Contents 4 Facts & Figures 6 Shareholders’ Letter 8 Strategy 10 Summary of Group Results 14 Segment Reporting 26 Corporate Governance 31 Board of Directors 45 Corporate Executive Board 51 Swiss Life Compensation Report for the Financial Year 2015 68 Report of the Statutory Auditor 75 Corporate Responsibility 76 CEO Foreword 77 Introduction 80 Responsibility in our business operations 90 Responsibility in society 94 Responsibility for employees 102 Environmental responsibility 104 GRI content index 109 Brand 112 Market Consistent Embedded Value (MCEV) 114 Introduction 116 Summary of MCEV Results 126 Information by Market Unit 133 Methodology 140 Assumptions 145 Auditor’s Report on Embedded Value 147 Glossary and List of Abbreviations 150 Consolidated Financial Statements 152 Consolidated Statement of Income 153 Consolidated Statement of Comprehensive Income 154 Consolidated Balance Sheet 156 Consolidated Statement of Cash Flows 158 Consolidated Statement of Changes in Equity 159 Notes to the Consolidated Financial Statements 297 Report of the Statutory Auditor 299 Swiss Life Holding Financial Statements 300 Management Report 301 Statement of Income 302 Balance Sheet 303 Notes to the Financial Statements 309 Appropriation of Profit 310 Report of the Statutory Auditor 312 Share Performance and Historical Comparison
The Swiss Life Group’s 2015 financial year at a glance: Course of business — In 2015 the Swiss Life Group once again grew its earning power: Net profit rose from CHF 818 million to CHF 878 million (+7%). Adjusted operating income was up 17% at CHF 1.3 billion. All units contributed to this positive development, with premium income up by 5% year-on-year in local currency to CHF 18.9 billion. The Group also saw an increase in its fee business, a central strategic area: Fee and commission income rose by 8% in local currency to CHF 1.3 billion (in CHF –1%). Swiss Life was also able to successfully conclude its “Swiss Life 2015” Group-wide programme during the year under review and meet or exceed all financial objectives. At its Investors’ Day in the autumn of 2015, Swiss Life presented its new objectives up to 2018, featuring four strategic thrusts: Quality of earnings and earnings growth; capital, cash and dividends; customer centricity and advice; and operational efficiency.
Workforce — Around 7600 employees and approximately 4600 certified financial advisors were working for the Swiss Life Group worldwide at the end of 2015.
Dear Shareholders, 2015 proved to be a very successful year for Swiss Life. We achieved, and in some cases even exceeded, all our financial targets under the Group-wide programme “Swiss Life 2015” launched in 2012. Our new business margin of 1.7% again outstripped our goal of 1.5%. We also performed well in fee and commission business. In 2010, our fee result only came to CHF 134 million, compared to CHF 342 million by the end of 2015. We have also reduced costs by over a quarter since 2008 in spite of investments and organic growth. Moreover, our return on equity in 2015 was in the higher end of our target range at 9.7% and our proposed dividend of CHF 8.50 shows we are on the right track.
Even if recent years have seen us make consistent progress – these successes were not just given to us, especially considering the low and even negative interest rate levels. Nor was it necessarily to be expected that Standard & Poor’s would improve our rating from A– to A, as they did in May last year. We also see Swiss Life’s return to the Swiss Market Index of the 20 largest Swiss companies in March as further confirmation of our progress.
Dear shareholders, Swiss Life is in an excellent position to successfully negotiate these trends. After all, we are a company that will soon have proven its adaptability for 160 years. Our success stems from our proven business model. Profitability, margin management, cost efficiency and disciplined asset and liability management have been our priorities over the past few years. And this is not going to change.
Generate substantial new business value through margin and product management inance investments and growth by implementing further cost savings
The Group-wide programme is based on the “Swiss Life 2015” and Milestone programmes, both now successfully concluded, which sustainably reinforced Swiss Life’s competitive position despite a difficult environment. Alongside profitability, margin management and cost efficiency, disciplined asset and liability management remain central to Swiss Life’s market success. Swiss Life’s long investment duration and robust direct investment income enable it to withstand the current low interest rate environment and protect its interest margin. The investment strategy is structured so that consistent asset and liability management ensures the interest rate margin is protected for decades. The company can thus meet its customer guarantees, even if the low interest rate environment endures over the long term.
Swiss Life will continue in future consistently focusing all business processes on customers. In addition, over the next three years, Swiss Life will increase investment by well over CHF 100 million to further the development of the business model, and thus lay the foundations of the Group’s future success. The investments are to be primarily in digitalisation, quality of advice and organic growth initiatives.
Summary of Group Results In 2015 the Swiss Life Group once again grew its earning power: Net profit rose from CHF 818 million to CHF 878 million (+7%). Adjusted operating income was up 17% at CHF 1.3 billion. All units contributed to this positive development.
Swiss Life continued its profitable growth in 2015, with premium income up by 5% year-on-year in local currency to CHF 18.9 billion. This corresponds to a fall of 1% in Swiss francs. In fee business the Group increased earnings in local currency by 8% to CHF 1.3 billion (–1% in Swiss francs).
Despite continuing low interest rates and the negative currency effect, Swiss Life generated direct investment income of CHF 4.3 billion in 2015 (2014: CHF 4.5 billion). The net investment result improved from CHF 5.1 billion to CHF 5.2 billion, producing a net investment return of 3.7% (2014: 3.8%). The robust investment return allowed Swiss Life to again strengthen the insurance reserves in 2015 by CHF 1.2 billion, and thus shore up the sustainability of the business model.
In the home market of Switzerland, premium volume rose by 5% to CHF 10.5 billion. In the corporate client sector Swiss Life saw a 6% increase in premiums to CHF 8.9 billion, while the market grew by only 1%. In private client business, the result of CHF 1.6 billion all but attained the previous year’s level (–1%) while also outperforming the market (–2%). In addition, Swiss Life Switzerland successfully pursued its full-range provider strategy for corporate clients, growing the share of new business, alongside full insurance, with semi-autonomous insurance solutions to 11% (2014: 4%). In France Swiss Life grew premiums by 2% to CHF 4.2 billion. The quality of new life insurance business again posted a pleasing rate of growth with a higher proportion of unit-linked solutions (60%). The focus on profitable growth in Germany led to a 2% fall in premiums to EUR 1.3 billion: The planned reduction in traditional business was largely offset by the increase in the proportion of modern savings products as well as disability and long-term care insurance. Swiss Life International posted premium growth of 14% to EUR 2.3 billion.
Efficiency ratios improved Group-wide by 2 basis points to 0.60%. In spite of low interest rates, the new business margin of 1.7% (2014: 1.8%) was above the ambition level of 1.5%. The value of new business rose from CHF 255 million in 2014 to CHF 268 million (+5%). Swiss Life generated an adjusted return on equity of 9.7% in 2015 (2014: 9.6%), and thus once again attained the upper end of its target band of 8 to 10%. Shareholders’ equity came to CHF 12.2 billion (–5%) due in particular to lower unrealised gains on bonds and currency effects. Swiss Life estimates its SST ratio at 140% as at 1 January 2016 (based on the internal model approved with certain conditions ).
Equity securities and equity funds 5 744 3.9% 4 044 2.7%
Cash and cash equivalents and other 1 779 1.2% 2 819 1.9%
Segment Reporting Swiss Life continued to improve its earning power in 2015, generating adjusted profit from operations across all segments of CHF 1323 million. All units contributed to this positive development. Net profit during the reporting period was CHF 878 million, a 7% rise.
The Swiss Life Group managed to ratchet up its operational effectiveness once again during the 2015 financial year. Gross written premiums, policy fees and deposits received across all segments grew by 5% in local currency to CHF 18.9 billion (2014: CHF 19.1 billion). The Group recorded growth in local currency of 8% in fee and commission income, a strategically central area of Swiss Life, to CHF 1.3 billion.
As a full-range provider, Swiss Life offers its corporate customers solutions to all their occupational pension requirements. The product offering was optimised further during the reporting year and aligned more closely with customers’ needs, for example through the Swiss Life Business Premium product launched in 2015, which gives insured persons a say in the investment strategy based on their willingness and ability to assume risk. This executive solution is designed for companies which want to give their key employees more involvement in determining their own pension arrangements. The online portal Swiss Life myWorld, launched in 2015 for private clients’ and insured persons’ 2nd pillar pension provision, provides customers with a round-the-clock overview of their individual pension situation and allows them to make independent simulations.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 10 534 10 038 5%
Swiss Life in France increased its segment result to CHF 234 million (2014: CHF 222 million). This represents a 20% increase in local currency, due principally to the quality of new business, a higher financial margin, increased unit-linked business and improved technical margins in health, death and disability insurance and property and casualty business.
The French insurance market posted 4% growth in local currency. Savings and pension provisions were up 5%, health, death and disability insurance by 3% and property and casualty rose by 1.5%. Swiss Life grew its premium volume in France, meanwhile, by 2% in local currency to CHF 4.5 billion (2014: CHF 5.1 billion). The strong positioning of the life insurance business in the premium segment, the diversification of business activities and multichannel distribution all contributed to this increase. Premium income in savings and pension provisions rose by 5% in local currency, placing them at market level. The share of premium income from unit-linked contracts (45%) was above the market average of 20% thanks to the private insurer strategy and the bonus distribution policy for customers in the premium segment. The realignment in health, death and disability insurance to group business gathered momentum, particularly towards the end of the year, with significant new business in target products (group standard business and individual death and disability). The full effect of this realignment will become apparent in 2016. Swiss Life Banque Privée continues to contribute to the Group’s business with high net worth individuals through its increased volume and improved operating result.
Swiss Life is positioning itself in Germany as a leading provider of pensions and financial solutions under one roof by managing all production and distribution organisations from a single source. The segment information comprises local insurance activities and the financial advisory companies operating in Germany under Swiss Life Select, tecis, Horbach and Deutsche Proventus.
During the year under review, Swiss Life Germany increased its segment result to CHF 129 million due to an excellent fee result and a good risk result – in spite of a challenging operating environment due mainly to sustained low interest rates and new requirements resulting from the Life Insurance Reform Act. Moreover, the operating result was affected by currency effects.
Fee and commission income fell by 14% in 2015 to CHF 364 million due to exchange rate effects. In local currency they remained virtually at the previous year’s level (–2%). 2014 was positively affected by the extraordinary economic circumstances triggered by a reduction in the maximum technical interest rate for life insurance effective 1 January 2015.
At the end of 2015 the proprietary financial advisory companies in Germany had 3138 trained and registered financial advisors under contract (+4%).
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 1 399 1 618 –14%
In the year under review, the segment achieved a result of CHF 41 million, which was 11% higher than during the previous year (2014: CHF 37 million). This encouraging development is due to operational progress, ongoing cost discipline and growth in fee and commission income. Due to negative currency effects, fee and commission income in Swiss francs fell to CHF 225 million (2014: CHF 240 million). Gross written premiums, policy fees and deposits received came to CHF 2.5 billion, which was the same as the previous year.
Fee income from the financial advisory companies fell by CHF 9 million to CHF 131 million, due to the negative development of the local currencies against the Swiss franc.
The expansion of third-party business led to a net inflow in assets under management of CHF 7.2 billion. This was due principally to the growth of institutional mandates in fixed income and real estate.
Corporate Governance The Swiss Life Group is committed to good corporate governance. Its principles and guidelines for responsible corporate management are constantly fine-tuned in accordance with recognised national and international standards.
The companies falling within the Group’s scope of consolidation are presented in the Consolidated Financial Statements (note 36). Information on the listing on the SIX Swiss Exchange and market capitalisation can be found in the section “Share Performance and Historical Comparison ” on pages 312 and 313. The organisational structure of the Group shows the key business markets and areas. 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.
The operational management structure as at 31 December 2015 is shown on page 45.
The purchase or sale of shares or of acquisition/disposal considerations regarding shares in companies that are domiciled in Switzerland and have their shares listed in Switzerland must be reported to the company in question and the SIX Swiss Exchange if the shareholdings exceed, fall below or reach certain thresholds. The relevant thresholds are 3, 5, 10, 15, 20, 25, 33⅓, 50 and 66⅔% of the voting rights. Details are set out in the Federal Act on Stock Exchanges and Securities Trading (SESTA) – as of 1 January 2016 in the Financial Market Infrastructure Act (FMIA) – and in the Stock Exchange Ordinance-FINMA (SESTO-FINMA).
ETHENEA Independent Investors S.A., 16, rue Gabriel Lippmann, 5365 Munsbach, Luxembourg, reported in a publication of 1 December 2015 that it held 975 000 shares of Swiss Life Holding Ltd, equivalent to a 3.04% share of the voting rights.
On the balance sheet date some 165 000 shareholders and nominees were listed in the Swiss Life Holding share register, of which about 4000 were institutional shareholders. Taken together, the shareholders entered in the share register held around 50% of the shares issued. Over half of these shares were owned by shareholders domiciled in Switzerland. Approximately a third of the registered shares were in private hands.
In 2013 the General Meeting of Shareholders of Swiss Life Holding decided on 23 April 2013 to change the conditional share capital: The previous conditional share capital of 2 359 386 registered shares or CHF 12 032 868.60 was increased to 6 000 000 registered shares or CHF 30 600 000 (clause 4.9 of the Articles of Association). The ordinary share capital remained unchanged; as in 2012 the decision was taken at the General Meeting of Shareholders on 23 April 2013 to make a distribution of CHF 4.50 per share out of the capital contribution reserve.
In 2014 and 2015 there were no changes to the share capital. The distributions of CHF 5.50 and CHF 6.50 per share decided by the General Meetings of 23 April 2014 and 27 April 2015 were made out of the capital contribution reserve.
Swiss Life – Annual Report 2015 register as a nominee. The voting right representation is restricted to 10% of the share capital overall, whereby nominees who are connected with regard to capital or voting rights under uniform management or contractual agreement will be counted as a single shareholder. The Board of Directors may approve exceptions to these restrictions on registration, observing the principle of responsible judgement. No such exceptions were granted during the period under review.
As at 31 December 2015, Swiss Life Holding and its Group companies had not granted any options on rights to participate in Swiss Life Holding.
The Organisational Regulations stipulate that a member of the Board of Directors shall automatically resign from the Board at the General Meeting of Shareholders in the year in which the member reaches the age of 70.
On the balance sheet date of 31 December 2015, the Board of Directors was composed of the following members.
