Expertise, proximity, openness, clarity and engagement are the values we stand for. Values which underpin our perception of ourselves as an independent Swiss company and which lay the foundations for a trustworthy and forward-looking life insurance company.
Building on these foundations, our life and pensions solutions provide security and offer our clients scope for self-fulfilment, innovation and entrepreneurship. This year the spotlight falls on our clients and their insurance advisors as they talk about how Swiss Life provides independence and security. After all, values are not just words, they are an integral part of real life.
2 Shareholders’ Letter 4 CEO Interview 10 Strategy and Markets 16 Results and Course of Business 16 Summary of Group Results 24 Segment Reporting 24 Insurance Switzerland 26 Insurance France 27 Insurance Germany 28 Insurance Other 29 AWD 30 Investment Management 31 Other Success Factors 31 Human Capital 33 Responsible Corporate Conduct 35 Brand Management 38 Corporate Governance 40 Board of Directors 46 Corporate Executive Board 54 Compensation 64 Extract from the Financial Report 70 Share Performance and Historical Comparison 72 Contacts and Publishing Details
“The Group has emerged from the financial crisis in good shape – thanks to our excellent net worth, our financial stability, our close and diverse client relationships, and also the engagement of our workforce.”
As a provider of life and pensions solutions for private individuals and companies, Swiss Life contributes to the stability of pension systems in the markets in which it operates. Our core business for over 150 years of creating a financially secure future for our clients is one of the central themes guiding our society. Demographic trends and the limits on state pensions are forcing governments and their 2009 proved an eventful and challenging year for the global economy. With notable upward trends, the financial markets began to show signs of recovery from the financial crisis. Investor and consumer trust is also starting slowly to return. Yet, it would be a mistake to think we can just go back to business as usual. The financial market crisis has raised some fundamental global questions for which there are no simple answers. It has left its mark – on politics and
What did 2009 signify for Swiss Life? Swiss Life can look back on a good financial year in many respects. Our Group made significant improvements at operational level compared to the previous year, generating profit from continuing operations of CHF 562 million, which is a jump of CHF 1.4 billion. Our Investment Management division contributed strongly to this, putting in an excellent performance to achieve 3.9%, yet without increasing Swiss Life’s risk appetite. At the same time, we were able to boost our equity, increasing solvency by six percentage points to 164%. In addition, Swiss Life has already made great progress in curbing costs with its revitalisation programme MILESTONE, which was introduced Groupwide in August 2009. Strict cost management measures and progress in product development have already produced pleasing results
“We still have many opportunities and a lot of work ahead of us”
Over the last year, Bruno Pfister, Group CEO, and his management team have successfully set the course for profitable growth. Swiss Life improved its operational results significantly in 2009, generating premium growth of 9%. With its MILESTONE programme, the management team has equipped the company to realise its ambitions, even in persistently challenging market conditions.
improve our focus on modern life and pensions products with variable guarantees and risk products to boost our profitability. Secondly, we are stepping up our distribution activities, in particular third-party distribution channels and AWD. In the third thrust we are continuing to work ambitiously at improving our efficiency. Optimising costs is still an ongoing priority. Fourthly, we are strengthening our balance sheet by optimising our inforce business and our use of risk capital. Thanks to MILESTONE, we paved the way for profitable growth in 2009, which is why the fifth thrust is vital: The long-term success of the programme depends on the disciplined and ambitious execution of all initiatives. This is the only way we can justify the confidence of our clients and the financial market.
What makes you so optimistic about AWD? AWD plays a key role in the implementation of Swiss Life’s strategy. By acquiring AWD, we significantly strengthened our distribution capacity in the core markets of Germany and Switzerland. Our figures for 2009 show that we have doubled the volume of new business distributed through this channel. Furthermore, AWD provides us with access to Austria and Eastern Europe. After its reorganisation, AWD will quickly become an important additional source of earnings. AWD’s commission-based income supports our new focus away from the interest business to commission income and risk premiums.
Criticism rained down on AWD and thus on Swiss Life in 2009. What went wrong? There are many reasons. On the one hand, the financial market crisis thwarted our plans for AWD. But we didn’t just sit back and do nothing. AWD used 2009 to simplify its organisational structures and to reorganise the business, which greatly reduced its cost base. In addition, we had to change AWD’s brand promise following a court judgement in relation to investments. The fact that our market presence was not affected by this change is testament to AWD’s strong reputation and the day-to-day performance of its teams in the market. I am thus confident that as soon as demand for personal financial advice picks up again, we will get back on the road to success with a leaner and more dynamic AWD Group. Already AWD posted a positive operational result
By 2012 Swiss Life aims to generate 70% of its new business through life and pensions products with variable guarantees and risk products. Why this shift? Until now we have been strongly dependent on the net financial result of traditional life insurance business. This dependence is a huge handicap when faced with situations such as a financial crisis. Traditional business strains the balance sheet and ties up a lot of equity. This is why we want to generate more commission income in future. This shift diversifies our sources of revenue, stabilises our profits and reduces dependence on the volatile financial market.
Life and pensions solutions are as multifaceted as our clients. But, regardless of how individual the right solution may be for each client, all life and pensions solutions aim to create more independence. They are geared to our personal situations and empower us to translate our ambitions, plans and visions into reality.
Manuela Albisetti Stadler joined Swiss Life in 2001. She has been working as a General Agent in Horgen for over two years and looks after around 330 corporate clients and 4600 private clients.
The business woman heads a team of 16 and values the independence her job provides, plus its regional focus and the proximity to clients, whose lives she helps shape.
Notwithstanding the flagging economy, demand for insurance cover in Swiss Life’s core markets remained stable. Premium volume in the life insurance market in France went up by 12% in 2009, compared to the year before. Premium income also rose in Germany despite the difficult economic situation, advancing by 7%. In Switzerland – Swiss Life’s home market – premium volume declined slightly due to the large relative share of occupational pensions, where new business was hard to come by. Many potential new clients are affiliated with employee benefits institutions which are reporting a shortfall. Such gaps in funding make it harder to switch to a full insurance solution from an insurance company. The market for individual insurance, on the other hand, showed modest growth in Switzerland as well.
Swiss Life’s cross-border business continued to experience positive growth, generated above all by insurance solutions for high net worth individuals. In contrast, variable annuities – unit-linked life insurance policies with guarantees – were hit the hardest by the problems on the capital markets, falling short of their growth expectations due to the uncertainties on stock exchanges around the world.
The life and pensions market will continue to grow in the long term. This is definitely indicated by the enormous challenge to Europe’s retirement systems posed by rising life expectancies and falling birth rates. Meeting this challenge will require a shift from state-run to increasingly private pension systems. If the insurance industry wants to profit from this development, it will have to offer product innovations which cover the wide range of client requirements more effectively. Innovativeness and a stronger emphasis on modern life and pensions solutions with variable guarantees and risk products will be crucial to a life insurer’s success. Modern life and pensions solutions do not necessarily mean that the client has to forego guarantees, but rather that the costs of the guarantees are structured in a way that ties up less capital.
The insurance industry demonstrated its resilience during the financial crisis. The life insurance companies’ business model proved its worth in the crisis period. In practice, the direct insurance and reinsurance business performed as usual, claims were paid on time and in full, and the state only had to intervene in cases where insurers ran into difficulties with banking-type operations. Swiss Life successfully positioned itself as a leading international life and pensions specialist in a sector which proved its durability under crisis and continues to offer very good prospects for the future. Swiss Life’s MILESTONE programme is aimed at further strengthening its position in the life and pensions market by focusing on profitable growth and boosting competitiveness.
INSURANCE PROVIDERS — With a market share of close to 2%, Swiss Life is one of the top 10 life insurance providers in Europe. The Swiss Life Group operates in Switzerland, Germany and France. To drive its international business forward, Swiss Life has also established centres of competence in Luxembourg, Liechtenstein and Singapore, and has set up a sales office in Dubai.
In France, the fourth largest life insurance market in the world, Swiss Life has a market share of 1.4%. Swiss Life’s goal in France is to strengthen its position as the leading provider of life and pensions solutions for high net worth individuals and to remain the number two in private health insurance. It plans to achieve this by generating a higher share of modern products and by giving banks, brokers and independent financial advisors a greater role in the multi-channel distribution network.
In Germany, Swiss Life is one of the leading providers of occupational retirement and disability insurance and enjoys an outstanding reputation among brokers. Thanks to its qualification as “best select” partner for AWD in a number of product groups, there was a strong rise in the volume of new business in 2009. Swiss Life in Germany is pursuing the goal of becoming a profitable provider of life and pensions solutions with variable guarantees and risk products by 2012. Besides driving product innovations, expanding distribution networks and stepping up its cooperation with AWD, Swiss Life will focus in future on improving operational efficiency and reducing administrative costs.
TION — Swiss Life is pursuing a multi-channel strategy in distribution which has proved its worth. AWD is a key player in this strategy. It is one of the leading “financial optimisers” in Europe and stands for sustainable, profitable growth. By the end of 2010, AWD aims to cut its costs by EUR 70 million from their 2008 level to improve profitability. The Swiss Life Group has set itself the target of increasing its share of products distributed through AWD to 20% to 25% with new, competitive products in all relevant product categories, further product offensives and improved service. In the process, the independent product selection by AWD advisors will be safeguarded. As part of its focus on rapidly expanding core markets in Eastern Europe, AWD is withdrawing from Croatia and Romania. In future, the company wants to concentrate in the region on markets with above-average growth potential.
EGY — Swiss Life continues to pursue its ambition of becoming the leading international life and pensions specialist. To ensure this can become a reality, even in the wake of the financial crisis, Swiss Life introduced MILESTONE, a long-term programme focusing on profitable growth and enhanced competitiveness.
All five thrusts are instrumental to the central issue of adding value: Swiss Life is gearing its priorities to profitable growth.
1. By consistently focusing on modern life and pensions solutions with variable guarantees and on risk products, Swiss Life aims, in particular, to enhance customer value by providing greater flexibility and improved margins. At the same time, the Group is also ensuring a reduction in the capital requirements associated with new business.
Although the published goals for 2012 have been set, clear internal interim targets have been defined for all five of MILESTONE’s main thrusts. Achieving these will be the top priority for the 2010 financial year.
She looks after the well-being of her clients with a range of services, including traditional facial and body treatments, peelings and shiatsu therapy.
My business relationship with Fabien Spitz is sincere and uncomplicated. For me, independence represents the ability to run my company and have peace of mind. As a sole proprietor, I, alone, am responsible for my staff, so it’s up to me to make the necessary arrangements. For me, therefore, a private pension plan is just as crucial as insuring my business premises. I can count on Swiss Life to deliver exactly what I need.
CONSOLIDATED RESULT — Swiss Life made significant improvements at operational level in 2009, increasing its result from operations to CHF 562 million, up CHF 1.4 billion on the previous year. It achieved an annual result from continuing operations of CHF 324 million. This corresponds to an increase of CHF 1.5 billion on the previous year. The net profit, including discontinued operations, stood at CHF 277 million which corresponds to diluted earnings per share of CHF 8.83. This was impacted by expenses of CHF 47 million in connection with the sale of Banca del Gottardo. With equity of CHF 7.2 billion, this produced a return on equity of 4%. These developments are attributable, on the one hand, to improved conditions on the financial markets and, on the other, to the very strong performance of Swiss Life’s investment management activities. Swiss Life thus achieved a financial result of CHF 4.6 billion in 2009, which is a strong improvement over the prior-year figure of CHF 600 million. In addition, the revitalisation programme, MILESTONE, which aims to sustainably boost competitiveness and improve profitability, is starting to show results. In particular, there have been significant cuts in operating costs, after adjustment for restructuring charges and one-off impacts. However, the overall net profit is still not satisfactory as the costs of holding capital were not covered.1500
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 20 219 18 515 9.2%
SEGMENT RESULTS — In Switzerland, Swiss Life achieved a segment result of CHF 467 million, to which the much improved financial result of CHF 2.7 billion contributed greatly. Operating expenses increased vis-à-vis the previous year due to one-off restructuring charges and other one-off impacts. However, Swiss Life cut its administrative costs by 13.9% by optimising its processes and by focusing and reducing its project portfolio. Insurance operations in France generated a segment result of posted a result of CHF 77 million, down CHF 17 million on the previous year. AWD reported a segment loss of CHF 92 million (2008: CHF -41 million), attributable to one-off and restructuring charges. Adjusted for these charges, AWD again achieved a positive operating result in 2009 of CHF 19 million (EUR 12.6 million). AWD continued to pursue the strategic path set in the third quarter of 2009, returning to profitability in the fourth quarter. This can be attributed to cost-cutting measures, especially in Germany, and to the fundamental reorganisation of AWD, in particular in Austria and the United Kingdom.
GROWTH — Swiss Life grew its premium income by 9% to CHF 20.2 billion in the year under review. Adjusted for currency effects, this corresponds to 12% growth. A strong fourth quarter overall contributed to this pleasing performance. In particular, the Group recorded growth in Germany and in its international business with high net worth individuals. In Germany, premium income climbed from CHF 2 billion to CHF 2.2 billion. Swiss Life recorded growth in the single premiums business which was more than twice the market average and also outperformed the market in its periodic premiums business, despite recording a decline. The partnership with AWD flourished: New business produced through AWD in Germany doubled to around EUR 380 million and in Switzerland increased from CHF 11 million to CHF 112 million.
CHF 159 million (2008: CHF 40 million) – due to the considerably higher financial result and positive claims experience. In Germany, Swiss Life achieved a segment result of CHF 92 million – up CHF 63 million on the previous year. Results in the Insurance Other segment, which includes the growth initiatives in Liechtenstein, Luxembourg, Singapore and Dubai as well as payment protection insurance, were once again marked by investments. High operating costs are reflected in particular in startup investments such as the product platform in Luxembourg and payment protection insurance. The corresponding segment loss amounted to CHF 43 million in the period under review. As a result of lower asset management income, the Investment Management segment
Equity securities and equity funds 3 803 3.4% 2 335 2.2%
Cash and cash equivalents and other 5 387 4.8% 6 709 6.3%
MILESTONE — With its Group-wide MILESTONE programme to boost profitability and efficiency, Swiss Life set the course for profitable growth in 2009. The Group presented the programme in detail at its Investors’ Day in December 2009. MILESTONE is much more than just a cost-cutting programme. The programme will change key areas of the value chain. It has five main thrusts: Firstly, to increase value to customers and boost product profitability; secondly, to leverage distribution power – in terms of both the quality of advice and the expansion of distribution structures; thirdly, to improve operational efficiency and cut costs; fourthly, to further strengthen the Group’s balance sheet and capital base; finally, the fifth aim is disciplined execution. The Group has identified and is resolutely pursuing some 500 initiatives. A consequence of this disciplined execution is evident in the improvements in the Group’s costs situation, to which the Switzerland division and AWD have made a significant contribution. Overall, operating costs have already fallen by around 10%. Swiss Life has also made good progress in gearing its new business towards modern life and pensions products with variable guarantees and also towards risk products. Their share of new business increased to 60% in 2009.
Carla Zimmermann joined the Zurich branch of the renowned banking institution Mirabaud & Cie. in 2006. As an investment advisor, the up-and-coming manager cultivates relationships with clients in Switzerland and throughout Europe.
share. It is only through recognising our clients as unique individuals that we can establish a relationship of trust which lasts a lifetime.
In the year under review, the rate of Swiss Life products distributed through AWD (measured on basis of production volume) advanced noticeably to CHF 112 million.
Insurance benefits, including changes in insurance reserves, fell by 2.0% to CHF 7.9 billion, mainly due to the reduction in the BVG minimum interest rate from 2.75% to 2% and to lower savings deposits. The significantly improved financial result led to a considerable rise in allocations to the reserves for policyholder bonuses.
Swiss Life in France generated premium volume of CHF 5.3 billion, which represents a 5% rise in local currency (after adjustment for a sum of CHF 476 million from the termination of a partnership in 2008). Its savings and pensions business advanced by 5% (11% in local currency) and the company again achieved above-average premium income from unit-linked products. In health and disability insurance, premiums receded by 3% (3% rise in local currency). This rise in local currency was mainly attributable to the synergies gained from its own distribution network and from brokers, whereas premiums generated through partner networks declined in 2009. Property insurance premiums remained stable.
The French insurance market grew on the whole by 9%. More specifically, an 11% increase was recorded in savings and pensions products, 4% in health and disability insurance and 1% in property insurance.
INSURANCE GERMANY — Swiss Life posted a segment result of CHF 92 million for Germany in the year under review. This represents a rise of CHF 63 million vis-à-vis the previous year, which was impacted by the financial crisis.
In the 2009 financial year, distribution of Swiss Life products through AWD (measured on basis of production volume) advanced 107% to CHF 574 million.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 2 169 1 977 9.7%
Net earned premiums and policy fees 1 753 1 819 –3.6%
INSURANCE OTHER — The segment Insurance Other comprises the areas Private Placement Life Insurance (PPLI), Corporate Solutions, Swiss Life Products (Luxem-
The PPLI business area specialises in life insurance for high net worth individuals and has built up a strong presence in Liechtenstein, Luxembourg, Singapore, Dubai and Switzerland. It put in an excellent performance in the 2009 financial year, writing CHF 5 billion in gross premiums. This success stems from the recovery of the financial markets, PPLI’s unique global approach and its international sales team, which has built up a sound reputation. Thanks to further growth and strict cost management, PPLI expects to return a profit in 2010.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 5 263 2 639 99.4%
bourg) S.A. and Payment Protection Insurance (PPI). The segment posted a loss of CHF 43 million in the year under review due to investments made in new business fields.
In 2009 AWD generated sales of EUR 528.7 million, which corresponds to a decline of 17%. Sales of unitlinked products fell by 20% and investment funds showed a drop of 36% from the previous year’s level. AWD achieved 10% growth in sales of life insurance and pension products vis-à-vis the previous year and increased its sales of private health insurance by 11% and of property and accident insurance by 21%.
Restructuring measures have already boosted AWD’s operating result to EUR 12.6 million. A total of EUR 53.7 million in one-off and restructuring charges was incurred during 2009 in connection with the reorganisation. EBIT stood at EUR –41.1 million (2008: EUR 19.7 million). The restructuring measures aim to return AWD to stable and profitable growth from 2010.
In its core market Germany, AWD merged the back offices of Horbach and AWD Deutschland GmbH and downsized the holding. In the United Kingdom, stricter requirements under the Retail Distribution Review posed major challenges to management. The implementation of regulatory requirements and the deterioration in market conditions were the main reasons behind the decision in November 2008 to reorganise AWD UK and to dispose of business units. The restructuring process in the UK was completed in 2009 and the region has returned to profitability. The business model in Austria was also redesigned. Widespread media coverage of court cases relating to past selling of real estate equities hampered business here. AWD’s decision to pull out of Romania and Croatia was based on an inability to achieve critical mass. The remaining markets in the CEE region continue to be a growth region for AWD, with future development here also focusing on profitability.
New asset management applications were introduced in Switzerland at the start of 2010. Within the framework of MILESTONE, the segment’s top priorities for the current year are to expand and optimise all associated processes and to further advance its third-party business.
INVESTMENT MANAGEMENT — The Investment Management segment comprises Group-wide institutional asset management activities. At CHF 77 million, the 2009 result is CHF 17 million less than the previous year, mainly due to lower asset management income. Thanks
HUMAN CAPITAL — A key factor in a company’s success is the extent to which its employees go the extra mile and are committed to the company. To further strengthen its staff’s engagement and affinity with the company, Swiss Life launched and implemented a series of initiatives in 2009, focusing on cultivating the performance culture within the organisation and on Swiss Life’s commitment to being a responsible employer.
Swiss Life’s success essentially depends on a highly skilled workforce showing above-average engagement. With this in mind, all human capital management measures are geared towards positioning Swiss Life in the market and vis-à-vis the workforce as a responsible and attractive employer. In doing so, Swiss Life consistently applies the corporate strategy and corporate values.
PERFORMANCE CULTURE — As part of the MILESTONE programme, a Group-wide initiative entitled “My Milestones ” was launched in the fourth quarter of 2009. Its aim is to accentuate Swiss Life’s values and employee competencies so as to strengthen the performance culture. This is because the company recognises that the contribution of each and every employee is crucial in successfully driving the corporate strategy forward. And the desired mindset and behaviour defined in the corporate values are vital in achieving this. Clear and open communication nurtures a relationship of trust, which fosters closer and more effective cooperation. In addition, a deeper understanding of the processes and activities equips employees to perform their tasks more efficiently. To address these issues, every country and market unit within the Group has launched a programme of measures specifically tailored to their individual needs.
