Contents 4 Corporate Governance 8 Board of Directors 17 Corporate Executive Board 21 Report on Compensation 33 Risk Management 34 Market Consistent Embedded Value (MCEV) 36 Introduction 38 Summary of MCEV Results 46 Information by Market Unit 51 Methodology 56 Assumptions 60 External Auditors’ Statement 61 Glossary and List of Abbreviations 64 Consolidated Financial Statements 66 Consolidated Statement of Income 67 Consolidated Statement of Comprehensive Income 68 Consolidated Balance Sheet 70 Consolidated Statement of Cash Flows 72 Consolidated Statement of Changes in Equity 73 Notes to the Consolidated Financial Statements 176 Report of the Statutory Auditor 178 Swiss Life Holding Financial Statements 179 Review of Operations 180 Statement of Income 181 Balance Sheet 182 Notes to the Financial Statements 195 Appropriation of Profit 196 Report of the Statutory Auditor
The companies falling within the Group’s scope of consolidation are presented in the Consolidated Financial Statements (Note 38). Information on the listing on the SIX Swiss Exchange and market capitalisation can be found on page 72 in the Business Review. 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 2010 is shown on page 16.
The relevant disclosures of significant shareholdings can be found on the publication platform of the SIX Swiss Exchange’s disclosure office at www.six-exchange-regulation. com, “Obligations” area, “Disclosure of Shareholdings ” section and “Significant Shareholders” subsection (www.six-exchange-regulation.com/obligations/disclosure/ major_shareholders_en.html).
Talanx AG, Riethorst 2, 30659 Hanover, Germany, reported in a publication of 20 May 2009, that one of its groups held 2 987 988 shares of Swiss Life Holding, equivalent on that day to 8.52% of the voting rights. The group consists of: AmpegaGerling Investment GmbH, Hohenzollernring 72, 50672 Cologne, Talanx AG, Riethorst 2, 30659 Hanover and Talanx Beteiligungs-GmbH & Co. KG, Riethorst 2, 30659 Hanover. Talanx BeteiligungsGmbH & Co. KG is managed by the beneficial owner (HDI V.a.G.) as follows: The limited partner is Talanx AG, Riethorst 2, 30659 Hanover. As the sole shareholder, Talanx AG is the beneficial owner (HDI V.a.G.). The general partner is Hannover Beteiligungsgesellschaft mbH, Riethorst 2, 30659 Hanover. Talanx AG is the sole partner of Hannover Beteiligungsgesellschaft m.b.H. AmpegaGerling Investment GmbH is managed by the beneficial owner as follows: 94.9% is controlled by AmpegaGerling
Asset Management GmbH, Hohenzollernring 72, 50672 Cologne (Talanx AG is AmpegaGerling Asset Management GmbH’s sole partner) and 5.1% by Alstertor Erste Beteiligungs- und Investitionssteuerungs-GmbH & Co. KG, Hamburg. Alstertor Erste Beteiligungs- und Investitionssteuerungs-GmbH & Co. KG’s sole limited partner is Talanx AG.
BlackRock, Inc., 40 East 52nd Street, New York 10022, USA reported in a publication of 9 January 2010 that a group consisting of BlackRock Asset Management Japan Limited, Marunouchi Trust Tower Main, 1-8-3 Marunouchi, Chiyoda-ku, Tokyo 100-8217, BlackRock Advisors UK Ltd, Murray House, 1 Royal Mint Court, London EC3N 4HH, BlackRock Investment Management (UK) Ltd., 33 King William Street, London EC4R 9AS, BlackRock International Ltd., 40 Torphichen Street, Edinburgh EH3 8JB, BlackRock Investment Management (Australia) Limited, Level 43, Grosvenor Place, 225 George Street, Sydney NSW 2000, BlackRock Fund Managers Ltd., 33 King William Street, London EC4R 9AS, BlackRock Investment Management LLC, 800 Scudders Mill Road, Plainsboro NJ 08536, BlackRock Financial Management Inc., 40 East 52nd Street, New York NY 10022, BlackRock Asset Management Australia Limited, Level 43, Grovesnor Place, 225 George Street Sydney NSW 2000, BlackRock Fund Advisors, 400 Howard
Since the establishment of Swiss Life Holding on 17 September 2002, a number of capital market transactions have been conducted. A detailed description of the transactions carried out up to and including the end of 2007 can be found in the Corporate Governance section of the annual reports for the relevant years. The annual reports
Swiss Life — Financial Statements 2010 can be accessed at www.swisslife.com, “Shareholders & Analysts ” area, “Archive Reports” section (www.swisslife.com/ en/annualreports).
On 8 May 2008 the General Meeting of Shareholders decided to reduce the par value by CHF 17, i.e. from CHF 34 to CHF 17 per registered share, thereby decreasing the share capital to CHF 594 327 463, divided into 34 960 439 registered shares. As a result of the par value reduction, the conditional capital fell to CHF 42 219 517, divided into 2 483 501 registered shares with a par value of CHF 17 each. The 0.625% convertible bond issue (2004–2010) was partially converted in 2008, creating 124 115 new registered shares. As at 31 December 2008 the ordinary share capital thus increased to CHF 596 437 418, divided into 35 084 554 registered shares with a par value of CHF 17 each, and the conditional capital decreased to CHF 40 109 562, divided into 2 359 386 registered shares with a par value of CHF 17 each.
On 7 May 2009 the General Meeting of Shareholders of Swiss Life Holding decided on a capital reduction of CHF 51 059 500 by cancelling 3 003 500 shares with a par value of CHF 17, which were acquired under the share buyback programme approved on 8 May 2008. As a result the share capital decreased from CHF 596 437 418 to CHF 545 377 918. The General Meeting of Shareholders also decided to pay a dividend of CHF 5 per registered share, in the form of a reduction in par value. The share capital thus decreased from CHF 545 377 918 (32 081 054 registered shares, each with par value of CHF 17) to CHF 384 972 648 (32 081 054 registered shares, each with par value of CHF 12). At the same time the conditional share capital was reduced to CHF 28 312 632 (2 359 386 registered shares, each with par value of CHF 12). In 2009 no conversions were made on the 0.625% convertible bond (2004–2010).
Regulations are in place to govern transactions in Swiss Life Holding shares carried out by Swiss Life Group employees. Pursuant to the Code of Compliance and the Swiss Life Group’s Directive on Insider Information, all purchases and sales of Swiss Life Holding securities made by members of senior management or employees who are privy to confidential information are subject to a reporting requirement. In addition, blackout periods are imposed annually from 1 January until 24 hours after the year-end results have been presented and from 1 July until 24 hours after the half-year results have been presented.
Additional information on the Swiss Life share is available in the section “Information on Share Performance and Historical Comparison” on pages 72 and 73 in the Business Review.
MEMBERS OF THE BOARD OF DIRECTORS — On the balance sheet date of 31 December 2010, the Board of Directors was composed of the following members: Year appointed/ Name Main function Additional functions re-elected Elected until
Audit Committee Franziska Tschudi Member Nomination and Compensation Committee 2003/2005/2008 2011 1 Member of the Board of Directors of Swiss Life Ltd since 2000
GEROLD BÜHRER — Born 1948, Swiss national First Vice Chairman of the Board of Directors
AL Gerold Bührer graduated in economics (lic. oec. publ.) from the University of Zurich in 1972. Following 17 years with the Union Bank of Switzerland as a member of senior management in its financial sector and a Member of the Executive Board of its fund investment company, he joined Georg Fischer Ltd in 1991, where he served as a Member of its Executive Board (Finances) from 1991 until 2000. He began working as an independent economic consultant in 2001 and, since the end of 2006, has held the office of Chairman of economiesuisse. Gerold Bührer was a Member of the Grand Council of the Canton of Schaffhausen from 1982 to 1991 and, from 1991 to 2007, a Member of the Swiss Parliament (National Councillor).
Other appointments: – economiesuisse, Zurich, Chairman – Bank Sal. Oppenheim jr. & Cie. (Schweiz) Ltd, Zurich,
Member of the Board of Directors – Cellere AG, St. Gallen, Member of the Board of Directors – Georg Fischer Ltd, Schaffhausen, Member of the
AL Frank Schnewlin studied at the University of St. Gallen (lic. oec. HSG), the London School of Economics (Master of Science) and the Harvard Business School
Following his election to the Board of Directors of Swiss Life Holding in May 2009, he assumed the role of Chairman of the newly established Nomination and Compensation Committee.
Between 1995 and 1999 Volker Bremkamp was an Executive Director and, at the same time, Group Executive Director, Continental Europe, of Guardian Royal Exchange plc, London, which was taken over by the AXA Group in 1999. From 1999 to 2000 he held the position of Executive Director of AXA Colonia Konzern AG, Cologne (holding company of AXA Germany). He has been Managing Director of BMB Bremkamp Management - und Beteiligungs-GmbH since 2000.
Paul Embrechts will be resigning from the Board of Directors after eight years of office with effect from the General Meeting of Shareholders of Swiss Life Holding Ltd on
AL After studying medicine and gaining many years of sales experience in the financial services sector in various management positions, in 1988 Carsten Maschmeyer founded the company Allgemeiner Wirtschaftsdienst Gesellschaft für Wirtschaftsberatung und Finanzbetreuung mbH. In 1998 he was appointed Chairman of the Board of Management of AWD Holding AG and, in 2000, launched an initial public offering of shares in AWD. Carsten Maschmeyer sold AWD to Swiss Life at the end of 2007 and, as Co-CEO of AWD from September 2008 until March 2009, he was responsible for strategic development and opening up new markets. In January 2010 he founded MaschmeyerRürup AG – an independent and internationally focused advisor concentrating on retirement provisions for key players in banking and insurance. He heads the company as Chairman of the Board. He is also expanding CM Vermögensverwaltung GmbH & Co. KG. At the end of December 2010, Carsten Maschmeyer
HENRY PETER — Born 1957, Swiss and French national Member of the Board of Directors
Other appointments: – Sigurd Rück Ltd, Zurich, Chairman of the Board of
The Board of Directors meets as often as business requires, generally at least six times a year. Meetings are generally called by the Chairman of the Board of Directors. However, any member of the Board of Directors may request that a meeting be called, as may the Corporate Executive Board. In addition to the members of the Board of Directors, the Group CEO also generally attends the meetings or parts of meetings in an advisory capacity, as do other members of the Corporate Executive Board when required.
