive SLH shares after a period of three years, provided that the relevant conditions are met at that point.
Share ownership/participation rights as at 31 December 2017 As at 31 December 2017, acting members of the Board of Directors and the Corporate Executive Board (including closely linked parties) held the following number of registered Swiss Life Holding shares and future subscription rights to Swiss Life Holding shares in the form of Restricted Share Units (RSUs).
Annual profit amounts to CHF 460 147 097. The Board of Directors proposes to the General Meeting of Shareholders that the profit be appropriated in accordance with the table below. If this proposal is adopted, an ordinary dividend of CHF 14.00 per share will be made from profit. In addition, if this proposal is adopted, a distribution of CHF 2.50 per share will be made from the capital contribution reserve. This amounts to a total distribution of CHF 16.50 per share.
The proposal of the Board of Directors to the General Meeting of Shareholders on 30 April 2019 is based on shares entitled to a dividend as at 31 December 2018. The actual total amount of distribution depends on the number of shares entitled to a dividend on 2 May 2019. Swiss Life Holding Ltd waives a corresponding dividend in respect of treasury shares it holds at the time of distribution.
TOTAL PROFIT SHOWN IN THE BALANCE SHEET 460 842 881 313 695 784
In our opinion, the financial statements (pages 307 - 314) as at 31 December 2018 comply with Swiss law and the company’s articles of incorporation.
We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Audit scope We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In particular, we considered where subjective judgements were made; for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
Participations represent a significant amount of the balance sheet (CHF 3’216 million, 55% of total assets). We refer to page 308 of the financial statements of Swiss Life Holding Ltd.
Our work in the area of participations mainly focused on the audit of management’s analysis of valuation adjustments of participations as well as an assessment of assumptions used by management to determine the value in use.
We reviewed the financial budgets approved by management and the board of directors. The financial budgets include details on certain planned activities supporting the expected business development. In particular, we challenged management as to the feasibility of reaching the planned cash flow projections.
In addition, we, together with our valuation experts, assessed the main parameters used in the calculation of the weighted average cost of capital, from which the discount rate is derived. In particular, we identified the market data inputs used by management and compared these against independent data. As for the long-term growth rate used at the end of the mid-term planning period, we compared it to the economic environment and industry trends.
Performance of Swiss Market Index (SMI) (in %) –10 +14 –7 –2 +10
Performance of Dow Jones STOXX 600 Insurance Index (in %) –10 +7 –6 +14 +10
Total dividend payout to shareholders (in CHF million) 30.04. 460 356 271 207 176
Dividend yield on year-end price (in %) 28.12. 3.57 3.19 2.95 2.40 2.33
As % of registered Number of shares Number of shareholders shareholders
Gross written premiums, policy fees and deposits received 19 218 18 565 17 366 18 853 19 102
Net insurance benefits and claims –13 961 –13 189 –14 064 –15 516 –15 218
Number of employees (full-time equivalents) 8 624 7 979 7 801 7 595 7 492
Contacts Swiss Life General-Guisan-Quai 40 P.O. Box 2831 CH-8022 Zurich www.swisslife.com