ENGAGEMENT — In 2009 the Swiss Life Group revised the concept and design of its employee survey, strictly aligning it to the corporate strategy. A commitment index showing how strongly employees feel an affinity towards Swiss Life is now also used to measure the value “engagement ”. Engagement encompasses three components: Engaged employees speak positively about the company, are committed to the company and go the extra mile. Companies which have a high engagement rating are more successful than their competitors on the market.
In addition, specific training measures are in place for managers destined for senior management roles at Swiss Life Group level. In a series of five modules, participants from all countries and units work on strategically relevant subjects such as self-management, client orientation, financial management, strategy and cross-border and cross-divisional cooperation. In 2009, 4 of the 19 participants were women. The retention rate among the past participants at senior management level currently stands at 90%.
SOCIAL PARTNERSHIP — Cooperation with the Europa Forum (European works council) was again stepped up at Swiss Life Group level and in Germany and France in 2009, with intensive dialogue and an in-depth exchange of information taking place. The Europa Forum was founded in 1996 and is based on one of the most farreaching agreements in Europe.
In this connection, around 520 job reductions will be made in Switzerland by 2012. The job reduction process has been carefully planned. To support its implementation, Swiss Life has introduced a programme of measures which were worked out with the social partners and which have been in force since 1 January 2005. Natural fluctuation and the possibilities offered by flexible working hour models were exploited, and the staff affected were individually assisted and supported with their professional reorientation by a team of experts.
RESPONSIBLE CORPORATE CONDUCT — Swiss Life is committed to helping people create a financially secure future. This commitment goes beyond the scope of its actual business activities. Swiss Life commits itself socially, involves itself in political debate and is mindful of its carbon footprint. It sees itself as looking to the long term with the focus on the individual.
Clients, partners, employees and shareholders place their trust in Swiss Life. Responsible corporate conduct is part and parcel of Swiss Life’s culture and is based on five corporate values which guide employee behaviour: expertise, proximity, openness, clarity and engagement. Adherence to these principles is a prerequisite for legally and ethically correct business conduct and for financial profitability. It is also, however, central to Swiss Life’s social, political and environmental commitment.
SOCIETY — In 2009, the Perspectives Foundation, which Swiss Life founded on the occasion of its 150th anniversary in 2007, donated approximately CHF 1 000 000 to support charitable initiatives in health, science, education, culture and sport, as well as humanitarian causes. One of the institutions supported in 2009 was the ENTERPRISE Foundation which awards the ENTERPRIZE for exemplary corporate behaviour in occupational training.
In France, the Fondation Swiss Life commenced its activities in 2009. The foundation focuses on projects and commitments in the field of health, supporting for instance the Institut Curie, a hospital and research facility devoted to the fight against cancer. The foundation also supports other charitable projects which are managed by Swiss Life employees.
ENVIRONMENT — Swiss Life has been committed to conserving natural resources for many years. The company is a founding member of the Swiss Climate Foundation which supports energy efficiency enhancement and climate protection measures in small and medium-sized companies (SMEs) in Switzerland. As a member of the Energy Model Zurich, Swiss Life aims to increase energy efficiency in its Zurich location by at least 1.5% per year and to steadily reduce its energy consumption and emissions. Since 2006, Swiss Life has been using power from renewable energy sources, enabling it to reduce its CO2 emissions by 4650 tonnes.
Swiss Life in France has committed itself to the recommendations of the Charte de Développement Durable (Charter for Sustainable Development). Since 2008, Swiss Life in Germany has been taking part in the climate protection programme “ECOPROFIT” – a joint initiative of the city of Munich and the Chamber of Commerce and Industry, and was designated a “Münchner ÖKOPROFITBetrieb ” (Munich ECOPROFIT-certificated company) for its exceptional commitment to corporate environmental protection. As a result of sustainable economic activities, Swiss Life was able to save approximately 91 000 kWh of energy at its Munich location during 2007-2008, reducing CO2 emissions by 58.3 tonnes. This corresponded to cost savings of more than EUR 500 000. The successful sustainable measures included in the ECOPROFIT project were continued in 2009 and supplemented by further initiatives.
Sustainability is also gaining in importance in investment operations. In Switzerland, the Swiss Life subsidiary Swiss Life Asset Management, in collaboration with SAM Sustainable Asset Management, has been offering sustainable investments since 2005. This investment concept, using mixed mandates for institutional investors, selects both equities and bonds for their economic, ecological and social added value. In addition, Swiss Life offers a sustainable fund Swiss Life Fund (LUX) Equity Global Sustainability, and its unit-linked life insurance includes three sustainable fund portfolios (Eco).
In a fast-moving market environment with ever fiercer competition, brand identity is a major factor for success. A strong corporate identity offers key competitive advantages.
BRAND PROMISE — Introduced in 2009, the brand promise (known in the trade as a “claim”) is: “The future starts here.” People are concerned about the future. They want to be prepared for all eventualities, while maintaining their independence in order to realise their plans, dreams and wishes. The new claim is a call to take control of the future. At the same time, it is the brand promise which Swiss Life delivers and demonstrates in daily contact with its clients. The claim also radiates the self-confidence of a strong and forward-looking brand.
In line with the latest developments as regards corporate governance and the disclosure of the compensation report, Swiss Life decided in the year under review to submit the compensation report to the Annual General Meeting for approval for the first time.
Key information on corporate governance within the Swiss Life Group is summarised in the passages below. The full corporate governance report is provided in the Financial Statements (available at www.swisslife.com/report).
Talanx AG, Germany, disclosed on 20 May 2009 that a group composed of AmpegaGerling Investment GmbH, Talanx AG and Talanx Beteiligungs-GmbH & Co. KG held 2 987 988 Swiss Life Holding shares, corresponding to 8.52% of the voting rights.
BlackRock, USA, reported in a publication of 9 January 2010 that a group consisting of various companies and funds of the BlackRock group held a total of 1 190 832 shares and 775 other purchase positions of Swiss Life Holding, corresponding to 3.71% of the voting rights.
The notifications of significant shareholders pursuant to Art. 20 of the Stock Exchange Act can be found on the website of the SIX Swiss Exchange’s disclosure office (www.six-exchange-regulation.com).
– Conditional share capital: CHF 28 312 632, divided into 2 359 386 registered shares with a par value of CHF 12 each
SHARES — Subject to the 10% limit on voting rights set out in the Articles of Association (cf. the section on “Shareholders’ participation rights” on page 62), each share grants the right to one vote at the General Meeting of Shareholders.
CONVERTIBLE BONDS AND OPTIONS — One convertible bond issue was outstanding on the balance sheet date, the Swiss Life Holding 0.625% issue (2004–2010) amounting to CHF 317 000 000. Neither Swiss Life Holding nor the Group companies had granted options on rights to participate in Swiss Life Holding.
Member of the Board of Directors – Cellere AG, St. Gallen, Member of the Board of
Trustees – Horizon21, Pfaeffikon Canton of Schwyz, Member of the Insurance Linked Securities Advisory Committee
AL Volker Bremkamp joined Albingia Versicherungs AG in Hamburg (a subsidiary of Guardian Royal Exchange plc, London) in 1963, receiving his qualifications as an insurance expert in 1965. Between 1969 and 1971 he was employed by various insurance companies and brokers in London and Paris. He returned to Albingia Versicherungs AG, Hamburg, in 1971, serving as an Executive Director from 1978 to 1989 and, from 1989 to 2000, as Chief Executive Officer of Albingia Lebensversicherungs AG and of Albingia Versicherungs AG. Volker Bremkamp was an Executive Director and, at the same time, Group Executive Director, Continental Europe, of Guardian Royal Exchange plc, London, from 1995 to 1999, which was taken over by the AXA Group in 1999. From 1999 to 2000 he held the position of Executive Director of AXA Colonia Konzern AG, Cologne (holding company of AXA Germany ). He has been Managing Director of BMB Bremkamp Management- und Beteiligungs-GmbH since 2000 and Managing Director of Xenios Invest GmbH since 2007.
Board of Directors – OCAD AG, Baar, Chairman of the Board of Directors – Infrassure Ltd., Zurich, Member of the Board of
AL After studying medicine and gaining many years of sales experience in the financial services sector in various management positions, in 1988 Carsten
Peter Quadri will be put forward for re-election at the Annual General Meeting of Swiss Life Holding on
Directors – Bühler AG, Uzwil, Member of the Board of Directors – Zurich Chamber of Commerce, Chairman – Unitectra Ltd, Zurich and Berne, Chairman of the
AL Franziska Tschudi graduated in law at the University of Berne and passed her bar exam there in 1984. She studied US law at Georgetown University,
Geneva, she served as Secretary General at SIG Holding AG from 1992 to 1995. She then became a Member of the Executive Board of WICOR Holding AG (“Weidmann Group”), Rapperswil in 1995, where she was Head of Corporate Development and, from 1998, Head of the Business Area Electrical Technology Asia/Pacific. She has held the positions of Chief Executive Officer and Managing Director of WICOR Holding AG since 2001.
Swiss Life — Business Review 2009 duties and the Board of Directors with issues relating to corporate governance. The Committee also supports the Board of Directors with key strategic decisions.
NOMINATION AND COMPENSATION COMMITTEE — The Nomination and Compensation Committee supports the Board of Directors with setting the compensation policy and with key personnel decisions regarding appointments to the highest levels of management and related performance-based and market consistent compensation.
TIVE BOARD — The Organisational Regulations of Swiss Life Holding provide for the comprehensive delegation of the executive management responsibilities of the company to the Group CEO and the Corporate Executive Board, with the exception of those duties reserved for other bodies in accordance with the law, the Articles of Association or the Organisational Regulations themselves.
EXECUTIVE BOARD — The Group CEO regularly informs the Chairman of the Board of Directors and the Board of Directors and its committees on the course of business, new business activities and significant projects. The Group CEO informs the Chairman of the Board of Directors immediately of any extraordinary matters. Considerable expenditure which is unbudgeted for and amounts to more than 10% of the relevant budget must be submitted to the Chairman’s and Corporate Governance Committee for approval. Similarly, significant investments and divestments require the approval of the Investment and Risk Committee or, when they reach a certain level, the approval of the Board of Directors as a whole.
The organisational structure of the Group is geared to the main functions of its business. The resultant organisation is reflected in the division of tasks within the Corporate Executive Board.
The Corporate Executive Board is responsible for implementation of the corporate strategy, for the establishment of conditions governing business operations and for financial guidance. It is responsible for the preparation of the resolutions for the Board of Directors and its committees, and for monitoring the implementation of these decisions in the Group. The Corporate Executive Board is vested with the authority to rule on business referred to it by the Board of Directors, the Board of Directors committees and the Chairman of the Board of Directors, insofar as decision or approval is not reserved exclusively to one of these.
On 31 December 2009 the Corporate Executive Board of Swiss Life Holding was composed of the following members: Member of the Corporate Executive
AL Bruno Pfister graduated from the University of Geneva with a master’s degree in law before being called to the bar in Geneva.
Following completion of his business management studies (MBA from the UCLA Graduate School of Management in Los Angeles), the initial stages of his career saw him working for Chase Manhattan Bank in London and Geneva. From 1988 onwards he was a management consultant for McKinsey & Co in Zurich. In 1996 Bruno Pfister became Chief of Staff of the Private Banking division at Liechtenstein Global Trust (LGT) where he managed a global strategic project before being appointed Chief Financial Officer of LGT Group and LGT Bank in Liechtenstein in 1998. In 1999, as a Member of the Credit Suisse Group Executive Board, he took over as Head of Customer Segment Management and Product Management at Credit Suisse.
IVO FURRER — Born 1957, Swiss national Chief Executive Officer Switzerland (CEO Switzerland)
THOMAS BUESS — Born 1957, Swiss national Group Chief Financial Officer (Group CFO)
AL After completing his business administration and economics studies at the University of St. Gallen and a two-year research activity at the Institute of
CHARLES RELECOM — Born 1953, Belgian national Chief Executive Officer France (CEO France)
AL Charles Relecom graduated from the University of Namur (Belgium) with a degree in mathematics and went on to gain a master’s degree in Actuarial Science at the University of Louvain (Belgium). He began his career in 1978 as Chief Actuary and Chief Technology Officer at Swiss Life in Belgium. In 1984 he moved to the head office in Zurich, where he played a significant role in setting up the International Division. From 1988 to 1994 he worked for Elvia Life as Director of Sales in the key accounts business. In 1994 he moved to «La Suisse» and, in 1998, was appointed CEO of the non-life business and Chief Actuary. In 2000 he became the CEO of «La Suisse», a position he held until 2005 when the company was integrated into the Swiss Life Group. Following the integration, Charles Relecom returned to Swiss Life in Belgium, initially as the CEO of Zelia S.A. and, from February 2006, as CEO for the entire Belgian business.
From left to right: Matthias R. Aellig (Group CRO), Klaus G. Leyh (CEO Germany), Walter Schönbächler (Chief Audit Executive), Thomas Buess (Group CFO), Charles Relecom (CEO France), Ruedi Bodenmann (Head of Group Product Management), Manfred Behrens (CEO AWD), Bruno Pfister (Group CEO), Christian Pfister (Head of Group Communications), Ivo Furrer (CEO Switzerland), Hans-Peter Conrad (General Counsel), Karl P. Ruoss (Head of Group Human Resources), Patrick Frost (Group CIO), Beat Hubacher (Delegate for Corporate Mandates)
She and her advisor share an interest in sailing and hiking.
Hermann Schweigert began working as an independent insurance broker in 1983. His business relationship with Swiss Life dates right back to the start of his career. For him, it’s important that his clients live quite close by, so that he can get to know them all personally and meet them occasionally at the bakers or in the local supermarket. He also wants to limit his number of clients to 1000 and his staff to 4. He is very happy that his son Benno came on board two years ago. Benno shares his outlook for the company and plans on taking over the reins some day.
As with all my clients, when I first met Dr Dietlind von Laßberg, we worked together to precisely identify her needs in terms of a concept. Once we had this, the next step was to find the right products on the market. As so often in the past, Swiss Life had exactly what we needed. Looking back, my maxim proved true once again: Success is the sum of small efforts, repeated day in and day out.
Also included in the information on compensation disclosed for the period under review is the variable compensation to Corporate Executive Board members for the 2009 financial year, determined and payable as a cash bonus at the beginning of 2010. The members of the Board of Directors have not been granted variable compensation for the 2009 financial year.
As already stated in the 2008 compensation report, the members of the Board of Directors did not receive any variable compensation in the form of blocked shares for the 2008 financial year. Furthermore, the members of the Corporate Executive Board did not receive a cash bonus or a variable compensation component in shares.
The chosen compensation system is in line with the market environment and must be competitive. The overall compensation takes into account the employees’ professional skills, engagement and personal performance.
ING BODIES — The following compensation in cash was received by acting members of the Board of Directors and the Corporate Executive Board during the period under review: In CHF
Rolf Dörig ceded the position of Delegate of the Board of Directors on 7 May 2009 to take over from Bruno Gehrig as Chairman of the Board of Directors.
Compensation remitted to members of the Board of Directors comprises the basic compensation, compensation in cash and variable compensation in shares. The basic compensation takes into account membership of the Board of Directors of Swiss Life Holding and its subsidiary Swiss Life Ltd as well as membership of the individual Board Committees. It is partly paid in the form of blocked shares. The additional compensation in cash is commensurate to the function and workload and is determined annually by the Board of Directors. If Swiss Life Group’s business operations have proved successful, a further, variable compensation component may be remitted in the form of Swiss Life Holding shares. This is decided by the Board of Directors, taking into consideration the business results.
As in previous years, the equity compensation programmes for 2008 and 2009 are based on two objective performance criteria, each with a 50% weighting. Depending on how the two criteria develop over the course of three years, the number of PSUs can increase by up to a factor of 1.5 or drop to zero. One criterion is the Total Shareholder Return on Swiss Life Holding shares (TSR Swiss Life Holding), whereby a performance in excess of 20% is required for the subscription right to share allocation to arise after three years. The second criterion involves comparing the TSR of the company’s own shares with the TSR of the shares of the companies included in the Dow Jones STOXX 600 Insurance Index (TSR Outperformance). Based on this second criterion, a subscription right arises if the performance on expiry of the three-year term is above the first quartile in comparison with the companies in question. The value of the PSUs allocated equals the fair value as at 1 April of the year of allocation. It is determined by an independent consultancy company.
2 “Closely linked parties” are natural persons and legal entities pursuant to Art. 678 of the Swiss Code of Obligations that have close personal, economic, legal or de facto ties with members of the governing body. This typically includes spouses, minor children, companies controlled by members of the governing body, and natural or legal persons serving the members of the governing body in a fiduciary capacity.
As part of their basic compensation for 2009, the members of the Board of Directors were allotted the following Swiss Life Holding shares, subject to a three-year blocking period: Board of Directors 2940 shares, allocated at values of CHF 77.6649 and CHF 107.55531. The shares are subject to a three-year blocking period.
TORS — Rolf Dörig succeeded Bruno Gehrig as Chairman of the Board of Directors of Swiss Life Holding following the Annual General Meeting of 7 May 2009.
For the 2009 financial year, the members of the Board of Directors have not been granted variable compensation in shares. The shares allotted in 2009 form part of the basic compensation, 80% of which is granted in cash and 20% in shares.
Total compensation 2009 3 in cash and shares 1 238 690 including annual contribution to occupational provisions of CHF 195 656 1 434 346
Total compensation 2008 4 in cash and shares 1 621 806 including annual contribution to occupational provisions of CHF 195 656 1 817 462 1 Including company car and premium contribution for the position of Delegate of the Board of Directors. 2 Part of basic compensation. The allocation and valuation was effected on 18.12.2009 at an economic value of CHF 107.5553, which is equal to the tax value, taking into account a blocking period of three years. The share price at the time of allocation was CHF 128.10. For the 2009 financial year, no variable compensation in shares has been granted to the members of the Board of Directors.
2 For the 2009 financial year, no variable compensation in shares has been granted to the members of the Corporate Executive Board. 3 Without mathematical value of PSUs allocated.
In 2008 Bruno Pfister was allocated 5924 future subscription rights in the form of Performance Share Units (PSUs). On the allocation date of 1 April 2008, the fair value of one PSU was CHF 179.30. Taking into account the mathematical value of the PSUs allocated in 2008, which came to CHF 1 062 173, Bruno Pfister’s total compensation for 2008 amounted to CHF 2 870 514.
HOLDERS AND AGENDA — The rules set out in the Articles of Association for convening a General Meeting of Shareholders and drawing up the agenda comply with the stipulations of the law. Shareholders representing shares with a par value of at least one million francs can submit a written request within a time limit published in advance by Swiss Life Holding for the inclusion on the agenda of an item for discussion, together with the relevant motions.
ENTRY IN THE SHARE REGISTER — Entries can be made in the share register up to the day before the General Meeting of Shareholders. The company reserves the right to adhere to the legal maximum period of 20 days for recognition of entries in the share register.
DUTY TO MAKE AN OFFER — Swiss Life Holding’s Articles of Association provide for neither an “opting up” nor an “opting out” clause within the meaning of Art. 32 and Art. 22 of the Stock Exchange Act.
CLAUSES ON CHANGES OF CONTROL — No contractual provisions exist in favour of the Board of Directors or the Corporate Executive Board with regard to control of the company. Members of the Board of Directors must observe a notice period of twelve months under their employment contract.
PricewaterhouseCoopers (PwC) serves as external statutory auditor for 68% of the Swiss Life Group companies that are directly or indirectly held by Swiss Life Holding under its scope of consolidation.
In the report of the auditor, PwC confirms that it meets the legal requirements concerning professional qualification and independence.
OF THE LEAD AUDITOR — The Articles of Association stipulate that the external auditor is to be elected by the General Meeting of Shareholders for one financial year at a time. When Swiss Life Holding was established in 2002, PwC was named as statutory auditor and Group auditor. Since then PwC has been re-elected without fail. PwC has also acted as statutory auditor and Group auditor for Swiss Life Ltd since 1994. The partner at PwC in charge of auditing the Swiss Life Holding annual financial statements and consolidated financial statements (lead auditor ) has held that function since the 2004 financial year.