The Board of Directors met eight times during the year under review. The meetings lasted around three and a half hours on average. There was full attendance at all meetings, with the exception of one meeting, which one member was unable to attend. The Group CEO and the other members of the Corporate Executive Board attended all the meetings. The Board of Directors conducted parts of the meetings among themselves.
The Chairman of the Board of Directors presides over meetings. As a rule, the Group CEO attends the Chairman ’s Committee meetings or parts of the meetings in an
The Chairman’s Committee held nine meetings during the year under review. The average duration of an ordinary meeting was around two hours. There was full attendance at all meetings, and the Group CEO was also present on each occasion.
The NCC may invite the Group CEO to part or all of its meetings in an advisory capacity. Other members of the Corporate Executive Board and in-house or external specialists may also be invited. The NCC generally meets three times a year.
During the year under review the NCC convened a total of seven times. Each session lasted for around two hours on average. There was full attendance at all meetings.
INVESTMENT AND RISK COMMITTEE — The Investment and Risk Committee assists the Board of Directors in matters concerning investment management, financial management and risk management within the Group. The tasks of the Investment and Risk Committee include drafting proposals on the principal features of asset and liability management (ALM) and submitting them to the Board of Directors, determining the investment policy, assessing capital adequacy, verifying compliance with guidelines on investments, and establishing the risk tolerance in insurance and investment operations. The
Investment and Risk Committee is vested with the authority to define various regulations and directives pertaining to the investment activities of the Swiss Life Group and must inform the Board of Directors accordingly.
Generally, the Group CIO and Group CFO attend the Investment and Risk Committee meetings or parts of meetings in an advisory capacity. The Group CEO may attend the meetings of the Investment and Risk Committee (without voting rights). Further members of the Corporate Executive Board and in-house specialists may also be invited to attend. The Investment and Risk Committee meets at least four times a year.
In the year under review, the Audit Committee convened four times, with a meeting lasting around three and a half hours on average. There was full attendance at all meetings. The Group CEO was present at all meetings, with the exception of one. The Group CFO, the Head of Corporate Internal Audit and representatives from the external audit services attended all meetings. To prepare for the meetings relating to the annual and half-year reports, the Audit Committee regularly calls on the services of an independent financial and business expert.
Corporate Internal Audit, which reports directly to the Chairman of the Board, represents a suitable means of independent monitoring and information gathering for the Board of Directors. Regular meetings take place between the Chairman of the Board of Directors and the Head of Corporate Internal Audit, as well as between the Chairman of the Audit Committee and the Head of Corporate Internal Audit. Implementation of the measures recommended by Corporate Internal Audit is monitored by Group Compliance & Operational Risk Management. The Audit Committee regularly receives a report on operational risk management within the Swiss Life Group.
Board of Directors for information and controlling purposes. Further details on this system are available in the “Risk Management” section on page 33.
Corporate Governance Committee, the Nomination and Compensation Committee and the Board of Directors, with no members of the Corporate Executive Board being present. The acceptance of directorships and senior political or military roles by members of the Corporate Executive Board is subject to the consent of the Chairman of the Board of Directors.
AL After graduating with a degree in economics from the University of Augsburg, Klaus G. Leyh worked for two years as a market researcher and advisor in the consumer goods industry. In 1995 he changed to the insurance sector, building up Generali’s Market Research department in Munich. He subsequently held management positions in marketing, product management and e-business at Generali Lloyd Versicherung AG, AXA Colonia Konzern and ARAG Lebens- und Krankenversicherung, and received a Master of Business Research (MBR) from the Ludwig Maximilian University of Munich. In 2001 Klaus G. Leyh joined Swiss Life in Germany as the head of its e-commerce and e-business activities and was assigned responsibility for distribution service, control and promotion in 2002. From January 2006 to September 2008 he held the position of Chief Market Officer and Member of the Executive Board of Swiss Life in Germany with responsibility for the entire sales force, distribution management, service and control.
AL Patrick Frost studied at the ETH in Zurich and the universities of Cologne, Basel and Zurich, obtaining degrees in natural science (dipl. Natw. ETH, 1993), economics (Dr. rer. pol., 1998) and law (lic. iur., 2001). He began his professional career in 1996 as a portfolio manager and analyst in financial engineering at Winterthur Group. Between 1999 and 2001 he was employed as a Senior Bond Portfolio Manager at Winterthur Investment Management Corp. in New York. He became the Head of Global
In 1984 he moved to Hamburg Mannheimer AG, where he assumed various leading positions in the areas of law and sales and went on to become regional manager. He joined Volksfürsorge Deutsche LebensversicherungsAG in May 1996 and, in 1998, was appointed Member of the Board of Directors with responsibility for sales and marketing. Manfred Behrens moved to Swiss Life in January 2004, where he held the position of Chief Executive Officer of Swiss Life in Germany (CEO Germany) until August 2008. He was appointed Co-Chief Executive Officer of AWD (Co-CEO AWD) in September 2008. In April 2009 he assumed the role of Chief Executive Officer of AWD (CEO AWD).
RESIGNATIONS — There were no resignations from the Corporate Executive Board during the period under review.
The variable compensation components are linked to the strategic objectives of the Group and the individual divisions, and the associated financial and HR-related targets. The variable bonus in cash and possibly in shares is based on achievement of the annual objectives. It is determined on the basis of the actual performance of individuals or teams (performance-linked payment) in relation to the objectives set and the Swiss Life Group’s annual result (share in the company’s success). Quantitative and qualitative performance is also always assessed on the basis of the competencies required for the function held, such as professional expertise, entrepreneurship, task fulfilment, cooperation and leadership. The percentage weighting between the individual and/or team performance and the share in the company’s success depends on the position and responsibilities of the function holder.
to annual profit, costs, business volume, return on equity and solvency, are the profitability of in-force and new business and margin development.
PRACTICE AND PROCEDURE — Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for determining the level and make-up of compensation for its members, whereas the Nomination and Compensation Committee is responsible for putting forward appropriate proposals. The Board of Directors also establishes the guidelines for the company’s compensation policy. In doing so, it takes into consideration the compensation policies of other companies in the financial services industry, drawing its findings from publicly available information and, as necessary, studies by external experts. Comparable companies in the insurance sector in Switzerland used for the purposes of providing relevant information for the current compensation policy included Allianz, AXA, Baloise Insurance, Swiss Re and Zurich Financial Services.
An equity compensation plan exists as a mid- to longterm salary component within the framework of the compensation arrangements 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 Nomination and Compensation Committee. Based on this plan, participants are granted future subscription rights to Swiss Life Holding shares in the form of Performance Share Units (PSUs). 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. The granting of this compensation component is in any case deferred for three years from the date of allocation and thus takes into consideration development in the meantime (deferred compensation).
(TSR Outperformance). A subscription right arises if the performance on expiry of the three-year term is above the first quartile in comparison with the companies in question. Depending on the fulfilment of the two performance criteria within the three-year period, the number of PSUs can increase by up to a factor of 1.5 and 2.0 respectively, or drop to zero. Performance requirements for the 2010 equity compensation plan have been increased over the 2008 and 2009 plans to the extent that 35% performance (previously 30%) is required in the TSR Swiss Life Holding for factor 1 and at least 50% performance (previously 40%) for the maximum factor. The maximum factor has in turn been increased from 1.5 or 150% to 2 or 200%.
From 2011, participants in the equity compensation plan will be allocated Restricted Share Units (RSUs) instead of PSUs. As with PSUs, 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, but without any additional performance leverage. The attribution of shares after the expiry of the threeyear deferral period will be effected in future on a 1:1 basis (1 RSU = 1 share); the plan is therefore very simple and the process transparent throughout the whole term. The value of RSUs during the three-year term develops linear with the Swiss Life Holding share price and thus systematically corresponds with shareholder interests. The plan also provides for adjustment and reclaiming mechanisms (clawback).
Carsten Maschmeyer. Rolf Dörig ceded the position of Delegate of the Board of Directors with effect from 7 May 2009 to take over from Bruno Gehrig as Chairman of the Board of Directors.
Part of basic for the 2010 compensation financial year1 Total 1 Allocated at the beginning of 2011 with value of 04.03.2011
Until leaving the Board of Directors at the General Meeting of Shareholders of 6 May 2010, Rudolf Kellenberger was paid compensation in cash to the amount of CHF 54 167 and, as part of the basic compensation, 110 shares, which were subject to a three-year blocking period.
Compensation remitted to members of the Corporate Executive Board comprises the basic salary, a variable bonus in cash, other compensation (child allowances, allowance for years of service, company cars, premium contributions to 3rd pillar pension plans), as well as possible variable compensation in the form of shares. The members of the Corporate Executive Board also take part in a midto long-term equity compensation plan which, as mentioned above, entitles them to Swiss Life Holding shares after a period of three years has elapsed, provided that the relevant requirements have been satisfied at that point.
Salary is determined annually by the Board of Directors, on the basis of a proposal by the Nomination and Compensation Committee, taking into account the individual member’s function-related responsibility.
The cash bonus is determined by the Board of Directors in accordance with the described compensation policy principles and based on the company result and the achievement of personal goals assessed in the employee appraisal procedure implemented throughout the Group (Group Performance System, GPS). The bonus is set at a maximum of 35% of total compensation (“bonus cap”) and requires that all objectives have been considerably exceeded.
For the 2010 financial year, the members of the Board of Directors were allotted the following shares, subject to a three-year blocking period: Board of Directors 5114 shares, allocated at values of CHF 95.464, CHF 110.242 and CHF 132.4921. The shares are subject to a three-year blocking period.