Other appointments: – Adecco S.A., Chairman of the Board of Directors – dorma+kaba Holding Ltd, Vice Chairman of the Board of Directors – Danzer Holding AG, Member of the Supervisory Board – Walter Frey Holding AG, Member of the Board of Directors
Other appointments: – Cellere AG, Member of the Board of Directors – Georg Fischer Ltd, Vice Chairman of the Board of Directors – J.P. Morgan, Member of the European Advisory Council – FehrAdvice & Partners AG, Chairman of the Board of Directors – Meier + Cie AG, Chairman of the Board of Directors (since 4 August 2015)
Frank Schnewlin will be put forward for re-election as Member of the Board of Directors and as Member of the Compensation Committee at the General Meeting of Shareholders of Swiss Life Holding on 26 April 2016.
Chairman of the Risk and Audit Committee – Twelve Capital AG and Twelve Capital Holding AG, Chairman of the Board of Directors – Drosos Foundation, Vice Chairman of the Board of Trustees/Chairman of the Finance
Adrienne Corboud Fumagalli — Born 1958, Swiss and Italian national Member of the Board of Directors bild Adrienne Corboud Fumagalli is a Doctor of Economics and Social Sciences and a graduate of the University of Fribourg. In 1996 she joined the PTT in the management team of Radiocom (radio, TV, mobile) in charge of New Business Development and the international market. The PTT then became Swisscom and Adrienne Corboud Fumagalli held various positions from 1997 to 2000, ultimately becoming Director of Product Marketing in Radio Broadcasting Services. In November 2000, Adrienne Corboud Fumagalli joined the Kudelski Group as Corporate Secretary and Member of the Corporate Executive Board. In January 2004, she was appointed Executive Vice President in charge of Business Development. Since 2008 Adrienne Corboud Fumagalli has served as VicePresident for Innovation and Technology Transfer at EPF Lausanne (EPFL) with a special focus on the development of the EPFL Innovation Park Foundation and industrial partnerships.
Other appointments: – Sanitas Krankenversicherung and Sanitas Beteiligungen AG, Member of the Board of Trustees and the Board of Directors and Chairman of the Audit Committee – Wincare health insurance, Member of the Board of Directors and Chairman of the
Frank W. Keuper will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 26 April 2016.
Henry Peter — Born 1957, Swiss and French national Member of the Board of Directors bild Henry Peter completed his studies in law at the University of Geneva in 1979, and in 1981 he was called to the Geneva bar. Following an assistantship in Geneva, a period of study as a visiting scholar at the University of California in Berkeley and legal work in Lugano, he obtained his PhD at the University of Geneva in 1988. Since 1988 he has been a partner in a Lugano law firm, currently PSM Law SA. He has also served since 1997 as professor of business law at the University of Geneva. Between 2004 and 2015 he was a Member of the Swiss Takeover Board. Since 2007 he has been a Member of the Sanction Commission of the SIX Swiss Exchange.
Franziska Tschudi will be put forward for re-election as Member of the Board of Directors and as Member of the Compensation Committee at the General Meeting of Shareholders of Swiss Life Holding on 26 April 2016.
Klaus Tschütscher — Born 1967, Liechtenstein national Member of the Board of Directors bild Klaus Tschütscher studied law at the University of St. Gallen and obtained a doctorate (Dr. iur.) in 1996. In 2004 he also completed a postgraduate LL.M. degree in International Business Law at the University of Zurich. He started his career in 1993 as a research assistant at the University of St. Gallen. Two years later he became Head of Legal Services and Deputy Director of Liechtenstein Tax Administration.
In this function he was notably a member of the Liechtenstein OECD delegation and Governor of the European Bank for Reconstruction and Development (EBRD) in London for four years. Klaus Tschütscher went on to start his political career as a member of government of the Principality of Liechtenstein. Initially he was Deputy Prime Minister from 2005 to 2009, responsible in particular for Justice and Economic Affairs. From 2009 to 2013 Klaus Tschütscher was Prime Minister and Finance Minister of Liechtenstein. He has received various awards and international distinctions. Klaus Tschütscher is a delegate to UNICEF Switzerland and an honorary member of the charitable foundation “Football is more” (FIM). Since his withdrawal from politics, Klaus Tschütscher has been a Member of the Board of Directors of Swiss Life Holding Ltd.
Changes in the Board of Directors with effect from the 2016 General Meeting of Shareholders
The Board of Directors met nine times during the year under review. The meetings lasted around three hours on average. All members of the Board of Directors attended all the meetings. The Group CEO and the other members of the Corporate Executive Board were present at all meetings. The Board of Directors conducted parts of the meetings among themselves.
The Chairman’s Committee held ten meetings during the year under review. Each session lasted for around two hours on average. The meetings were attended by all members, including the Group CEO and the Group CFO.
Compensation Committee The Compensation Committee supports the Board of Directors with regard to setting the compensation policy and in key personnel decisions regarding appointments to the highest levels of management and related performance-based and market consistent compensation. The fundamental duties and responsibilities of the Compensation Committee are set out in Article 12 of the Articles of Association as amended on 23 April 2014.
During the year under review, the Compensation Committee convened a total of five times. Each session lasted for around one-and-a-half hours on average. There was full attendance at all meetings. In the year under review, the Chairman of the Board of Directors also attended meetings of the Compensation Committee in relation to nomination and succession planning issues in the Board of Directors and Corporate Executive Board.
Generally, the Group CFO and the Head of Corporate Internal Audit attend the Audit Committee meetings or parts of the meetings in an advisory capacity. The Group CEO may attend the meetings of the Audit Committee (without voting rights). Representatives from the external audit services are also regularly invited (cf. also “Supervisory and control instruments vis-à-vis the auditors”, page 73). In addition, further members of the Corporate Executive Board or inhouse specialists may also be invited to attend. The Audit Committee meets at least four times a year. The frequency of meetings depends on the financial budgeting and reporting process.
bild Patrick Frost studied at the ETH in Zurich and the universities of Cologne, Basel and Zurich, obtaining degrees in natural science (dipl. Natural Science (dipl. Natw. ETH), economics (Dr. rer. pol.) and law (lic. iur.)). He began his career in the mid-nineties as an analyst and subsequently as a Portfolio Manager in asset management for Winterthur Group. After two years in the US as a Corporate Bond
Manager, he was appointed Head of Fixed Income at Winterthur Group in 2001.
Ivo Furrer — Born 1957, Swiss national Chief Executive Officer Switzerland (CEO Switzerland)
Credit Suisse Group, where he was Head of e-Investment Services Europe and member of the management of Personal Financial Services. Ivo Furrer began working for Zurich Financial Services in 2002, initially in Germany as head of the international key account business, and in 2005 as a Member of the Global Corporate Executive Committee. In 2007 he was appointed CEO Life Switzerland and Member of the Global Life Executive Committee of Zurich Financial Services.
Thomas Buess — Born 1957, Swiss national Group Chief Financial Officer (Group CFO)
Markus Leibundgut — Born 1969, Swiss national Chief Executive Officer Germany (CEO Germany)
Other appointments: – Corporate Private Care AG, Member of the Board of Directors – Rüegg-Naegeli AG, Member of the Board of Directors – Stiftung Technopark Zürich, Member of the Board of Trustees – Inter-Community School Foundation, Member of the Board of Trustees
Nils Frowein, CEO International since January 2013, was appointed Member of the Corporate Executive Board of the Swiss Life Group on 1 January 2015.
With regard to the compensation system, the key principles of the compensation policy of the Swiss Life Group have been incorporated into the Articles of Association. The members of the Board of Directors are granted exclusively fixed compensation. This is paid partly in blocked Swiss Life Holding shares, with the amount, date of allocation and duration of the blocking period set by the Board of Directors. The members of the Corporate Executive Board are entitled to a fixed basic salary and, if applicable, a short- and long-term variable compensation component. The variable compensation for members of the Corporate Executive Board has been limited under the Articles of Association to a maximum 181% of the fixed basic salary.
Since 2009, Swiss Life has given shareholders the opportunity to hold a separate advisory vote at the General Meeting on the compensation report for the relevant financial year. The outcome of the vote is important for the Board of Directors in their assessment and structuring of compensation. This vote on the compensation report will continue to be held in the future in line with good corporate governance practice.
– For the Corporate Executive Board: The short-term variable compensation component for the 2014 financial year in the amount of CHF 3 949 081 in total (bonus and deferred compensation in cash), determined by the Board of Directors at the beginning of 2015 in view of the 2014 annual results, and the maximum total amount of the fixed compensation and the long-term variable compensation (equity compensation plan) for the 2016 financial year in the amount of CHF 12 800 000 in total.
In the same way, the General Meeting on 26 April 2016 will be asked to approve the exclusively fixed compensation for the Board of Directors until the 2017 ordinary General Meeting, the short-term variable compensation component for the Corporate Executive Board for the 2015
Swiss Life – Annual Report 2015 financial year and the maximum total amount of fixed compensation (basic salary incl. ancillary benefits and occupational provisions) and of the long-term variable compensation component (equity compensation plan) for the 2017 financial year.
The proposed budget/maximum amount for the fixed and long-term variable compensation for the Corporate Executive Board for the 2017 financial year represents an upper limit, which would only be exhausted in the case of exceptional business performance. The Board of Directors will determine the fixed compensation and the long-term variable compensation component for the Corporate Executive Board at the beginning of 2017 and will detail the key underlying factors in the respective compensation report, on which the shareholders can in turn hold an advisory vote.
The information on compensation granted to Corporate Executive Board mem bers also includes the variable compensation, which was determined by the Board of Directors at the beginning of 2016 and is published on an accrual basis as compensation for the 2015 financial year. The members of the Board of Directors are granted exclusively fixed compensation, payable 70% in cash and 30% in Swiss Life Holding shares; the allocated shares are subject to a three-year blocking period.
The share in the company’s success is measured using quantitative Group targets (Key Performance Indicators, KPIs), which are defined in advance for the following three years as part of medium-term planning. The main KPIs for the medium-term planning are, besides the annual profit, payout capacity, the planned cost savings, the risk and fee result, new business profitability, the return on equity and solvency (Swiss Solvency Test, SST). In order to avoid conduct aimed at
Personal performance based on the specified quantitative and qualitative objectives is assessed annually in the employee appraisal procedure implemented throughout the Group (Group Performance System, GPS). Two assessment elements/models are used for determining objectives and evaluating performance: The Group Objectives Model (GOM) relating to qualitative and quantitative objectives and the Group Competency Model (GCM) for measuring and assessing individual competencies and behaviour, including the compliance regulations.
Within the framework of the compensation arrangements for members of the Corporate Executive Board, “deferred compensation in cash” was introduced on 1 January 2012 as a new compensation component related to the short-term variable compensation. On the basis of the corresponding regulations, a portion of the short-term variable cash compensation determined by the Board of Directors is not paid immediately but after a period of three years has elapsed and provided that the regulatory requirements are satisfied at that point. The allocated deferred compensation in cash represents an entitlement during the three-year deferral period. The underlying “deferred cash plan” also provides for adjustment and reclaiming mechanisms (clawback). A full or partial reduction of the deferred compensation is provided for in the following cases: Negative impact of the key figures applying to the allocation of deferred compensation due to a restatement of the annual accounts or damage to Swiss Life as a result of a violation of statutory, regulatory or compliance standards by participants in the plan. If the employment relationship is terminated by a participant during the three-year deferral period for deferred compensation in cash, the entitlements expire worthless (retention component). For the 2015 financial year, the Board of Directors has determined that, as in the previous year, as from a variable compensation amount in cash of CHF 500 000, 23% of the total variable compensation in cash is to be allocated as deferred compensation in cash.
As a long-term variable compensation component linked to the performance of the Swiss Life Holding share price and to the medium-term planning and degree of target achievement, an equity compensation plan has been in place since 2004 for members of the Corporate Executive Board and other key performers within the Swiss Life Group, who are determined by the Corporate Executive Board with the approval of the Compensation Committee. Based on this plan, participants are granted future subscription rights to Swiss Life Holding shares. These subscription rights entitle them to receive Swiss Life Holding shares free of charge after a period of three years has elapsed, provided that the prerequisites under the plan have been satisfied at that point.
Since 2011 participants in the equity compensation plan have been allocated Restricted Share Units (RSUs) on 1 April (2011–2013 equity compensation plans) or on 1 March (equity compensation plans from 2014). The RSUs grant the holder future subscription rights, entitling them to receive Swiss Life Holding shares free of charge after a three-year period has elapsed. The attribution of shares after the expiry of the three-year deferral period is effected on a 1:1 basis (1 RSU = 1 share): The plan is therefore very simple, transparent throughout the whole term and directly linked to the performance of the Swiss Life Holding share price. The value of RSUs during the three-year term develops linear with the Swiss Life Holding share price and thus symmetrically corresponds with shareholder interests. 56 members of Swiss Life Group senior management participated in the 2013 equity compensation plan, in which a total of 74 630 RSUs were allocated; 18 590 in total to the Corporate Executive Board, of which 3360 to Bruno Pfister, in his capacity as Group CEO at the time. 57 members of Swiss Life Group senior management participated in the 2014 equity compensation plan. A total of 57 223 RSUs were allocated; 14 432 in total to the members of the Corporate Executive Board, of which 4226 to Bruno Pfister as Group CEO at the time. Altogether 51 members participated in the 2015 equity compensation plan, in which a total of 51 660 RSUs were allocated; 13 288 in total to the Corporate Executive Board, of which 3644 to Patrick Frost in his capacity as Group CEO since 1 July 2014. A total of 51 members of Swiss Life Group senior management participated in the 2016 equity compensation plan. A total of 51 270 RSUs were allocated; 14 586 in total to the members of the Corporate Executive Board, of which 3478 RSUs to Patrick Frost as Group CEO.
The 2013–2015 equity compensation plans are based on the Group-wide programme “Swiss Life 2015”, which had been announced at the Swiss Life Group’s Investors’ Day on 28 November 2012 (see www.swisslife.com/investorsday2012). With regard to the 2013 and 2014 equity compensation plans, the Board of Directors has set the following performance criteria, based on the mediumterm planning 2013–2015 (2013 equity compensation plan) and 2014–2016 (2014 equity compensation plan): Cost efficiency (50% weighting), risk and fee result (25% weighting) and IFRS profit (25% weighting). With regard to the 2015 equity compensation plan, the Board of Directors has set the following performance criteria on the basis of the medium-term planning 2015–2017: IFRS profit (50% weighting), the risk and fee result (25% weighting) and Cash to Swiss Life Holding for further strengthening of the financial substance and payout capacity (25% weighting). The 2016 equity compensation plan is based on the new Group-wide programme “Swiss Life 2018”, which was announced at the Swiss Life Group’s Investors’ Day on 25 November 2015 (see www.swisslife.com/investorsday2015). For the purpose of supporting the achievement of the respective corporate goals, performance criteria have been determined by the Board of Directors analogously to the previous year’s objectives (IFRS profit, 50% weighting; risk and fee result, 25% weighting; Cash to Swiss Life Holding, 25% weighting).