ADDITIONAL FEES — In 2009 PwC received additional fees totalling around CHF 3.0 million for advisory services (2008: CHF 2.1 million), approximately CHF 1.1 million of which was for actuarial advisory services, CHF 0.8 million for fiscal and financial advisory services and CHF 0.7 million for strategic advisory services.
VIS THE AUDITORS — The Audit Committee evaluates the independence of the external auditors and identifies possible conflicts of interest. It also examines the terms and conditions of the external audit mandates and assesses the audit plan and strategy for the year in question.
The external auditors submit regular written reports on the status of the auditing work. They also submit detailed reports on the half year and annual financial statements. At the end of the year, the external auditors draw up a comprehensive report for the attention of the Annual General Meeting of Shareholders and a detailed report on the financial year just completed for the attention of the Audit Committee, the Board of Directors and the Swiss Financial Market Supervisory Authority FINMA.
Swiss Life communicates actively and openly both within and outside the company. Key facts and figures about the Swiss Life Group can be found at www.swisslife.com. Furthermore, all interested parties can subscribe to the company ’s mailing list so as to receive up-to-date ad-hoc reports and media releases free of charge via the e-mail distribution system.
Impairment of property and equipment and intangible assets 16, 17 –24 –4
Net profit attributable to equity holders of Swiss Life Holding 278 350 non-controlling interests –1 –5
Financial liabilities at fair value through profit or loss 10 16 001 10 805 11 427
Notes capital premium shares differences equity earnings equity interests Total equity
Cancellation of treasury shares –51 –635 686 – – – – – –
Total net comprehensive income – – – –318 364 350 396 –17 379
Purchases of treasury shares – – –711 – – – –711 – –711
Sales of treasury shares – 12 150 – – – 162 – 162
Equity markets continued to suffer from the impacts of the financial crisis at the beginning of 2009 and the Swiss Life share price fell to an annual low in February. The situation started to improve in March and equity markets recovered to finish 2009 on a positive note.
Number of shares (incl. conversions in 2008) 31.12.2009 32 081 054 31.12.2008 35 084 554
Dow Jones STOXX 600 Insurance Index (in EUR) 30.12.2009 151 30.12.2008 134
Market capitalisation (in CHF million) 30.12.2009 4 235 30.12.2008 2 540
Dividend yield on year-end price (in %) 30.12.2009 3.79 30.12.2008 23.48
Gross written premiums, policy fees and deposits received 20 219 18 515 21 213 19 421 n/a
Net insurance benefits and claims –11 884 –12 915 –13 268 –12 012 –14 040
Net result from continuing operations 324 –1 143 726 576 n/a
Number of employees (full-time equivalents) 7 820 8 291 8 556 8 693 8 979 1 Including reserve release of CHF 304 million due to change in Dutch law. 2 Up to 2008, traditional embedded value methodology used; from 2009, market consistent embedded value methodology applied.
The Business Review and the Financial Statements for 2009 can be found at: www.swisslife.com/report
ANNUAL GENERAL MEETING OF SHAREHOLDERS 2010 6 May 2010, Hallenstadion Zurich
This year’s photo editorial profiles a selection of our clients and their advisors. They give an insight into their business relationships and explain how Swiss Life helps others to achieve independence and security.
In the interests of its shareholders, policyholders and staff, Swiss Life attaches great importance to corporate governance and the requirements it entails in terms of the management and organisation of the Swiss Life Group. The corporate governance of Swiss Life Holding Ltd (Swiss Life Holding) is based on the Directive on Information Relating to Corporate Governance issued by the SIX Swiss Exchange and the circular of the Swiss Financial Market Supervisory Authority FINMA on corporate governance, risk management and internal control systems for insurance companies. It is also modelled on leading national and international corporate governance standards, in particular the Swiss Code of Best Practice for Corporate Governance issued by the Swiss Business Federation, economiesuisse, as well as the Organization for Economic Cooperation and Development’s (OECD) principles on corporate governance.
This report describes the essential features of corporate governance within the Swiss Life Group. The structure below largely follows the Directive on Information Relating to Corporate Governance issued by the SIX Swiss Exchange, which came into force on 1 July 2002, and were revised on 1 January 2007 and 1 July 2009, and also takes into consideration the new regulations on transparency stipulated in the Swiss Code of Obligations with regard to the compensation of members of the Board of Directors and the Corporate Executive Board. Further information on the Code of Compliance and the values of the Swiss Life Group can be found in the section “Responsible Corporate Conduct” (page 33) in the Business Review.
The most important companies falling within the Group’s scope of consolidation are presented in the Consolidated Financial Statements (Note 38). Information on the listing on the SIX Swiss Exchange and market capitalisation can be found on page 70 in the Business Review. The organisational structure of the Group is geared to the main functions of its business. The resulting operational responsibilities are reflected in the allocation of responsibilities among the Corporate Executive Board. With regard to insurance operations, one person with responsibility for the market and results is assigned to each specific area.
SHAREHOLDERS — Barclays Plc, 1 Churchill Place, London E14 5HP, England, informed in the publication of 12 February 2008 that at that time it held, directly or indirectly, 1 474 185 registered shares of Swiss Life Holding, corresponding to 4.22% of the voting rights. These shares were held by the following subsidiaries of Barclays Plc: Barclays Global Fund Advisors, 45 Fremont Street, San Francisco, California 94105-2204; Barclays Global Investors Ltd, 1 Churchill Place, London E14 5HP; Barclays Bank Plc, 1 Churchill Place, London E14 5HP; Barclays Global Investors NA, 45 Fremont Street, San Francisco, California 94105-2204; Barclays Global Investors Japan Ltd, Ebisu Prime Square Tower, 1-1-39 Hiroo, Shibuya-KU, Tokyo 150 8402; Barclays Global Investors (Deutschland) AG, Apianstrasse 6, 85774 Unterföhring; Barclays Global Investors Canada Ltd, BCE Place, 161 Bay Street, Suite 2500, Box 614, Toronto, Ontario M5J 2S1; Barclays Bank (Schweiz) AG, Rue d’Italie 8-10, 1211 Geneva; Barclays Life Assurance Co Ltd, 1 Churchill Place, London E14 5HP.
Carsten Maschmeyer, Hanebuthwinkel 17, 30655 Hanover, Germany, reported in the publication of 23 October 2008, that he and his two sons, Marcel Jo Maschmeyer and Maurice Jean Maschmeyer, held a total of 1 216 211.60 purchase positions of Swiss Life Holding, which was equivalent to 3.48% of the voting rights (1 051 045 registered shares, corresponding to 3.01% of the voting rights). The same group disclosed in a publication of 24 November 2008 that it had since accumulated a total of 1 833 547 purchase positions, corresponding to a 5.24% share in the voting rights (1 603 547 of which were registered shares, corresponding to 4.59% of the voting rights). In the publication of 17 December 2008 the group disclosed that it held 2 114 616 purchase positions, corresponding to 6.05% of the voting rights (1 884 616 of which were registered shares of Swiss Life Holding, corresponding to 5.39% of the voting rights). In a publication released on 23 December 2008, Carsten Maschmeyer reported that the group had been extended to include the asset management firms CM Vermögensverwaltung GmbH & Co. KG and CM Vermögensverwaltungs -Geschäftsführungs GmbH. At that time the extended group held 2 174 616 purchase positions, corresponding to a 6.22% share of the voting rights: 1 944 616 registered shares of Swiss Life Holding (5.56% of the voting rights), in addition to 80 000 short puts (corresponding to 0.23% of the voting rights) and 150 000 discount certificates (corresponding to 0.43%) on the shares of Swiss Life Holding (cf. also on pages 26 and 27 details on share ownership as at 31.12.2009 of currently serving Board of Director and Corporate Executive Board members).
Quai 40, 8002 Zurich; Swiss Life Ltd, General-GuisanQuai 40, 8002 Zurich; Welfare Foundation for Swiss Life Ltd’s Internal Services; Welfare Foundation for Swiss Life Ltd’s Sales Force; Welfare Foundation for Swiss Life Ltd’s Internal Services and Sales Force in Switzerland, all c/o Swiss Life Ltd, General-Guisan-Quai 40, 8002 Zurich.
Deutsche Bank AG, Theodor-Heuss-Allee 70, 60486 Frankfurt, Germany, informed in a publication of 7 February 2009 that a group consisting of Deutsche Investment Management Americas Inc., 345 Park Avenue, New York; Deutsche Bank Trust Company Americas, 60 Wall Street, New York; Deutsche Asset Management (Japan) Limited, 2-11-1 Sanno Park Tower, Nagatacho, Chiyodaku, Tokyo; Deutsche Asset Management Investmentgesellschaft mbH, Mainzer Landstr. 178-190, 60327 Frankfurt and Deutsche Bank AG Frankfurt, TheodorHeuss -Allee 70, 60486 Frankfurt, held a total of 1 909 687 purchase positions of Swiss Life Holding, corresponding to 5.46% of the voting rights (326 891 of which were registered shares, corresponding to 0.93%). This group also held 946 309 sales positions, corresponding to 2.71% of the voting rights of Swiss Life Holding. In its publication of 11 March 2009, Deutsche Bank announced that the group had been extended to include DWS Investment S.A. Luxembourg, 2 Boulevard Konrad Adenauer, 1115 Luxembourg. Together the group held a total of 2 246 666 purchase positions, corresponding to 6.43% of the voting rights (195 743 of which were registered shares of Swiss Life Holding, corresponding to 0.56% of the voting rights). The group also held 1 241 594 sales positions on Swiss Life Holding shares, corresponding to 3.55% of the voting rights. In the course of the year, the group reported at various times that the holding had fallen below or exceeded the reportable threshold of 3%: Publication of 26 June 2009 (3.86% purchase positions and 5.4% sales positions), publication of 19 September 2009 (5.08% purchase positions and 7.3% sales positions) and publication of 24 September 2009 (4.06% purchase positions and 5.99% sales positions). Finally, on 6 November 2009 the group disclosed that its participation had fallen below the 3% reportable threshold.
Credit Suisse Group Ltd, Paradeplatz 8, P.O. Box, 8070 Zurich, Switzerland, informed in the publication of 28 March 2009 that it held, directly or indirectly, through Clariden Leu Holding Ltd., Bahnhofstrasse 32, 8001 Zurich, Credit Suisse (International) Holding AG,
Talanx AG, Riethorst 2, 30659 Hanover, Germany, reported in a publication of 1 April 2009, that together with HDI Haftpflichtverband der Deutschen Industrie V.a.G. (HDI V.a.G.), Riethorst 2, 30659 Hanover, it held 2 069 988 registered shares of Swiss Life Holding, equivalent to 5.9% of the voting rights. In a publication of 20 May 2009, Talanx AG reported a change in the group’s composition. The group at that time newly consisted of: AmpegaGerling Investment GmbH, Hohenzollernring 72, 50672 Cologne, Talanx AG, Riethorst 2, 30659 Hanover and Talanx Beteiligungs-GmbH & Co. KG, Riethorst 2, 30659 Hanover. Talanx Beteiligungs-GmbH & Co. KG is managed by the beneficial owner (HDI V.a.G.) as follows: The limited partner is Talanx AG, Riethorst 2, 30659 Hanover. As the sole shareholder, Talanx AG is the beneficial owner (HDI V.a.G.). The general partner is Hannover Beteiligungsgesellschaft mbH, Riethorst 2, 30659 Hanover. Talanx AG is the sole partner of Hannover Beteiligungsgesellschaft m.b.H. AmpegaGerling Investment GmbH is managed by the beneficial owner as follows: 94.9% is controlled by AmpegaGerling Asset Management GmbH, Hohenzollernring 72, 50672 Cologne (Talanx AG is AmpegaGerling Asset Management GmbH’s sole partner) and 5.1% by Alstertor Erste Beteiligungs - und Investitionssteuerungs-GmbH & Co. KG, Hamburg. Alstertor Erste Beteiligungs- und Investitionssteuerungs -GmbH & Co. KG’s sole limited partner is Talanx AG. On the publication date the group held 2 987 988 Swiss Life Holding shares, corresponding to 8.52% of the voting rights.
Swiss Life — Financial Statements 2009 1290 Avenue of the Americas, New York, NY 10019, AXA Investment Managers Paris S.A., 100 Esplanade du Général de Gaulle, 922932 Paris La Défense Cedex, AXA Investment Managers S.A., 100 Esplanade du Général de Gaulle, 922932 Paris La Défense Cedex, AXA Financial Inc., 1290 Avenue of the Americas, New York, NY 10019, AXA IM Rose Inc., One Fawcett Place, Greenwich 05830, AXA Equitable Financial Services, LLC, 1290 Avenue of the Americas, New York, NY 10019, AXA Rosenberg Investment Management LLC, 4 Orinda Way, Orinda, California 94563, Equitable Holdings LLC, 1290 Avenue of the Americas, New York, NY 10019, AllianceBernstein L.P., 1345 Avenue of the Americas, New York, NY 10105, AXA S.A, 25 Avenue Matignon, 75008 Paris, AllianceBernstein Corporation, 1345 Avenue of the Americas, New York, NY 10105, held a total of 990 013 shares in Swiss Life Holding, corresponding to 3.09% of the voting rights. The parent company is AXA S.A. The shares are actually held by the three asset management companies AXA Investment Managers Paris S.A., AXA Rosenberg Investment Management Ltd. and AllianceBernstein L.P. They are attributed to the parent company through the following structures: 1) AllianceBernstein L.P. is controlled by AllianceBernstein Corporation, which is controlled by Equitable Holdings LLC, which is controlled by AXA Equitable Life Insurance Company, which, in turn, is controlled by AXA Equitable Financial Services LLC, and this company, in turn, is controlled by AXA Financial Inc. AXA Financial Inc. is held by AXA S.A. 2) AXA Rosenberg Investment Management Ltd. is controlled by AXA Rosenberg Investment Management LLC, which is controlled by AXA Rosenberg Group LLC, which, in turn, is controlled by AXA IM Rose Inc. AXA IM Rose Inc. is held by AXA Investment Managers S.A., which, in turn, is held by AXA S.A. 3) AXA Investment Managers Paris S.A. is controlled by AXA Investment Managers S.A., which, in turn, is held by AXA S.A. On 22 December 2009 the group reported that its holding had fallen below the 3% reportable threshold.
BlackRock International Ltd., 40 Torphichen Street, Edinburgh EH3 8JB, BlackRock Investment Management (Australia ) Limited, Level 43, Grosvenor Place, 225 George Street, Sydney NSW 2000, BlackRock Fund Managers Ltd., 33 King William Street, London EC4R 9AS, BlackRock Investment Management LLC, 800 Scudders Mill Road, Plainsboro NJ 08536, BlackRock Financial Management Inc., 40 East 52nd Street, New York NY 10022, BlackRock Asset Management Australia Limited, Level 43, Grovesnor Place, 225 George Street Sydney NSW 2000, BlackRock Fund Advisors, 400 Howard Street, San Francisco, CA 94105, BlackRock Institutional Trust Company, N.A., 400 Howard Street, San Francisco, CA 94105-2618, BlackRock Investment Management (Dublin) Ltd., First Floor, Fitzwilton House, Wilton Place, Dublin 2 and BlackRock Asset Management Canada Limited, 161 Bay Street, Suite 2500, Toronto, Ontario M5J 2S1, held a total of 1 190 832 shares and 775 other purchase positions of Swiss Life Holding, corresponding to 3.71% of the voting rights.
The detailed notifications of significant shareholders pursuant to Art. 20 of the Stock Exchange Act can be found on the website of the SIX Swiss Exchange’s disclosure office at www.six-swiss-exchange.com,“ Admission /Issuers” area, “Being Public” section, “Disclosure of Shareholdings” subsection (www.six-swiss-exchange.com/ admission/being_public/disclosure/major_shareholders _en.html).
A table showing the shareholder structure is provided in the section “Information on Share Performance and Historical Comparison” on page 71 in the Business Review.
CAPITAL AND CHANGES IN CAPITAL — The capital structure of Swiss Life Holding was as follows on the balance sheet date: – Ordinary share capital: CHF 384 972 648, divided into 32 081 054 fully paid registered shares with a par value of CHF 12 each
Since the establishment of Swiss Life Holding on 17 September 2002, a number of capital market transactions have been conducted. A detailed description of the transactions carried out up to and including the end of 2006 can be found in the Corporate Governance section of the annual reports for the relevant years. The annual reports can be accessed at www.swisslife.com, “Shareholders & Analysts” area, “Archive Reports” section (www.swisslife.com/en/annualreports).
At Swiss Life Holding’s Annual General Meeting on 8 May 2007, the shareholders approved a dividend in the form of a reduction in par value of CHF 7 per registered share. Consequently, the ordinary share capital fell to shares with a par value of CHF 34 each, and the conditional capital decreased to CHF 124 700 814, divided into 3 667 671 registered shares with a par value of CHF 34 each. In 2007 the 0.625% convertible bond issue (2004–2010) was partially converted, creating 1 184 170 new registered shares. This meant that the ordinary share capital increased to CHF 1 188 654 926, divided into 34 960 439 registered shares with a par value of CHF 34 each, and the conditional capital decreased to CHF 84 439 034, divided into 2 483 501 registered shares with a par value of CHF 34 each.
On 7 May 2009 the Annual General Meeting of Swiss Life Holding decided on a capital reduction of CHF 51 059 500 by cancelling 3 003 500 shares with a par value of CHF 17, which were acquired under the share buyback programme approved on 8 May 2008. As a result the share capital decreased from CHF 596 437 418 to CHF 545 377 918. The Annual General Meeting also decided to pay a dividend of CHF 5 per registered share, again in the form of a reduction in par value. The share capital thus decreased from CHF 545 377 918 (32 081 054 registered shares, each with par value of CHF 17) to CHF 384 972 648 (32 081 054 registered shares, each with
SHARES — 32 081 054 fully paid Swiss Life Holding registered shares with a par value of CHF 12 each were outstanding on the balance sheet date. Subject to the 10% limit on voting rights set out in the Articles of Association (cf. the section on “Shareholders’ participation rights” on page 30), each share grants the right to one vote at the General Meeting of Shareholders.
REGISTRATIONS — Swiss Life Holding shares are not subject to any limitations on transferability. According to the Articles of Association, resolutions for the introduction, amendment or repeal of limitations on transferability must be put before the General Meeting of Shareholders and must be approved by two-thirds of the voting shares represented and by an absolute majority of the share par value represented.
FUNCTION — The Board of Directors is responsible for all matters that are not reserved for the consideration of the General Meeting of Shareholders (formally the supreme decision-making body of a public limited company) under the terms of the law (Art. 698 of the Swiss Code of Obligation OR) or by the company’s Articles of Association. In line with its non-transferable duties prescribed by law the Board of Directors is responsible, in particular, for the ultimate direction of the Group, as well as the supervision of the Corporate Executive Board.
Gerold Bührer 1st Vice Chairman Nomination and Compensation Committee 2002/2003/2005/20081 2011
Franziska Tschudi Member Audit Committee 2003/2005/2008 2011 1 Member of the Board of Directors of Swiss Life Ltd since 2000
ROLF DÖRIG — Born 1957, Swiss national Chairman of the Board of Directors
Other appointments: – Adecco S.A., Glattbrugg, Chairman of the Board of
Committee – Danzer AG, Baar, Chairman of the Board of Directors
AL Gerold Bührer graduated in economics (lic. oec. publ.) from the University of Zurich in 1972. Following 17 years with the Union Bank of Switzerland as a member of senior management in its financial sector and a Member of the Executive Board of its fund investment company, he joined Georg Fischer AG in 1991, where he served as a Member of its Executive Board (Finances) from 1991 until 2000. He began working as an independent economic consultant in 2001 and, since the end of 2006, holds the office of Chairman of economiesuisse. Gerold Bührer was a Member of the Grand Council of the Canton of Schaffhausen from 1982 to 1991 and, from 1991 to 2007, a Member of the Swiss Parliament (National Councillor).
School (MBA) before earning his doctorate in economics in 1983 at the University of Lausanne (Dr. ès sc. écon). From 1983 to 2001 he held various positions at the Zurich Financial Services Group in Switzerland and the USA, including Head of Corporate Center and Head of the Business Division Southern Europe, Asia/Pacific, Middle East, Africa and Latin America. From 1993 he served on the Zurich Financial Services Group’s Executive Committee. From 2002 to 2007, Frank Schnewlin chaired the Baloise Group’s Corporate Executive Committee as CEO and was, at the same time, Head of the International Division. Following his election to the Board of Directors of Swiss Life Holding in May 2009, he assumed the role of Chairman of the newly established Nomination and Compensation Committee.