The number of future subscription rights to Swiss Life Holding shares allocated in the context of the abovementioned equity compensation plan to members of the Corporate Executive Board in the form of Performance Share Units (PSUs), the exercise of which depends on the fulfilment of specific performance criteria, is shown in table form in the Notes to the Swiss Life Holding Financial Statements.
AWD Holding AG and its subsidiaries paid a total of EUR 44 625 in consulting fees for services provided to the AWD Group to a company in which the Board of Directors member Carsten Maschmeyer has an important shareholding.
Expenditure for occupational provisions on behalf of the remaining members of the Corporate Executive Board totalled CHF 976 910 (regular annual contributions of CHF 848 645 and supplementary payments of CHF 128 265 in accordance with the pension fund regulations due to an increase in insured salary).
The basic compensation of members of the Board of Directors is paid 80% in cash and 20% in blocked Swiss Life Holding shares. As a result of the good business results, variable compensation for the 2010 financial year was paid to members of the Board of Directors at the beginning of 2011 in the form of blocked shares amounting to 10% of the fixed compensation. No variable compensation components in shares had been allocated to members of the Board of Directors for the 2009 financial year.
Total compensation 2009 in cash and shares 1 238 690 including annual contribution to occupational provisions of CHF 195 656 1 434 346 1 On the one hand as part of the basic compensation and, on the other, as variable compensation in blocked shares for the 2010 financial year allocated at the beginning of 2011. The allocation was effected on 18.06.2010, 15.12.2010 and 04.03.2011 at an economic value of CHF 95.454, CHF 110.242 and CHF 132.492, which is equal to the tax value, taking into account the blocking period of three years. The share prices on the days of allocation were CHF 113.70, CHF 131.30 and CHF 157.80 respectively.
Total compensation 2010 2 in cash and shares 2 485 435 including regular contribution to occupational provisions of CHF 234 220 3 2 719 655
REQUIRED MAJORITIES — In addition to the resolutions provided for by law, a qualified majority (corresponding to at least two thirds of the voting shares represented and an absolute majority of the share par value represented) is required to: – change provisions concerning restrictions on voting rights – dissolve the company (liquidation) – dismiss more than one third of the members of the
SHAREHOLDERS AND AGENDA — The rules set out in the Articles of Association for convening a General Meeting of Shareholders and drawing up the agenda comply with the stipulations of the law. Shareholders who represent at least 0.25% of the share capital can submit a written request within a time limit published in advance by Swiss Life Holding for the inclusion on the agenda of an item for discussion, together with the relevant motions. The written application must be accompanied by a blocking certificate issued by a bank to confirm that the shares are deposited with it until after the General Meeting of Shareholders is held.
ENTRY IN THE SHARE REGISTER — Entries can be made in the share register up to the day before the General Meeting of Shareholders. In all cases, however, the company reserves the right to adhere to the legal maximum period of 20 days for recognition of entries in the share register in accordance with Art. 685g of the Swiss Code of Obligations. For administrative reasons (postal delivery times), the deadline for registering to participate in the General Meeting of Shareholders is usually seven calendar days before the event takes place.
VOTING SYSTEM AND PROCEDURES — Based on a corresponding authorisation in the Articles of Association, the presiding officer at Swiss Life Holding’s General Meeting of Shareholders generally requests that votes to be taken electronically. Swiss Life Holding uses a certified electronic voting system which permits balloting with remote-controlled handsets and records the exact number of voting shares represented.
PricewaterhouseCoopers (PwC) serves as external statutory auditor for all (prior year: 68%) Swiss Life Group companies that are directly or indirectly held by Swiss Life Holding under its scope of consolidation.
The partner at PwC in charge of auditing the Swiss Life Holding annual financial statements and consolidated financial statements (lead auditor) has held that function since the 2004 financial year. 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, it has appointed a new lead auditor who will take over responsibility for auditing the Swiss Life Holding annual financial statements and consolidated financial statements as of the 2011 financial year.
Key facts and figures about the Swiss Life Group, info kits on previous financial statements and all the details on events relevant to the shareholders, analysts and the media (general meeting of shareholders, media conferences, etc.), can be accessed at www.swisslife.com in the areas “Shareholders & Analysts” (www.swisslife.com/analysts ) and “News & Media” (www.swisslife.com/media).
Furthermore, 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 (www.swisslife.com/subscription). These releases are also published on the Swiss Life website at the same time as they are sent to subscribers, and are available online for at least two years (www.swisslife.com/ media).
The qualitative risk management elements mentioned above are presented and discussed below. Detailed information on the risk budgeting process and asset and liability management is provided in Note 5 (Risk Management Policies and Procedures) of the Consolidated Financial Statements.
Contents 36 1.1 Basis of Preparation 36 1.2 Covered Business and Non-Covered Business 38 2 Summary of MCEV Results 38 2.1 Group MCEV 38 2.2 MCEV of Covered Business 39 2.3 Value of New Business 41 2.4 Group MCEV – Analysis of Earnings 42 2.5 Covered Business – Analysis of Earnings 44 2.7 Reconciliation of IFRS Net Asset Value to Group MCEV 46 3 Information by Market Unit 46 3.1 Market Units 46 3.2 Results by Market Unit 51 4.1 MCEV Components for Covered Business 53 4.2 New Business 53 4.3 Asset and Liability Data 54 4.4 Economic Scenario Generator 54 4.5 Dynamic Management Actions and Policyholder Behaviour 54 4.6 Look-Through Principle 55 4.8 Employee Pension Schemes and Share-Based Payment Programmes 56 5.1 Economic Assumptions 58 5.2 Taxation and Legislation 59 5.3 Operating Assumptions 60 6 External Auditors’ Statement 61 7 Glossary and List of Abbreviations
Market consistent embedded value (MCEV) is a measure of the consolidated value of shareholders’ interests in the in-force covered business of the Swiss Life Group. Covered business includes life, health and pension business of the company. The Group MCEV is a measure of the consolidated value of shareholders’ interest in the covered and non-covered business in force of the company. Business in force includes business written as at 31 December 2010; future new business is not included. The notion of market consistent embedded value (MCEV) will alternatively refer within the course of this report to the MCEV of Swiss Life’s covered business, of one of its market units, or to Swiss Life’s Group MCEV.
The value of in-force covered business is defined as the sum of: – the certainty equivalent value of future profits (CEV) – the time value of financial options and guarantees
(TVOG), including the cost of credit risks – the cost of residual non-hedgeable risks (CNHR) – the frictional costs of required capital (FC)
CEV Certainty equivalent value TVOG Time value of options and guarantees CNHR Cost of non-hedgeable risks FC Frictional costs VIF Value of in-force business RC Required capital FS Free surplus NAV Net asset value MCEV Market consistent embedded value scaling only indicative 2 Summary of MCEV Results
During 2010, the capital markets were characterised by strong movements of the relevant interest rates and a decline of the euro and the US dollar against the Swiss franc. While interest rates recovered from their historic lows in the third quarter, they are still below their levels as per end of year 2009 while their volatilities increased. In the context of the ongoing margin management and to preserve current and future margins, the company has, among various reassessments performed during 2010, adjusted its approach to policyholder participation.
The Group MCEV includes the covered as well as the noncovered business. The covered business is valued according to the MCEV methodology. The value of the noncovered business included in the Group MCEV is the unadjusted IFRS net asset value.
The Group MCEV increased by 10%. The value of the noncovered business is slightly below the previous year’s level. Despite the adverse economic environment and the weakened euro, the value of covered business increased by 20%.
The value of in-force business (VIF) is the sum of the certainty equivalent value, TVOG, CNHR, and FC. Thus MCEV is the sum of net asset value and value of in-force business, or the sum of free surplus, required capital and value of in-force business. Despite lower interest rates and higher interest rate volatilities, the value of in-force business increased strongly. This reflects the company’s approach to profit sharing, margin management, improved demographic assumptions, and other reassessments.
The certainty equivalent value (CEV) is the present value of future shareholder profits – net of tax – under the certainty equivalent scenario. This scenario is derived from reference rates as at the respective valuation date. The CEV contains that part of the value of financial options and guarantees which materialises in the underlying scenario (also called intrinsic value of the financial options and guarantees).
The cost of residual non-hedgeable risks (CNHR) represents the value of risks which is calculated by way of a cost of capital approach because there are no liquid markets, such as insurance risks, expense risks, and risks from variances to assumed rules for policyholder decisions.
The frictional costs of required capital (FC) represents the present value of costs incurred by shareholders due to investment management expenses and taxes on investment returns of restricted assets. They are calculated based on the required capital.
The following sections show the premium volumes, measured in present value of new business premiums (PVNBP)
and annual premium equivalent (APE), the value of new business and the new business margins on the basis of PVNBP and APE. Furthermore there is an analysis of change showing the development of value of new business from last year to the current year.
PRESENT VALUE OF NEW BUSINESS PREMIUMS (PVNBP) 14 607 14 390
The opening adjustments represent dividend payments from the covered and non-covered business, resulting in the reduction of par value of CHF 2.40 per share or a total of CHF 77 million as shown in the Consolidated Financial Statements (Note 1) and currency exchange rate effects of CHF –2 million.
The non-operating MCEV earnings relate to borrowing costs and tax effects for the non-covered business. The change in non-operating MCEV earnings compared to 2009 originates almost entirely from the covered business.
Expected existing business contribution (in excess of reference rate) 9 –5 833 837 –
Transfers from VIF and required capital to free surplus 666 –162 –504 – –
CAPITAL TO FREE SURPLUS include the transfer of the results of the preceding step to free surplus and subsequent split between free surplus and required capital. The total effect in this line is zero. As this step is carried out after taking into account the contributions in excess of reference rates the effect on free surplus is positive.