The attribution of the long-term variable compensation component (equity compensation plan, RSU plan) is deferred for a period of three years from the date of allocation as is the case with the deferred compensation in cash. Likewise, the RSU plans provide for adjustment and reclaiming mechanisms (clawback). These apply in the case of a negative impact of the key figures applying to the allocation of deferred compensation due to a retroactive correction to a restatement of the annual accounts and in the case of damage to Swiss Life as a result of a violation of statutory, regulatory or compliance standards. If the employment relationship is terminated by a participant during the three-year term of the RSU plan, the future entitlements expire worthless.
The compensation paid to members of the Board of Directors in the 2015 financial year is shown on an individual basis in the 2015 compensation table below. For comparison purposes, the compensation for the 2014 financial year is shown again after the 2015 compensation table.
Based on the Articles of Association of Swiss Life Holding, the maximum amount of the fixed compensation for the Board of Directors for the new period of office from the 2016 ordinary General Meeting until the 2017 ordinary General Meeting will be presented to the General Meeting of Shareholders on 26 April 2016 for approval. Compared to the previous years the Board of Directors proposes an augmentation of the compensation of CHF 140 000 in total. The basic compensation for members of the Board of Directors, which has remained unchanged at CHF 110 000 since 2011, is to be increased by CHF 10 000; in addition, compensation for time expenditure related to chairing a Board of Directors’ committee is to be slightly increased. Compensation for the Vice Chairmen and the Chairman of the Board of Directors remains unchanged.
Rolf Dörig, Chairman of the Board of Directors 840 000 1 542 360 210 1 200 210 287 641 – 1 487 851 1 The allocation of shares was effected on 18.06.2015 and 15.12.2015 at the stock exchange closing price of CHF 210.80 and CHF 261.90 respectively. Taking into account the blocking period of three years, the economic value, which is equal to the tax value, is CHF 176.9919 and CHF 219.8965 respectively.
2 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV/FAK amounted to a total of CHF 176 787 in the year under review.
The variable compensation components are determined by the Board of Directors in accordance with the compensation policy and based on the company result and the achievement of personal goals during the relevant business year, assessed in the employee appraisal procedure implemented throughout the Group (Group Performance System, GPS).
The amount of the variable compensation (short-term variable compensation in cash and equity compensation plan as a long-term variable compensation component) is limited in the Articles of Association of Swiss Life Holding to a maximum of 181% of the fixed basic salary (statutory “bonus cap”, upper limit for the variable compensation). On the basis of the current compensation policy the Board of Directors has, with a view to harmonising fixed and variable compensation in the case of maximum target achievement and departing from a benchmark of 100%, set a range of 100–130% of the fixed basic salary for the variable compensation components. Starting from the principle of equal apportionment, the ratio of short-term to long-term variable compensation components is determined by the Board of Directors in consideration of the results achieved in the respective business year (discretionary decision). In the case of an “on target” achievement, the range for variable compensation of members of the Corporate Executive Board is 80–100% of the fixed basic salary (“on-target bonus”).
The long-term variable compensation component in the form of the equity compensation plan (RSU plan 2016) is also reported in the compensation table for the 2015 financial year, which serves as the basis for the amount of the allocation and the corresponding number of allocated RSUs (accrual method).
Expenditure for occupational provisions for members of the Corporate Executive Board in the period under review amounted to CHF 1 622 925. This includes the ordinary annual employer contribution of CHF 228 421 for the occupational benefits of Patrick Frost, Group CEO.
Following the 2015 compensation table, the details of the compensation for 2014 are stated in a separate table for comparison.
Aggregate total compensation in cash and in shares and occupational Regular Extraordinary provisions expense contributions 6 contributions (amount) 7
2 In the 2014 financial year, Bruno Pfister received the salary agreed in his contract of employment until formal termination of the employment relationship on 30 November 2014; for his service as Group CEO until 30 June 2014 a short-term variable compensation (bonus and deferred compensation in cash) of a total of CHF 540 000 was determined. In addition he received 1415 RSUs as a long-term variable compensation component (2014 RSU plan: the allocation was effected at a fair value of CHF 203.54 as calculated by an independent consultancy firm). This compensation is included in the tabular amounts for the other members of the Corporate Executive Board or the corresponding total amount.
Aggregate total compensation in cash and in shares and occupational Regular Extraordinary provisions expense contributions 5 contributions (amount) 6
Swiss Life – Annual Report 2015 1 audited 2 “Closely linked parties” are natural persons and legal entities (in the sense of Art. 678 of the Swiss Code of Obligations and Art. 16 of the Compensation Ordinance) that have close personal, economic, legal or de facto ties with members of governing bodies. This typically includes spouses, minor children, companies controlled by members of governing bodies, and natural or legal persons serving as members of governing bodies in a fiduciary capacity.
Shareholdings as well as future subscription rights to Swiss Life Holding shares as at 31 December 2014 are shown in the Notes to the Swiss Life Holding Financial Statements on page 308.
No share options have been granted in the Swiss Life Group since 2003 and no options are outstanding.
In the form of an overview, the following additional information is provided on the Swiss Life Group compensation systems for the 2015 financial year.
of which total variable compensation (total pool) 2 132 540 859
Total outstanding deferred compensation 11 456 814 of which cash payment 946 177 of which shares 0 of which options 0 of which others (Restricted Share Units, RSU) 10 510 637
Charges and credits in the financial year from compensation for previous financial years 3 –1 753 281
In addition to the resolutions provided for by law, a qualified majority (corresponding to at least two thirds of the voting shares represented and an absolute majority of the share par value represented ) is required to: – change provisions concerning restrictions on voting rights – dissolve the company (liquidation) – dismiss more than one third of the members of the Board of Directors – change these provisions of the Articles of Association
Based on a corresponding authorisation in the Articles of Association, the presiding officer at Swiss Life Holding’s General Meeting of Shareholders generally requests that votes be taken electronically. Swiss Life Holding uses a certified electronic voting system which permits balloting with remote-controlled handsets and records the exact number of voting shares represented.
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 of the Federal Act on Stock Exchanges and Securities Trading (SESTA).
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 statutory auditor and Group auditor. Since then, PwC has been reappointed without interruption. PwC has also acted as statutory auditor for Swiss Life Ltd since 1994. Swiss Life Holding last invited tenders for its statutory auditor and Group auditor mandate for the 2008 financial year. On completion of the evaluation process, the Board of Directors, in accordance with the proposal of the Audit Committee, again nominated PwC as its statutory auditor and Group auditor at the General Meeting of Shareholders.
The partner at PwC in charge of auditing the Swiss Life Holding annual financial statements and consolidated financial statements (lead auditor) has exercised this function since 2011. The role of lead auditor rotates in compliance with the term of office regulations stipulated by the Swiss Code of Obligations, the independency guidelines set forth by the Swiss Institute of Certified Accountants and Tax Consultants and internal guidelines at PwC.
In 2015 the auditing fees credited to PwC came to approximately CHF 8.1 million (2014: CHF 8.2 million). This includes the fees for reviewing the 2015 half-year accounts.
Additional fees in the region of CHF 1.1 million were paid to PwC in 2015 (2014: CHF 1.5 million ), approximately CHF 0.5 million of which was for the audit of the Market Consistent Embedded Value (MCEV) report. The remainder consists of fees for legal, fiscal and other advisory services. All services were performed in compliance with the relevant independency regulations set out in the Swiss Code of Obligations, the Audit Supervision Act and FINMA circular 2013/3, “Auditing”.
At www.swisslife.com/subscription, all interested parties can subscribe to the company’s mailing list so as to receive timely ad hoc reports and media releases free of charge via the e-mail distribution system. 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 at www.swisslife. com, “Media” area, “Media releases” section (www.swisslife.com/mediareleases).
In addition to its comprehensive Annual Report and Financial Statements, Swiss Life Holding also publishes its half-year results. Furthermore, in May and November of each year, it publishes specific details on the previous quarter. All Swiss Life’s annual reports since 1998 and all half-year reports since 2001 can be accessed on the internet at www.swisslife.com/en/home/investors/ results/archive.html, “Investors” area, “Results & Reports” section, “Archive Reports” and “Annual Reports” subsections (www.swisslife.com/annualreports). A report detailing the key facts and figures on business operations is sent out on an annual basis to all the shareholders listed in the share register.
Furthermore, Investors’ Day 2015 was held on 25 November 2015, on which occasion Swiss Life presented the objectives of the “Swiss Life 2018” Group-wide programme, the successor to the “Swiss Life 2015” Group-wide programme. The relevant documents and presentations can be found at www.swisslife.com, “Investors” area, “Investors’ Day 2015” section (www.swisslife.com/ investorentag2015).
In our business, responsible and far-sighted management is the platform on which long-term success is built. Our customer relationships often last for several decades. And our various target groups are increasingly interested in the way we think and act as a company and how we contribute to society. The basis for all our activities is provided by the ethical values and instructions contained in our Code of Conduct. We aim to act sustainably and responsibly in our fields of activity. So it is fitting that we hope in future to make a signal contribution to public discussion of a “longer self-determined life”. Supporting current and future customers as they take their financial future into their own hands forms the core of our daily work at Swiss Life.
We assume social responsibility first and foremost in our core business – long-term financial provisions: We help people look to the future with confidence. But we also want to take responsibility beyond our immediate field of operations. We do this by lending our constant support to a host of projects that aim to promote confidence and self-determination – whether through charitable foundations or volunteer work. In our home market of Switzerland we back domestic charitable initiatives by way of the “Perspectives” foundation; in France and Germany we make a contribution to social and cultural projects with our own foundations. We are also the proud co-founder of the Swiss Climate Foundation and have been supporting sports and culture with sponsorship commitments for years.
For the first time we have determined the sustainability topics that are key for us as a company and for our main target groups, and set them out in the report. Among the topics given the greatest weight in surveys are customer orientation, sustainable profitability and subjects such as compliance and the advancement of our employees.
Together with its Annual Report 2015, the Swiss Life Group is for the first time presenting a Corporate Responsibility Report in accordance with the guidelines of the Global Reporting Initiative (GRI).
For more information on dialogue with the various stakeholders, see: www.swisslife.com/en/stakeholdercommunication (G4-25, G4-27).
Our success is based on the competence and performance of our employees. We create attractive working conditions, we support our employees with further training, talent and management prospects in a traditional Swiss company.
Support individuality – the way we think Create confi dence – the way we feel
The contents of the Corporate Responsibility Report were established as part of a multi-level materiality process with internal and external stakeholders. Based on qualitative and quantitative interviews with the Swiss Life Executive Board, a project group comprising specialists from Investor Relations, Asset Managers, Human Resources and Corporate Communication worked on selected key themes for Swiss Life, discussed them with selected investors and media professionals and refined them in structured interviews. Finally, the completed materiality matrix was approved and ratified by the Corporate Executive Board (G4-18). The report comprises Swiss Life’s main locations in Switzerland, Germany and France and refers to all company entities within the scope of consolidation (pages 290 to 296; G4-17).
Relevance for Swiss Life medium high h ig h m ed iu m
The Corporate Responsibility Report covers all the subjects included in the matrix. The reporting on the key areas (GRI aspects) is based on the indicators outlined in the GRI-G4 guidelines.
Swiss Life has potential for profitable growth in all markets. Its divisions are managed in accordance with a multi-local approach; a significant portion of the decision-making power is with the local divisions. This ensures that decisions can be made close to the market and with commensurate effect. Customer needs form the basis for local guidance. Only those who can win over existing customers and the new generation with relevant offers and services will be among the winners in decades to come. Swiss Life is closely oriented to customer needs and invests in consulting, digitalisation and organic growth. With these measures, Swiss Life aims to increase customer satisfaction and loyalty along with the recommendation rate, and thus further expand the groundwork for future economic success.
Customer centricity is a strategic thrust of Swiss Life. The company has launched various initiatives in recent years with an eye to further strengthening Swiss Life’s customer centricity. These initiatives are centrally coordinated and meticulously analysed and assessed.
Trend in customer satisfaction in Swiss new business with corporate customers
In late 2015 a company-wide campaign entitled “100 employees visit 100 customers” was successfully concluded. Over the past two years, Swiss Life allowed 100 employees who have no direct customer contact in their daily work to spend a day with a customer and get a glimpse into his or her life. The reports published on all the visits meant that all employees could follow the campaign. Furthermore, following each visit a meeting room was named after the customer and adorned with his or her portrait. The aim of this campaign was to anchor customers’ lives in the company, and to render customer centricity palpable.
A customer portrait in the “Patrick Hemmelmayr” meeting room in Zurich
In France an obligatory electronic training programme was instituted for every employee with five golden rules for a customer-centric organisation.
In Germany employees are able to experience customer feedback in real time on a centrallypositioned screen and thus watch as customer needs are met in consulting and customer service.
Innovations in the product range in 2015 1 Products which are either new or enhance customer value 2 Other products in the market
The company offers private and corporate clients comprehensive and individual advice plus a broad range of own and partner products through its own agents, financial advisors and distribution partners. Swiss Life Select, the subsidiary specialising in financial planning for private households and brokering financial products, as well as the advisors of Tecis, Horbach, Deutsche Proventus and Chase de Vere, also part of the Group, use the Best Select approach to choose suitable products for customers from the market.
Swiss Life uses a variety of directives at Group level to regulate product management and has established a uniform, auditable product development process. This process defines the minimum requirements of local product development as well as the approval and escalation process for initiatives at Group level. The observance of laws and provisions, practical customer value and the quality of customer documentation are naturally essential criteria in the assessment process.
Swiss Life uses analytical methods to ensure that strategic risks are dealt with adequately in what continues to be a very challenging economic environment. In its strategic risk management process, Swiss Life incorporates all the information on risks and the risk/return characteristics in its strategic decisions. An understanding of the interplay of individual risks is essential in order to take due account of the factors influencing risks during strategy development so that these factors can be steered appropriately.
Swiss Life manages assets for its own insurance companies and for institutional investors as clients (such as pension funds, fund management companies, other insurance companies etc.), whereby it complies with the stipulations of the supervisory authorities as an insurance company and asset manager. Furthermore, Swiss Life relies on the aforementioned integrated, value-oriented risk management with an eye to protecting customer assets and optimally deploying risk capital.
Moreover, Swiss Life undertakes to observe ethical principles, besides acting in accordance with the law, when taking investment decisions.
Swiss Life is at the centre of public life and aware of its social responsibility. The company contributes to public dialogue around the subject of a “longer self-determined life” and is involved in many projects promoting self-determination and confidence.