AL Volker Bremkamp joined Albingia Versicherungs AG in Hamburg (a subsidiary of Guardian Royal Exchange plc, London) in 1963, receiving his qualifications as an insurance expert in 1965. Between 1969 and 1971 he was employed by various insurance companies and brokers in London and Paris. He returned to Albingia Versicherungs AG, Hamburg, in 1971, serving as an Executive Director from 1978 to 1989 and, from 1989 to 2000, as Chief Executive Officer of Albingia Lebensversicherungs AG and of Albingia Versicherungs AG. Volker Bremkamp was an Executive Director and, at the same time, Group Executive Director, Continental Europe, of Guardian Royal Exchange plc, London, from 1995 to 1999, which was taken over by the AXA Group in 1999. From 1999 to 2000 he held the position of Executive Director of AXA Colonia Konzern AG, Cologne (holding company of AXA Germany). He has been Managing Director of BMB Bremkamp Management- und Beteiligungs -GmbH since 2000 and Managing Director of Xenios Invest GmbH since 2007.
Chairman of the Supervisory Board – Everpublic AG, Hamburg, Chairman of the Supervisory Board – WAVE Management AG, Hamburg, Chairman of the
RUDOLF KELLENBERGER — Born 1945, Swiss national Member of the Board of Directors
AL Rudolf Kellenberger received his degree in civil engineering from the Swiss Federal Institute of Technology (ETH), Zurich, in 1970. Between 1970 and 1978 he was employed as a project planning engineer in the bridge construction industry, including three years in the United Kingdom. He joined Swiss Re in 1978, where he served as Head of the Engineering Department from 1990 to 1992. In 1993 he was appointed Member of the Executive Board with responsibility for Europe. From 2000 to the end of December 2004 Rudolf Kellenberger served as Deputy Chief Executive Officer of Swiss Re. He has been appointed to various boards of directors in the area of insurance since retiring in March 2005.
CARSTEN MASCHMEYER — Born 1959, German national Member of the Board of Directors
– International Neurobionics Foundation, Hanover, Vice Chairman of the Advisory Board
– “Germany – Land of Ideas” initiative, Hanover, Member of the Advisory Board
AL Henry Peter completed his studies in law at the University of Geneva in 1979, and in 1981 he was called to the Geneva bar. Following a pupillage in Geneva, a period of study as a visiting scholar at the University of California in Berkeley and legal work in Lugano, he obtained his PhD at the University of Geneva in 1988.
Since 1988 he has been a partner in a law firm in Lugano, currently Peterlegal SA. In addition, he has held the position of Professor of Business Law at the University of Geneva since 1997. He became a Member of the Swiss Takeover Board in 2004 and a Member of the Sanction Commission of the SIX Swiss Exchange in 2007.
Board of Directors – Casino de Montreux SA, Montreux, Vice Chairman of the Board of Directors/Chairman of the Audit Committee
FRANZISKA TSCHUDI — Born 1959, Swiss national Member of the Board of Directors
She studied US law at Georgetown University, Washington DC, earning an LL.M., and passed the bar exam for the US states of New York and Connecticut in 1987. Franziska Tschudi completed postgraduate studies at the University of St. Gallen (1991 to 1993), receiving an Executive MBA. After initially working as an Assistant for Media Law at the Institute for Constitutional and Administrative Law at the University of Berne, and practising business and media law in Zurich, Washington DC and Geneva, she served as Secretary General at SIG Holding AG from 1992 to 1995. She then became a Member of the Executive Board of WICOR Holding AG (“Weidmann Group”), Rapperswil in 1995, where she was Head of Corporate Development and, from 1998, Head of the Business Area Electrical Technology Asia/Pacific. She has held the positions of Chief Executive Officer and Managing Director of WICOR Holding AG since 2001.
Other appointments: – BIOMED AG, Dübendorf, Member of the Board of
Member of the Board – St. Gallen – Appenzell Chamber of Commerce and
Industry, St. Gallen, Vice Chairperson – economiesuisse, Zurich, Member of the Board of
The Board of Directors meets as often as business requires, but at least six times a year as a rule. Meetings are generally called by the Chairman of the Board of Directors. However, any member of the Board of Directors may request that a meeting be called, as may the Corporate Executive Board. In addition to the members of the Board of Directors, the Group CEO also generally attends the meetings or parts of meetings in an advisory capacity, as do other members of the Corporate Executive Board when required.
The Board of Directors met eleven times during the year under review in ordinary and extraordinary meetings. The meetings lasted around three and a half hours on average, with around 95% attendance rate. The Group CEO and the other members of the Corporate Executive Board attended all the meetings. The Board of Directors conducted parts of the meetings among themselves.
MITTEE — The Chairman’s and Corporate Governance Committee assists both the Chairman of the Board of Directors in performing his leadership and coordination duties and the Board of Directors with issues relating to corporate governance. The Committee also supports the Board of Directors with key strategic decisions.
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. Further members of the Corporate Executive Board and in-house or external specialists may also be invited to attend. The Chairman’s and Corporate Governance Committee meets at least six times a year.
The NCC consists of at least three members, all of which are independent members of the Board of Directors. A Board of Director member is regarded as being independent if he/she has not exercised any operational management role within the Swiss Life Group for at least three years and has no or only a minor business relationship with the Group.
The NCC may invite the Group CEO to part or all of its meetings in an advisory capacity. Other members of the Corporate Executive Board and in-house or external specialists may also be invited. The NCC meets on average three times a year.
INVESTMENT AND RISK COMMITTEE — The Investment and Risk Committee assists the Board of Directors in matters concerning investment management, financial management and risk management within the Group. The tasks of the Investment and Risk Committee include drafting proposals on the principle features of asset and liability management (ALM) and submitting them to the Board of Directors, determining the investment policy, assessing capital adequacy, verifying compliance with guidelines on investments, and establishing the risk tolerance in insurance and investment operations. The Investment and Risk Committee is vested with the authority to define various regulations and directives pertaining to the investment activities of the Swiss Life Group and must inform the Board of Directors accordingly. In addition, the Investment and Risk Committee is free to decide itself on investments at a particular level and specifies the terms of significant intra-Group financing.
tee (without voting rights). Further members of the Corporate Executive Board and in-house specialists may also be invited to attend. The Investment and Risk Committee meets at least four times a year.
Generally, the Group CFO and the Head of the Corporate Internal Audit attend the Audit Committee meetings or parts of the meetings in an advisory capacity. The Group CEO may attend the meetings of the Audit Committee (without voting rights). Representatives from the external audit services are also regularly invited (cf. also “Supervisory and control instruments vis-à-vis the auditors”, page 31. In addition, further members of the Corporate Executive Board or in-house specialists may also be invited to attend.
In the year under review, the Audit Committee convened five times (ordinary and extraordinary meetings), with an ordinary meeting lasting three and a half hours on average. There was full attendance, except in the case of one meeting were one member was unable to attend. Representatives from the external audit services were present at four of the meetings. To prepare for the meetings relating to the annual and half-year reports, the Audit Committee regularly called on the services of an independent financial and business expert.
EXECUTIVE BOARD — The Board of Directors is continually and comprehensively briefed on the activities of the Corporate Executive Board. The Group CEO regularly informs the Chairman of the Board of Directors and the Board of Directors and its committees on the course of business, new business activities and significant projects. The Group CEO informs the Chairman of the Board of Directors immediately of any extraordinary matters. Considerable expenditure which is unbudgeted for and amounts to more than 10% of the relevant budget must be submitted to the Chairman’s and Corporate Governance Committee for approval. Similarly, significant investments and divestments require the approval of the Investment and Risk Committee or, when they reach a certain level, the approval of the Board of Directors as a whole.
The Group CEO directs the business operations of the Group. The Group CEO, together with the Corporate Executive Board, works out the long-term objectives and strategic orientation of the Group for submission to the Board of Directors and, based on the resolutions of the Board of Directors, ensures the goal-oriented leadership and development of the Group. The Corporate Executive Board can form committees to address specific areas and can delegate competencies to such Corporate Executive Board committees.
The organisational structure of the Group is geared to the main functions of its business. The resultant organisation is reflected in the division of tasks within the Corporate Executive Board. The members of the Corporate Executive Board have a direct management role with functional management responsibility for cross-divisional competencies. The members of the Corporate Executive Board are responsible for setting objectives, financial planning, HR management and achievement of objectives within their division. They issue directives for their division within the context of legal and regulatory requirements, the relevant regulations and the Group directives valid for the Group as a whole.
Bruno Pfister has been with the Swiss Life Group since August 2002, initially as Group Chief Financial Officer (Group CFO) and, as of 1 January 2006, Chief Executive Officer International (CEO International). He assumed the position of Group Chief Executive Officer (Group CEO) of the Swiss Life Group in May 2008.
– Swiss Insurance Association (SIA), Zurich, Member of the Board and the Board Committee
– SIX Exchange Regulation, Zurich, Member of the Regulatory Board and Issuers Committee
appointed CEO Life Switzerland and Member of the Global Life Executive Committee of Zurich Financial Services.
Other appointments: – German Insurance Association (GDV), Berlin, Member of the Main Committee Life Insurance
AL After completing his business administration and economics studies at the University of St. Gallen and a two-year research activity at the Institute of International Economics, Thomas Buess launched his career in insurance in 1985. From 1985 to 1993 he assumed various positions in the area of finance at the ELVIA Group. In 1994 he joined Zurich Financial Services Group as Chief Financial Officer and Member of the Executive Committee of the Swiss P&C business unit. From 1997 to 1999 he was Chief Financial Officer of all Swiss operations. In 1999 Thomas Buess moved to the USA as Chief Financial Officer of Zurich Financial Services Group’s North American business area. In 2002 he was appointed Group Chief Financial Officer and Member of the Group Management Board. Thomas Buess went on to head the reorganisation of the life insurance business before assuming the role of Chief Operations Officer of Zurich Financial Services Global Life in 2004. In January 2009 he moved to Allianz Group as Head of Operational Transformation.
Other appointments: – Swiss Insurance Association (SIA), Zurich, Member of the Economics and Finances Committee
AL Charles Relecom graduated from the University of Namur (Belgium) with a degree in mathematics and went on to gain a master’s degree in Actuarial Science at the University of Louvain (Belgium). He began his
Swiss Life — Financial Statements 2009 career in 1978 as Chief Actuary and Chief Technology Officer at Swiss Life in Belgium. In 1984 he moved to the head office in Zurich, where he played a significant role in setting up the International Division. From 1988 to 1994 he worked for Elvia Life as Director of Sales in the key accounts business. In 1994 he moved to «La Suisse» and, in 1998, was appointed CEO of the non-life business and Chief Actuary. In 2000 he became the CEO of «La Suisse», a position he held until 2005 when the company was integrated into the Swiss Life Group. Following the integration, Charles Relecom returned to Swiss Life in Belgium, initially as the CEO of Zelia S.A. and, from February 2006, as CEO for the entire Belgian business.
Patrick Frost was appointed Member of the Corporate Executive Board and Group Chief Investment Officer (Group CIO) of the Swiss Life Group in July 2006.
Other appointments: – Castle Alternative Invest AG, Freienbach, Member of the Board of Directors – Technopark Zurich, Member of the Board of Trustees
In 1984 he moved to Hamburg Mannheimer AG, where he assumed various leading positions in the areas of law and sales and went on to become state manager. He joined Volksfürsorge Deutsche Lebensversicherungs-AG in May 1996 and, in 1998, was appointed Member of the Board of Directors with responsibility for sales and marketing. Manfred Behrens moved to Swiss Life in January 2004, where he held the position of Chief Executive Officer of Swiss Life in Germany (CEO Germany) until August 2008. He was appointed Co-Chief Executive Officer of AWD (Co-CEO AWD) in September 2008. In April 2009 he assumed the role of Chief Executive Officer of AWD (CEO AWD).
On 5 May 2009, Swiss Life informed that Thomas Müller, Group Chief Financial & Risk Officer (Group CFO), decided to leave the company for personal reasons at the end of June 2009, following seven years of successful service. As of 1 August 2009 Thomas Buess was appointed new Group CFO.
The information in this report is mainly presented in the same way as the previous year. Also included in the information on compensation disclosed for the period under review is the variable compensation to Corporate Executive Board members for the 2009 financial year, determined and payable as a cash bonus at the beginning of 2010. The members of the Board of Directors have not been granted variable compensation for the 2009 financial year.
As already stated in the 2008 compensation report, the members of the Board of Directors also did not receive any variable compensation in the form of blocked shares for the 2008 financial year. The members of the Corporate Executive Board did not receive a cash bonus and were not granted variable compensation in shares. Besides this information, last year’s report also contains details of the variable compensation for the 2007 financial year.
COMPENSATION POLICY PRINCIPLES — Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for establishing the guidelines on the Group’s compensation policy (incl. bonuses and equity compensation programmes) and with regard to employee benefit institutions. The compensation policy underpins the performance culture required by the corporate strategy and forms part of the HR policy. The aim is to retain qualified employees and recruit new, highly skilled staff. The chosen compensation system is in line with the market environment and must be competitive. The overall compensation takes into account the employees’ professional skills, engagement and personal performance.
Individual compensation is made up of a basic salary and variable short-, medium- and long-term salary components as well as contributions to occupational provisions and risk insurance. The basic salary is determined according to the employee’s function and skill set, and is annually re-assessed and adjusted if appropriate. The variable salary components are linked to the strategic objectives of the company and the individual divisions, and the associated financial and HR-related targets. Personal performance and target achievement are assessed annually in the employee appraisal procedure implemented throughout the Group (Group Performance System) and taken into consideration when applying the defined compensation policy.
The share option programme for Swiss Life Group management, which was introduced in 2000, was discontinued at the end of 2002. Accordingly, no further share options have been allocated since 2003.
55 members of the Swiss Life Group senior management participated in the 2007 equity compensation programme. A total of 56 222 PSUs were allocated; 24 444 to the Corporate Executive Board, of which 6717 to Rolf Dörig as Group CEO.
Two members of the Board of Directors resigned in the 2009 financial year. Bruno Gehrig resigned from his position as Chairman of the Board of Directors of Swiss Life Holding after the Annual General Meeting on 7 May 2009 due to his election to the Board of Directors of UBS Ltd in October 2008. After serving for six years, Pierfranco Riva also stepped down from the Board of Directors at the 2009 Annual General Meeting due to reaching the statutory age limit. Two new members were appointed: Frank Schnewlin and Carsten Maschmeyer. Rolf Dörig ceded the position of Delegate of the Board of Directors on 7 May 2009 to take over from Bruno Gehrig as Chairman of the Board of Directors.
Executive Board on 1 July 2008 and 1 October 2008, respectively. Paul Müller handed over his position as CEO Switzerland to Ivo Furrer as of 1 September 2008.
In the 2009 financial year, the composition of the Corporate Executive Board changed as follows. Reto Himmel, Group Chief Technology & Operations Officer (Group CTO), left the Corporate Executive Board effective 31 March 2009 due to the discontinuation of the Group CTO function. Thomas Buess joined the Board as of 1 August 2009 as the new Group Chief Financial Officer (Group CFO), replacing Thomas Müller who resigned from the Corporate Executive Board with effect from
Compensation to the members of the Corporate Executive Board comprises a salary, a variable bonus in cash, other compensation (child allowances, allowances for years of service, company cars, premium contributions to 3rd-pillar pension plans) and, possibly, variable compensation in shares. The salary is determined annually by the Board of Directors at the request of the Nomination and Compensation Committee, taking into account the function -related responsibility and workload. If the Swiss Life Group’s business operations have proven successful, a variable cash bonus and, possibly, variable compensation in shares are also granted. This is decided on by the Board of Directors, taking into consideration both the business results and the personal achievement of objectives by the members of the Corporate Executive Board.
For the 2009 financial year, like the 2008 financial year, no variable compensation in shares has been granted to the members of the Board of Directors or the Corporate Executive Board.
Corporate Executive Board none 1 Economic value equal to the tax value, taking the blocking period into account. The share prices on allocation amounted to CHF 92.50 and CHF 128.10.
SHARE OWNERSHIP — On the balance sheet date, acting members of the Board of Directors and the Corporate Executive Board (including closely linked parties) held the following number of Swiss Life Holding registered shares: SLH shares
LOANS — On the balance sheet date, there were no loans outstanding to members of the Board of Directors or the Corporate Executive Board: Board of Directors none
Details on the company’s benefit expenditure can be found in the Consolidated Financial Statements (Notes 23 and 30) and the Notes to the Swiss Life Holding Financial Statements. For reasons of transparency, information on the following benefits is provided here: As Chairman of the Board of Directors, Bruno Gehrig was affiliated to the employee benefits institutions of Swiss Life for the purpose of occupational provisions and obtains the corresponding pension benefits under the pension fund regulations. The regular employer contribution assumed on a pro-rata basis for Bruno Gehrig amounted to CHF 43 678.
Rolf Dörig, in his former role as Delegate of the Board of Directors and current position as Chairman of the Board, was and remains insured for occupational provisions with the employee benefits institutions of Swiss Life. A regular annual employer contribution of CHF 195 656 was assumed on his behalf in the period under review.
No such affiliation exists for other members of the Board of Directors; no contributions have been made on their behalf.
Shares 2 117 558 1 093 SLH shares at CHF 107.5553
3 Compensation received as Delegate of the Board of Directors and, following the Annual General Meeting of 7 May 2009, as Chairman of the Board of Directors of Swiss Life Holding.
RESTRICTIONS ON VOTING RIGHTS — In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of his own shares and those he represents. Legal entities and partnerships which are connected through capital, voting rights, uniform management or in any other way, as well as individuals or legal entities and partnerships which act in concert by virtue of agreement, as a syndicate or in any other way, are deemed to be a single person. Any amendment to or revocation of restrictions on voting rights must be approved by at least two-thirds of the voting shares represented at the General Meeting of Shareholders and an absolute majority of the share par value represented. The Board of Directors can permit exceptions to this limit on the basis of its discretionary powers; during the year under review, no such exceptions were granted.
REQUIRED MAJORITIES — In addition to the resolutions provided for by law, a qualified majority (corresponding to at least two thirds of the voting shares represented and an absolute majority of the share par value represented) is required to: – change provisions concerning restrictions on voting rights
SHAREHOLDERS AND AGENDA — The rules set out in the Articles of Association for convening a General Meeting of Shareholders and drawing up the agenda comply with the stipulations of the law. Shareholders representing shares with a par value of at least one million francs can submit a written request within a time limit published in advance by Swiss Life Holding for the inclusion on the agenda of an item for discussion, together with the relevant motions. The written application must be accompanied by a certificate issued by a bank to confirm that the shares are deposited with it until after the General Meeting of Shareholders is held.
DUTY TO MAKE AN OFFER — Swiss Life Holding’s Articles of Association provide for neither an “opting up” nor an “opting out” clause within the meaning of Art. 32 and 22 BEHG (Swiss Stock Exchange Act).
ADDITIONAL FEES — In 2009 PwC received additional fees totalling around CHF 3.0 million for advisory services (2008: CHF 2.1 million), approximately CHF 1.1 million of which was for actuarial advisory services, CHF 0.8 million for fiscal and financial advisory services and CHF 0.7 million for strategic advisory services. The remainder resulted from legal and other advisory services. The advisory services were performed in compliance with the relevant independency regulations set forth in the Swiss Code of Obligations and the Audit Supervision Act.
The Audit Committee also acknowledges and approves the various recommendations of the external auditors, including the Management Letter. If required, the committee discusses with representatives of the external auditors any issues which could have a major impact, either collectively or individually, on the financial situation or the result of the audit.
Furthermore, all interested parties can subscribe to the company’s mailing list so as to receive up-to-date ad-hoc reports and media releases free of charge via the e-mail distribution system (www.swisslife.com/subscription ). These releases are also published on the Swiss Life website at the same time as they are sent to subscribers, and are available online for at least two years (www.swisslife.com/media).
Swiss Life pursues an integrated, value-oriented risk management approach, involving both quantitative and qualitative elements. The goal is to protect customers’ funds and ensure the best possible investment of risk capital, while complying with the regulatory requirements.