EXPERIENCE VARIANCES aggregate the impact of actual performance versus expectations on insurance contracts regarding non-economic assumptions such as mortality, expenses, lapses, as well as the deviations in handling of additional reserves. As a result of the low interest rate environment the situation in Switzerland was reassessed and subsequently reserves were strengthened.
ASSUMPTION CHANGES refer to the impact of the change on assumptions such as future mortality, morbidity, longevity rates, changes in anticipated surrenders and expenses, and the approach to future profit sharing. These are commented on in section 3.2.
OTHER OPERATING VARIANCE includes effects from strategic management decisions, modelling improvements and other reassessments. Comments are provided in the section 3 (results per market unit).
ECONOMIC VARIANCES represent the change in embedded value by replacing the starting economic scenarios by the closing ones. The effects from expected investment
10% increase in equity / property market values 723 15% 1 10% decrease in equity / property market values –808 –16% 1 25% increase in equity / property implied volatilities –276 –6% –14 –7%
5% proportionate decrease in mortality rates (annuities) –118 –2% –5 –2%
Overall, sensitivities are significantly reduced with respect to the ones for 2009. Management actions such as duration measures, cost reductions, strengthening of buffers and changes to the profit sharing approach contributed to this effect.
Swiss Life’s MCEV for covered business reflects the value of the shareholders’ interest in the life, health and pension business as well as assumed external reinsurance of the Swiss Life Group. This value includes the determination of best estimate liabilities for bonus and tax pay-
Value of in-force business 3 032 1 Goodwill adjustments correspond to goodwill of covered business with the exception of CHF 72 million from French operations (see section 3.2). 2 Group MCEV includes CHF 1 443 million of goodwill and intangible assets as part of the unadjusted IFRS net assets for non-covered business.
Starting with the total IFRS net assets, there are valuation differences between IFRS and MCEV regarding the net asset value for the covered business. In the reconciliation these valuation differences are shown under “adjustments ”. The main elements that have been adjusted are deferred acquisition costs (DAC), goodwill and other intangible assets, differences between statutory and IFRS balance sheet items reflecting different reserving bases, and different treatment of the investments and unrealised gains (that form part of the IFRS net assets but are projected on MCEV as part of the value of in-force business in the MCEV calculations).
Swiss Life’s covered business is subdivided according to market units as follows: – Life, pension and assumed external reinsurance business in Switzerland
– All businesses in France, mainly life, health and pension business
– Life and pension business in Germany – Life and pension business in Luxembourg, Liechtenstein, and Singapore (together referred to as Insurance Other)
This breakdown by market unit essentially coincides with the IFRS insurance segments in the annual report. There are minor differences since the MCEV classification follows the legal structure in order to ensure a correct modelling of the profit sharing. A divergence from the IFRS insurance segment reporting is the treatment of Swiss Life Asset Management in France, which is reported for MCEV purposes under France.
GERMANY — Swiss Life sells traditional and modern products within individual and group life business. Disability insurance plays an important role. The main distribution channel is independent brokers, followed by financial advisors such as AWD.
INSURANCE OTHER — Swiss Life offers private placement life insurance (PPLI) through Liechtenstein, Singapore and Luxembourg. In Luxembourg, Swiss Life also provides group insurance solutions for international and local corporate clients through Corporate Solutions.
VALUE OF IN-FORCE BUSINESS 1 655 824 271 282 3 032
Frictional costs of required capital –188 –97 –47 –14 –346 1 The value for France includes CHF 72 million in goodwill and intangible assets orginating from the non-life and non-health insurance operations.
SWITZERLAND — The net asset value is influenced by the hybrid debt. It includes the – negative – difference between the market value of assets covering the hybrid debt in the statutory balance sheet and the marked-tomodel value of the hybrid debt which is calculated as described in section 4.3. The decrease in net asset value is mainly a consequence of assessments alluded to before.
The increase in value of in-force business is driven by the reduced expense base, changes in the profit sharing approach, and updated demographic assumptions. In aggregate, these changes also lead to lower time value of options and guarantees and to lower sensitivities.
VALUE OF NEW BUSINESS BY MARKET UNIT – PREMIUMS AND MARGINS FOR THE YEAR 2010
Value of new business before new business strain 71 150 50 61 333
VALUE OF NEW BUSINESS BY MARKET UNIT – PREMIUMS AND MARGINS FOR THE YEAR 2009
Value of new business before new business strain 65 96 30 63 255
SWITZERLAND — New business consists of new contracts and new coverages on existing contracts. Within group life business, replacements and newly insured persons entering existing contracts are not accounted for as new business.
FRANCE — The value of new business for Swiss Life in France is determined as the sum of the value of new business for the life business and for the health business.
The value of new business for the health business remained stable compared to 2009, whereas the value of new business for the life operations increased considerably. Higher volumes of contracts sold and the related economies of scale on acquisition expenses, a higher share of unit-linked vs. traditional saving products as well as a reassessed profit sharing contributed positively to this increase.
INSURANCE OTHER — The business of private placement life insurance (PPLI) generated almost the entire value of new business which improved by 12.5% despite the unfavourable EUR exchange rate. The new business margin increased considerably compared to the previous year. This is related to pricing initiatives, cost savings and higher average premium amounts. Because of the weight of PPLI within Insurance Other, by far the biggest share of new business premiums consists of single premiums. The premium volume is lower than in 2009 only because of the strong Swiss franc. Using last year’s foreign exchange rates, the current premium of CHF 4.2 billion would amount to CHF 4.9 billion.
Expected existing business contribution (in excess of reference rate) 599 155 63 20 837
SWITZERLAND — The experience variances stem mainly from strengthening of policyholder reserves and funds as well as persistency variances in group life business.
Other operating variances include forward looking decisions, scope enhancement with the assumed external reinsurance, modelling refinements, and other reassessments.
The negative experience variance is explained by the current year effect of the transition to a new policyholder participation approach for the life business and by deviations between expectation and experience for demography and expenses in 2010 for the health operations.
In other operating variance, the long-term effects of the transition mentioned above, an increase in the scope of modelled business and modelling refinements as well as other reassessments are shown.
INSURANCE OTHER — The value of new business represents, at CHF 54 million, the main driver for the considerable increase in embedded value of Insurance Other.
REQUIRED CAPITAL (RC) — The required capital is the market value of assets, attributed to the covered business – over and above that required to back liabilities for covered business – whose distribution to shareholders is restricted. Swiss Life bases the amount of required capital on 150% of the statutory solvency level according to Solvency I, except for assumed external reinsurance where an economic approach is used instead.
Certainty equivalent value and time value of financial options and guarantees are items that involve balance sheet projections consisting of local statutory liabilities and assets in line with: – local legal and regulatory obligations – company practice due to commercial and competitive constraints – local market practice in the calculation of embedded values
TEES (TVOG) — The certainty equivalent value does not allow for the risk that the financial outcome for shareholders could differ from the one implied by the certainty equivalent scenario. This is of particular relevance when products or funds include guarantees or options for the policyholder such as: – guaranteed interest rates – profit sharing and regulatory constraints, e.g. “legal quotes” – maturity guarantees – guaranteed minimum death benefits – guaranteed annuity options – surrender options
The initial economic capital for credit risk is defined as the impact on the present value of future profits corresponding to the 99% expected shortfall of the credit loss from the actual bond portfolio over one year, due to the migration and default risk. The underlying credit risk calculations are performed using an internal model based on the CreditMetrics2 methodology.
The economic capital for cost of credit risk has been projected based on mathematical reserves. The same charge for annual cost of capital has been applied to the resulting projected capital at risk.
The drivers for projecting the economic capital for CNHR are based on the statutory solvency margin.
A capital charge of 4% per annum 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 non-hedgeable risks.
A “stand-alone” valuation for value of new business has been performed when the business in force is not affected by writing new business (for example for unit-linked contracts ). In this case, the value of new business has been valued independently of the business in force.
ASSETS — The asset model used for the calculation of the MCEV differentiates three main asset classes: – cash and fixed income instruments – equity-type investments (including real estate) – derivatives
Equities, real estate, participations and alternative investments (hedge funds and private equities) are modelled separately using appropriate indices for the corresponding geographical regions (Switzerland, Europe and USA) and currencies.
Actual initial market values of assets have been taken where available (“marked-to-market”), or estimated where there is no market (“marked-to-model”), for example by discounting unquoted loan and mortgage asset proceeds. Local regulatory and accounting frameworks (such as the amortisation of bonds or lower of cost or market principle ) are incorporated in the model.
The stochastic economic scenarios are generated by the economic scenario generator developed and provided by Barrie & Hibbert, a UK based financial consulting company. For variable annuity products another economic scenario generator is used.
For the calculation of the MCEV and the value of the new business as at valuation date, 1000–2000 economic scenarios (also referred to as simulations) are used, ensuring a satisfactory convergence of the results for all market units. For the calculation of the sensitivities and some steps in the movement analysis, some market units use fewer scenarios in connection with variance reduction techniques.
MCEV guidance requires that profits or losses incurred in service companies from managing covered business are measured on a “look-through” basis. This principle ensures that all profits and losses incurred with regard to the covered business are passed to the corresponding entity, and consequently passed to the present value of future profits.
The Group MCEV for Swiss Life comprises MCEV results for covered business and IFRS net asset values for noncovered business.
Swiss Life — Financial Statements 2010 5.1.2.2 SWAPTION IMPLIED VOLATILITIES AS AT 31 DECEMBER 2009
5.1.2.4 PROPERTY VOLATILITIES USED FOR THE CALCULATION AS AT 31 DECEMBER 2010 AND 31 DECEMBER 2009
5.1.3 CORRELATION ASSUMPTIONS — The correlation assumptions between different asset classes are based on historical market data. The correlations between returns on equities and on 10-year zero coupon bonds are assumed to be 16% for 2010 and 2009.