Swiss Life wants to assume responsibility beyond the scope of its business operations. That includes a topic that affects everyone in Swiss Life’s core markets: Demographic development. People are living ever longer and want to maintain their self-determination and dignity as they grow old. Today most Europeans can expect to live over 80 years and some studies indicate the life expectancy of newborns today will even reach 100. By comparison: In 1900 people lived to about 45 on average. This development has far-reaching consequences.
You can find further information on a “longer self-determined life” from 29 March 2016 at: www.swisslife.com/hub.
Swiss Life’s operational environment is heavily influenced by political and regulatory decisions. For example, legal principles and their practical application in the form of ordinances have a direct effect on product design, processes and the manner of reporting to shareholders, supervisory authorities and the public.
The company is also in direct contact with representatives of political committees and organisations as well as supervisory authorities on a number of levels. Political work and cooperation are closely coordinated with business associations in all the core markets. Moreover, a number of company executives are members of various national business associations: For example, Patrick Frost, Group CEO of Swiss Life, is on the Board of the economic umbrella organisation economiesuisse, while Ivo Furrer, CEO of Swiss Life Switzerland, is on the Managing Board of the Swiss Insurance Association (SIA) where he is also Chairman of the Board Committee.
Swiss Life also fosters relationships with politicians and industry groupings in France and Germany as part of its socio-political responsibility. Swiss Life Germany is represented on all the major committees of the German Insurance Association (GDV) and maintains regular contact with the Bundesverband der Verischerungskaufleute (BVK, a German association for self-employed insurance brokers) and the Verband unabhängiger Finanzdienstleistungs-Unternehmen in Europa (Votum, an association representing the interests of financial service providers operating throughout Europe).
Charles Relecom, CEO of Swiss Life France, is a member of the Board of Directors of the French Insurance Association (FFSA); Nils Frowein, CEO of Swiss Life International, sits on the Board of the German Chamber of Commerce; and there are also other examples of Swiss Life representatives being members of committees relevant to the company’s business.
The Public Affairs organisational unit is responsible for monitoring political challenges. In addition, the Political Communications Steering Committee meets four times a year. This internal committee is chaired by the Group CEO and sets the topical priorities.
Swiss Life works with impoverished children through the Foundation Confidence for Children
Swiss Life is also a co-founder of the Swiss Climate Foundation, which promotes improved energy efficiency and innovative climate protection solutions and supports small and mediumsized enterprises engaged in climate protection initiatives.
Swiss Life Germany has been a contributor to the Nicolaidis Foundation since 2007, a non-profit organisation for widows, widowers and their children.
In Switzerland, Swiss Life has sponsored the Swiss Football Association for over ten years; it is also a partner of Swiss Orienteering and of schweiz.bewegt, the biggest personal mobility and nutrition project in Switzerland.
Swiss Life in Germany has also been committed to regional grass-roots and disabled sporting activities for several years.
The Swiss Life Group leadership priorities are as follows: – We act as if Swiss Life were our own business – We communicate openly and clearly – We trust, motivate, empower and support people – We develop efficient teams – across the company as well – We deliver results on time – We accept accountability – follow through and act consistently
Group-wide standard processes are used to provide optimal support to managers and employees: – Employee performance reviews (all) – Performance assessments with all employees (setting of objectives and subsequent performance assessment) – Professional development interviews and measures – Decisions on salary and promotions – Strategy and value-oriented behaviour – as per the Group-wide competency model – Assessment of employee risks
Swiss Life continuously invests in the internal and external training and development of its employees. True to the motto of lifelong learning, employees, specialists and managers are offered a range of learning opportunities on specialist topics as well as modules on social and methodological skills.
Expenses for staff training and development within the Group in 2015 amounted to CHF 14.7 million – about CHF 1749 per employee. As a proportion of total personnel costs, the outlay for training and development is 1.8%. The investment is earmarked for a varied, needs-based training offering.
In addition to the traditional training options, a digital learning platform offers managers the opportunity to learn about leadership and management competencies in an efficient way, independently of time or place. The platform provides rapid access to standardised management processes, skills-oriented further training and other management topics. Where necessary, a manager can select and combine a learning sequence from an extensive pool of learning resources including brief videos, checklists and learning programmes. The learning platform provides the basis for integrated learning architecture. In addition, a number of tailored training, advisory and coaching modules are available for managers and teams.
The divisional talent pools help to prepare future first and second-level managers (team leaders and department heads) as well as project managers and specialists for their future roles through training modules and project work. All divisions conducted programmes, tailored to the particular requirements of each unit, at all locations during the reporting period.
Alumni meet the participants every year at the “Shaping the Future Day” when there is in-depth analysis of the Group’s strategic orientation, as well as an update and ensuing discussion on the progress of the Group-wide programme with the Corporate Executive Board.
Mutual respect across all hierarchical levels is part of the Swiss Life DNA. Respect fosters trust and helps create a comfortable working atmosphere for employees with conditions conducive to carrying out their everyday work.
In the 2015 financial year, there were no cases of discrimination or other complaints (e.g. mobbing) via the established management processes or other informal channels (e.g. an Ombudsman managed by a third party).
In accordance with valid national and international law, the Swiss Life Group follows fair employment procedures free of discrimination. Recruitment or promotion is based solely on ability, competence and potential in view of the requirements of the position in question. Fair and equal compensation for all employees is ensured by the Group-wide Group Compensation Policy. Swiss Life uses instruments in all its major national companies to review and ensure equal pay for men and women. In Switzerland, for example, Logib software based on data provided by the Swiss Federal Statistical Office is used for that purpose. The insurance sector is not subject to any collective agreements.
Occupational health management is a priority at Swiss Life. Good working conditions influence employee health to the extent that: – a comprehensive workplace concept is provided, – diverse requirements are met, – social interaction is promoted, – autonomy, freedom to act, learning and development opportunities are facilitated, – meaningfulness is ensured and – employees and their contributions and performance are valued.
In 2015, an online offer of text, brief videos, checklists and learning programmes was put together on the subject of “Health and wellbeing” and placed on the intranet for employees in Switzerland, Luxembourg, Austria and the Czech Republic. It will be rolled out to Germany, France and the UK in 2016.
In 2015 the works council participated in the German Works Councils Prize for the first time. In the “Innovative works council work” category the “Whistleblowing” works agreement and “Talent pool” internal agreement were nominated, and the “Occupational reintegration” works agreement was nominated in the “Good work” category.
In France, the close cooperation between the social partners progressed further during the reporting period. Negotiations and agreements are conducted and concluded on an ongoing basis on the basis of “good partnership”.
In 2015, there were a total of nine negotiations on the following subjects (with an average of five meetings per negotiation topic): – An agreement on the union law establishing the number of hours for union representatives, the works council and the Committee for Health Protection and Security to fulfil their role is ready for signing (the unions have already signed); – An agreement on a forward-looking employment and qualification policy (obligatory in France) is ready for signing; – A company-wide agreement on psychosocial risks is ready for signing; – Annual mandatory salary negotiations: Two agreements for commercial employees and inspectors and one agreement for administrative employees are ready for signing; – An agreement about equality in the workplace has been signed by all the trade union organisations; – Agreement on carrying over days off (signed); – Agreement on health insurance for employees (signed); – Agreement on flat-rate hourly fees including the right to be “incommunicado” when not at work.
In France, regular awareness campaigns have been held since 2008 to sensitise employees to the urgent need to reduce the impact on the environment. That includes a programme to reduce paper consumption and waste.
Moreover, Swiss Life has taken part in the Carbon Disclosure Project (CDP) survey since 2011. CDP is an independent charitable organisation which holds the most comprehensive set of corporate data on climate change in the world. In its first survey, Swiss Life scored 70 out of 100 index points for transparency (climate disclosure score). Since then, the company has steadily improved and it now rates above the average for the Swiss financial sector at 97 index points.
When constructing new buildings, Swiss Life aims for the Minergie® standard as a rule or other sustainable construction standards. Renovations are based on a comprehensive approach whereby the first step is to massively reduce energy consumption and then provide the required energy in the most environmentally-friendly way possible. Swiss Life applies the “Variantenvergleich Energie systeme” (VVES, a standard for comparing energy systems) to its investments and its operating and maintenance costs. The VVES provides reliable figures on alternative power supply methods for properties. Intelligent building technology concepts and universal controls ensure the sparing and optimal use of resources. Extensive documentation and straightforward systems facilitate sustainability in operations and maintenance.
G4-31 Contact point for questions regarding the report Media Relations, p. 315
G4-EN7 Reduction of energy requirements for products and services Emissions p. 102-103
G4-EN16-FS Financial portfolio related indirect Greenhouse Gas Emissions CDP report Reason for omission, see CDP report CC14.1
Page number in SPECIFIC STANDARD DISCLOSURES Annual Report 2015 Reasons for omission LABOUR PRACTICES AND DECENT WORK Employment from p. 94
G4-LA4 Notice periods regarding significant operational changes p. 74 Occupational Health and Safety p. 98-99
G4-LA12 Staff and management structure p. 34-39, p. 46-50, p. 96 Information unavailable on staff by employee category and gender.
G4-PR2 Violation of regulations and codes of conduct concerning products and p. 84 services related health and safety Product and Service Labelling p. 84
Swiss Life presents itself with a strong umbrella brand. As a rule all products and services are offered under the umbrella brand and reinforce its positioning.
Sub-brands underline the expert role of the umbrella brand in specific market segments. Swiss Life maintains a deliberately restricted portfolio of sub-brands for individual sales channels.
Brands which have less affinity with the core business but potential for a positive image transfer are allocated to level 3. Here the umbrella brand serves as an additional textual identifier.
Support individuality – the way we think We know our customers. We understand their needs and empower them to make the right selection from a wide range of flexible solutions to live a longer self-determined life.
We support our customers to face a longer life with self-determination and confidence.
In 2015, in a survey carried out by Reader’s Digest Switzerland, Swiss Life was once again voted “Most Trusted Brand” in the Life Insurance category. Furthermore, in 2015 the “Best Swiss Brands” study, conducted for the past several years by Interbrand, again lists Swiss Life, with a brand value of CHF 279 million, among the 50 most valuable brands in Switzerland. Numerous awards in other divisions also confirm the strength of the Swiss Life brand internationally. For example, Swiss Life Asset Managers was nominated best international asset manager for the second time in the European Funds Trophy 2015, organised by Funds Class. And in Germany, Swiss Life was voted best broker insurer in 2015 by Focus Money business magazine and the AfW Federal Financial Services Association.
Reversed sentence campaign in Germany Swiss campaign on the subject of a “longer self-determined life”
The brand identity is one of the key instruments in making the Swiss Life brand personality tangible for internal and external target groups, and in distinguishing it from the competition. In 2015, the launch of the “Reversed sentences” campaign, winner of many awards in Switzerland, in Germany and the Czech Republic, set the foundation for the Swiss Life Select sub-brand in those countries. In Switzerland, meanwhile, a new brand campaign was launched, featuring the concept of a “longer self-determined life”. Brand awareness and other important factors, such as advertising and sponsorship presence, are subject to continuous local market research by independent institutes. The assessments made regularly in Switzerland, Germany and France show positive trends in brand performance in 2015. The results have an ongoing influence on the preparation and adaptation of marketing measures.
Contents 114 1.1 Basis of preparation 114 1.2 Covered business and non-covered business 116 2 Summary of MCEV Results 116 2.1 Key results 117 2.2 MCEV of covered business 118 2.3 Value of new business 119 2.4 Group MCEV — analysis of earnings 120 2.5 Covered business — analysis of earnings 124 2.7 Reconciliation of IFRS net asset value to Group MCEV 126 3 Information by Market Unit 126 3.1 Market units 127 3.2 Results by market unit 133 4.1 MCEV components for covered business 136 4.2 New business 136 4.3 Asset and liability data 137 4.4 Economic scenario generator 138 4.5 Dynamic management actions and policyholder behaviour 138 4.6 Look-through principle 139 4.8 Employee pension schemes and share-based payment programmes 140 5.1 Economic assumptions 144 5.2 Taxation and legislation 144 5.3 Operating assumptions 145 6 Auditor’s Report on Embedded Value 147 7 Glossary and List of Abbreviations
Benefiting from strong operating earnings, Swiss Life contained the adverse effects from the challenging capital market environment and negative currency translation effects. The MCEV in 2015 amounted to CHF 12 509 million, compared to CHF 12 901 million in the prior year. In an environment of very low interest rates, Swiss Life generated a value of new business of CHF 268 million (CHF 255 million in 2014).
Present value of new business premium (PVNBP) 15 643 14 414
The value of new business profited from considerably increased volumes while the interest rate development had a substantial negative impact. The resulting pressure on new business profitability was mitigated by active new business steering across the Group. In local currency the value of new business increased by 10%.
Due to the capital market and currency developments mentioned, the value of covered business decreased by 5% despite substantial operating MCEV earnings resulting from profitable new business and operating returns on the in-force business supported by margin management and favourable demographic experience. The Group MCEV decreased by 3% in total.
Excluding currency translation effects of CHF –405 million, the MCEV of the covered business would have remained at a comparable level.
The net asset value and similarly the free surplus decreased because of negative currency translation effects and reserve strengthenings, while the dividends and new business were financed from operating earnings. Goodwill and other intangibles are not included in the net asset value, with the exception of France (see section 4.7).
The value of in-force business decreased by 4% driven by the adverse capital markets and, for the non-CHF denominated units, currency developments. Frictional costs increased, among others, due to new business written.
2.3.2 Value of new business — analysis of change The following graph and table detail the drivers for the change in new business value and margin of the business sold in 2015 compared to the business sold in 2014.
Other movements in IFRS net equity n/a 1 –40 –40 17
The non-operating MCEV earnings relate to borrowing costs and tax effects of the non-covered business. For Group MCEV, the change in non-operating MCEV earnings compared to 2014 arises almost entirely from the covered business.
Expected existing business contribution (reference rate) 1 –5 3 –1 21
Experience variances Experience variances aggregate the impact of actual development versus expectations regarding non-economic assumptions such as mortality, expenses, lapses and deviations in handling of additional reserves. A variety of effects relating to persistency and other demographic experience as well as reserve strengthening resulted in a MCEV increase. The last had a negative impact on free surplus and a positive effect on value of in-force business; the largest contribution stems from the Swiss business.
Economic variances Economic variances represent the change in embedded value by replacing the starting economic scenarios by the closing ones. Effects from deviations between actual and expected investment returns are included here. Overall, the economic variances had a negative impact on MCEV, driven by lower interest rates in Switzerland and widened credit spreads, mitigated by a strong real estate performance.
Other non-operating variances Other non-operating variances encompass effects relating to government-set parameters, tax impacts and changes in the regulatory environment.