CONTROL SYSTEM — Operational risk management (ORM) at Swiss Life includes the methods and processes used for the identification, assessment and steering or avoidance of operational risks. ORM defines operational risk as the danger that losses may result from shortcomings or failures in internal processes, people or systems, or from external events.
Market consistent embedded value (MCEV) is a measure of the consolidated value of shareholders’ interests in the in-force covered business of the Swiss Life Group. Covered business includes life, health and pension business of the company. The Group MCEV is a measure of the consolidated value of shareholders’ interest in the covered and non-covered business in force of the company. Business in force includes business written as at 31 December 2009; future new business is not included. The notion of market consistent embedded value (MCEV) will alternatively refer within the course of this report to the MCEV of Swiss Life’s covered business, of one of its market units, or to the Swiss Life’s Group MCEV.
PricewaterhouseCoopers have audited this market consistent embedded value report. Their opinion is part of this report and can be found in section 6.
The net asset value is split between: – The required capital (RC), i.e., the amount of capital provided by shareholders necessary to run the business
– The free surplus (FS): additional capital allocated to the covered business above the required capital
The value of in-force covered business is defined as the sum of: – The certainty equivalent value of future profits from inforce covered business (CEV)
– The time value of financial options and guarantees (TVOG), including the cost of credit risks
The IFRS net asset value (IFRS NAV) is defined as the unadjusted IFRS net asset value allocated to the non-covered business. For more details about the MCEV components, see section 4 on methodology. Please note that the notion of certainty equivalent value is equivalent to the notion of present value of future profits in the CFO Forum Principles.
The Group MCEV increased by 9%. The value of the noncovered business remained at the previous year’s level. The value of covered business increased by 16%, mainly caused by the economic recovery. This increase was weakened by waiving the liquidity premium. For the 2009 calculation, no liquidity premium was assumed, whereas for 2008, liquidity premiums of 65 bps (for Switzerland) and 50 bps (for France, Germany and Luxembourg) were applied.
The change in value of new business by 3% is driven by an increase in new business premiums, combined with lower new business margins.
The following table shows the MCEV by components, together with the previous year’s figures: In CHF million
Time value of financial options and guarantees –1 984 –1 481
The cost of residual non-hedgeable risks (CNHR) represents the value of risks which cannot be calculated in a market consistent way because there are no liquid markets, such as insurance risks, expense risks, and risks from variances to assumed rules for policyholder decisions. It is calculated under a cost of capital approach.
The value of in-force business (VIF) is the sum of the certainty equivalent value, TVOG, CNHR, and FC. Thus MCEV is the sum of net asset value and value of in-force business, or the sum of free surplus, required capital and value of in-force business.
The following sections show the premium volumes, measured in annual premium equivalent (APE) and present value of new business premiums (PVNBP), the value of new business and the new business margins on the basis of APE and PVNBP. The annual premium equivalent is defined as new annual premiums plus 10% of new single premiums. The present value of new business premiums is equal to new single premiums plus the present value of new annual premiums which is calculated on the same assumptions as the value of new business.
Additional explanations about new business calculations can be found under section 4.2 later in this report.
This table shows the value of new business together with the new business premium volumes and margins. Within MCEV reporting, PVNBP is used to measure the premium volume of new business. For better comparison with previous disclosures, the traditional measure of APE is also shown.
The increase in single premiums and subsequently in PVNBP is mainly generated by Private Placement Life Insurance (PPLI). The changes in economic assumptions together with waiving of liquidity premiums lowered the overall new business margin.
The table below shows the change in market consistent embedded value split by components from the MCEV as at 31 December 2008 to the MCEV as at 31 December 2009.
The operating MCEV earnings for non-covered business correspond mainly to gains and losses from Swiss Life Holding, AWD, Swiss Life Property Management and from the discontinued banking segment. The operating MCEV earning for covered business are explained in the next section. The comparatively very high operating earnings in 2008 are based on two effects: First, gains resulting from divestments and second, de-risking of strategic asset allocation mainly in Switzerland.
The other movements in IFRS net equity (non-covered business only) are mainly due to the sale of treasury shares, as well as the change in unrealised capital gains and losses and the change in minority interest.
The closing adjustments result mainly from a restructuring concerning the Swiss and French businesses. After the restructuring of the French business in 2008, the remaining French branch was left as a holding company without insurance activity and included in non-covered business for the Group MCEV 2008. During 2009, this branch – with a negative IFRS NAV – was integrated into the Swiss business. The effect on Group MCEV is neutral. In addition, the closing adjustments relate to the change in currency exchange rates during 2009.
Experience variances aggregate the impact of actual performance versus expectations on insurance contracts regarding non-economic assumptions such as mortality, expenses, lapses, as well as the deviations in handling of additional reserves. A strengthening of additional reserves in the Swiss business and their subsequent partial release over time leads to a decrease in NAV and an
Assumption changes refer to the impact of the change on assumptions such as future mortality, morbidity, longevity rates, changes in surrender rates, expense rates, and rules for future profit sharing. These are commented on in section 3.2.
Other operating variance refers to any other changes that differ from the expected values not captured by the items above. This includes effects of an improved approach for cost of credit risk as well as a refinement of interest rate modelling.
– correspondingly higher credit risk exposure and therefore higher costs of credit risk
– higher assumed (swaption) implied volatilities, where it has to be noted that the assumptions for the valuation at 31.12.2008 were based on market averages over 2008. For 2009, implied volatilities as at the valuation date were applied.
Economic 100 bp increase of interest rates (reference rates) 982 24% 38 31%
10% increase in equity / property market values 901 22% –1 10% decrease in equity / property market values –997 –24% –1 25% increase in equity / property implied volatilities –392 –9% –18 –15%
25% decrease in equity / property implied volatilities 302 7% 16 13%
5% proportionate decrease in mortality rates (annuities) –114 –3% –1 –1%
1 not available 2 For the base value, a solvency requirement of 150% is assumed.
As can be seen in the table above, the sensitivities with the biggest impact on the MCEV and the value of new business are the economic sensitivities: interest rates, equity/property market values, and their corresponding volatilities. Operational sensitivities such as expenses, lapse rates and required capital also have a significant impact. The same sensitivities are also relevant to the value of new business.
For the other parts of the Swiss Life Group, i.e., the noncovered business, the shareholder value is derived from its contribution to the Group’s IFRS net asset value.
This breakdown by market units essentially coincides with the IFRS insurance segments in the annual report. There are minor differences since the MCEV classification follows the legal structure in order to ensure a correct modelling of the profit sharing. A significant discrepancy from the IFRS insurance segment reporting is the treatment of Swiss Life Asset Management in France, which belongs in this report to the MCEV of Swiss Life in France.
Time value of financial options and guarantees –1 602 –148 –227 –7 –1 984
Time value of financial options and guarantees –1 051 –182 –242 –6 –1 481
Frictional costs of required capital –259 –216 –48 –7 –530 1 The value for France includes CHF 90 million in goodwill and intangible assets orginating from the non-life and non-health insurance operations.
SWITZERLAND — The relatively high amount of time value of financial options and guarantees results from a combination of a small spread between market and guaranteed interest rates, the high volatility of interest rates and relatively large costs of credit risk due to the significant share of corporate bonds in the Swiss asset portfolio. The “legal quote” rules (statutory minimum policyholder distribution ratio) applying to the profit sharing of the Swiss group life business also add to the time value of financial options and guarantees.
– The health insurance business of Swiss Life Prévoyance et Santé
GERMANY — The size of the cost of residual non-hedgeable risks comes from disability contracts which play an important role in the German business mix.
The time value of financial options and guarantees is relatively high. The reason is the high level of guarantees applicable to the German business together with the “legal quote” enforced in Germany. This effect is increased by high interest volatilities and low long-term interest rates.
New business annual premium equivalent (APE) 296 547 173 477 1 493 1 New business strain represents the effect on the net asset value from writing new business.
VALUE OF NEW BUSINESS BY MARKET UNIT FOR THE YEAR 2008
PRESENT VALUE OF NEW BUSINESS PREMIUMS (PVNBP) 3 824 3 767 1 356 1 987 10 935
SWITZERLAND — New business consists of new contracts and new coverages on existing contracts. Within group life business, replacements and newly hired persons for existing contracts are not accounted for as new business.
The value of new business written in 2009 dropped considerably to a mere 22% of the previous year’s value. This is mainly caused by the removal of the liquidity premium, narrowing the spread between market and guaranteed interest rates. Higher assumed volatilities also contributed to this decline.
In accordance with the strategy, there is a shift towards modern savings and retirement products with flexible guarantees and risk products. This shift did not result in a noticeable overall change of new business margin. Whereas the margin for modern products has been increasing, the margin for traditional business decreased due to a shift from products with regular premiums to single premium products, which are less profitable.
FRANCE — The value of new business for Swiss Life in France is determined as the sum of the value of new business for the life business and that for the health business.
The value of new business remained stable compared to 2008, in spite of a volume increase. The lower new business margin mostly resulted from two effects. First, the business mix was less favourable, namely a higher share of traditional vs. unit-linked saving. Second, the change from traditional embedded value to market consistent embedded value for the health business resulted in an increase of PVNBP and thus in a decrease in the new business margin.
GERMANY — The value of new business as well as the new business margin for the German operations have increased when compared with the values reported for 2008. The higher volume of risk and supplementary disability insurance contracts written contributed substantially to this enhancement.
SWITZERLAND — Almost the entire opening and closing adjustments result from restructuring concerning the Swiss and French businesses. This was described in section 2.4.
The dominant effect in the economic variances for the operations in Switzerland results from the narrowing of credit spreads. Economic variances also include a negative impact of a more risky strategic asset allocation. This is in accordance with the higher risk capacity at 31.12.2009 following the financial recovery during the reporting year.
In other operating variance, the effect of changing the model applied to the French health business from traditional embedded value to market consistent embedded value is included. The remaining impact comes mainly from the updated value of the French non-insurance companies.
The deviations in other operating variance are related to a higher part of the total business in-force being modelled together with an enhanced modelling of the policyholder surrender behaviour and the integration of the use of free policyholder reserves (Freie RfB) in emergency situations.
The higher basis for assumed recurring expenses for Corporate Solutions decreased the MCEV and is included in the assumption variances. A negative effect included here is related to the decreased assumed persistency rates for PPLI.
Reviewed expense allocations within Corporate Solutions as well as an enhanced bonus fund projection are the main reasons for the other operating variance.
The higher than anticipated investment return in 2009 due to the recovering market conditions resulted in higher assets under control. This is one of the main drivers for PPLI’s value in force and is reflected in the economic variances.
Swiss Life — Financial Statements 2009 4 Methodology 4.1 MCEV COMPONENTS FOR COVERED BUSINESS
NET ASSET VALUE (NAV) — The net asset value is the market value of assets allocated to the covered business, which are not backing the liabilities from the covered business.
REQUIRED CAPITAL (RC) — The required capital is the market value of assets, attributed to the covered business – over and above that required to back liabilities for covered business – whose distribution to shareholders is restricted. Swiss Life bases the amount of required capital on 150% of the statutory solvency level according to Solvency I.
The amount of required capital disclosed is presented from a shareholders’ perspective and thus is net of funding sources other than shareholder resources (such as subordinated loans or policyholders’ share in unrealised gains).
(TVOG), including the cost of credit risk (see below) 3. Cost of residual non-hedgeable risks (CNHR) 4. Frictional costs of required capital (FC)
CERTAINTY EQUIVALENT VALUE (CEV) — The certainty equivalent value is defined as the present value of the future shareholders’ statutory profits (net of tax) under the certainty equivalent scenario.
In this scenario, future market returns are determined as the forward rates implied in the reference rates at the valuation date. Discounting is done at the same reference rates. Consequently, the certainty equivalent value includes the intrinsic value of financial options and guarantees, but not the corresponding time value.
The rules for management and policyholders’ actions applied in the certainty equivalent scenario are the same as those used for the stochastic projection used to determine the time value of financial options and guarantees.
The cost of credit risk accounts for the credit risk of investments in bonds that would have otherwise been unaccounted for in other MCEV components. It is defined as the present value of charges on the projected economic capital for credit risk.
The initial economic capital for credit risk is defined as the impact on the present value of future profits corresponding to the 99% expected shortfall of the credit loss from the actual bond portfolio over 1 year, due to the migration and default risk. The underlying credit risk calculations are performed using an internal model based on the CreditMetrics2 methodology.
ASSETS — The asset model used for the calculation of the MCEV differentiates three main asset classes: – Cash and fixed income instruments – Equity-type investments (including real estate) – Derivatives
Actual initial market values of assets have been taken where available (“marked-to-market”), or estimated where there is no market (“marked to model”), for example by discounting unquoted loan and mortgage asset proceeds. Local regulatory and accounting frameworks (such as the amortisation of bonds or lower of cost or market principle ) are incorporated in the model.
When a substantial part of the assets is held in foreign currencies, these foreign assets are modelled explicitly (including the foreign currency exchange risk).
INSURANCE LIABILITIES — Liabilities are calculated in line with local statutory requirements using individual policy data. For projection purposes, policies of the same product with similar risk profiles are grouped together to form model points.
The stochastic economic scenarios are generated by the Economic Scenario Generator. This software was developed and provided by Barrie & Hibbert, a UK based financial consulting company.
Since the assets and liabilities within the Swiss Life Group are mostly denominated in Swiss francs, euros or US dollars, the economic scenarios model these three economies in a market consistent way. The exchange rates and dividend yields are modelled as additional risk factors, as well as the inflation rates in each economy.
For the calculation of the MCEV and the value of the new business as at valuation date, 2000 economic scenarios (also referred to as simulations) are used, ensuring a satisfying convergence of the models for all market units. For the calculation of the sensitivities and some steps in the movement analysis, some market units use fewer scenarios in connection with variance reduction techniques.
Dynamic management actions and policyholder behaviour mainly concern the following areas: profit sharing for participating life businesses, asset allocation and realisation of gains and losses, and assumed policyholder behaviour with regards to their contractual options. They are dependent on the time period, economic scenario considered, local regulations and type of business.
Non-covered business comprises all other entities of the Swiss Life Group that are valued as the unadjusted IFRS net asset value on a consolidated level, such as the distribution unit AWD or investment management, financing and holding companies. Non-covered business is added to the MCEV results from the covered business to form the Group MCEV.
For future MCEV publications, other units – such as Swiss Life Products (Luxembourg) S.A. and Swiss Life Insurance Solutions AG – will be included under covered business as soon as their MCEV is significant.
Allowance is made for gains or losses arising from the defined benefit pension plans for Swiss Life’s own employees. The effects are modelled as respective expenses in the projections. In Switzerland there is no need for separate projection of expenses as the pension scheme for own employees is included in the portfolio as an insurance contract. In other units the major part of the effect is covered by external insurance contracts. The rest is based on best estimates.
5.1.1 REFERENCE RATES — The reference rates used for the calculation of the MCEV 2009 are based on the swap rates as at 31 December 2009.
The reference rates used for the calculation of the MCEV 2008 include an additional liquidity premium of 65 basis points for Switzerland, and 50 basis points for France, Germany and Luxembourg. Swiss Life has considered that the spreads on debt securities for liquidity risks cannot be ignored in the disorderly market conditions observed at the end of 2008.
Economy 1 year option 2 year option 5 year option 10 year option 15 year option 30 year option 1 n/a: not available 5.1.2.2 INTEREST RATE VOLATILITIES USED FOR THE CALCULATION AS AT 31 DECEMBER 2008
5.1.2.4 PROPERTY VOLATILITIES USED FOR THE CALCULATION AS AT 31 DECEMBER 2008 AND 31 DECEMBER 2009
5.1.4.1 FORWARD INFLATION RATES USED FOR THE CALCULATION AS AT 31 DECEMBER 2009
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.2 TAXATION AND LEGISLATION
Non-economic assumptions such as mortality, morbidity and lapse rates have been determined by the respective business units based on their best estimate as at the valuation date. Best estimate assumptions are set by considering past and current experience.
To the Board of Directors of Swiss Life Holding AG General-Guisan-Quai 40 8002 Zürich
As requested, we have audited the accompanying Embedded Value Report 2009 of Swiss Life Group for the period ended 31 December 2009. The Embedded Value Report has been prepared in accordance with the Market Consistent Embedded Value (“MCEV”) Principles issued in June 2008 and amended in October 2009 by the European Insurance CFO Forum as described in Section 1.
CERTAINTY EQUIVALENT VALUE (CEV) — Certainty equivalent value is defined as the present value of the future shareholders’ statutory profits (net of tax) under the certainty equivalent scenario.
The cost of residual non-hedgeable risks accounts for risk factors such as mortality, morbidity, expenses and lapse rates.
FREE SURPLUS (FS) — The free surplus is the market value of any assets allocated to, but not required to support, the in-force covered business at the valuation date.
FRICTIONAL COSTS OF REQUIRED CAPITAL (FC) — The additional investment and taxation cost incurred by shareholders through investing required capital in the company compared to direct investment as individuals.
LOOK-THROUGH PRINCIPLE — Method by which profits or losses from service companies within the Swiss Life Group, which are directly related to managing the covered business, are included in the MCEV and in the value of new business.
Market consistent embedded value is a measure of the consolidated value of shareholders’ interests in the inforce covered business of the Swiss Life Group.
NET ASSET VALUE (NAV) — The net asset value is the market value of assets, attributed to the covered business over and above that required to back liabilities for covered business.
NEW BUSINESS MARGIN — The value of new business divided by the present value of new business premiums (PVNBP) or divided by the annual premium equivalent (APE) respectively.
NON-COVERED BUSINESS — All business of the Swiss Life Group which is not accounted for under covered business, such as investment management and AWD, is included in the non-covered business of the Group MCEV by means of their IFRS net asset values.
REFERENCE RATE — The reference rates used for the calculation of the MCEV are based on the swap rates at the valuation date. For the year-end 2008, liquidity premiums were included in addition (see section 5).
TOTAL MCEV EARNINGS — Change in MCEV and in Group MCEV in the reporting period after initial and closing adjustments and other movements in IFRS net equity.
VARIABLE ANNUITIES — Unit-linked contracts with additional guarantees and policyholder options.
Swiss Life — Financial Statements 2009 121 6 Earnings per Share 122 7 Premiums, Policy Fees and Deposits Received 123 8 Details of Certain Items in the Consolidated Statement of Income 128 10 Financial Assets and Liabilities at Fair Value through Profit or Loss 129 11 Financial Assets Available for Sale 130 12 Loans and Receivables 131 13 Financial Assets Held to Maturity 131 14 Investment Property 132 15 Investments in Associates 134 16 Property and Equipment 135 17 Intangible Assets including Intangible Insurance Assets 138 18 Other Assets and Liabilities 138 19 Investment Contracts 143 21 Other Financial Liabilities 143 22 Insurance Liabilities and Reinsurance Assets 146 23 Employee Benefits 150 24 Income Taxes 156 27 Capital Management 157 28 Acquisitions and Disposals of Subsidiaries 159 29 Assets Held for Sale and Discontinued Operations 160 30 Related Party Transactions 161 31 Assets under Management 162 32 Fair Value of Financial Instruments 164 33 Guarantees and Commitments 165 35 Future Minimum Lease Payments under Non-Cancellable Operating Leases – Lessor 166 36 Reclassification of Financial Assets Available for Sale to Loans 166 37 Reclassifications in the Consolidated Balance Sheet 168 38 Significant Subsidiaries 174 Report of the Statutory Auditor
Benefits and claims under investment contracts with discretionary participation –129 –184
Earnings per share attributable to equity holders of Swiss Life Holding
Revaluation surplus on owner-occupied property transferred to investment property – 8
Total net comprehensive income attributable to equity holders of Swiss Life Holding 661 396 non-controlling interests 2 –17
Liabilities associated with assets held for sale – – 37 502
Premiums, policy fees and deposits received, net of reinsurance 13 959 15 744
Benefits and claims paid, net of reinsurance –13 412 –17 610
Acquisitions of subsidiaries, net of cash and cash equivalents 28 –13 –1 211
Disposals of subsidiaries, net of cash and cash equivalents 28 38 4 118
Cash and cash equivalents for the account and risk of the Swiss Life Group’s customers 1 910 1 287
TOTAL CASH AND CASH EQUIVALENTS AS AT END OF PERIOD 8 683 9 408
Reduction in par value 26 –160 1 – – – – –159 – –159
Reduction in par value 26 –596 49 – – – – –547 – –547
On 29 March 2010, 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.