5.1.4.1 FORWARD INFLATION RATES USED FOR THE CALCULATION AS AT 31 DECEMBER 2010
5.1.4.2 FORWARD INFLATION RATES USED FOR THE CALCULATION AS AT 31 DECEMBER 2009
Tax assumptions have been set in line with the local tax regime. Tax losses carried forward are considered in the projections. Taxation rules are based on individual companies ’ total results. Tax impact of future new business has not been allowed for. The following table 5.2.1 shows the corporate tax rates applied.
As requested, we have audited the accompanying Embedded Value Report 2010 of Swiss Life Group for the period ended 31 December 2010. The Embedded Value Report has been prepared in accordance with the Market Consistent Embedded Value (“MCEV”) Principles issued in June 2008 and amended in October 2009 by the European Insurance CFO Forum as described in Section 1.
In our opinion, the Embedded Value Report at 31 December 2010 has been properly prepared on the basis of the MCEV Principles. Without qualifying our opinion, we draw your attention to the fact that areas of non-compliance with the guidance underlying the MCEV Principles have been disclosed by Swiss Life Holding AG in accordance with G1.4 of the MCEV Principles.
COST OF CREDIT RISK — The cost of credit risk accounts for the credit risk of investments in bonds that would otherwise have been unaccounted for in other MCEV components.
REFERENCE RATE — The reference rates used for the calculation of the MCEV are based on the swap rates at the valuation date.
Swiss Life — Financial Statements 2010 123 6 Earnings per Share 123 7 Premiums, Policy Fees and Deposits Received 125 8 Details of Certain Items in the Consolidated Statement of Income 130 10 Financial Assets and Liabilities at Fair Value through Profit or Loss 131 11 Financial Assets Available for Sale 132 12 Financial Assets Pledged as Collateral 132 13 Loans and Receivables 134 14 Financial Assets Held to Maturity 135 15 Investment Property 136 16 Investments in Associates 137 17 Property and Equipment 138 18 Intangible Assets including Intangible Insurance Assets 141 19 Other Assets and Liabilities 141 20 Investment Contracts 145 22 Other Financial Liabilities 146 23 Insurance Liabilities and Reinsurance Assets 148 24 Employee Benefits 152 25 Income Taxes 158 28 Capital Management 159 29 Acquisitions and Disposals of Subsidiaries 161 30 Assets Held for Sale and Discontinued Operations 162 31 Related Party Transactions 164 32 Assets under Management 165 33 Fair Value of Financial Instruments 167 34 Guarantees and Commitments 169 36 Future Minimum Lease Payments under Non-Cancellable Operating Leases – Lessor 169 37 Events after the Reporting Period 170 38 Scope of Consolidation 176 Report of the Statutory Auditor
Total net comprehensive income attributable to equity holders of Swiss Life Holding 261 661 non-controlling interests –4 2
Financial assets at fair value through profit or loss 10 23 395 21 997
Net cash flows from financial instruments at fair value through profit or loss 266 1 487 financial assets available for sale –11 984 –7 501 financial assets held to maturity 92 675 investment property –997 –386 other operating assets and liabilities 3 831 –92
Acquisitions of subsidiaries, net of cash and cash equivalents 29 – –13
Cash and cash equivalents as at 1 January 8 683 9 408
TOTAL CASH AND CASH EQUIVALENTS AS AT END OF PERIOD 6 940 8 683
Share Share Treasury translation directly in Retained shareholders’ controlling Notes capital premium shares differences equity earnings equity interests Total equity
BALANCE AS AT END OF PERIOD 308 1 646 –18 –762 209 6 021 7 404 33 7 437
Disposals of subsidiaries – – – – – – – 0 0
On 29 March 2011, 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 following amendments to Standards and new Interpretations are mandatory for the first time for the financial year beginning on 1 January 2010, but are not currently relevant for the Swiss Life Group: – IFRS 1 First-time Adoption of International Financial Reporting Standards – Additional Exemptions for Firsttime Adopters
– IFRS 1 First-time Adoption of International Financial Reporting Standards – Revised Version
– IFRIC 17 Distributions of Non-cash Assets to Owners – IFRIC 18 Transfers of Assets from Customers – Annual improvements to IFRS as published in April 2009.
The Group’s consolidated financial statements include the assets, liabilities, income and expenses of Swiss Life Holding and its subsidiaries. A subsidiary is an entity in which Swiss Life Holding owns directly or indirectly more than 50% of the voting rights, or in which it otherwise has the power to exercise control over operations. Subsidiaries are consolidated from the date on which effective control is obtained. All intercompany balances, transactions and unrealised gains and losses on such transactions have been eliminated. A listing of the Group’s subsidiaries is set out in note 38. The financial effect of acquisitions and disposals of subsidiaries is shown in note 29. Associates for which the Group has between 20% and 50% of the voting rights and/or exercises significant influence are accounted for using the equity method. The Group’s share of net income for the year is recognised as a share of results of associates and the ownership interest in the investment is recorded in the balance sheet at an amount that reflects its share of the net assets. The
Group’s share of net income is included from the date on which significant influence begins until the date on which significant influence ceases. Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. The carrying amount includes goodwill on the acquisition. A listing of the Group’s principal associates is shown in note 16.
In a qualifying cash flow hedge, the effective portion of the gain or loss on the hedging derivative is recognised directly in equity. Any ineffective portion of the gain or loss is recognised immediately in the income statement. For a hedged forecast transaction that results in the recognition of a financial asset or liability, the associated gain or loss recognised in equity is reclassified into profit or loss in the same period or periods during which the asset acquired or liability assumed affects profit or loss. When a hedging instrument expires or is sold, or a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in income. However, when a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to income.
Financial assets reclassified from financial assets available for sale to loans due to the disappearance of an active market are not reclassified back to financial assets available for sale if the market becomes active again.
Financial assets which the Group has the ability and positive intent to hold to maturity are carried at amortised cost using the effective interest method.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is reversed by the amount that represents the difference
If an item of property and equipment becomes an investment property because its use has changed, the positive difference resulting between the carrying amount and the fair value of this item at the date of transfer is recognised in equity as a revaluation surplus. However, if a fair value gain reverses a previous impairment loss, the gain is recognised in the income statement. Any resulting decrease in the carrying amount of the property is recognised in net profit or loss for the period. Upon the disposal of such investment property, any surplus previously recorded in equity is transferred to retained earnings; the transfer is not made through income.
The statutory minimum distribution ratios (“legal quote”) relating to the Swiss Life Group’s operations are as follows: SWITZERLAND — Group business subject to “legal quote”: At least 90% of the calculated income on the savings, risk and cost components minus the expenses thereof must be allocated to the policyholders.
NON-DISCRETIONARY PARTICIPATION FEATURES — Certain policyholder participation systems do not satisfy the criteria for discretionary participation features. These policyholder bonuses might be guaranteed elements. Some policyholder bonuses are based on benchmark interest rates which are credited to the policyholders. For certain products, policyholder bonuses are based on the development of biometric parameters such as mortality and morbidity. These policyholder bonuses are allocated based on the risk result of the contracts involved. The amount and timing of these bonuses are not subject to management discretion and are accrued to the policyholders’ liabilities based on the relevant contractual terms and conditions.
DISCRETIONARY PARTICIPATION FEATURES — Premiums from traditional life insurance contracts are recognised when due from the policyholder. Insurance liabilities
Swiss Life — Financial Statements 2010 are established in order to recognise future benefits and expenses. Benefits are recognised as an expense when due.
REINSURANCE — The Group assumes and/or cedes insurance in the normal course of business. Reinsurance assets principally include receivables due from both insurance and reinsurance companies for ceded insurance liabilities. Amounts recoverable or due under reinsurance contracts are recognised in a manner consistent with the reinsured risks and in accordance with the terms of the reinsurance contract. Reinsurance is presented in the consolidated balance sheet and income statement on a gross basis unless a right and the intention to offset exist.
For participating life insurance contracts, where the contribution principle applies to the allocation of the policyholder bonus, the deferred acquisition costs are amortised over the life of the contract based on the present value of the estimated gross margin amounts which are expected to be realised. Expected gross margins include expected premiums and investment results less expected benefit claims and administrative expenses, anticipated
When DAC is amortised in proportion to gross profits or gross margins on the acquired contracts, realised gains/ losses are taken into account as well as gains/losses recognised directly in equity (unrealised gains/losses). If these gains/losses were to be realised, the gross profits or gross margins used to amortise DAC would be affected. Therefore, an adjustment relating to these unrealised gains/losses is recognised in equity and is also reflected in the amount of DAC in the balance sheet (“shadow accounting”).
For non-financial assets the recoverable amount is measured as the higher of the fair value less costs to sell and its value in use. Fair value less costs to sell is the amount obtainable from the sale of an asset or cash-generating unit in an arm’s-length transaction between knowledgeable, willing parties, less the costs of disposal. “Value in use” is the present value of the future cash flows expected to be derived from an asset or cash-generating unit from its continuing use.
Unrecognised actuarial gains and losses which exceed 10% of the greater of the present value of the defined benefit obligations and the fair value of plan assets at the end of the previous reporting period are recognised in income
Swiss Life — Financial Statements 2010 over the expected average remaining working lives of the employees participating in the plans.
SHARE-BASED PAYMENTS — The Group operates equitysettled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the shares is recognised in income with a corresponding increase in equity. As the fair value of the services received cannot reliably be measured, the value is measured by reference to the fair value of the equity instruments granted and the price the employees are required to pay.
Provisions are liabilities with uncertainties as to the amount or timing of payments. Provisions are recognised if there is a present obligation that probably requires an outflow of resources and a reliable estimate can be made at the balance sheet date and be measured on a best-estimate basis. Contingent liabilities are disclosed in the Notes if there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources or the amount of the obligation cannot be measured with sufficient reliability.