The economic sensitivities are assumed to occur after the new business contracts have been sold, indicating how the value of in-force business and the value of new business written would be affected by sudden economic shocks.
The table below shows sensitivities of the MCEV and the value of new business to important financial market parameters as well as to operational and demographic assumptions.
10% increase in equity / property market values 811 8% 1 1
10% decrease in equity / property market values –958 –9% 1 1
25% increase in equity / property implied volatilities –338 –3% –17 –6%
25% decrease in equity / property implied volatilities 273 3% 14 5%
–1 534 2.7 Reconciliation of IFRS net asset value to Group MCEV
Swiss Life’s MCEV for covered business reflects the value of the shareholders’ interest in the life, health and pension business of the Swiss Life Group. This value includes the determination of best estimate liabilities for policyholder bonuses and tax payments, which are derived from results based on local statutory accounting rather than on IFRS. Therefore local balance sheets and profit and loss accounts are the starting point for the projections. The net asset value (of assets not backing liabilities) is based on the local balance sheet, and adjusted to market value.
Reconciliation of IFRS net assets to Group MCEV as at 31 December 2015
Value of in-force business 7 050 1 Goodwill adjustments correspond to goodwill of covered business with the exception of CHF 78 million from French operations (see section 3.2). 2 Group MCEV includes CHF 844 million of goodwill and intangible assets as part of the unadjusted IFRS net assets for non-covered business.
The adjusted IFRS net asset value corresponds to the MCEV net asset value of the Swiss Life Group. Adding the value of in-force business leads to the Group MCEV.
Swiss Life – Annual Report 2015 3 Information by Market Unit 3.1 Market units
Switzerland Swiss Life’s main business in the Swiss market is group life business with a full range of offerings. The individual business includes modern savings and retirement products with flexible and lower guarantees, risk and annuity products, as well as traditional savings products. Swiss Life’s own sales force plays the major role in distribution, followed by brokers and Swiss Life Select. The business for assumed external reinsurance is included here.
The MCEV of Swiss Life in France, Germany and International was negatively affected by the impacts of foreign currency translation into group presentation currency CHF.
Swiss Life in France is subject to a tax of 3% applied to dividends paid to Switzerland, which is considered for the actual payment.
Germany Mainly due to the unfavourable capital market development, the MCEV decreased by CHF 49 million excluding the currency translation effect. This was counteracted by revised surplus sharing.
International The MCEV increased by CHF 20 million despite adverse foreign currency translation effects, driven by a strong value of new business. In addition to the good annual profit, a capital transfer contributed to the increase of the net asset value.
Value of new business before new business strain 244 127 21 41 433
PRESENT VALUE OF NEW BUSINESS PREMIUMS (PVNBP) 8 408 4 006 936 2 293 15 643
PRESENT VALUE OF NEW BUSINESS PREMIUMS (PVNBP) 6 939 4 326 938 2 211 14 414
New business annual premium equivalent (APE) 487 522 72 223 1 304 1 New business strain represents the effect on the net asset value from writing new business.
The pressure on margins due to the challenging interest rate environment following the decisions of the Swiss National Bank from January 2015 was counteracted by comprehensive repricing measures in individual life and mitigated by further reduced guarantees in group life. Combined with increased volumes in both group and individual life and a strong contribution from assumed reinsurance business, the value of new business remained at a high level.
France Ongoing margin management led to an increased value of new business and at the same time the volume increased on a local currency basis by 3%.
The new business margin in life improved substantially thanks to the enhanced financial margin and the revised profit-sharing, a further increased share of unit-linked business and cost efficiency gains. Along with the higher new business volumes this led to a significant increase in new business value.
In health, the general shift of the offering to group business and some niches in individual business led to stable margins, although volumes decreased.
Germany New business margin and value increased as a result of continued pricing discipline, revised surplus sharing and the shift towards modern-traditional products with flexible and lower guarantees. On a local currency basis, volumes increased by 10% with a maintained high share of risk business.
Because of the weight of Private Clients business within International, by far the biggest share of new business premiums consists of single premiums.
Expected existing business contribution (reference rate) –2 1 1 –0 –1
Expected existing business contribution (in excess of reference rate) 144 107 3 14 267
The positive experience variances relate to portfolio true-ups including improved persistency. Also balance-sheet strengthening, such as a reduction of technical interest rates, had a positive impact.
Assumption changes mainly relate to group life and are influenced by the regular inclusion of the demographic and persistency experience, which had minor opposite effects.
The assumption changes mainly reflect updated lapse and capital take-up parameters.
Other operating variances include effects from a revised surplus sharing approach and the handling of bond realisations.
The negative economic variances result mainly from increased credit spreads and more than offset the operating earnings.
Closing adjustments relate to the aforementioned effects of foreign currency translation.
International Operating earnings of CHF 50 million correspond to a return of 12% on MCEV. This was driven by a strong value of new business, the operating profit and overall positive true-up effects on the in-force business relating to mortality, persistency and expenses.
Economic variances mostly relate to the performance of the assets under management, which are the basis for the fees earned in the Private Clients business.
An annual charge of 4% has been applied to the resulting projected capital at risk. It represents the excess return or risk premium that a shareholder might expect on capital exposed to nonhedgeable risks.
Swiss Life – Annual Report 2015 4.5 Dynamic management actions and policyholder behaviour
The look-through principle is applied for asset management services and corporate centre services. The future profits or losses taken into account for these services are limited to those linked to the insurance business, after “legal quote” and taxes.
Swiss Life – Annual Report 2015 3 Copyright © 2011 Markit Group Limited 5 Assumptions 5.1 Economic assumptions
As some of Swiss Life’s liabilities are running longer than asset durations are available on financial markets in sufficient depth and liquidity, an extrapolation of yields is applied to assess swap rates beyond this horizon. Swiss Life uses the approach for extrapolation prescribed by EIOPA for QIS 5.
The spread (over swap rates) applied for the valuation of the hybrid debt was updated based on a subordinated bond index and amounts to 319bp as at 31 December 2015. For the opening MCEV the spread amounted to 287bp.
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.1.1.3 100% Liquidity premium, relative to swap rates, as at 31 December 2015 and 31 December 2014
5.1.2.4 Property volatilities used for the calculation as at 31 December 2015 and 31 December 2014
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.1.4.2 Forward inflation rates used for the calculation as at 31 December 2014
Expense assumptions are reconciled with past and current experience. They do not account for future cost reductions. Projected expenses are subject to inflation. All the expected expense overruns affecting the covered business, such as overhead expenses and development costs in new markets, have been allowed for in the calculations. Corporate costs are included in the expenses of market units by means of a “look-through” procedure (see section 4.6).
Swiss Life – Annual Report 2015 6 Auditor’s Report on Embedded Value
Board of Directors’ responsibility The Board of Directors is responsible for the preparation of the MCEV Report in accordance with the MCEV Principles, including the applied methodology and the assumptions used and for such internal controls as determined necessary to enable the preparation of the MCEV Report that is free from material misstatement, whether due to fraud or error.
Swiss Life – Annual Report 2015 7 Glossary and List of Abbreviations
Annual premium equivalent (APE) Volume measure for new business. Sum of regular premiums from new business +10% of single premiums on business written during the period.
Group MCEV The Group MCEV for Swiss Life comprises MCEV results for covered business and IFRS net asset values for non-covered business of the Swiss Life Group (as explained above under point 4.7).
Non-covered business All businesses of the Swiss Life Group which are not accounted for under covered business, such as investment management and Swiss Life Select, are included in the non-covered business of the Group MCEV by means of their IFRS net asset values.
Value of new business (VNB) The value of new business reflects the additional value to shareholders created by writing new business during the reporting period.
Consolidated Financial Statements 152 Consolidated Statement of Income 153 Consolidated Statement of Comprehensive Income 154 Consolidated Balance Sheet 156 Consolidated Statement of Cash Flows 158 Consolidated Statement of Changes in Equity 159 Notes to the Consolidated Financial Statements 159 1 General Information 160 2 Summary of Significant Accounting Policies 160 2.1 Basis of preparation 160 2.2 Changes in accounting policies 160 2.3 Consolidation principles 161 2.4 Foreign currency translation and transactions 162 2.5 Cash and cash equivalents 164 2.7 Financial assets 165 2.8 Impairment of financial assets 167 2.9 Investment property 168 2.10 Insurance operations 173 2.11 Property and equipment 173 2.12 Inventory property 174 2.14 Investment management 174 2.15 Commission income and expense 175 2.16 Intangible assets 177 2.17 Impairment of non-financial assets 177 2.18 Income taxes 178 2.19 Assets held for sale and associated liabilities 178 2.20 Financial liabilities 179 2.21 Employee benefits 180 2.22 Provisions and contingent liabilities 181 2.23 Treasury shares 181 2.24 Earnings per share 181 2.26 Forthcoming changes in accounting policies 184 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies 188 4 Segment Information
Swiss Life – Annual Report 2015 195 5 Risk Management Policies and Procedures 195 5.1 Contracts for the account and risk of the Swiss Life Group’s customers 197 5.2 Risk budgeting and limit setting 197 5.3 Asset and liability management (ALM) 199 5.4 Financial risk management objectives and policies 213 5.5 Insurance risk management objectives and policies 220 6 Earnings per Share 221 7 Premiums, Policy Fees and Deposits Received 222 8 Details of Certain Items in the Consolidated Statement of Income 226 9 Derivatives and Hedge Accounting 229 10 Financial Assets and Liabilities at Fair Value through Profit or Loss 230 11 Financial Assets Available for Sale 230 12 Financial Assets Pledged as Collateral 231 13 Loans and Receivables 233 14 Investment Property 234 15 Investments in Associates 236 16 Property and Equipment 238 17 Intangible Assets including Intangible Insurance Assets 242 18 Other Assets and Liabilities 243 19 Investment Contracts 248 21 Other Financial Liabilities 248 22 Insurance Liabilities and Reinsurance Assets 251 23 Employee Benefits 261 24 Income Taxes 272 28 Acquisitions and Disposals of Subsidiaries 273 29 Related Party Transactions 275 30 Fair Value Measurements 285 31 Offsetting Financial Assets and Liabilities 286 32 Guarantees and Commitments 289 34 Future Minimum Lease Payments under Non-Cancellable Operating Leases – Lessor 289 35 Events after the Reporting Period 290 36 Scope of Consolidation 297 Report of the Statutory Auditor
Share of profit or loss of associates 5, 15 7 3
Intangible assets including intangible insurance assets 17 2 840 2 972
Premiums, policy fees and deposits received, net of reinsurance 15 004 15 239
Benefits and claims paid, net of reinsurance –12 744 –11 539
financial instruments at fair value through profit or loss –1 169 566
Cash and cash equivalents for the account and risk of the Swiss Life Group’s customers 2 625 2 309
Consolidated statement of changes in equity for the year ended 31 December 2014
Equity-settled share-based payments – 9 – – – 9 – 9
BALANCE AS AT END OF PERIOD 164 1 237 –31 3 067 8 319 12 755 76 12 831
For the 2014 financial year, a distribution was made to the shareholders of Swiss Life Holding Ltd (hereinafter referred to as “Swiss Life Holding”) from the capital contribution reserve instead of a dividend payment from profit. This amounted to CHF 207 million (CHF 6.50 per registered share) and was paid in 2015.
On 15 March 2016, 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 Group’s consolidated financial statements include the assets, liabilities, income and expenses of Swiss Life Holding and its subsidiaries. A subsidiary is an entity over which Swiss Life Holding has control. Control is achieved if Swiss Life Holding has the power over the subsidiary, is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to use its power to affect its returns. Subsidiaries are consolidated from the date on which effective control is obtained. All intercompany balances, transactions and unrealised gains on such transactions have been eliminated. Unrealised losses have been eliminated unless the transaction provides evidence of an impairment of the asset transferred. A listing of the Group’s subsidiaries is set out in note 36. The financial effect of acquisitions and disposals of subsidiaries is shown in note 28. Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions.
Foreign currency transactions For individual Group entities, foreign currency transactions are accoun ted for using the exchange rate at the date of the trans action. Outstanding balances in foreign currencies at year-end arising from foreign currency transactions are translated at year-end exchange rates for monetary items while historical rates are used for non-monetary items. Those non-monetary items in foreign currencies recorded at fair values are translated at the exchange rate on the revaluation date.
Financial assets at fair value through profit or loss (FVPL) Financial assets at fair value through profit or loss comprise financial assets held for trading and financial assets designated as at fair value through profit or loss. Financial assets which the Group buys with the intention to resell in the near term are classified as held for trading. Financial assets designated as at fair value through profit or loss are irrevocably designated as such when initially recognised. Financial assets are primarily designated as at fair value through profit or loss in the following instances: – Financial assets backing insurance liabilities and liabilities arising from investment contracts for the account and risk of the Swiss Life Group’s customers (contracts with unit-linked features, separate accounts, private placement life insurance) in order to avoid measurement inconsis tencies with the corresponding liabilities.
– Certain financial assets with embedded derivatives which otherwise would have to be separated. – Certain financial assets and financial liabilities where a measurement or recognition inconsis tency can be avoided (“accounting mismatch”) that would otherwise arise from measuring those assets or liabilities or recognising the gains and losses on them on different bases.
A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Held-to-maturity securities and loans and receivables are assessed for impairment when a significant decrease in market value related to credit risk arises, namely after a downgrade of a debtor’s rating below single B– after initial recognition (i.e. CCC or lower according to Standard and Poor’s or equivalent) or when payments of principal and/or interest are overdue by more than 90 days. If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that
Swiss Life – Annual Report 2015 have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
If an investment property becomes owner-occupied, it is reclassified as property and equipment, and its fair value at the date of reclassification becomes its cost for subsequent measurement purposes.
Because there is a direct effect on the measurement of DPF liabilities when asset gains or losses are realised, changes in these liabilities are recognised in other comprehensive income when, and only when, the valuation differences on the assets arise from gains or losses recognised in other comprehensive income (“shadow accounting”).
Germany A minimum of 90% of the net investment returns less 100% of the minimum guaranteed interest on the policyholder account (“interest result”), a minimum of 90% of the risk result and a minimum of 50% of the positive expense result are allocated to the policyholder. A negative investment result can be offset with positive other profit sources.
Liability adequacy test If the actual results show that the carrying amount of the insurance liabilities together with anticipated future revenues (less related deferred acquisition costs (DAC) and related intangible assets) are not adequate to meet the future obligations and to recover the unamortised DAC or intangible assets, the entire deficiency is recognised in profit or loss, either by reducing the unamortised DAC or intangible assets or by increasing the insurance liabilities. The liability adequacy test is performed at portfolio level at each reporting date in accordance with a loss recognition test considering current estimates of future cash flows including those resulting from embedded options and guarantees.