THE CURRENT PERIOD — In March 2007, the International Accounting Standards Board issued a revised IAS 23 Borrowing Costs which removes the option of immediately recognising as an expense borrowing costs relating to assets which take a substantial period of time to get ready for use or sale. The revised Standard applies to borrowing costs relating to qualifying assets for which the commencement date for capitalisation is on or after 1 January 2009. The revised Standard does not impact the Swiss Life Group, as it was already the Group’s accounting policy to capitalise borrowing costs directly attributable to the construction or acquisition of a qualifying asset as part of the cost of that asset.
As part of the annual improvement project, the International Accounting Standards Board issued an amendment to IAS 40 Investment Property and a consequential amendment to IAS 16 Property, Plant and Equipment in May 2008. Property under construction or development for future use as investment property falls within the scope of IAS 40. As the Swiss Life Group applies the fair value model for investment property, such property is measured at fair value. Where fair value of investment property under construction is not reliably measurable, the property is measured at cost until the date construction is completed or the date at which fair value becomes reliably measurable, whichever is earliest. The amendments apply for annual periods beginning on 1 January 2009. The adoption of this amendment led to a reclassification of property and equipment to investment property of CHF 92 million as at 1 January 2009.
IFRS 2 Share-based Payment – Amendment relating to vesting conditions and cancellations
Annual improvements to IFRS as published in May 2008, except for the amendment to IAS 40 Investment Property and IAS 16 Property, Plant and Equipment, described above.
FUNCTIONAL AND PRESENTATION CURRENCY — Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the Group’s entities operate (the “functional currency”). The consolidated financial statements are presented in millions of Swiss francs (CHF), which is the Group’s presentation currency.
Derivatives embedded in insurance contracts which are closely related or which are insurance contracts themselves, such as guaranteed annuity options or guaranteed interest rates, are reflected in the measurement of the insurance liabilities. Options, guarantees and other derivatives embedded in an insurance contract that do not carry any insurance risk are recognised as derivatives.
value through profit or loss. Gains and losses arising from fair value changes, being the difference between fair value and cost/amortised cost, are reported in equity. On disposal of an AFS investment, the cumulative gain or loss is transferred from equity to income for the period. Gains and losses on disposal are determined using the average cost method.
LOANS AND RECEIVABLES — Loans and receivables are non-derivative financial assets with fixed or determinable payments. Loans include loans originated by the Group and investments in debt instruments which are not quoted in an active market and for which no intention of sale in the near term exists. Loans are initially recognised at fair value, net of transaction costs or direct origination costs. Subsequent measurement is at amortised cost using the effective interest method.
FINANCIAL ASSETS PLEDGED AS COLLATERAL — Sales or purchases of financial assets under agreements to repurchase or resell and under lending agreements are accounted for as collateralised borrowings or loans. Interest paid or received is recognised in income over the life of each agreement.
FINANCIAL ASSETS AT AMORTISED COST — The Group assesses at each balance sheet date if there is objective evidence that a financial asset or a group of financial assets is impaired.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating ), the previously recognised impairment loss is reversed by the amount that represents the difference
Swiss Life — Financial Statements 2009 between the carrying amount and the new amortised cost value by adjusting the allowance account. The amount of the reversal is recognised in income.
ABLE FOR SALE) — At each balance sheet date and interim reporting date, an assessment is made whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of an equity instrument classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered objective evidence of impairment. In this respect, a decline of 30% or more is regarded as significant, and a period of 12 months or longer is considered to be prolonged. In such a situation, the impairment loss – measured as the difference between the acquisition cost and the current fair value – is removed from equity and recognised in the income statement. After recognition of an impairment loss, any further declines in fair value are recognised in the income statement, and subsequent increases in fair value are recognised directly in equity.
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. As a 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.
The accounting policies for insurance contracts and investment contracts with discretionary participation features have been modified as appropriate to be consistent with the IFRS requirements. Guidance dealing with similar and related issues, definitions, recognition and measurement criteria for assets, liabilities, income and expenses as set out in the IASB Framework for the Preparation and Presentation of Financial Statements has been considered.
Discretionary participation features are defined in IFRS 4 Insurance Contracts as contractual rights to receive, as a supplement to guaranteed benefits, additional benefits which are likely to be a significant portion of the total contractual benefits and whose amount or timing is contractually at the discretion of the issuer. These DPF are contractually based on the performance of a specified pool of contracts or a specified type of contract or on the realised and unrealised investment returns on a specified pool of assets held by the issuer or on the profit or loss of the company. The unrealised investment returns comprise gains/losses recognised directly in equity.
FRANCE — 85% of the investment result and 90% of any other results are allocated to the policyholders as a minimum.
NON-DISCRETIONARY PARTICIPATION FEATURES — Certain policyholder participation systems do not satisfy the criteria for discretionary participation features. These policyholder bonuses might be guaranteed elements. Some policyholder bonuses are based on benchmark interest rates which are credited to the policyholders. For certain products, policyholder bonuses are based on the development of biometric parameters such as mortality and morbidity. These policyholder bonuses are allocated based on the risk result of the contracts involved. The amount and timing of these bonuses are not subject to management discretion and are accrued to the policyholders ’ liabilities based on the relevant contractual terms and conditions.
DISCRETIONARY PARTICIPATION FEATURES — Premiums from traditional life insurance contracts are recog-
nised when due from the policyholder. Insurance liabilities are established in order to recognise future benefits and expenses. Benefits are recognised as an expense when due.
For contracts with a short duration (e.g. most non-life contracts ), premiums are recorded as written upon inception of the contract and are earned primarily on a pro-rata basis over the term of the related policy coverage. The unearned premium reserve represents the portion of the premiums written relating to the unexpired terms of coverage.
POLICYHOLDER DEPOSITS — For investment contracts with discretionary participation, savings premiums collected are reported as deposits (deposit accounting). The liabilities relating to these contracts are not calculated actuarially; they move in line with premiums paid by the policyholders plus interest credited less expenses and mortality charges and withdrawals.
COSTS — Liabilities for unpaid claims and claim settlement costs are for future payment obligations under insurance claims for which normally either the amount of benefits to be paid or the date when payments must be made is not yet fixed. They include claims reported at the balance sheet date, claims incurred but not yet reported and claim settlement expenses. Liabilities for unpaid claims and claim settlement costs are calculated at the estimated amount considered necessary to settle future claims in full, using actuarial methods. These methods are continually reviewed and updated. Claim reserves are not discounted except for claims with determinable and fixed payment terms.
OPERATING LEASE — The Group primarily enters into operating leases for the rental of equipment. The total payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.
DEFERRED ACQUISITION COSTS (DAC) — Costs that vary with and are directly related to the acquisition of new and renewed insurance contracts and investment contracts with discretionary participation features, including commissions, underwriting costs, agency and policy issue expenses, are deferred. Deferred acquisition costs are periodically reviewed to ensure that they are recoverable from future revenues.
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 which are expected to be realised. Expected gross margins include
Swiss Life — Financial Statements 2009 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.
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight-line basis for the expected useful life up to three years. Costs associated with developing or maintaining
computer software programs are recognised as an expense as incurred. Development costs that are directly associated with identifiable software products controlled by the Group and that will probably generate future economic benefits are capitalised. Direct costs include the software development team’s employee costs. Computer software development costs recognised as assets are amortised using the straight-line method over their useful lives, not exceeding a period of three years.
Swiss Life — Financial Statements 2009 is derecognised when the obligation specified in the contract is discharged or cancelled or expires.
Borrowing costs presented in the consolidated statement of income relate to the interest expense on the financial liabilities classified as borrowings whilst interest expense presented in the consolidated statement of income relates to interest expense on bank deposits, insurance and investment contract deposits and repurchase agreements.
OTHER FINANCIAL LIABILITIES — For deposits with fixed and guaranteed terms the amortised cost basis is used. Initial recognition is at the proceeds received, net of transaction costs incurred. Subsequently, they are stated at amortised cost using the effective interest method. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the deposits. For repurchase agreements, initial recognition is at the amount of cash received, net of transaction costs incurred. Subsequently, the difference between the amount of cash initially received and the amount of cash exchanged upon maturity is amortised over the life of the agreement using the effective interest method.
HEALTHCARE BENEFITS — Some Group companies provide healthcare benefits to their retirees. The entitlement to these benefits is usually based on the employee remaining in service up to the retirement age and the completion of a minimum service period. The expected costs of these benefits are accounted for in the same manner as for defined benefit plans.
In January 2008, the International Accounting Standards Board issued a revised version of IFRS 3 Business Combinations and related revisions to IAS 27 Consolidated and Separate Financial Statements. One of the main changes is an option which is added to IFRS 3 Business Combinations to permit the acquirer in business combinations in which control is achieved without buying all of the equity of the acquiree to recognise 100% of the goodwill, not just the acquirer’s portion of the goodwill (“full goodwill method”). The revised Standard requires that acquisitionrelated costs are expensed. Another change relates to partial disposals of an investment in a subsidiary while control is retained and to the acquisition of additional shares in a subsidiary after control was obtained. Such transactions are accounted for within equity. The amendments will be effective for annual periods beginning on or after 1 July 2009. IFRS 3 Business Combinations will be applied prospectively with effect from 1 January 2010 and therefore there will be no impact on comparative periods in the 2010 consolidated financial statements.
In July 2008, the International Accounting Standards Board published Eligible Hedged Items (an amendment to IAS 39 Financial Instruments: Recognition and Measurement ). The amendment provides clarification on
In April 2009, the International Accounting Standards Board issued annual improvements to IFRS. The improvements will be effective for annual periods beginning on or after 1 January 2010. The Swiss Life Group is currently analysing the impact of these changes on its financial statements.
In October 2009, an amendment to IAS 32 Financial Instruments: Presentation was issued. The amendment addresses the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. Previously such rights issues were accounted for as derivative liabilities. Provided certain conditions are met, such rights issues are classified as equity under the amendment regardless of the currency in which the exercise price is denominated. The amendment will be effective for annual periods beginning on or after 1 February 2010. The Swiss Life Group does not currently have such rights issues.
In November 2009, IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments was issued. The Interpretation addresses the accounting by an entity when the terms of a financial liability are renegotiated and result in the entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability. The Interpretation will be effective for annual periods beginning on or after 1 July 2010. The Swiss Life Group does currently not have such extinguishments.
In November 2009, an amendment to IFRIC 14 Prepayments of a Minimum Funding Requirement was issued.
The following amended Standards and Interpretations are not relevant to the Swiss Life Group: IFRS 1 First-time Adoption of International Financial Reporting Standards – Amendment relating to the cost of an investment on first-time adoption and amendment to the retrospective application of IFRS for first-time adopters
IFRS 1 First-time Adoption of International Financial Reporting Standards – Limited exemption from comparative IFRS 7 disclosures for first-time adopters
– The fair value of investment contracts and deposits, which are carried at amortised cost, is estimated using discounted cash flow calculations based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. The fair values of demand or savings deposits are equal to the amount payable on demand or the carrying amount. The carrying amounts of variablerate deposits approximate their fair values at the reporting date.
The fair value of investment property is based on current prices in an active market for properties of a similar nature, condition or location – suitably adjusted. Recent prices for similar properties on less active markets, with
Swiss Life — Financial Statements 2009 suitable adjustments for differences, are also used for the estimation of the fair values. Furthermore, investment property is valued using discounted cash flow projections if reliable estimates and reasonable assumptions (such as rental income and operating expenses) can be made, based on external evidence. Future expenditure that will improve the property is not included in the fair value. The risk-adjusted discount rates used in the cash flow projections reflect the specific nature and location of the individual properties. The cash flows used in the projections are based on actual rental income on a sustainable basis. Cost is reflected in the cash flows based on experience and budgets approved by management. The cash flows include inflation. External valuations for individual real estate assets are performed on a rotating basis, but at a minimum each property is evaluated every three years.
Insurance liabilities are established by using appropriate estimates and assumptions on mortality, morbidity, exercise of policyholder options and interest rates. With regard to mortality for example these estimates are typically based on standard industry tables. Management makes allowance for expected improvements due to continued advances in medical science and social conditions.
For insurance contracts and investment contracts with discretionary participation features without fixed and guaranteed terms, future premiums can be increased in line with experience. The assumptions used to determine the liabilities do not contain margins and are not lockedin but are updated at each reporting date to reflect the latest estimates.
In the group life business, tariffs can be adjusted due to loss experience with regard to disability each year. In the group life business, the tables are based on own company records reflecting loss experience. Especially in the group life business changes in the labour market may have a significant influence on disability. The tables are updated for significant changes.
EXPENSES AND INFLATION — In Switzerland, expenses are taken into account in the pricing of the contracts using internal statistics. Such calculated amounts are allocated to the different lines of business. Inflation is reflected in these calculations.
The reportable segments have been identified based on information about the components of the entity that management uses to make decisions about operating matters. The information provided to management focuses on the category of product lines and services. The organisational and management structure within the insurance business is geographical. The reportable segments have therefore been identified as follows: – Insurance Switzerland – Insurance France – Insurance Germany – Insurance Other – Investment Management – AWD – Other – Insurance (Discontinued) – Banking (Discontinued)
The insurance segments primarily consist of life insurance operations. These operations offer a broad range of life, pension, annuity and investment-type policies to both groups and individuals, including accident, health and disability coverage. The Group’s strategy focuses primarily on life and pensions in a number of key European markets, such as Switzerland, France, Germany, Luxembourg and Liechtenstein. The insurance segments also include a number of companies which hold investments primarily pertaining to life insurance.
“Insurance Other” comprises insurance operations in Liechtenstein, Luxembourg, Singapore and Dubai, as well as payment protection insurance.
Policy fees earned on investment and unit-linked contracts 18 95 26 73
Net gains/losses on financial instruments at fair value through profit or loss 237 117 –46 2
Benefits and claims under investment contracts with discretionary participation –117 –12 – –
Net insurance benefits and claims –7 887 –2 135 –1 829 –33
Impairment of property and equipment and intangible assets –23 – – –
– – – – – 15 –238 – –238 1 –4 –17 – – – –118 – –118
Premiums earned on insurance contracts 7 795 3 674 1 862 81
Premiums earned on investment contracts with discretionary participation 158 8 – –
Benefits and claims under insurance contracts –7 892 –2 824 –2 089 –39
Benefits and claims under investment contracts with discretionary participation –172 –12 – –
Net insurance benefits and claims –8 059 –2 804 –2 030 –20
Impairment of property and equipment and intangible assets –4 – – –
Other expenses –163 –266 –54 –39 of which inter-segment –136 –16 –45 –28
SEGMENT RESULT –748 40 29 –36 of which inter-segment –42 –15 –40 –35
Financial assets at fair value through profit or loss 1 857 7 331
Non-current assets for this purpose consist of investment property, property and equipment and intangible assets (except for intangible assets arising from insurance contracts ).
Swiss Life — Financial Statements 2009 5 Risk Management Policies and Procedures
Risk management functions are fulfilled at several levels by different bodies within the Swiss Life Group, such as the Investment and Risk Committee at the level of the Board of Directors of the Swiss Life Group and the Group Risk Committee at the level of the Corporate Executive
Board of the Swiss Life Group. The risk management functions at the level of the individual operations of the Swiss Life Group are organised accordingly.
The information below focuses first on the risk budgeting and asset and liability management process before covering in an extensive way the principal risk categories faced by the Swiss Life Group.
The assets and liabilities from separate account/unitlinked contracts and private placement life insurance are generally excluded from the Swiss Life Group’s financial risk management considerations to the extent that the risks are borne by the customers.
TOTAL ASSETS FOR THE ACCOUNT AND RISK OF THE SWISS LIFE GROUP’S CUSTOMERS 18 661 12 425
Financial liabilities at fair value through profit or loss 10 15 101 9 727
TOTAL LIABILITIES FOR THE ACCOUNT AND RISK OF THE SWISS LIFE GROUP’S CUSTOMERS 18 631 12 404
The financial result for the years ended 31 December for the account and risk of the Swiss Life Group and the Swiss Life Group’s customers was as follows: In CHF million For the account and risk of the For the account and risk of the Swiss Life Group Swiss Life Group’s customers Total
Net gains/losses on investment property 184 194 – – 184 194
The financial result for the account and risk of the Swiss Life Group’s customers consists of net gains/losses on financial assets at FVPL 1 512 –3 060 net gains/losses on financial liabilities at FVPL –1 488 3 123 5.2 RISK BUDGETING AND LIMIT SETTING
The main objective of the ALM process is to ensure that the Swiss Life Group’s insurance operations can meet their commitments to policyholders at all times while also adequately compensating shareholders for making risk capital available. Based on the economic principles of risk management and on the risk appetite definition applied in the risk budgeting process, ALM comprises the following main activities: strategic asset allocation and distribution policy with regard to surplus generated on investments.
The ALM process is centrally coordinated at Group level by means of local asset and liability management committees with representatives from local senior management
Swiss Life — Financial Statements 2009 and representatives from Group level. The local units are in charge of implementing the decisions. The process requires the involvement of investment management, finance, actuarial and risk functions.
DISTRIBUTION POLICY — The distribution policy seeks to harmonise the interests of the different groups of stakeholders. Holders of traditional life insurance policies favour a guaranteed minimum interest rate coupled with regular and appropriate discretionary participation whereas shareholders place greater emphasis on returns commensurate with the level of risk they are exposed to. Internal guidelines have been developed which define the policies for the allocation of policyholder participation with regard to annual bonus and terminal bonus. The focus of the Swiss Life Group lies on the sustainability of the business model and should balance the policyholders’ and shareholders’ expectations.
The Group is exposed to financial risk through its financial assets, financial liabilities (primarily investment con-
tracts and borrowings), reinsurance assets and insurance liabilities. In particular, the key financial risk is that the proceeds from the financial assets are not sufficient to fund the obligations arising from the insurance and investment contracts, as well as from borrowings and other liabilities. The most important components of the financial risk are interest rate risk, equity price risk, credit risk, currency risk and liquidity risk.
The risk budgeting and limit setting described above ensure that interest rate risk, equity price risk, currency risk and credit risk remain under control. The corresponding market risk capital, interest rate risk capital, currency risk capital and credit risk capital limits as well as exposure limits for currencies and net equity for each relevant insurance operation are defined based on the risk appetite. These limits are assessed and reported on a monthly basis.
Insurance liabilities for the account and risk of the Swiss Life Group’s customers 742 952
MENTS AND INSURANCE CONTRACTS — The Group’s primary interest rate exposure is to contracts with guaranteed benefits and the risk that the interest rates of the financial assets purchased with the consideration received from the contract holders is insufficient to fund the guaranteed benefits and expected discretionary participation payable to them.
Most 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 (BVG) stood at 2% in 2009 and will remain at 2% for 2010.
The Group manages interest rate risk by managing the interest rate sensitivity of key rate exposures of its investment portfolio against the interest sensitivity of key rate exposures of liabilities issued. The key rate exposure of the liabilities is determined by projecting the expected cash flows from the contracts using best estimates of mortality, disability, expenses, surrender and exercise of policyholder options. The ALM process defines the strategic asset allocation optimising the net interest rate sensitivity of the investment and liability portfolios. To the extent that this is not practicable, swap contracts and other instruments are used to hedge interest rate risk. In certain markets receiver swaptions are used to hedge the risk of interest rates decreasing below guaranteed interest rates. Payer swaptions are used to hedge the risk of fair value changes of interest-sensitive financial assets. Strategically, a minimum interest rate risk will remain, since a perfect interest rate hedge can either not be achieved or would not be targeted.
designated a portion of assets to be held to maturity and matching the maturity profile of the associated liabilities to minimise the interest risk arising from these positions. The assets to be held to maturity fund the insurance and investment contracts that will not be surrendered or will not require the payment of a death benefit.
EQUITY PRICE RISK — A decline in the equity market may lead to a reduction of the Swiss Life Group’s realised and unrealised gains/losses, which also negatively affects the Swiss Life Group’s results of operations and financial condition.
A portion of Swiss Life’s investment portfolio comprises investments in funds which hold securities issued by nonpublic companies (private equity). These investments may be illiquid or may only be disposed of over time or at a loss, and they may not produce adequate returns or capital gains. If Swiss Life were required to liquidate some or all of the investments in its private equity portfolio, the proceeds of such liquidation may be significantly less than the amount paid for, or the carrying amount of, such investments.