In October 2010, the International Accounting Standards Board issued requirements on the accounting for financial liabilities. These requirements are part of IFRS 9 Financial Instruments. The new requirements address the problem of volatility in profit or loss arising from an issuer choosing to measure its own debt at fair value. An entity choosing to measure a liability at fair value will present the portion of the change in its fair value due to changes in the entity’s own credit risk in other comprehensive income. IFRS 9 Financial Instruments applies to annual periods beginning on or after 1 January 2013. The
In May 2010, the International Accounting Standards Board issued annual improvements to IFRS. The improvements will be effective for annual periods beginning on or after 1 July 2010 and 1 January 2011, as appropriate. The Swiss Life Group is currently analysing the impact of these changes on its financial statements.
In November 2009, amendments to IAS 24 Related Party Disclosures were issued by the International Accounting Standards Board. The amendments apply to annual periods beginning on or after 1 January 2011 and clarify and simplify the definition of a related party. The requirements for government-related entities to disclose details of all transactions with the government and other government -related entities are removed. The Swiss Life Group does not expect a significant impact of these changes on its disclosures.
– IFRS 1 First-time Adoption of International Financial Reporting Standards – Amendment relating to the cost of an investment on first-time adoption and amendment to the retrospective application of IFRS for firsttime adopters
The fair value of financial instruments is determined based on quoted market prices, where available, or on estimates using present values or other valuation techniques. Those techniques are significantly affected by the assumptions used, including discount rates and estimates of future cash flows. Where market prices are not readily available, fair value is based either on estimates obtained from independent experts or quoted market prices of comparable instruments. In that regard, the derived fair value estimates cannot be substantiated by comparison with independent markets and, in many cases, could not be realised immediately.
– The fair value of financial reinsurance assets and liabilities, which are carried at amortised cost, is estimated
The accounting policies for the segments are the same as those described in the Summary of Significant Accounting Policies section. Inter-segmental services and transfers of assets and liabilities are treated as if the transactions were with third parties, i.e. at market prices applicable at the time of the transaction.
The reportable segments have been identified based on information about the components of the entity that management uses to make decisions about operating matters. The information provided to management focuses on product lines and services. The organisational and management structure within the insurance business is geographical. The reportable segments have therefore been identified as follows: – Insurance Switzerland – Insurance France – Insurance Germany – Insurance Other – Investment Management – AWD – Other – Insurance (Discontinued) – Banking (Discontinued)
“Insurance Other” comprises insurance operations in Liechtenstein, Luxembourg, Austria, Singapore and Dubai, as well as payment protection insurance.
Non-life operations involve operations in France and Luxembourg and mainly include property and casualty, liability and motor insurance, accident and health insurance, as well as payment protection insurance. These operations are included in the segment “Insurance France” and “Insurance Other”.
“AWD” comprises the Hanover-based AWD Group, which was acquired by the Swiss Life Group on 19 March 2008. The AWD Group specialises in personal and holistic financial planning for medium and high-income customer segments.
Premiums earned on investment contracts with discretionary participation 513 10 – –
Policy fees earned on investment and unit-linked contracts 31 120 20 86
Net gains/losses on financial instruments at fair value through profit or loss 4 185 25 51 –36
Benefits and claims under insurance contracts –8 095 –2 188 –1 974 –38
Net insurance benefits and claims –8 609 –2 100 –1 969 –26
Financial assets at fair value through profit or loss 2 494 6 499
Insurance Insurance Investment Insurance Banking Germany Other Management AWD Other (Discontinued) (Discontinued) Eliminations Total
The Swiss Life Group operates in selected countries. The Group’s income and non-current assets by geographical location are detailed below: In CHF million Total income Non-current assets
Swiss Life — Financial Statements 2010 5 Risk Management Policies and Procedures
Risk management functions are performed at several levels by different bodies within the Swiss Life Group, such as the Investment and Risk Committee at the level of the Board of Directors of the Swiss Life Group and the Group Risk Committee at the level of the Corporate Executive Board of the Swiss Life Group. The risk management functions at the level of the individual operations of the Swiss Life Group are organised accordingly.
The assets relating to certain life insurance and investment contracts are managed for the account and risk of the Swiss Life Group’s customers (separate account/unitlinked contracts, private placement life insurance). They are segregated and managed to meet specific investment objectives of the policyholders. The assets back the insurance liabilities and the financial liabilities arising from these contracts. The fair values of the liabilities reflect the fair values of the assets. Certain contracts with unit-linking features contain financial and insurance guarantees. The liabilities relating to this part are included in the financial and insurance liabilities.
Financial liabilities at fair value through profit or loss 10 17 259 15 101
TOTAL LIABILITIES FOR THE ACCOUNT AND RISK OF THE SWISS LIFE GROUP’S CUSTOMERS 21 008 18 631
Net gains/losses on financial instruments at fair value through profit or loss (FVPL) 8 4 249 291 1 24 4 250 315
Net gains/losses on investment property 306 184 – – 306 184
expectations of customers. The actuarial bases used for this purpose should ensure that each individual product generates a sufficient contribution margin. To ensure that the Group’s principles are observed, guidelines on product management and underwriting have been introduced to harmonise the local guidelines and to ensure that they are in line with the guidelines of the Group. 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.
TOTAL INSURANCE LIABILITIES WITH EMBEDDED DERIVATIVES NOT SEPARATED AND FAIR VALUED 83 406 86 135
Insurance liabilities for the account and risk of the Swiss Life Group’s customers 961 742
Minimum guaranteed interest rate 6 – 8% – – 3 3
The Group manages interest rate and interest rate volatility risk by managing the interest rate and volatility sensitivity of its investment portfolio against the corresponding sensitivity of liabilities issued. The interest rate and volatility exposure of the liabilities is determined by projecting the expected cash flows from the contracts using best estimates of mortality, disability, expenses, surrender and exercise of policyholder options in combination with interest rate and volatility scenarios. The ALM process defines the strategic asset allocation optimising the net interest rate sensitivity of the investment and liability portfolios. To the extent that this is not practicable, swap contracts and other instruments are used to hedge interest rate risk. In certain markets payer swaptions are used to hedge the risk of fair value changes of interest-sensitive financial assets. Strategically, a minimum interest rate risk will remain, since a perfect interest rate hedge can either not be achieved or would not be targeted.
In addition to the strategic optimisation of the net interest rate risk exposure at an economic level, the Group has designated a portion of assets to be held to maturity and
The Group is also exposed to credit risk associated with reinsurance recoverables. As a consequence, the financial strength of reinsurers is monitored. The creditworthiness of reinsurers is considered on an annual basis by review-
The non-rated loans primarily comprise mortgages and policy loans. For the large part of the mortgages a risk class system is in place which allows to identify, measure, monitor and manage the risks at the level of portfolios, borrowers and loans at all times. The risk class system also enables a risk-adequate pricing of the loans. Implementation, parametrisation and control of the system are set out in an internal directive which has been approved by the Group Chief Investment Officer.
In CHF million For the account and risk of the For the account and risk of the Swiss Life Group Swiss Life Group’s customers Total
Debt instruments at fair value through profit or loss 964 2 634 5 848 5 077 6 812 7 711
Debt instruments available for sale 53 908 47 166 – – 53 908 47 166
In CHF million Up to More than 3 months 3–6 months 6–12 months 1 year Total
Balance as at losses Write-offs translation Balance as at 1 January Reclassification recognised and disposals differences end of period
CREDIT RATING AS AT 31 DECEMBER 2010 of which collateralised –
Loan commitments – – – – 107 107 of which collateralised 53
Loan commitments – – – – 100 100 of which collateralised 56
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
The balance sheet currency exposure is to a large extent hedged using foreign currency derivatives. The following table shows the foreign currency exposure before hedging on the Group’s balance sheet against the major functional currencies Swiss franc and euro: BALANCE SHEET CURRENCY EXPOSURE AS AT 31 DECEMBER 2010
The liquidity analysis of financial liabilities and commitments is based on undiscounted cash flows by remaining contractual maturities, whereas insurance and policyholder participation liabilities are analysed by estimated timing of net cash outflows. The analysis is made for amounts for the account and risk of the Swiss Life Group.
Derivatives: contractual inflows – –1 605 –1 771 –1 662 –73 –123 –30
Financial liabilities at fair value through profit or loss 312 – – 312 – – –
Investment contracts without discretionary participation 178 0 26 102 22 11 17
Derivatives: contractual inflows – –989 –1 355 –2 104 –3 165 – –
Investment contracts without discretionary participation 433 29 77 273 26 18 10
Financial assets available for sale 2 945 3 735 55 005 48 120 – – 57 950 51 855
Financial assets held to maturity 178 114 5 051 6 318 – – 5 229 6 432
Intangible assets including intangible insurance assets – – 3 982 4 576 – – 3 982 4 576
Deferred income tax assets – – 150 80 – – 150 80
Deferred income tax liabilities – – 821 756 – – 821 756 5.5 INSURANCE RISK MANAGEMENT OBJECTIVES
The nature of insurance risk can be summarised as follows: MORTALITY AND LONGEVITY — Mortality and longevity risks respectively reflect the financial consequences of insured people dying sooner or living longer than expected. For example, a life insurer with an annuity portfolio making payments to the policyholders until their death is financially exposed to those individuals who live longer than expected. Conversely, an insurer writing life insurance business that pays out amounts contingent on death of the policyholders is exposed to increases in mortality levels.
Disability income and other annuities – deferred 7 556 7 964
Disability income and other annuities – deferred 14 176 13 907
MORBIDITY AND DISABILITY — Disability risk reflects the financial consequences of groups of individuals getting disabled more often and/or recovering less quickly than expected. With regard to morbidity, the most significant risk factors are epidemics, widespread changes in lifestyle, such as eating, smoking and exercise habits or economic effects.
At end of year of loss occurrence 535 447 454 447 407 519 474 388 437 358 n/a 9 years later 412 – – – – – – – – – n/a
The market consistent embedded value of the Swiss Life Group amounted to CHF 7.6 billion as at 31 December 2010 (2009: CHF 6.9 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.
The sensitivity analysis relating to continuing operations with regard to insurance risk is as follows: Higher overall 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 mortality risk is comparatively limited due to respective reductions in policyholder bonuses. Therefore, this sensitivity is considered not significant as an adverse risk for the embedded value.