Swiss Life – Annual Report 2015 policy for deferred acquisition costs applies to the portion of acquisition costs associated with the insurance component, and the policy for deferred origination costs applies to the other portion (see 2.16 Intangible assets).
Operating lease The Group primarily enters into operating leases for the rental of equipment and property. The total payments made under operating leases are charged to the income statement on a straightline basis over the period of the lease.
Deferred income taxes are recognised for all temporary differences between the carrying amounts of assets and liabilities in the consolidated balance sheet and the tax bases of these assets and liabilities using the balance sheet liability method. Current income taxes and deferred income taxes are charged or credited directly to equity if the income taxes relate to items that are credited or charged in the same or a different period, directly to equity.
In January 2016, IFRS 16 Leasing was issued by the International Accounting Standards Board. The new Standard eliminates the classification of leases as either operating leases or finance leases for lessees. Instead all leases are treated in a way similar to finance leases applying the current Standard IAS 17 Leases. The new Standard brings leases on-balance sheet for lessees, the effect being that reported assets and liabilities increase. IFRS 16 Leases replaces the straight-line operating lease expense with a depreciation charge for the lease asset and an interest expense on the lease liability. This change aligns the lease expense treatment for all leases. As a practical expedient, short-term and low-value leases are exempt from this treatment. The exemption permits a lessee to account for qualifying leases in the same manner as existing operating leases (IAS 17 Leases). For lessors, the accounting treatment from IAS 17 Leases is substantially carried forward. The Swiss Life Group is currently analysing the effect of the adoption of IFRS 16 on its financial statements.
In January 2016, the International Accounting Standards Board issued amendments to IAS 12 Income Taxes. The amendments, Recognition of Deferred Tax Assets for Unrealised Losses, clarify how to account for deferred tax assets related to debt instruments measured at fair value. The amendments apply for annual periods beginning on or after 1 January 2017. The Swiss Life Group does not expect a major effect of the amendments on its financial statements.
IFRS 9 covers classification and measurement of financial instruments, impairment of financial assets and hedge accounting. Classification determines how financial assets and financial liabilities are accounted for in financial statements and how they are measured on an ongoing basis. Financial assets are classified on the basis of the business model within which they are held and their contractual cash flow characteristics. An expected-loss impairment model is introduced. Under the new model, it is no longer necessary for a credit event to have occurred before an impairment loss is recognised. The new model for hedge accounting aligns accounting treatment more closely with risk management activities. IFRS 9 is effective for annual periods beginning on or after 1 January 2018. In December 2015, the International Accounting Standards Board published for public comment proposals to amend the existing insurance contracts Standard, IFRS 4. This is to address the temporary consequences of the different effective dates of IFRS 9 Financial Instruments and the new insurance contracts Standard. The proposals include an optional temporary exemption from applying IFRS 9 that would be available to companies whose predominant activity is to issue insurance contracts (deferral approach). Such a deferral would be available until the new insurance contracts Standard comes into effect. But it could not be used after 1 January 2021. The Swiss Life Group is currently analysing the effect of the adoption of IFRS 9 on its financial statements.
IFRS 15 Revenue from Contracts with Customers was published in May 2014. The core principle is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 also introduces disclosure requirements that provide comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. IFRS 15 is effective for annual periods beginning on or after 1 January 2018. The Swiss Life Group does not expect a material impact from the adoption of the new standard on its financial statements.
In May 2014, the International Accounting Standards Board issued Amendments to IFRS 11 Joint Arrangements. The amendments provide guidance on the accounting for acquisitions of interests in joint operations in which the activity constitutes a business. The amendment is effective prospectively for annual periods beginning on or after 1 January 2016.
Swiss Life – Annual Report 2015 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies
Impairment of held-to-maturity and available-for-sale debt instruments and loans and receivables
The information provided to management focuses on product lines and services. The organisational and management structure within the insurance business is geographical. The reportable segments have therefore been identified as follows: – Switzerland – France – Germany – International – Asset Managers – Other
Switzerland, France, Germany and International primarily consist of life insurance operations and distribution units. The life insurance operations offer a broad range of life, pension, health, annuity and investment-type policies to both groups and individuals, including disability coverage. The Group’s strategy focuses primarily on life and pensions in Switzerland, France and Germany, health insurance in France and on cross-border business from Liechtenstein, Luxembourg and Singapore. These segments also include a number of companies which hold investments mainly pertaining to life insurance.
“International” comprises the cross-border insurance operations in Liechtenstein, Luxembourg and Singapore, the Swiss Life Select units operating in Austria, the Czech Republic and Poland as well as Chase de Vere operating in the United Kingdom.
Premiums ceded to reinsurers –10 –156 –40 –10 – 0 –217 76 –141
Benefits and claims under insurance contracts –11 203 –2 095 –1 310 –13 – 1 –14 620 62 –14 558
Benefits and claims under investment contracts with discretionary participation –1 053 – – – – – –1 053 – –1 053
Benefits and claims recovered from reinsurers 6 125 23 3 – –1 156 –60 95
Net insurance benefits and claims –12 251 –1 970 –1 287 –10 – 0 –15 518 2 –15 516
Other expenses –114 –136 –77 –40 –83 –22 –472 –2 –474 of which inter-segment –315 48 –41 –13 –35 –11 –366 366
Additions to non-current assets 1 754 66 460 8 1 0 2 289 – 2 289
Policy fees earned on insurance contracts 9 15 0 0 – – 24 – 24
Benefits and claims under insurance contracts –10 418 –2 413 –1 613 –11 – 5 –14 450 65 –14 385
Depreciation and amortisation expense –118 –235 –18 –4 –6 –2 –383 – –383
Impairment of property and equipment and intangible assets 0 – –12 – – – –12 – –12
Additions to non-current assets 1 080 300 163 4 206 0 1 754 – 1 754
Financial liabilities at fair value through profit or loss 3 716 1 585 904 18 907 – – 25 111 – 25 111
Assets held for sale – – – – – – – – –
Financial assets available for sale 68 179 18 749 8 080 1 219 45 891 97 162 – 97 162
Financial assets pledged as collateral 1 682 1 081 – – – – 2 763 – 2 763
Risks must be identified, assessed, managed and monitored locally and aggregated at Group level. Monthly reports covering interest rate risk, equity and real estate price risk, currency risk, credit risk and insurance risk are prepared on a consolidated basis. Strategic and operational risks are assessed and reported on an annual basis.
The risk appetite for the largest operations in the insurance business is defined with the help of local risk bud gets, which are used as a basis for the determination of the individual risk limits. These limits are used as a framework for the asset and liability management process, the objective of which is to define a strategic asset allocation. From this strategic asset allocation a scenariobased expected return is calculated, which forms the basis for the mid-term planning of the Group.
TOTAL ASSETS FOR THE ACCOUNT AND RISK OF THE SWISS LIFE GROUP’S CUSTOMERS 29 918 31 284
TOTAL LIABILITIES LINKED TO ASSETS FOR THE ACCOUNT AND RISK OF THE SWISS LIFE GROUP’S CUSTOMERS 29 777 31 192
at fair value through profit or loss 8 95 –2 016 –15 7 81 –2 009
Share of profit or loss of associates 7 3 – – 7 3
Compliance with external constraints Aspects other than the purely economic view must also be considered in the ALM process, such as regulatory requirements including statutory minimum distribution ratios (“legal quote”), funding ratios, solvency, local accounting rules and International Financial Reporting Standards, liquidity requirements and rating targets. Some of these views may lead to results that are not aligned with the economic approach, but nevertheless need to be taken into account.
Strategic asset allocation Defining the strategic asset allocation is the first major task of the ALM process and aims at achieving an efficient risk capital allocation, i.e. optimising the returns on the asset portfolio for the available risk capital defined within the risk budgeting process, taking into account all known constraints.
Product design The targets of risk management are supported by product management principles. Product design defines among other things which guarantees and benefits are built into a specific product to respond to the demand from and expectations of customers. The actuarial bases used for this purpose support each individual product generating a sufficient contribution margin. To ensure that the Group’s principles are observed, guidelines and directives on product management and underwriting are in place. As the Group’s insurance entities operate in a number of different countries, the local regulatory constraints may have an impact on the business units’ product range. These constraints must always be obeyed.
Swiss Life – Annual Report 2015 5.4 Financial risk management objectives and policies
TOTAL INTEREST-SENSITIVE INSURANCE LIABILITIES 65 995 25 602 89 91 686
Some life insurance products with a savings component and investment contracts are subject to minimum guaranteed interest rates. The guaranteed rate differs according to the type of contract. In Switzerland for instance the minimum guaranteed interest rate for the occupational pensions segment (mandatory BVG savings account) stood at 1.75% in 2015 and will be reduced to 1.25% for 2016 (2014: 1.75%).
A portion of Swiss Life’s investment portfolio comprises investments in funds which hold securities issued by non-public companies (private equity, infrastructure). These investments may be illi quid or may only be disposed of over time or at a loss, and they may not produce adequate returns or capital gains. If Swiss Life were required to liquidate some or all of the investments in its private equity port folio, the proceeds of such liquidation may be significantly less than the amount paid for, or the carrying amount of, such investments.
Swiss Life – Annual Report 2015 party is generally A– (Standard & Poor’s or equivalent) for the Swiss Life Group’s insurance operations. During periods of market turmoil reliance on ratings is of limited value; therefore an additional qualitative and quantitative counter party monitoring process has been established to allow for immediate proactive measures.
Debt securities classified as loans 4 392 6 088 – – 4 392 6 088
TOTAL EXPOSURE TO CREDIT RISK 117 470 128 135 8 410 8 549 125 880 136 684
Credit risk mitigation – collateral held and other credit enhancements as at 31 December 2015
Credit risk mitigation – collateral held and other credit enhancements as at 31 December 2014
TOTAL OTHER LOANS AND RECEIVABLES 3 184 2 759 1 128 920 98 4 732 48 12 869
Exposure to credit risk of debt instruments – credit rating by class as at 31 December 2014
TOTAL OTHER LOANS AND RECEIVABLES 3 215 3 512 2 766 581 104 5 463 74 15 715
Financial assets individually determined as impaired – impairment loss allowance for the year 2014
The Swiss Life Group’s European insurance and investment operations (excluding Switzerland) generally invest in assets denominated in the same currency as their insurance and investment contract liabilities, which mitigates the currency risk for these operations. As a result, currency risk arises from recognised assets and liabilities denominated in other currencies and net investments in foreign operations. Although the Swiss Life Group actively engages in currency management to reduce the effect of exchange rate fluctuations on its assets and liabilities, particularly by hedging against the risk of such movements in relation to part of its investments denominated in euros and in US dollars, significant movements in exchange rates could adversely affect the Swiss Life Group’s earnings and financial position, including the value of its investment portfolio. Foreign exchange exposure is hedged to a large extent in line with the strategic asset allocation. The instruments which the Swiss Life Group uses to hedge exposure may not be perfectly correlated to the related assets, so the Group will still be exposed to losses if the value of the hedge and the value of the underlying asset or liability do not correspond appropriately.
At the strategic level, the Swiss Life Group holds substantial liquidity and uses active debt maturity planning to ensure financial flexibility and efficient liquidity management.
Financial assets at fair value through profit or loss 3 095 1 420 3 202 1 994 27 293 28 975 33 590 32 389
Financial assets available for sale 6 177 6 306 89 848 90 857 – – 96 026 97 162
Financial assets pledged as collateral 22 72 2 086 2 691 – – 2 109 2 763
Intangible assets including intangible insurance assets – – 2 840 2 972 – – 2 840 2 972
Financial liabilities at fair value through profit or loss 1 359 468 1 137 622 22 615 24 325 25 111 25 415
Nature of insurance risk When designing a new product or reviewing an existing one, care has to be taken that the product neither includes systemic risk nor provides incentives for adverse selection. The product should meet the market’s needs. The Swiss Life Group favours transparent and simple product design with a reliable pricing basis with sufficient statistical data available. Insurance risk arises when biometric parameters deviate adversely from expectations. The uncertainty in the estimation of future benefit payments and premium receipts for long-term insurance contracts is due to the unpredictability of long-term changes in overall levels of mortality and disability, for instance. Furthermore, deviations from the expected outcome of a portfolio can also arise because of random fluctuations. The impact of random fluctuations depends on the extent of diversification within a portfolio of contracts: that is, on the size of the portfolio.
Disability income and other annuities – deferred 7 045 7 526
Disability income and other annuities – deferred 14 979 15 000
Non-life The Swiss Life Group has non-life operations, mainly in France, covering risks associated with accident and health (disability) as well as property and casualty.
Cumulative payments to date –225 –211 –206 –227 –232 –228 –217 –217 –203 –113 –2 080
LIABILITIES FOR THE CURRENT AND 9 PREVIOUS YEARS 15 18 19 36 33 72 67 79 143 182 666
The reinsurance team at Group level is responsible for implementing the retention policy by way of intra-group reinsurance. Intra-group reinsurance is transacted at arm’s length.
Swiss Life – Annual Report 2015 1Copyright © Stichting CFO Forum Foundation 2008
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 an important management tool, 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 in-force business (VIF). Future new business is not included.
The market consistent embedded value of the Swiss Life Group amounted to CHF 12.5 billion as at 31 December 2015 (2014: CHF 12.9 billion). Due to different valuation principles, changes in the embedded value are typically not reflected to the same extent in the consolidated balance sheet and consolidated statement of income of the Swiss Life Group and vice versa.
An analysis of sensitivity indicates to what extent the embedded value is affected by variations in risk factors. The analysis is based on changes in the assumptions used in the embedded value calculation whereby a specific risk factor is changed while holding all other assumptions constant (unless they are directly associated). In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. In the event of a change in a specific risk factor, the effect of anticipated management actions, such as different allocations to policyholder participation and dynamic policyholder behaviour, as a consequence is considered in the analysis. The changes in a specific risk factor are applied to the entire projection period.
The sensitivity analysis with regard to insurance risk is as follows: Higher mortality would have a significant positive effect on the embedded value of life annuities (survival risk), whereas the negative effect on the embedded value of contracts with death cover (mortality risk) is comparatively limited due to corresponding reductions in policyholder bonuses. Therefore, this sensitivity is considered not significant as an adverse risk for the embedded value.
At 31 December 2015, if mortality rates (annuities) had decreased by 5%, the embedded value would have been CHF 163 million lower (2014: CHF 118 million lower).
At 31 December 2015, if the interest rates had been 100 basis points higher, the embedded value would have been CHF 987 million higher (2014: CHF 530 million higher).