CREDIT RISK — The Group is exposed to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Key areas where the Group is exposed to credit risk are: – Counterparty risk with respect to bonds purchased – Counterparty risk with respect to loans and mortgages granted – Counterparty risk with respect to money market and cash positions – Counterparty risk with respect to derivative transactions – Reinsurance share of insurance liabilities – Amounts due from reinsurers in respect of claims already paid – Amounts due from insurance contract holders – Amounts due from insurance intermediaries
Counterpary risk is managed through the holding of credit default swaps or credit default swap indices. A credit default swap provides insurance to the debt holder against a default of the debt issuer. It is traded over-thecounter and itself underlies the collateral management process described above. The credit default swap index is a hedge on credit risk of a basket of counterparties and is an exchange-traded derivative.
For fixed-income assets the total exposure per counterparty is aggregated and reported to the Group Risk Committee. The individual operations maintain records of the payment history for the significant contract holders with whom they conduct regular business. Ratings and single positions above a certain level with regard to fixedincome assets are reported to management on a regular basis. The exposure to individual counterparties is also managed by other mechanisms such as the right to offset where counterparties are both debtors and creditors of the Group. In addition, limits regarding single counterparty exposure are in place which depend on the rating and amount of exposure in relation to total investments. Information reported to management includes assessment of bad debts. Where there exists a certain exposure to individual policyholders, or homogenous groups of policyholders, a financial analysis equivalent to that conducted for reinsurers is carried out.
The non-rated loans primarily comprise mortgages and policy loans. In certain countries, specific additional guidelines and rules have been defined locally to monitor credit risk. Such guidelines cover investments in fixedincome securities whereby the average rating of the fixedincome portfolio (calculated by weighting in accordance with the Standard & Poor’s method) must be AA– or higher (Standard & Poor’s or equivalent). Minimum and maximum thresholds apply with regard to permitted investments in non-government bonds. For these investments additional exposure limits are in place. For certain businesses, credit risk is monitored and controlled with a risk limit framework whereby maximum limits are reviewed and at least approved annually. The majority of the bond portfolio is invested in government bonds (including supranational and sovereigns) and bonds issued by the financial sector covered by collateral or government guarantees.
Debt instruments at fair value through profit or loss 2 634 3 227 5 077 3 120 7 711 6 347
Debt instruments pledged as collateral 330 – – – 330 –
In CHF million At fair value through Available Loans and Held to Pledged as profit or loss for sale receivables maturity collateral Total
The fair value of collateral and credit enhancements primarily consists of collateral for mortgage loans.
Debt instruments pledged as collateral – 330 – – – – 330
Debt instruments at fair value through profit or loss – – – – – –15 101 –15 101
Swiss Life — Financial Statements 2009 faces the risk of not being able to refinance its debt obligations due to unexpected long-term market disruptions.
At operational level, rolling forecasts are in place to address situational liquidity risk, which primarily arises on unexpected calls on cash resources from claims, amounts payable at maturity and surrenders arising from insurance and investment contracts. To overcome unexpected liquidity shortfalls at times asset disposals are not desired, repurchase agreements are used to ensure shortterm refinancing at minimal cost.
Liquidity risk is considered in the strategic asset allocation. At a strategic level, the Swiss Life Group holds sufficient liquidity and uses proactive debt maturity planning to ensure full financial flexibility and efficient liquidity management.
Derivatives: contractual inflows – –989 –1 355 –2 104 –3 165 –
Financial liabilities at fair value through profit or loss 900 – – 951 0 –
Investment contracts with discretionary participation 8 868 29 51 274 2 130 6 384
Investment contracts without discretionary participation 433 29 77 273 26 28
Carrying More than amount Up to 1 month 1–3 months 3–12 months 1–5 years 5 years
Investment contracts with discretionary participation 9 055 30 52 283 2 118 6 572
Investment contracts without discretionary participation 355 3 4 139 172 37
Financial assets at fair value through profit or loss 1 998 3 879 3 258 1 905 16 741 11 132 21 997 16 916
Financial assets available for sale 3 735 4 375 48 120 38 788 – – 51 855 43 163
Financial assets pledged as collateral – – 330 – – – 330 –
Intangible assets including intangible insurance assets – – 4 576 4 651 – – 4 576 4 651
Financial liabilities at fair value through profit or loss 900 1 078 – – 15 101 9 727 16 001 10 805
Deferred income tax liabilities – – 756 648 – – 756 648 5.5 INSURANCE RISK MANAGEMENT OBJECTIVES
The nature of insurance risk can be summarised as follows: MORTALITY AND LONGEVITY — Mortality and longevity risks respectively reflect the financial consequences of insured people living longer or dying sooner than expected. For example, a life insurer with an annuity portfolio making payments to the policyholders until their death is financially exposed to those individuals who live longer than expected. Conversely, an insurer writing life insurance business that pays out amounts contingent on death of the policyholders is exposed to increases in mortality levels.
ANNUITIES PAYABLE PER ANNUM BY TYPE OF ANNUITY – GROUP LIFE
Disability income and other annuities – deferred 13 907 14 040
MORBIDITY AND DISABILITY — Disability risk reflects the financial consequences of groups of individuals getting disabled more often and/or recovering less quickly than expected. The most significant disability risk factors are epidemics or widespread changes in lifestyle, such as eating, smoking and exercise habits.
tested for profitability according to predefined procedures before approval. Certain contracts which include specific risks relating to derivatives or demographic risk factors for which no reliable data is available must be submitted for approval irrespective of the amount of coverage offered. Insurance coverage exceeding set limits is subject to regular internal reporting requirements. Additionally, it must be ensured that the underwriting practices are in line with local laws.
Claims arising from the accident and health business primarily cover refunds for medical treatment, daily allowances in the case of sick leave, annuities and longterm medical care. The most significant factors that could increase the overall liabilities in health insurance are the increase in the claim frequency due to an increase in the average age of the insured persons and negative economic and social factors. The insurance liabilities arising from accident and health insurance contracts must consider outstanding claims and claims incurred but not reported (IBNR). A large part of the insurance liabilities arising from these contracts relates to IBNR, and experience shows that health insurance contracts are sensitive to late reporting of claims (both number of claims and amounts).
In CHF million Estimate of ultimate claim costs by accident year
CURRENT ESTIMATE OF CUMULATIVE CLAIMS 490 445 435 366 368 389 383 427 437 3 740
Cumulative payments to date –431 –375 –363 –284 –278 –286 –258 –252 –173 –2 700
LIABILITIES FOR THE CURRENT AND 8 PREVIOUS YEARS 59 70 72 82 90 103 125 175 264 1 040
The development of claims under non-life insurance contracts comprises the non-life business in France. CEAT, Paris, is no longer included in the figures above due to the sale in 2009.
As far as non-life insurance is concerned, the reinsurance arrangements mostly include non-proportional coverage on any single risk and/or event, adapted to the specifications of each contract. This includes excess of loss, stoploss and catastrophe coverage. Facultative reinsurance is also written for protection against specific risks.
No single reinsurer is a material reinsurer to the Group, nor is the Group’s business substantially dependent upon one single reinsurer.
Approximately 2.0% of insurance in force from continuing operations in terms of earned insurance premiums was ceded as at 31 December 2009 (2008: 2.2%).
SENSITIVITY ANALYSIS — The Swiss Life Group uses the market consistent embedded value (MCEV) following the guidelines of the European Insurance CFO Forum Market Consistent Embedded Value Principles©1, as one of the main management tools, for its sensitivity analysis with regard to insurance risk and market risk. From the shareholders ’ point of view, the embedded value serves as an indicator of the value of the existing insurance portfolios. It is composed of two components: the net asset value (NAV) attributable to shareholders and the value of inforce business (VIF). Future new business is not included.
The market consistent embedded value calculations are based on economic scenarios which are calibrated to market conditions at valuation date. Best estimate assumptions were made regarding a number of factors, in particular asset allocation, policyholder participation, development of costs and claims, policyholder behaviour, mortality and morbidity. Business is assumed to be continuing at the same level (going concern) and the current cost ratios – adjusted for inflation – are thus assumed to hold good for the future as well. Future costs for maintaining classic solvency capital funded by the shareholders and which underpins the insurance business are charged to the MCEV. The Swiss Life Group calculates the embedded value for all its life and health insurance companies. All other companies are taken into account at
their IFRS net asset value. As a consequence, embedded value sensitivities do not affect the value of these companies.
At 31 December 2009, if morbidity had been 5% higher, the embedded value would have been CHF 107 million lower (2008: CHF 87 million lower).
At 31 December 2009, if the market value of equity securities and property had been 10% higher, the embedded value would have been CHF 901 million higher (2008: CHF 909 million higher).
At 31 December 2009, if the equity securities and property implied volatilities had been 25% lower, the embedded value would have been CHF 302 million higher (2008: CHF 193 million higher).
Basic earnings per share (EPS) are calculated on the weighted average number of shares outstanding during the reporting period, excluding the average number of shares purchased by the Group and held as treasury shares.
Net result attributable to equity holders of Swiss Life Holding 325 –1 138 –47 1 488 278 350
BASIC EARNINGS PER SHARE FOR THE NET RESULT ATTRIBUTABLE TO EQUITY HOLDERS OF SWISS LIFE HOLDING (IN CHF) 10.36 –35.37 –1.50 46.25 8.86 10.88
Elimination of interest expense on convertible bonds 2 – – – 2 –
RESULT USED TO DETERMINE DILUTED EARNINGS PER SHARE 327 –1 138 –47 1 488 280 350
Assumed conversion of convertible bonds 201 113 – – – 201 113 –
DILUTED EARNINGS PER SHARE FOR THE NET RESULT ATTRIBUTABLE TO EQUITY HOLDERS OF SWISS LIFE HOLDING (IN CHF) 10.33 –35.37 –1.50 46.25 8.83 10.88
Deposits received under insurance and investment contracts 7 846 4 693
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 20 219 18 515 8 Details of Certain Items in the Consolidated Statement of Income
Interest income on financial assets held to maturity and available for sale 1 814 1 926
Sale of financial assets available for sale 26 495 –692 loans –64 79
Financial liabilities designated as at fair value through profit or loss –8 5
Financial instruments for the account and risk of the Swiss Life Group’s customers 5 24 63
TOTAL NET GAINS/LOSSES ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 315 1 853
Net benefits and claims under insurance contracts 11 755 12 731
Change in liability for future life policyholder benefits, gross 18 72
Net gains/losses on financial instruments at fair value through profit or loss from continuing operations include interest and dividend income of CHF 84 million for the period ended 31 December 2009 (2008: CHF 54 million). Net gains/losses on liabilities designated as at fair value through profit or loss from continuing operations include changes attributable to credit risk: nil for the period ended 31 December 2009 (2008: nil).
Derivatives embedded in insurance contracts – – 0 0 6 10
In CHF million Gains/losses on hedging Fair value assets Fair value liabilities instruments Gains/losses on hedged items Contract/notional amount
In 2009 and 2008 the Group entered into interest rate swaps to hedge the available-for-sale fixed-rate bond portfolios in CHF, USD and EUR against changes in the fair value attributable to interest rate risk. The fair value of the bond portfolios as at 31 December 2009 was CHF 0.8 billion in total (2008: fair value of the bond portfolios CHF 0.4 billion).
Liabilities for the account and risk of the Swiss Life Group’s customers 5 15 101 9 727
Share of net assets of investment funds attributable to minority unitholders 900 1 078
The carrying amounts and the contractual redemption amounts at maturity of financial liabilities designated as at fair value through profit or loss are as follows: In CHF million Carrying amount Redemption amount
TOTAL FINANCIAL ASSETS AVAILABLE FOR SALE 51 314 43 975 541 –812 51 855 43 163
Based on detailed assessments with regard to indications of impairment, impairment losses from continuing operations totalling CHF 174 million were recognised in the period under review (2008: CHF 3108 million). The impairment losses in 2009 related to equity instruments were CHF 180 million and gains with regard to debt instruments CHF 6 million (2008: debt instruments CHF 108 million (impairment losses) and equity instruments CHF 3000 million (impairment losses)).
The effect of the reclassification of financial assets available for sale to loans as at 1 July 2008 is shown in note 36.
Assets previously classified as available for sale 36 12 169 14 685 –79 –44 12 090 14 641
BALANCE AS AT END OF PERIOD 108 80 – – 108 80
TOTAL ALLOWANCE FOR IMPAIRMENT LOSSES 113 83 15 15 128 98
LGT Swiss Life Non Traditional Advisers, Vaduz 10 3 7 3 8 6 3 43.7%
BALANCE AS AT END OF PERIOD 835 84 62 10 991
BALANCE AS AT END OF PERIOD –197 –49 –43 –6 –295
TOTAL PROPERTY AND EQUIPMENT AS AT END OF PERIOD 638 35 19 4 696 of which assets held under a finance lease – – 3 – 3
Revaluation in respect of transfers to investment property 26 8 – – – – 8
Balance as at 1 January –185 –2 –61 –50 –13 –311
TOTAL PROPERTY AND EQUIPMENT AS AT END OF PERIOD 625 92 45 34 6 802 of which assets held under a finance lease 0 – – 1 – 1
As described in the Summary of Significant Accounting Policies section, property under construction or development for future use as investment property was reclassified from property and equipment to investment property as at 1 January 2009. The amount reclassified came to CHF 92 million.
Classification as assets held for sale and other disposals – – –1 – – – –1 –
Foreign currency translation differences 0 –2 –6 –153 0 –1 –6 –156
Classification as assets held for sale and other disposals –6 – – – –4 –7 –10 –7
Foreign currency translation differences –8 –91 –2 –26 –2 –23 –12 –140
Classification as assets held for sale and other disposals 6 – – – 4 6 10 6
BALANCE AS AT END OF PERIOD –157 –163 –63 –29 –120 –114 –340 –306
In November 2009, the squeeze-out of the remaining AWD Holding shareholders representing 3.3% of the shares was completed. The purchase price of the shares amounted to CHF 58 million and led to additional goodwill of CHF 55 million.
Goodwill of CHF 11 million was recognised in 2009 on the acquisition of a financial advisory business in France.
Goodwill totalling CHF 79 million was recognised on the acquisition of Deutsche Proventus AG, Bremen, in 2008.
The cost that led to the recognition of goodwill concerns the anticipated future business of AWD.
Goodwill relating to Lloyd Continental and goodwill relating to “Other” have been allocated to the “Insurance France” segment. Goodwill relating to CapitalLeben has been allocated to the “Insurance Other” segment.
1 1% in 2012 and 2011 respectively, reduced by 0.25% in each subsequent year
Net carrying amount of goodwill 81 81 314 316 944 894
No impairment losses were recognised in 2009 and 2008. A reasonably possible change in the key assumptions would not cause an impairment loss of the goodwill allocated to the “AWD” segment.
CUSTOMER RELATIONSHIPS — A customer relationship asset of CHF 4 million was recognised on the acquisition of a financial advisory business in France in 2009.
Investment contracts with discretionary participation with deposit accounting 10 566 9 686
Liabilities released for payments on death, surrender and other terminations during the year –111 –104
In the case of traditional contracts in the life insurance business, future life policy benefit liabilities are determined by using the net-level-premium method on the basis of actuarial assumptions as to mortality, persistency, expenses and investment return, including a margin for adverse deviation. For participating contracts where the contribution principle applies to the allocation of the policyholder bonus, future life policy benefit liabilities are determined by using the net-level-premium method on the basis of appropriate mortality and interest rate assumptions. These amounts relate to contracts issued in Switzerland and France.
In 2009, hybrid debt was repurchased. The gain on the repurchase, calculated as the difference between the carrying amount and the amount paid to extinguish the liability, amounted to CHF 95 million and is included in other income.
Swiss Life AG renounced in 2009 the right to call on the first call date the privately placed subordinated step-up loan issued in 1999.
In March 1999, Swiss Life AG 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%, increasing by 100 basis points as from April 2009), CHF 290 million (at a rate of interest of Libor plus a margin of 1.05%, increasing by 100 basis points as from April 2009) and EUR 215 million (at a rate of interest of 5.3655%, as from October 2009 the rate of interest will be an aggregate of Euribor plus a margin of 2.05%). Swiss Life AG can next call the EUR 443 million floating rate loan and the CHF 290 million floating rate loan on 6 April 2014 and the EUR 215 million loan on 6 October 2014 or at five-year intervals thereafter, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority.
Swiss Life AG 1 EUR 700 EUR 590 5.849% 2007 2017 871 1 039
Swiss Life AG EUR 100 EUR 100 +1.750% 2001 2011 148 149
2007, provided that the closing price of the Swiss Life Holding share was at least 130% of the conversion price for 20 consecutive trading days. The early redemption at the option of Swiss Life Holding is subject to a period of 30 days’ notice to the bondholders.
The proceeds received 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 260 million and was calculated using a market interest rate for an equivalent non-convertible bond. The residual amount of CHF 57 million represents the value of the option to convert the instrument into Swiss Life Holding shares (SLH shares) and is 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 2009, CHF 8 million in convertible debt was repurchased. No convertible bonds were converted in 2009 (2008: conversion into 124 115 SLH shares with a corresponding increase in share capital totalling CHF 3 million and an increase in share premium totalling CHF 20 million).
On 25 July 2008, Swiss Life Insurance Finance Ltd entered into a EUR 500 million loan agreement with a syndicate of banks. The syndicated loan has a three-year maturity and was originally split into a EUR 200 million fully drawn loan bearing an interest rate of Euribor plus a margin of 0.70% and a EUR 300 million undrawn credit facility against a commitment fee of 0.225%. In 2009, EUR 100 million was repaid.
Claims under non-life insurance contracts 1 197 1 181 228 220 969 961
TOTAL INSURANCE LIABILITIES AND REINSURANCE ASSETS 92 317 91 024 412 447 91 905 90 577 of which for the account and risk of the Swiss Life Group’s customers 5 742 952 – – 742 952
TOTAL GROSS CLAIMS UNDER NON-LIFE INSURANCE CONTRACTS 1 197 1 181
Claims incurred, benefits paid and surrenders –206 –113 7 –7 –213 –106
Effect of changes in actuarial assumptions and other movements –11 33 –75 –495 64 528
BALANCE AS AT END OF PERIOD 78 528 77 831 101 151 78 427 77 680
Deposits released for payments on death, surrender and other terminations during the year –716 –782
Policyholder liabilities are recognised in accordance with legal or contractual requirements and ratified by management.
Due to the requirements of IFRS 4 Insurance Contracts in combination with IAS 19 Employee Benefits, insurance contracts issued to defined benefit plans covering own employees are eliminated. Insurance contracts issued to defined benefit plans covering own employees have been issued in Switzerland and France. Certain assets relating to these plans qualify as plan assets and are therefore not eliminated. These plans are accounted for as partially funded plans. To the extent these plans are not funded by amounts included in the plan assets, the defined benefit liabilities are backed by the investments relating to the eliminated insurance contracts. These investments are part of the investments presented in the consolidated balance sheet of the Swiss Life Group.
The contributions relating to the continuing operations expected to be paid for the year ending 31 December 2010 are CHF 60 million. These contributions include amounts paid to insurance contracts issued to defined benefit plans covering own employees.
The net defined benefit asset/liability consists of gross defined benefit liabilities –2 025 –2 003 gross defined benefit assets 167 165
Certain subsidiaries sponsor various defined contribution plans. Participation in the various plans is based either on completion of a specific period of continuous service or on the date of hire. The plans stipulate contributions by both employers and employees. The expenses under these plans from continuing operations amounted to CHF 1 million in 2009 (2008: CHF 1 million).
The liability for long-term employee benefits amounted to CHF 7 million as at 31 December 2009 (2008: CHF 6 million). It relates to part-time employment contracts prior to retirement and to profit-sharing arrangements for certain employees.
In 2006, the number of PSUs granted under this programme amounted to 46 651 (balance after reduction in par value). Due to the reduction in par value of the Swiss Life Holding share in 2006, the number of PSUs granted was adjusted using the Eurex R factor of 0.9965. The fair value at the measurement date amounted to CHF 252.56. The date of grant was 1 April 2006.
The expense recognised for share-based payment amounted to CHF 2 million in 2009 (2008: CHF 11 million).
Increase/reduction in taxes resulting from lower taxed income –188 –112 non-deductible expenses 142 150 other income taxes (incl. withholding taxes) 43 –8 change in unrecognised tax losses 38 273 adjustments for current tax of prior periods 17 –118 changes in tax rates 0 0 intercompany effects –80 101
In 2009, other income taxes (incl. withholding taxes) of CHF 43 million are mainly based on a transaction at a lower income tax rate compared to the ordinary income tax rate. Positive intercompany effects of CHF 80 million in 2009 are primarily due to tax group effects and to intragroup income and expense.