At 31 December 2010, if the longevity improvement parameter had increased by 5%, the embedded value would have been CHF 28 million lower (2009: CHF 50 million lower).
At 31 December 2010, if the interest rates had been 100 basis points lower, the embedded value would have been CHF 824 million lower (2009: CHF 1535 million lower).
At 31 December 2010, if the swaption implied volatilities had been 25% higher, the embedded value would have been CHF 247 million lower (2009: CHF 347 million lower).
At 31 December 2010, if the swaption implied volatilities had been 25% lower, the embedded value would have been CHF 397 million higher (2009: CHF 345 million higher).
At 31 December 2010, if the market value of equity securities and property had been 10% higher, the embedded value would have been CHF 723 million higher (2009: CHF 901 million higher).
At 31 December 2010, if the market value of equity securities and property had been 10% lower, the embedded value would have been CHF 808 million lower (2009: CHF 997 million lower).
At 31 December 2010, if the equity securities and property implied volatilities had been 25% higher, the embedded value would have been CHF 276 million lower (2009: CHF 392 million lower).
At 31 December 2010, if the euro had strengthened by 10% against the Swiss franc, the embedded value of the foreign life and health insurance companies would have been CHF 254 million higher (2009: CHF 249 million higher).
RESULT USED TO DETERMINE DILUTED EARNINGS PER SHARE 557 327 – –47 557 280
Under the accounting principles adopted, deposits received under insurance and investment contracts for which deposit accounting is used are not recognised as income: In CHF million
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 20 191 20 219
Interest income on financial assets held to maturity and available for sale 2 201 1 814
Sale of financial assets available for sale 27 385 495 loans 17 –64
Realised gains/losses on sales of subsidiaries and other assets 15 13
Change in liability for future life policyholder benefits, gross 2 543 700
Derivatives designated as net investment hedges 29 – – – 374 –
To manage the risks associated with derivative trading, the Group establishes risk levels and monitors these exposures. Exposure to price risk on both derivatives and their underlyings is managed in accordance with risk limits set by management for buying or selling instruments or closing out positions. The risks arise from open positions in interest rates, currencies and equity instruments, all of which are exposed to general and specific market movements.
Derivatives designated and accounted for as hedging instruments primarily comprise derivatives associated with fair value hedges and cash flow hedges that qualify for hedge accounting.
Interest rate swaps to hedge note loans and registered bonds – – 3 – –3 – 4 – 518 –
In 2010 the Group entered into interest rate swaps to hedge euro-denominated fixed-rate note loans and registered bonds carried at amortised cost against changes in the fair value attributable to interest rate risk. The fair value of the hedged assets as at 31 December 2010 was EUR 442 million.
In 2010 the Group entered into futures to hedge the cash flows in EUR arising from policy fees earned on investment and unit-linked contracts against foreign currency movements.
In CHF million Amounts recognised Ineffectiveness recognised Fair value assets Fair value liabilities in equity in profit or loss Notional amount
TOTAL DERIVATIVES DESIGNATED AS NET INVESTMENT HEDGES 29 – – – 44 – – – 374 –
Assets for the account and risk of the Swiss Life Group’s customers 5 18 942 16 741
Liabilities for the account and risk of the Swiss Life Group’s customers 5 17 259 15 101
TOTAL FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS 17 571 16 001
TOTAL FINANCIAL LIABILITIES DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS 312 900 312 900 11 Financial Assets Available for Sale
TOTAL FINANCIAL ASSETS AVAILABLE FOR SALE 56 808 51 314 1 142 541 57 950 51 855
The effect of the reclassification of financial assets available for sale to loans as at 1 July 2008 is shown in Note 13.
Financial assets reclassified from financial assets available for sale 972 330 financial assets held to maturity 33 88 –
Debt securities not quoted in an active market 9 704 11 412 – – 9 704 11 412
BALANCE AS AT END OF PERIOD 70 108 9 – 79 108
Further details with regard to the financial assets reclassified are as follows: DEBT SECURITIES PREVIOUSLY CLASSIFIED AS AVAILABLE FOR SALE
Classification as assets held for sale and other disposals –187 –524
The adoption of an amendment to IAS 40 Investment Property and a consequential amendment to IAS 16 Property, Plant and Equipment led to the reclassification of property under construction or development for future use as investment property from property and equipment to investment property as at 1 January 2009. The amount reclassified came to CHF 92 million.
LGT Swiss Life Non Traditional Advisers, Vaduz 7 1 6 3 6 4 2 43.7%
Classification as assets held for sale and other disposals 0 35 49 4 88
Effect of shadow accounting 0 0 –32 –59 – – –32 –59
Classification as assets held for sale and other disposals – – – –1 – – – –1
BALANCE AS AT END OF PERIOD 1 745 1 947 316 370 230 261 2 291 2 578
Balance as at 1 January –157 –163 –63 –29 –120 –114 –340 –306
BALANCE AS AT END OF PERIOD –157 –157 –83 –63 –102 –120 –342 –340
GOODWILL — Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of identifiable assets, liabilities and contingent liabilities, if applicable, at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on associates is included in the carrying amount of the investment.
Also in 2009, the remaining 49.4% of the non-controlling interests of CEGEMA, France, were acquired, which led to additional goodwill of CHF 5 million.
The calculations relating to the recoverable amounts, which have been determined on a value-in-use basis, use cash flow projections based on financial budgets approved by management. The projection covers a fouryear period for Lloyd Continental. Due to the duration of the insurance and investment contracts a six-year period was used for CapitalLeben. The calculations for Lloyd Continental and CapitalLeben are based on present values that traditionally use a single set of estimated cash flows and a single discount rate.
Net carrying amount of goodwill 287 287 149 149 12 15
The calculations relating to the recoverable amounts which have been determined on a value-in-use basis use cash flow projections based on financial budgets approved by management. The projection covers a threeyear period for Insurance Switzerland and Insurance Germany and a five-year period for AWD. The calculations are based on present values that traditionally use a single set of estimated cash flows and a single discount rate. The key assumptions used for the impairment testing on the carrying amount of goodwill relating to AWD were as follows: In CHF million Insurance Switzerland Insurance Germany AWD
Net carrying amount of goodwill 81 81 265 314 794 944
A customer relationship asset of CHF 4 million was recognised on the acquisition of a financial advisory business in France in 2009.
Swiss Life — Financial Statements 2010 19 Other Assets and Liabilities
Investment contracts with discretionary participation with actuarial valuation 1 179 820
Investment contracts without discretionary participation at fair value through profit or loss 236 270 of which for the account and risk of the Swiss Life Group’s customers investment contracts with discretionary participation 2 559 2 518 investment contracts without discretionary participation 229 270
On 12 April 2007, ELM B.V., a Dutch repackaging vehicle, issued EUR 700 million in fixed/floating rate subordinated perpetual notes at a price of par to finance loan notes granted to Swiss Life AG, which are guaranteed by Swiss Life Holding. Swiss Life AG 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 17 April 2017, the interest will be the aggregate of 2.5% and Euribor 3-month deposits.
In 2001, Swiss Life AG issued a subordinated step-up loan of EUR 100 million with a time to maturity of 20 years that can be repaid after 10 years. The interest rate equals Euribor plus a margin of 1.75% for the first ten years and 2.75% thereafter.
Swiss Life AG 1 EUR 700 EUR 590 5.849% 2007 2017 733 871
Swiss Life AG EUR 100 EUR 100 +1.750% 2001 2011 125 148
On 10 June 2004, Swiss Life Holding issued CHF 317 million in 0.625% convertible bonds due in 2010. The bonds could be converted into registered shares of Swiss Life Holding at any time at the option of the holder. Bondholders exercising their conversion right were entitled to receive the number of shares equal to the principal amount of CHF 1000 divided by the original conversion price of CHF 209.625 (subject to adjustments, with effect from 29 July 2008 conversion price of CHF 200.20).
No convertible bonds were converted in 2010 or in 2009. On 10 June 2010, the remaining CHF 34 million in convertible debt matured and was redeemed (2009: repurchased CHF 8 million).
On 25 July 2008, Swiss Life Insurance Finance Ltd entered into a EUR 500 million loan agreement with a syndicate of banks. The syndicated loan has a three-year maturity and was originally split into a EUR 200 million fully drawn loan bearing an interest rate of Euribor plus a margin of 0.70% and a EUR 300 million undrawn credit facility against a commitment fee of 0.225%. The drawn part of the loan was reduced by repayments of EUR 100 million in 2009 and EUR 100 million in 2010.
Later than 1 year and not later than 5 years 1 4 1 3
Claims under non-life insurance contracts 998 1 197 203 228 795 969
BALANCE AS AT END OF PERIOD 6 274 6 505 66 81 6 208 6 424
Claims incurred, benefits paid and surrenders –7 738 –8 929 –246 –132 –7 492 –8 797
Insurance liabilities for the account and risk of the Swiss Life Group’s customers 961 742 24 Employee Benefits
Due to the requirements of IFRS 4 Insurance Contracts in combination with IAS 19 Employee Benefits, insurance contracts issued to defined benefit plans covering own employees are eliminated. Insurance contracts issued to defined benefit plans covering own employees have been issued in Switzerland and France. Certain assets relating to these plans qualify as plan assets and are therefore not eliminated. To the extent these plans are not funded by amounts included in the plan assets, the defined benefit liabilities are backed by the investments relating to the eliminated insurance contracts. These investments are part of the investments presented in the consolidated balance sheet of the Swiss Life Group.
The contributions relating to the continuing operations expected to be paid for the year ending 31 December 2011 are CHF 53 million. These contributions include amounts paid to insurance contracts issued to defined benefit plans covering own employees.