At 31 December 2015, if the interest rates had been 100 basis points lower, the embedded value would have been CHF 1428 million lower (2014: CHF 1068 million lower).
At 31 December 2015, if the swaption implied volatilities (interest rates) had been 10% lower, the embedded value would have been CHF 121 million lower (2014: CHF 79 million lower).
At 31 December 2015, if the market value of equity securities and property had been 10% higher, the embedded value would have been CHF 811 million higher (2014: CHF 722 million higher).
At 31 December 2015, if the market value of equity securities and property had been 10% lower, the embedded value would have been CHF 958 million lower (2014: CHF 818 million lower).
Net result attributable to equity holders of Swiss Life Holding 872 814
Weighted average number of shares outstanding 31 829 018 31 904 630
Assumed conversion of convertible bonds 2 071 173 1 998 862
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING FOR DILUTED EARNINGS PER SHARE 34 022 719 34 065 763
DILUTED EARNINGS PER SHARE FOR THE NET RESULT ATTRIBUTABLE TO EQUITY HOLDERS OF SWISS LIFE HOLDING (IN CHF) 25.85 24.11
Swiss Life – Annual Report 2015 7 Premiums, Policy Fees and Deposits Received
Under the accounting principles adopted, deposits received under insurance and investment contracts for which deposit accounting is used are not recognised as income.
Swiss Life – Annual Report 2015 8 Details of Certain Items in the Consolidated Statement of Income
Financial liabilities designated as at fair value through profit or loss 2 –59 –50
Change in liability for future life policyholder benefits, gross 4 532 4 484
Net benefits and claims under insurance contracts 14 463 14 287
Amortisation of present value of future profits (PVP) 17 1 1
Interest rate swaps to hedge available-for-sale bond portfolios 11 27 53 32 28 53 4 540
Currency forwards to hedge non-monetary investments 18 23 522 599 616 539 5 043
TOTAL DERIVATIVES DESIGNATED AS FAIR VALUE HEDGES 29 50 575 632 644 592 9 582
Interest rate swaps to hedge available-for-sale bond portfolios – – – 96 101 – –
TOTAL DERIVATIVES DESIGNATED AS FAIR VALUE HEDGES – 46 22 256 255 17 1 312
Derivatives designated as cash flow hedges as at 31 December 2015
TOTAL DERIVATIVES DESIGNATED AS CASH FLOW HEDGES 393 3 146 – –8 2 110 n/a n/a
Amounts Ineffective- Cash flows recognised ness Amounts Cash flows expected in other recognised transferred Contract/ expected to affect Fair value Fair value comprehen- in to notional to occur profit or loss assets liabilities sive income profit or loss profit or loss amount (year) (year)
TOTAL DERIVATIVES DESIGNATED AS CASH FLOW HEDGES 744 – 853 0 –1 3 584 n/a n/a
Swiss Life – Annual Report 2015 10 Financial Assets and Liabilities at Fair Value through Profit or Loss
FINANCIAL ASSETS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS
BALANCE AS AT END OF PERIOD 4 9 12 11 16 20
Interest income accrued on impaired loans was CHF 0.3 million as at 31 December 2015 (2014: CHF 0.4 million). The Group’s loan port folio is monitored closely through the review of information such as debt service, annual reports and assessments. This information is evaluated in light of current economic conditions and other factors such as diversification of the property portfolio. This evaluation is part of the regular review to determine whether the allowance for potential loan losses is warranted. Management believes that the allowance for loan losses is sufficient. However, management cannot predict with assurance the impact of future economic circumstances or how the mortgage and real estate portfolios would be affected by various economic circumstances.
Classification as assets held for sale and other disposals –623 –654
Rental income from investment property was CHF 868 million for the period ended 31 December 2015 (2014: CHF 850 million). Operating expenses arising from investment property that generated rental income stood at CHF 193 million for the period ended 31 December 2015 (2014: CHF 173 million).
DEPFA Holding Verwaltungsgesellschaft mbH, Düsseldorf 20.4% 1 177 n/a n/a n/a
Crédit et services financiers (CRESERFI), Paris 33.4% 47 0 1 – 1
TOTAL PROPERTY AND EQUIPMENT AS AT END OF PERIOD 367 17 12 11 407 of which assets held under a finance lease – – 1 – 1 of which buildings in the course of construction –
BALANCE AS AT END OF PERIOD –177 –35 –46 –14 –271
Foreign currency translation differences –1 0 –96 –18 –3 –1 –101 –19
BALANCE AS AT END OF PERIOD 12 14 1 431 1 450 21 33 1 464 1 497
Present value of future profits (PVP) The present value of future profits relates to portfolios of insurance contracts and investment contracts with discretionary participation acquired in a business combination or transfer of portfolios. It relates to contracts acquired in Germany and France and is amortised in proportion to gross profits or margins over the effective life of the acquired insurance and investment contracts.
BALANCE AS AT END OF PERIOD 1 754 136 181 21 2 092
BALANCE AS AT END OF PERIOD –542 –99 –131 0 –772
Goodwill relating to Lloyd Continental has been allocated to the “France” segment. Goodwill relating to CapitalLeben has been allocated to the “International” segment. Of the goodwill relating to other acquisitions, CHF 19 million (31.12.2014: CHF 21 million) has been allocated to the “France” segment and CHF 8 million (31.12.2014: CHF 9 million) to the “Asset Managers” segment as at 31 December 2015.
Net carrying amount of goodwill 152 152 438 485 76 82 666 719
As at 31 December 2015, customer relationships comprise customer relationships relating to Swiss Life Select: CHF 4 million (31.12.2014: CHF 5 million) which were allocated to the “Switzerland ” segment. The “France” segment comprises customer relationships of CHF 20 million (31.12.2014: CHF 26 million) and the “Asset Managers” segment CHF 46 million (31.12.2014: CHF 60 million). Customer relationships were included in the impairment test of the respective cash-generating unit.
Brands and other In October 2014, the acquisition of Corpus Sireo Holding GmbH & Co. KG, Cologne, led to the recognition of the brand “Corpus Sireo” of CHF 20 million and was included in the impairment test.
Swiss Life – Annual Report 2015 18 Other Assets and Liabilities
Investment contracts without discretionary participation at fair value through profit or loss 343 262 of which for the account and risk of the Swiss Life Group’s customers
Effect of changes in actuarial assumptions and other movements 9 6
The interest has been fixed at 5.25% p.a. until 4 October 2016. If the bonds are not redeemed on 4 October 2016, the interest resets at a rate fixed for the subsequent five years, consisting of the aggregate of the then-prevailing five-year CHF swap rate and the initial margin of 3.551% p.a.
On 12 April 2007, ELM B.V., a Dutch repackaging vehicle, issued EUR 700 million in fixed/ floating rate subordinated perpetual notes to finance loan notes granted to Swiss Life Ltd, which are guaranteed by Swiss Life Holding. Swiss Life Ltd may repay the loan notes in full on 12 April 2017 or on any interest payment date thereafter, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The notes bear interest from 12 April 2007 to 12 April 2017 at a rate of 5.849% p.a. If the notes are not redeemed on 12 April 2017, the interest will be the aggregate of Euribor 3-month deposits and a margin of 2.5% p.a.
Swiss Life AG EUR 443 EUR 192 +2.050% 1999 2019 209 231 1 hybrid loan notes issued by Demeter Investments B.V. 2 hybrid loan notes granted by ELM B.V. 3 hybrid bank loan originally granted by J.P. Morgan Bank Luxembourg S.A.
The loans are secured by investment property in the amount of CHF 312 million (2014: CHF 428 million).
Claims under non-life insurance contracts 872 953 170 195 702 758
Claims under life insurance contracts 6 102 6 193 84 85 6 018 6 108
TOTAL INSURANCE LIABILITIES AND REINSURANCE ASSETS 108 157 106 136 376 397 107 782 105 739 of which for the account and risk of the Swiss Life Group’s customers 5 3 167 2 760 – – 3 167 2 760
Claims incurred, benefits paid and surrenders –73 –112 5 –1 –77 –110
Additions from acquisition of insurance portfolio – 293 – – – 293
BALANCE AS AT END OF PERIOD 94 481 92 326 122 116 94 359 92 210
The valuation of other long-duration contracts is also based on the net-level-premium method with actuarial assumptions as to mortality, persistency, expenses and investment returns including provisions for adverse deviation.
The primary benefit of Swiss Life’s plans is an old-age pension after reaching retirement age. The level of the old-age pension is determined by the plan’s conversion rate applied to the employees’ individual pension account accumulated at retirement age. There are options for early retirement (with actuarially determined reduction of the conversion rate) and for choosing to receive a lumpsum payment instead of a pension. This old-age pension is funded by monthly contributions from the employer and the employee (deducted from salary) to an individual pension account which in addition is increased by a yearly interest accrual. The contributions are based on age and on a percentage of the contributory salary. Further funding of an individual pension account comprises mandatory transfers of funds made by new employees from plans of his/her former employers and discretionary contributions from the employee (with restrictions to maximum amounts). As a consequence of plan amendments in the past, certain age groups are granted guarantees of a minimum level of old-age pensions in case of early retirement. The cost with respect to early retirements of members from these age groups is borne by the employer.
There are various defined benefit plans in place. They provide pension benefits after reaching retirement age.
The investment risk inherent in achieving an adequate return on the plan assets covering the pension accounts of active employees is borne by the foundations. In addition, the investment risk and actuarial risk relating to old-age pensions lie with the foundations. However, for the two major plans, all pensions which were already in payout before 1 January 2011 are fully covered under a group insurance contract issued by Swiss Life Ltd. Furthermore, all insurance risk relating to death/survivors’/disability benefits is fully covered by several group contracts issued by Swiss Life Ltd.
Insurance contracts not eligible as plan assets under IFRS 1 459 1 440
BALANCE AS AT END OF PERIOD –3 325 –3 097 of which amounts owing to
Transfer to intragroup insurance contracts, reclassifications and other disposals –44 3
Average life expectation at ordinary retirement age (women) 24.8-24.9 24.8 23.2–28.8 23.2–28.8
Average life expectation at ordinary retirement age (men) 21.5–22.4 21.4–22.3 19.8–25.6 19.8–25.6
Swiss Life – Annual Report 2015 implicit in the net defined benefit asset/liability in the consolidated balance sheet as at end of period). In reality, it is unlikely that a change in assumption would happen in isolation. Some assumptions may well be correlated. In addition, the net effect in the consolidated balance sheet would also be driven by the change in the value of the plan assets.
At 31 December 2015, if the average life expectancy had increased by one year (for both men and women), the defined benefit obligation would have increased by CHF 105 million. At 31 December 2014, if the average life expectancy had increased by one year (for both men and women), the defined benefit obligation would have increased by CHF 105 million.
Duration of the defined benefit obligation (weighted average no. of years) 15.5 15.4
For 2015, 2014, 2013, 2012 and 2011 participants in the share-based payment programme are allocated restricted share units (RSUs). RSUs grant the holder future subscription rights, entitling him to receive Swiss Life Holding shares free of charge after a three-year period has elapsed and if certain conditions are fulfilled.
The fair value of the RSUs granted for each programme is determined at the grant date. The fair value was determined by an independent consulting company using the Black-Scholes formula. The associated expense during the vesting period is recognised under employee benefits expense with a corresponding increase in share premium.
The expense recognised for share-based payment amounted to CHF 12 million in 2015 (2014: CHF 12 million).
The expected weighted-average tax rate for the Group in 2015 was 24.2% (2014: 26.6%). This rate was derived by obtaining a weighted average of the expected income tax rates in the various jurisdictions in which the Group operates. The change of the weighted-average tax rate is due to the geographical allocation of the profits and the different tax rates in these jurisdictions. The actual income tax expense differs from the expected amount as follows.
The movements in net deferred income tax assets/liabilities during the period were as follows.
Recognised Foreign in other Acquisitions currency Balance as at Recognised in comprehensive and disposals translation Balance as at 1 January profit or loss income of subsidiaries differences end of period
Unused amounts reversed 0 –1 –13 –21 –1 0 –15 –23
In 2015, a distribution to shareholders out of the capital contribution reserve of CHF 207 million (CHF 6.50 per registered share) was made (2014: CHF 176 million, CHF 5.50 per registered share).
– Remeasurements of the net defined benefit liability relating to employee benefit plans.
Net balance as at 1 January –866 3 852 378 –132 3 232 71 –236 – –165 3 067
NET BALANCE AS AT END OF PERIOD –1 157 2 853 436 –53 2 079 66 –296 – –230 1 849
Net other comprehensive income before non-controlling interests –294 –947 58 27 –1 156 –5 –60 – –65 –1 221 1 Amount relates to debt securities reclassified to loans in 2008 (note 13)
Gains/losses arising during the period 9 –48 10 384 853 – 11 189 0 –299 – –299 10 891
Share of other comprehensive income of associates 15 – – – 0 0 – – – – 0
Gains/losses transferred to the income statement 8,9 – –223 –1 61 1 –163 – – – – –163
Net other comprehensive income before non-controlling interests –48 3 017 331 –26 3 274 0 –96 – –96 3 178 1 Amount relates to debt securities reclassified to loans in 2008 (note 13)
Profit or loss allocated to non-controlling interests 3 2 2 1
Continuous monitoring of solvency under the SST is conducted on a monthly basis, calibration is updated based on the full SST calculations as at the beginning of each calendar year and as at mid-year.
Economic and statutory capital requirements and the profit target are the main elements determining the risk budgets. Based on the overall risk budget set by the Investment and Risk Committee of the Board of Directors, the Group Risk Committee of the Corporate Executive Board defines the risk limits for the particular business units. Adherence to these limits is also checked on a monthly basis.
In 2015, Actuaires & Associés, Petit-Lancy, ABCON AG, Bern, and Sobrado Software AG, Cham, were acquired. Actuaires & Associés, Petit-Lancy, and ABCON AG, Bern, operate as pension fund administrators. Sobrado Software AG, Cham, offers a software platform to facilitate transactions between brokers and insurers.
Through the purchase of additional shares, the Swiss Life Group obtained control of RheinCOR Projektentwicklung GmbH, Cologne.
For the years ended 31 December 2015 and 2014, no impairment allowance has been made for doubtful debts in respect of the amounts owed by related parties. This assessment is undertaken each financial year by examining the financial position of the related party and the market in which the related party operates.
“Guarantees issued” relates to a bank loan granted to an associated company of the Group in relation to property under construction.
The details regarding key management compensation in accordance with the Swiss Code of Obligations, Article 663bbis and Article 663c and the Federal Ordinance against Excessive Compensation in Listed Stock Companies are set out in the Compensation Report, which forms part of the Corporate Governance section of the Annual Report 2015 of the Swiss Life Group.