The Swiss Life Group realised net tax benefits of CHF 118 million due to tax audits and final assessments in 2008. Intercompany effects of CHF 101 million in 2008 are mainly based on intragroup dividends.
Balance as at Recognised Recognised combinations translation Balance as at 1 January in income in equity and disposals differences end of period
NET DEFERRED INCOME TAX ASSETS/LIABILITIES –367 22 –79 –134 7 –551
In 2005, a provision totalling CHF 72 million relating to the restructuring programme of «La Suisse» in Switzerland was set up. As at 31 December 2009 the remaining provision amounted to CHF 3 million (2008: CHF 4 million ) and CHF 1 million was used during the period (2008: CHF 12 million). The provision primarily relates to redundancy programmes and onerous contracts. The outflow of the remaining amounts is expected within the following one to two years.
As approved by the shareholders at the General Meeting of Swiss Life Holding (SLH) on 7 May 2009, a reduction in the par value of CHF 5 per registered SLH share was effected in 2009 (2008: CHF 17 per registered share). The payout took place on 27 July 2009 and led to a reduction in the share capital of SLH of CHF 160 million (2008: CHF 596 million).
In 2009, no convertible bonds were converted into SLH shares (2008: 124 115 SLH shares with a corresponding increase in share premium totalling CHF 20 million).
BALANCE AS AT END OF PERIOD 32 081 054 35 084 554
BALANCE AS AT END OF PERIOD 232 158 4 619 466
Gains/losses recognised directly in equity comprise fair value changes of available-for-sale investments, revaluation surpluses on the transfer of owner-occupied property to investment property and the effective portion of the gain or loss on hedging derivatives in qualifying cash flow
Swiss Life — Financial Statements 2009 hedges. These amounts are net of certain policyholder bonuses and other policyholder liabilities and deferred acquisition costs, deferred income taxes and non-controlling interests.
Gains/losses arising during the period –22 1 689 – – 1 689
Effects of policyholder participation – –933 – –54 –987 shadow accounting – 12 – –76 –64 income tax 3 –125 – –28 –153 disposals of subsidiaries 1 – – – –
Gains/losses arising during the period –320 –3 727 – – –3 727
Revaluation surplus on owner-occupied property transferred to investment property 16 – – – 8 8
Reclassification of financial assets available for sale – 1 159 – –1 159 –
Gains/losses transferred to the income statement 8 – 3 800 – 80 3 880
The Group’s objectives when managing capital are as follows: to comply with the regulatory capital requirements, to define and manage economic capital and to fulfill the company’s target on rating capital. The company also actively manages the composition and quality of the capital to continuously optimise its capital structure and interest cover ratio.
In accordance with the federal act on the supervision of insurance companies and corresponding decree, the Swiss Life Group reports as an insurance group to the Swiss Financial Market Supervisory Authority (FINMA). The reporting covers risk management as outlined in note 5, Group Solvency I, legal structure, management organisation and intragroup transactions. The reporting is submitted on an ad-hoc, monthly, half-yearly or yearly basis depending on the topic and is reviewed on a yearly basis by the statutory auditor. At 31 December 2009 and 2008, the Group was compliant with the legal requirements.
Economic and statutory capital constraints are the main elements determining the risk budgets. Based on these risk budgets, the Corporate Executive Board (Group Risk Committee) defines the risk limits for each country and business unit. Monitoring the limits is performed monthly.
Swiss Life — Financial Statements 2009 account, among other factors, insurance risks, asset value volatility and credit risks. Within the capitalisation analysis, in addition to assessing capital adequacy, Standard & Poor’s also assesses the quality of capital in its various dimensions such as debt, hybrid and reinsurance leverage.
Intangible assets including intangible insurance assets 1 577 424 1 1 002
Financial liabilities at fair value through profit or loss – –245 –438 – –683
Transfer to financial assets at fair value through profit or loss – 16 – – 16
On 29 April 2008, the Swiss Life Group sold the Dutch and Belgian businesses. The disposal consideration amounted to CHF 2388 million. The gain realised on the sale was CHF 1034 million. For the purposes of segment reporting the Dutch and Belgian businesses have been presented as a separate segment “Insurance (Discontinued )”.
In November 2007, the Swiss Life Group entered into a sale agreement to dispose of Banca del Gottardo, Lugano. The transaction was completed on 7 March 2008. Banca del Gottardo, Lugano, is presented as a separate segment “Banking (Discontinued)” for segment reporting purposes.
Income tax expense on result from ordinary activities from discontinued operations – –62 – –3 – –65
Income tax expense on the gain/loss on remeasurement to fair value less costs to sell/disposal of operations – –148 – –2 – –150
NET RESULT FROM DISCONTINUED OPERATIONS – 894 –47 594 –47 1 488
Net cash flows from operating activities – –487 – 405 – –82
Net cash flows from investing activities – 0 –33 – –33 0
Net cash flows from financing activities – 433 – –38 – 395
NET CASH FLOWS FROM DISCONTINUED OPERATIONS – –54 –33 367 –33 313
Net gains/losses on financial instruments at fair value through profit or loss – – 40 40 –139
SLH shares issued to key management under equity compensation plans (number) – 2 940 – 2 940 10 253
Assets under unit-linked/private placement life insurance business –13 814 –8 683
Assets under control are taken to comprise: – assets stated as investments in the balance sheet and cash and cash equivalents
– assets included in the balance sheet for the account and risk of the Swiss Life Group’s customers (separate account/unit-linked investments, private placement life insurance)
For the purposes of determining assets under management, assets managed by third parties and alternative investments managed by third parties have been deducted from assets under control.
Financial assets for the account and risk of the Swiss Life Group’s customers 15 671 780 300 16 751
Financial liabilities for the account and risk of the Swiss Life Group’s customers – –15 071 –300 –15 371
Derivatives profit or loss for sale profit or loss for sale
Total gains/losses recognised directly in equity – – 7 – 213
BALANCE AS AT END OF PERIOD 35 226 46 – 1 686
Total gains/losses recognised in the income statement are presented in net gains/losses on financial assets – – –24 – –64 net gains/losses on financial instruments at fair value through profit or loss 2 19 – – –
Financial assets held to maturity 6 432 7 159 5 904 6 926
Later than 1 year and not later than 5 years 10 13
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 2009, committed principal amounts stood at EUR 16 million and CHF 56 million (2008: EUR 22 million and CHF 62 million). The range of committed interest rates is 2.63% to 5.88% for commitments in EUR and 1.25% to 3.66% for commitments in CHF.
Investment property 49 103 of which can be sold or repledged by transferee 330 –
Securities under derivative and other transactions – 2 979 35 Future Minimum Lease Payments under Non-Cancellable Operating Leases – Lessor
As at 1 July 2008, certain financial assets were reclassified from financial assets available for sale to loans due to the disappearance of an active market. The financial assets reclassified primarily consist of corporate debt instruments and debt instruments relating to emerging markets. The fair value as at 1 July 2008 of the financial assets reclassified amounted to CHF 14 966 million. At the date of reclassification the effective interest rate ranged from 0.8% to 9.7%, and the amount of cash flows expected to be recovered was estimated at CHF 32 658 million. In 2008, unrealised losses of CHF 740 million were recognised in equity in respect of these assets.
Gains/losses that would have been recognised in equity if the assets had not been reclassified (excluding adjustments for income tax and policyholder participation) 3 159 –2 259
Insurance and other payables and deposits have been reclassified to other financial liabilities.
Livit FM Services AG, Zürich IM from 07.02.2008 100.0% 100.0% CHF 100
Long Term Strategy AG in liquidation, Zug (cancelled 21.01.2010) Other 100.0% 100.0% CHF 2 000
Swiss Life Investment Management Holding AG, Zürich IM 100.0% 100.0% CHF 50 000
Swissville Commerce Holding AG, Zürich Ins. CH 100.0% 100.0% CHF 147 100 1 Segment (Ins. CH = Insurance Switzerland, Bank. Dis. = Banking (Discontinued), IM = Investment Management, Ins. Other = Insurance Other, Ins. FR = Insurance France, Ins. DE = Insurance Germany, Ins. Dis. = Insurance (Discontinued))
Swiss Life (Liechtenstein) AG, Schaan Ins. Other 100.0% 100.0% CHF 5 000
Carte Blanche Partenaires, Paris Ins. FR 94.7% 95.1% EUR 2 300
Swiss Life Assurance et Patrimoine, Paris Ins. FR 99.9% 100.0% EUR 154 797
Swiss Life Banque Privée, Paris Ins. FR 60.0% 60.0% EUR 36 471
Swiss Life France, Paris Ins. FR 100.0% 100.0% EUR 267 767
Swiss Life Gestion Privée SA, Paris Ins. FR 60.0% 100.0% EUR 205
AWD Beteiligungstreuhand GmbH, Hannover AWD from 01.10.2008 100.0% 100.0% DEM 50
AWD Gruppe Deutschland GmbH, Hannover AWD from 19.03.2008 100.0% 100.0% EUR 1 500
AWD – Versicherungsmakler und -beratungs GmbH, Hannover AWD from 19.03.2008 100.0% 100.0% EUR 31
DEUTSCHE PROVENTUS AG, Bremen AWD from 06.05.2008 100.0% 100.0% DEM 1 000
Financial Solutions AG Service & Vermittlung, München Ins. Other 100.0% 100.0% EUR 200
PROFIDUS Vermittlung- und Verwaltungs-GmbH, Bremen AWD from 06.05.2008 100.0% 100.0% EUR 51
ProVentus Akademie- und Vertriebs GmbH, Bremen AWD from 06.05.2008 100.0% 100.0% EUR 25
SL Private Equity GmbH, Frankfurt am Main Ins. DE from 14.05.2008 98.9% 98.9% EUR 91
Swiss Life AG (formerly Schweizerische Rentenanstalt), München (Branch Swiss Life AG) Ins. DE 100.0% 100.0% – –
Swiss Life Insurance Solutions AG, München Ins. Other 100.0% 100.0% EUR 7 500
Swiss Life Pensionsfonds, München Ins. DE 100.0% 100.0% EUR 3 000
Swiss Life Pensionskasse, München Ins. DE 100.0% 100.0% EUR 3 000
Swiss Life Products (Luxembourg) S.A. Branch Germany, München Ins. Other from 15.05.2008 100.0% 100.0% – –
Swiss Life Immo-Techno Center I, Bruxelles Ins. Dis. until 29.04.2008 – –
Banque du Gothard (Luxembourg), Luxembourg Bank. Dis. until 07.03.2008 – –
Gotam Fund Management Company, Luxembourg Bank. Dis. until 07.03.2008 – –
Gotam Umbrella Fund (Lux) Advisory Company, Luxembourg Bank. Dis. until 07.03.2008 – –
Gottardo Equity Fund (Lux) Management, Luxembourg Bank. Dis. until 07.03.2008 – –
Swiss Life (Luxembourg) S.A., Strassen Ins. Other 100.0% 100.0% EUR 23 000
Swiss Life Insurance Solutions S.A., Luxembourg Ins. Other from 27.11.2008 100.0% 100.0% EUR 9 000
Swiss Life International Pension Fund ASBL, Strassen Ins. Other from 18.04.2008 – – – –
Swiss Life Invest Luxembourg S.A., Strassen Other 100.0% 100.0% EUR 35 000
Swiss Life Products (Luxembourg) S.A., Strassen Ins. Other 100.0% 100.0% EUR 60 031
Swiss Life Solutions S.A., Strassen Ins. Other from 17.09.2008 100.0% 100.0% EUR 19 000 1 Segment (Ins. CH = Insurance Switzerland, Bank. Dis. = Banking (Discontinued), IM = Investment Management, Ins. Other = Insurance Other, Ins. FR = Insurance France, Ins. DE = Insurance Germany, Ins. Dis. = Insurance (Discontinued))
AWD Chase de Vere Consulting Limited, London AWD from 19.03.2008 100.0% 100.0% GBP 1 935
AWD Chase de Vere Corporate Services Limited, Manchester AWD from 19.03.2008 100.0% 100.0% GBP 0
AWD Chase de Vere Financial Services Ltd, Manchester AWD from 19.03.2008 100.0% 100.0% GBP 0
AWD Home Finance Limited, London AWD 19.03.08 – 12.12.08 – –
AWD Private Client Trustees Limited, London AWD from 19.03.2008 100.0% 100.0% GBP 0
Jaffrey Financial Services Limited, Dundee AWD from 19.03.2008 100.0% 100.0% GBP 22
Banca del Gottardo Italia, Bergamo Bank. Dis. until 07.03.2008 – –
AWD Gesellschaft für Wirtschaftsberatung GmbH, Wien AWD from 19.03.2008 100.0% 100.0% EUR 727
Swiss Life Österreich GmbH, Wien Ins. Other from 29.07.2009 100.0% 100.0% EUR 35
Swiss Life Insurance Finance Ltd., Grand Cayman Other 100.0% 100.0% EUR 5 1 Segment (Ins. CH = Insurance Switzerland, Bank. Dis. = Banking (Discontinued), IM = Investment Management, Ins. Other = Insurance Other, Ins. FR = Insurance France, Ins. DE = Insurance Germany, Ins. Dis. = Insurance (Discontinued))
AWD Savjetovanje d.o.o. za poslovno savjetovanje, Zagreb AWD from 19.03.2008 100.0% 100.0% HRK 20
AWD Česká republika s.r.o., Brno AWD from 19.03.2008 100.0% 100.0% CZK 1 000
ECG Oktatási Korlátolt Felelősségű Társaság, Budapest AWD from 19.03.2008 100.0% 100.0% HUF 5 000
AWD Sp.z o.o., Warszawa AWD from 19.03.2008 100.0% 100.0% PLN 200
European Consulting Group Sp.z o.o., Warszawa AWD from 19.03.2008 100.0% 100.0% PLN 498
AWD Romania Broker de Asigurare Srl, Târgu Mureş AWD from 19.03.2008 100.0% 100.0% RON 50
Swiss Life (Liechtenstein) AG, Singapore Branch, Singapore Ins. Other 100.0% 100.0% – –
In our opinion, the consolidated financial statements for the year ended 31 December 2009 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.
To finance ongoing operations, Swiss Life Holding carried out a capital increase at Swiss Life Products (Luxembourg ) SA and Swiss Life International Holding AG. The value of participations thus climbed CHF 60 million from CHF 3147 million to CHF 3207 million. Through its subsidiary Swiss Life Beteiligungs GmbH, Swiss Life Holding built up its participation in AWD Holding AG to 100% as part of the successfully executed squeeze out. The company also reduced its stake in MLP to under 10%, again through Swiss Life Beteiligungs GmbH.
Swiss Life Holding’s year-end liquid assets (liquid funds plus time deposits and comparable instruments) totalled CHF 624 million (2008: CHF 801 million).
Assets and liabilities are stated in the balance sheet in accordance with the provisions of the Swiss Code of Obligations (CO).
Swiss Life AG (formerly Swiss Life/Rentenanstalt), Zürich CHF 587 350 100.00% CHF 587 350 100.00%
ISSUANCE OF CONVERTIBLE DEBT IN 2004 — On 10 June 2004 Swiss Life Holding issued CHF 317 million in 0.625% convertible bonds (2004 to 2010) convertible into Swiss Life Holding registered shares. The conversion price is currently CHF 200.20.
In 2009, no convertible bonds were converted into Swiss Life Holding shares.
Reduction in par value (incl. cancellation of treasury shares) –211 –596
RISK ASSESSMENT — For information on risk assessment, please refer to Note 5 of the Swiss Life Group’s Consolidated Financial Statements.
COMPENSATION IN 2009 — The specifications below take into consideration the transparency regulations on compensation set out in the Swiss Code of Obligations, Art. 663bBIS and Art. 663c, and the Directive on Information Relating to Corporate Governance issued by the SIX Swiss Exchange. Further information on compensation and benefit expenditure can be found in the Corporate Governance section and the Consolidated Financial Statements (Notes 23 and 30).
As in the 2008 financial year, the members of the Board of Directors have not been granted any variable compensation in shares for 2009. Likewise, besides the cash bonus, the members of the Corporate Executive Board have not been given variable compensation in shares for the 2009 financial year.
The compensation received by each member of the Board of the Directors and the Chairman of the Corporate Executive Board (Group CEO) is disclosed individually.
The basic salary is determined according to the employee’s function and skill set, and is annually reassessed and adjusted if appropriate. The variable salary components are linked to the strategic objectives of the Group and the individual divisions and the associated financial and HR-related targets. The variable bonus in cash is based on achievement of the annual objectives. It is determined, on the one hand, by the actual performance of individuals or teams (performance salary) in relation to the targets set and, on the other, by the Swiss Life Group’s annual result (share in company’s success). The percentage weighting between the individual and/or team performance and the share in the company’s success depends on the position and responsibilities of the function holder. At Corporate Executive Board level, the share in the company’s success is set at 60%. Personal performance and achievement of goals are appraised annually as part of the Group-wide institutionalised process for employee assessment (Group Performance System, GPS). In addition to the quantitative Group objectives (Key Performance Indicators, KPI), the assessment takes into account factors such as professional expertise, entrepreneurship, task fulfilment, cooperation and leadership. To be eligible for any bonus in cash, a GPS target achievement of at least 80% is required.
EXECUTIVE BOARD — The compensation remitted to members of the Corporate Executive Board in the period under review comprises the salary, a variable bonus in cash and other compensation (child allowances, company cars, premium contributions to 3rd-pillar pension plans). They are also insured with the company under the framework of occupational provisions. The members of the Corporate Executive Board also participate in a long-term performance-based equity compensation programme, which is described in more detail below.
The salary is determined annually, taking into account the individual member’s function-related responsibility. As previously explained, the cash bonus is determined by the Board of Directors based on individual target achievement and the company’s success in the period under review.
companies included in the Dow Jones STOXX 600 Insurance Index (TSR Outperformance). Based on this second criterion, a subscription right arises if the performance on expiry of the three-year term is above the first quartile in comparison with the companies in question.
The value of the PSUs allocated equals the fair value as at 1 April of the year of allocation. It is determined by an independent consultancy company.
Two members of the Board of Directors resigned in the 2009 financial year. Bruno Gehrig resigned from his position as Chairman of the Board of Directors of Swiss Life Holding after the Annual General Meeting on 7 May 2009. After serving for six years, Pierfranco Riva also stepped down from the Board of Directors because he had reached the statutory age limit. Two new members were appointed: Frank Schnewlin and Carsten Maschmeyer. Rolf Dörig relinquished the role of Delegate of the Board of Directors on 7 May 2009 to take over from Bruno Gehrig as Chairman of the Board of Directors.
The composition of the Corporate Executive Board changed as follows in the 2009 financial year: Reto Himmel, Group Chief Technology & Operations Officer (Group CTO), left the Corporate Executive Board effective 31 March 2009 due to the discontinuation of the Group CTO function. Thomas Buess joined the Board as of 1 August 2009 as the new Group Chief Financial Officer (Group CFO), replacing Thomas Müller who resigned from the Corporate Executive Board with effect from
The disclosure of compensation for the remaining members of the Corporate Executive Board (without Group CEO) takes into account eight members for the 2009 financial year. The compensation is shown on a prorata basis for their period of membership of the Board in 2009.
The members of the Board of Directors did not receive any variable compensation in shares for the 2008 and 2009 financial years. All the shares allotted to them for 2008 and 2009 formed part of their basic compensation, 80% of which was granted in cash and 20% in shares subject to a three-year blocking period.
Amounts in CHF Expenditure for Compensation in cash Compensation in shares5 occupational provisions
Basic compen- sation and shares Regular contri- total compensation sation in cash Number Amount (amount) contributions2 butions (amount)3
Rolf Dörig, Group CEO until 08.05.2008, BoD Delegate from 09.05.2008 4 1 The compensation in shares was part of the basic compensation. The allocation of shares was effected on 24.06.2008 and 16.12.2008 at economic value, which is equal to the tax value (CHF 227.7469 and CHF 60.4526 respectively), taking into account a blocking period of three years. The share prices (closing prices) on the days of allocation were CHF 271.25 und CHF 72.00 respectively. No variable compensation in shares was granted for the 2008 financial year.