The fair value of assets or liabilities included in level 1 is based on unadjusted quoted prices in active markets for identical assets or liabilities. The fair value of assets or liabilities which are not traded in an active market is determined using valuation techniques. If all significant inputs to these valuation techniques are observable (directly and indirectly) in the market, the assets or liabilities are included in level 2.
Level 2: Valuation techniques and inputs Level 2 financial instruments carried at fair value include debt instruments, equity securities, investment funds, alternative investments, over-the-counter derivatives and investments in associates.
Market rental value p.a. (price/m2/year) – – EUR 130–4500 EUR 130–590
Assets measured at fair value based on level 3 for the year 2015
for assets held at the end of the period – 0 6 10 –18 –380 0 648 266 1 including assets attributable to non-controlling interests of investment funds
Assets measured at fair value based on level 3 for the year 2014
Foreign currency translation differences – –2 – –7 –9 –35 – –58 –110
BALANCE AS AT END OF PERIOD – 46 33 1 182 1 083 3 750 7 19 596 25 697
Total gains/losses recognised in profit or loss – – 0 0 1 0 1 0
Foreign currency translation differences – – 0 0 –11 –1 –11 –1
BALANCE AS AT END OF PERIOD – – 124 113 570 427 693 540
Gains/losses recognised in profit or loss Gains/losses on level 3 fair value measurements recognised in profit or loss are presented in the income statement as follows.
at the end of the period –12 –38 –370 605 648 278
at the end of the period – – –1 0 – –
Swiss Life – Annual Report 2015 30.2 Fair value of financial instruments carried at amortised cost
Investment contracts without discretionary participation 1 9 11 9 11 1 Carrying amount approximates fair value
NET AMOUNTS PRESENTED IN THE BALANCE SHEET 989 2 165 2 146 2 780 3 135 4 944
Contractual obligations to purchase or construct investment property 1 138 1 253
Other contingent liabilities and commitments 452 451 1 of which relating to investments in associates 2 4
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 2015, committed principal amounts stood at EUR 66 million and CHF 200 million (2014: EUR 30 million and CHF 165 million). The range of committed interest rates is 1.2% to 4.7% for commitments in euro and 1.0% to 2.3% for commitments in Swiss francs.
Represent unfunded commitments to make investments in direct private equity, private equity funds, infrastructure and hedge funds. Such commitments do not involve credit or market risk, as the Group purchases investments at market value at the time the commitments are invoked.
The following table provides details of financial assets which have been sold or otherwise transferred, but which do not qualify for derecognition because substantially all risks and rewards of ownership are retained. Repurchase agreements and securities lending transactions are discussed in notes 2.7 and 12. Other securities pledged include debt securities pledged as collateral under reinsurance contracts issued and debt securities pledged as collateral under prime broker contracts to cover margins due in respect of derivative transactions.
Securities lent in exchange for securities received 3 619 4 571 3 619 4 571
Cash pledged for derivative liabilities 754 1 265 754 1 265
The Group holds marketable securities as collateral in respect of the following transactions.
Swiss Life – Annual Report 2015 34 Future Minimum Lease Payments under Non-Cancellable Operating Leases – Lessor
On 2 March 2016, Swiss Life Ltd successfully placed a CHF 450 million undated subordinated bond, first callable in September 2021 (coupon until first call date: 3.75%) and a CHF 150 million dated subordinated bond with final maturity in 2046, first callable in September 2026 (coupon until first call date: 4.375%). The bonds were placed with investors in the Swiss franc market. The proceeds will be used for general corporate purposes, including future refinancing of outstanding subordinated debt instruments in accordance with applicable laws and regulations.
Oscar Weber Holding AG, Zürich CH 100.0% 100.0% Asset management & Real estate
Swiss Life International Services AG, Schaan, Branch Zürich, Zürich IN 100.0% 100.0% Services
Swiss Life Private Equity Partners AG, Zürich AM 100.0% 100.0% Asset management
CORPUS SIREO Asset Management Residential GmbH, Köln AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Asset Management Retail GmbH, Köln AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
(formerly CitCor Commercial Properties Management GmbH), Köln CH from 01.10.2014 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Investment Commercial No. 6 GmbH, Köln AM until 04.05.2015 – –
CORPUS SIREO Investment Residential No. 2 GmbH, Köln AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Investment Residential No. 30 GmbH & Co. KG, Köln AM from 01.10.2014 99.0% 100.0% Asset management & Real estate
CORPUS SIREO Makler GmbH, Branch Düsseldorf, Düsseldorf AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Makler GmbH, Köln AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Projektentwicklung Köln-West GmbH, Köln AM from 01.10.2014 99.9% 100.0% Asset management & Real estate
CORPUS SIREO Projektentwicklung Lessingstrasse GmbH, Köln AM from 01.10.2014 99.9% 100.0% Asset management & Real estate
(formerly CORPUS SIREO Projektentwicklung München II S.à.r.l., Luxembourg) AM from 26.11.2014 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Projektentwicklung Neuenhöfer Allee GmbH, Köln AM until 19.03.2015 – –
CORPUS SIREO Projektentwicklung Wohnen Bonner Strasse GmbH, Köln AM until 19.03.2015 – –
CORPUS SIREO Projektentwicklung Wohnen GmbH, Köln AM from 01.10.2014 99.9% 100.0% Asset management & Real estate
Financial Solutions AG Service & Vermittlung, Garching b. München DE 100.0% 100.0% Services
FRECOR Projektentwicklung und Wohnbau GmbH, Köln AM from 01.10.2014 76.0% 76.0% Asset management & Real estate
IC Investment Commercial No. 5 GmbH, Köln AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
SolViva Immobilien GmbH, Köln AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
Swiss Life Asset Management GmbH, Garching b. München AM 100.0% 100.0% Services
Swiss Life Beteiligungen GmbH, Garching b. München DE 100.0% 100.0% Holding
Swiss Life Pensionsfonds AG, Garching b. München DE 100.0% 100.0% Life insurance
Swiss Life Pensionskasse AG, Garching b. München DE 100.0% 100.0% Life insurance
CORPUS SIREO Health Care III Management S.à.r.l., Luxembourg AM from 12.06.2015 100.0% 100.0% Asset management & Real estate
(formerly CORPUS SIREO Investment Management S.à.r.l.), Luxembourg AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
CORPUS SIREO RetailCenter Management S.à.r.l., Luxembourg AM from 17.12.2014 100.0% 100.0% Asset management & Real estate
CS Stella (LUX) S.à.r.l., Luxembourg CH from 16.11.2015 100.0% 100.0% Asset management & Real estate
Stella (LUX) Pool 1 S.à.r.l., Luxembourg CH from 16.11.2015 100.0% 100.0% Asset management & Real estate
Stella (LUX) Pool 2 S.à.r.l., Luxembourg CH from 16.11.2015 100.0% 100.0% Asset management & Real estate
Stella (LUX) Pool 3 S.à.r.l., Luxembourg CH from 16.11.2015 100.0% 100.0% Asset management & Real estate
Stella (LUX) Single 1 S.à.r.l., Luxembourg CH from 16.11.2015 100.0% 100.0% Asset management & Real estate
Stella (LUX) Single 2 S.à.r.l., Luxembourg CH from 16.11.2015 100.0% 100.0% Asset management & Real estate
Stella 2-Management S.à.r.l., Luxembourg CH from 19.11.2015 100.0% 100.0% Asset management & Real estate
Swiss Life (LUX) German Core Real Estate Management S.à.r.l., Luxembourg AM from 06.07.2015 100.0% 100.0% Asset management & Real estate
Swiss Life Fund Management (LUX) S.A., Luxembourg AM 100.0% 100.0% Investment funds
Swiss Life German CRE Holding S.à.r.l., Luxembourg AM from 06.07.2015 – – Asset management & Real estate
Swiss Life German CRE Office and Retail S.C.S., Luxembourg AM from 06.07.2015 – – Asset management & Real estate
Swiss Life German CRE Residential S.C.S., Luxembourg AM from 06.07.2015 – – Asset management & Real estate
Swiss Life German CRE S.à.r.l., Luxembourg AM from 06.07.2015 – – Asset management & Real estate
Swiss Life Funds (Lux) Management Company S.A., Luxembourg AM until 17.12.2014 – –
Swiss Life International Pension Fund ASBL, Strassen IN – – Pension funds
Swiss Life Products (Luxembourg) S.A., Strassen DE 100.0% 100.0% Life insurance/Reinsurance
Swiss Life Real Estate Management Funds I S.C.S., Strassen DE from 05.11.2014 100.0% 100.0% Real estate
Swiss Life Real Estate Management II S.à.r.l., Luxembourg DE from 27.10.2015 100.0% 100.0% Asset management & Real estate
White Tower Munich General Partner S.à.r.l., Luxembourg DE from 27.10.2015 100.0% 100.0% Asset management & Real estate
Chase de Vere Financial Solutions Limited, Manchester IN 100.0% 100.0% Dormant
Swiss Life Products (Luxembourg) S.A., Branch Austria, Wien DE 100.0% 100.0% Life insurance/Reinsurance
As statutory auditor, we have audited the consolidated financial statements of Swiss Life Holding Ltd, which comprise the consolidated statement of income, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of cash flows, consolidated statement of changes in equity and notes to the consolidated financial statements (pages 152 to 296), for the year ended 31 December 2015.
Opinion In our opinion, the consolidated financial statements for the year ended 31 December 2015 give a true and fair view of the financial position, the results of operations and the cash flows in accor dance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.
Swiss Life Holding increased its profit in the 2015 financial year to CHF 349 million (2014: CHF 258 million).
Swiss Life Holding’s profit distribution to shareholders in the period under review came to CHF 207 million or CHF 6.50 per share and was made out of the capital contribution reserve. The par value of the Swiss Life Holding share stands unchanged at CHF 5.10. The company’s nominal share capital at the end of the year remained at CHF 164 million.
As at the end of the year Swiss Life Holding has assets (liquid funds, debt securities and investment funds) of CHF 1184 million. Due primarily to the reallocation of assets, liquid funds reduced from CHF 287 million to CHF 183 million, while debt security and investment fund holdings increased from CHF 801 million to CHF 1001 million. All debt securities are eligible for repo transactions.
The 2015 Financial Statements are the first to incorporate the provisions of Swiss accounting law (Title 32 of the Swiss Code of Obligations). The previous year’s balance sheet and income statement have been amended accordingly to ensure comparability. Treasury shares in particular are now represented as a negative value in equity. The reserve for treasury shares has been accordingly released. The valuation method for participations has also been adapted to the new Code of Obligations. With the introduction of new provisions, participations have been revalued by CHF 41 million. This adaptation is contained in the position “Unrealised gain/loss of capital assets”. Swiss Life Holding’s Financial Statements are presented in millions of Swiss francs (CHF), which is the presentation currency. Figures may not add up exactly due to rounding.
Share capital As at 31 December 2015, the share capital of Swiss Life Holding consisted of 32 081 054 fullypaid shares with a par value of CHF 5.10 each. In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of his own shares and those he represents. As at 31 December 2014, Swiss Life Holding had 32 081 054 registered shares outstanding with a par value of CHF 5.10 per share. Conditional share capital was CHF 30 600 000.00 as at 31 December 2015 (2014: 30 600 000.00).
Statutory capital reserve The statutory capital reserve consists of the reserve from capital contribution reserves of CHF 862 million. Following the distribution of CHF 6.50 per share, the capital contribution reserve was reduced by CHF 207 million during the year under review from CHF 1070 million to CHF 862 million as at 31 December 2015. Of this amount CHF 691 million is recognised by the Federal Tax Administration, while the legal qualification of CHF 171 million is still open and is to be reassessed according to future legal developments.
Issue of a convertible bond in 2013 On 2 December 2013, Swiss Life Holding launched a bond issue in the amount of CHF 500 million with a coupon of 0%, due in 2020. The bonds may be converted into registered Swiss Life Holding shares. The conversion price is set at CHF 240.70.
Swiss Life Holding further provides capital guarantees for a maximum net asset value of CHF 1100 million to Swiss Life Ltd, CHF 150 million to Swiss Life Funds, CHF 185 million to Swiss Life Products, CHF 7 million to Swiss Life Liechtenstein and CHF 7 million to Corpus Sireo.
In addition, Swiss Life Holding grants a line of credit in the amount of CHF 16 million to Swiss Life Products, a line of credit in the amount of CHF 6 million to Swiss Life Schweiz Holding and a line of credit in the amount of CHF 83 million to Corpus Sireo.
Number of full-time positions The number of full-time positions is not above 50 employees on average over the year.
On 2 March 2016, Swiss Life Ltd issued a perpetual subordinated bond for CHF 450 million with an initial optional call date in September 2021 and a subordinated bond for CHF 150 million maturing in 2046 with an initial optional call date in September 2026. Both bonds are guaranteed by Swiss Life Holding Ltd on a subordinated basis.
Share ownership/participation rights as at 31 December 2015 As at 31 December 2015, acting members of the Board of Directors and the Corporate Executive Board (including closely linked parties) held the following number of registered Swiss Life Holding shares and future subscription rights to Swiss Life Holding shares in the form of Restricted Share Units (RSUs).
Share ownership/participation rights as at 31 December 2014 As at 31 December 2014, acting members of the Board of Directors and the Corporate Executive Board (including closely linked parties) held the following number of registered Swiss Life Holding shares and future subscription rights to Swiss Life Holding shares in the form of Restricted Share Units (RSUs).
Annual profit amounts to CHF 349 030 082. The Board of Directors proposes to the General Meeting of Shareholders that the profit be appropriated in accordance with the table below. If this proposal is adopted, a distribution of CHF 8.50 per share will be made from the capital contribution reserve.
Balance carried forward from previous year 301 707 1 090 961
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the financial statements for the year ended 31 December 2015 comply with Swiss law and the company’s articles of incorporation.
Performance Swiss Market Index (SMI) (in %) –2 +10 +20 +15 –8
Market capitalisation (in CHF million) 30.12. 8 704 7 584 5 941 3 895 2 772
Total dividend payout to shareholders (in CHF million) 30.04. 207 176 144 144 144
Dividend yield on year-end price (in %) 30.12. 2.40 2.33 2.43 3.71 5.21
Number of employees (full-time equivalents) 7 595 7 492 6 992 7 046 7 168 1 equity excl. unrealised gains/losses on bonds
Annual Report 2015 The Annual Report is published in German and English and contains additional information on risk management, market consistent embedded value (in English only), corporate governance and the annual accounts. The English text is definitive for the Consolidated Financial Statements; the original German text is binding in all other respects.