The net defined benefit asset/liability consists of gross defined benefit liabilities –1 965 –2 025 gross defined benefit assets 168 167
Amount of insurance contracts not included in plan assets 2 137 2 047
Certain subsidiaries sponsor various defined contribution plans. Participation in the various plans is based either on completion of a specific period of continuous service or on the date of hire. The plans stipulate contributions by both employers and employees. The expenses under these plans from continuing operations amounted to CHF 1 million in 2010 (2009: CHF 1 million).
The Group determines the fair value of the PSUs granted for each programme at the grant date. The fair value was determined using the Black-Scholes formula and Monte Carlo simulations. 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 5 million in 2010 (2009: CHF 2 million).
Number of performance share units Balance as at Employee Balance as at 1 January Issued departures Vested end of period
The expected weighted-average tax rate for the continuing operations of the Group was 26.7% in 2010 (2009: 30.7%). 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 weightedaverage 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:
Income tax calculated using the expected weighted-average tax rate 159 131
Deferred tax liabilities have not been recognised on the aggregate amount of temporary differences with consolidated investments in subsidiaries to the extent the Group considers such undistributed earnings as being indefinitely reinvested and does not expect to repatriate these earnings in the foreseeable future. The amount of such temporary differences was approximately CHF 1.7 billion as at 31 December 2010 (2009: CHF 1.7 billion). If such earnings are ever repatriated, no material tax liabilities would be incurred due to participation exemption rules, unrecognised tax loss carryforwards and applicable double taxation treaties.
Swiss Life — Financial Statements 2010 gain or loss on hedging derivatives in qualifying cash flow hedges. These amounts are net of certain policyholder bonuses and other policyholder liabilities and deferred acquisition costs, deferred income taxes and non-controlling interests.
Net balance as at 1 January –216 232 – –273 –41
Gains/losses transferred to the income statement 8 – –321 – 232 –89
Share of gains/losses of associates 16 – – – 0 0
In accordance with the federal act on the supervision of insurance companies and corresponding decree, the Swiss Life Group reports as an insurance group to the Swiss Financial Market Supervisory Authority (FINMA). The reporting covers risk management as outlined in note 5, Group Solvency I, legal structure, management organisation and intragroup transactions. The reporting is submitted on an ad-hoc, monthly, half-yearly or yearly basis depending on the topic and is reviewed on a yearly basis by the statutory auditor. At 31 December 2010 and 2009, the Group was compliant with the legal requirements.
The value of a life insurance company for its shareholders comprises the economic net worth and the present value of future profits. The optimal amount of economic capital an insurance company needs to hold to maximise the company value is a trade-off between benefits and costs. For risk and capital management decisions, the Swiss Life Group uses an integrated approach. The economic risk capital is determined bottom up for each large business unit and takes into account market risk, credit risk and insurance risk. These risks are calculated using a loss distribution approach from which risk measures can be derived. The overall capital requirement is obtained by taking into account appropriate diversification benefits among the above-mentioned risk categories.
Elements of the bottom-up risk capital per business unit allow for a monthly estimate of the SST solvency situation. The calibration is done based on the full SST calculations as at the beginning of each calendar year and as at mid-year.
In 2009, a financial advisory business in France was acquired by the Swiss Life Group. The purchase consideration amounted to CHF 15 million.
As at 31 December 2010, assets held for sale comprised CHF 94 million investment property reclassified as held for sale (2009: CHF 2 million). The sales were effected in January 2011.
NET RESULT FROM DISCONTINUED OPERATIONS – – – –47 – –47
Net cash flows from operating activities – – – – – –
NET CASH FLOWS FROM DISCONTINUED OPERATIONS – – – –33 – –33
Asset management and other commission income – – 0 0 –
Net gains/losses on financial instruments at fair value through profit or loss – – 46 46 40
AWD Holding and its subsidiaries paid a total of EUR 0.045 million in consulting fees for services provided by a company in which Carsten Maschmeyer, member of the Board of Directors of Swiss Life Holding, has an important shareholding. Additionally, revenue of EUR 0.2 million and expenses of EUR 0.2 million were incurred by AWD Holding and its subsidiaries in relation to Carsten Maschmeyer and companies in which he has an important shareholding. All transactions were at arm’s length.
Financial assets at fair value through profit or loss 23 395 21 997
For the purposes of determining assets under management, externally managed on-balance-sheet assets have been deducted from assets under control.
In CHF million Valuation technique – Valuation technique – Quoted prices observable inputs unobservable inputs
Equity securities at fair value through profit or loss 2 943 533 13 3 489
Financial liabilities for the account and risk of the Swiss Life Group’s customers – 17 487 – 17 487
Equity securities available for sale 2 501 502 1 686 4 689
Financial liabilities for the account and risk of the Swiss Life Group’s customers – 15 071 300 15 371
If one or more significant inputs to these valuation techniques are not observable in the market, the financial instruments are included in level 3. Such inputs may include information that is derived through extrapolation which is not substantiated by observable market data or that reflects own assumptions about what market participants would use in pricing the asset or liability.
Total gains/losses recognised in the income statement are presented in net gains/losses on financial assets – – 16 – 188 –
Gains/losses for assets held at end of period recognised in the income statement are presented in net gains/losses on financial assets – – 0 – –5 –
Total gains/losses recognised in the income statement 2 19 –24 – –64 0
BALANCE AS AT END OF PERIOD 35 226 46 – 1 686 300
Gains/losses for assets held at end of period recognised in the income statement are presented in net gains/losses on financial assets – – –20 – –150 –
net gains/losses on financial instruments at fair value through profit or loss 2 13 – – – 0
The following table summarises the carrying amounts and fair values of those financial assets and liabilities not presented in the Group’s balance sheet at fair value: In CHF million Carrying amount Fair value
Financial assets held to maturity 5 229 6 432 5 099 5 904
Investment contracts without discretionary participation 170 433 170 433 34 Guarantees and Commitments
The Group has also entered into irrevocable commitments to extend credit in the form of loans and other instruments. They represent undrawn credit lines which are available to clients to secure their liquidity needs. With respect to credit risk, these commitments are contingent upon clients maintaining certain credit standards, and the Group monitors its exposure on a regular basis.
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 2010, committed principal amounts stood at EUR 4 million and CHF 52 million (2009: EUR 16 million and CHF 56 million). The range of committed interest rates is 3.34% to 5.69% for commitments in EUR and 1.18% to 3.11% for commitments in CHF.
Contractual obligations for repairs and maintenance of investment property amounted to CHF 60 million as at 31 December 2010, which are included in this line item (2009: CHF 70 million).
Investment property – 49 of which can be sold or repledged by transferee 1 060 330
Oscar Weber AG, Zürich Ins. CH 100.0% 100.0% CHF 5 000
S.I. Eaux-Vives Office AG, Zürich Ins. CH until 24.06.2010 – –
Swiss Life AG, Zürich Ins. CH 100.0% 100.0% CHF 587 350
Swiss Life Funds AG, Lugano IM 100.0% 100.0% CHF 20 000
1 Segment (Ins. CH = Insurance Switzerland, IM = Investment Management, Ins. Other = Insurance Other, Ins. FR = Insurance France, Ins. DE = Insurance Germany)
Carte Blanche Partenaires S.A., Paris Ins. FR 94.7% 95.1% EUR 2 300
Financière du Patrimoine SARL, Balma Ins. FR 80.0% 100.0% EUR 8
Garantie Assistance S.A., Paris Ins. FR 99.7% 100.0% EUR 1 850
MA Santé Facile S.A., Paris Ins. FR from 10.06.2010 100.0% 100.0% EUR 332
Swiss Life Assurance et Patrimoine S.A., Paris Ins. FR 99.9% 100.0% EUR 169 036
ProVentus Akademie- und Vertriebs GmbH, Bremen AWD 100.0% 100.0% EUR 25
Swiss Life Grundstücksmanagement GmbH & Co. Münchner Tor KG, München Ins. DE 100.0% 100.0% EUR 52 935
AWD Chase de Vere Direct Limited (formerly AWD Direct Limited), Manchester AWD 100.0% 100.0% GBP 9
Read Independent Financial Advisers Ltd, Manchester AWD until 31.03.2009 – –
Swiss Life Österreich AG, Wien Ins. Other from 29.07.2009 100.0% 100.0% EUR 70
Swiss Life Insurance Finance Ltd., Grand Cayman Other 100.0% 100.0% EUR 5 1 Segment (Ins. CH = Insurance Switzerland, IM = Investment Management, Ins. Other = Insurance Other, Ins. FR = Insurance France, Ins. DE = Insurance Germany)
AWD zastupanje u osiguranju d.o.o., Zagreb AWD until 24.06.2010 – –
AWD Česká republika s.r.o., Brno AWD 100.0% 100.0% CZK 1 000
Swiss Life Private Placement (Ireland) Limited, Dublin Other from 07.01.2009 100.0% 100.0% EUR 50 000
Swiss Life Private Placement (Middle East) Limited, Dubai Ins. Other 100.0% 100.0% USD 6 100 1 Segment (Ins. CH = Insurance Switzerland, IM = Investment Management, Ins. Other = Insurance Other, Ins. FR = Insurance France, Ins. DE = Insurance Germany)
Total income for Swiss Life Holding Ltd (Swiss Life Holding ) was CHF 209 million in 2010, and total expenditure, including tax, declined to CHF 9 million compared with the previous year’s figure of CHF 58 million. The substantial reduction in expenditure is mainly on the back of extraordinary charges in the previous year in connection with the strategic disposal of business units in 2008.
Swiss Life Holding’s profit distribution to shareholders in the period under review came to CHF 77 million or CHF 2.40 per share. This took the form of a reduction in par value of the Swiss Life Holding share from CHF 12.00 to CHF 9.60. The company’s share capital thus totals CHF 308 million.
Swiss Life Holding’s liquid assets (liquid funds plus time deposits) contracted to CHF 306 million, down from CHF 624 million. Conversely, a portfolio of easily tradable bonds and money market book claims for CHF 394 million was built up at the Swiss National Bank in the period under review. These share certificates are all eligible for repos and can generate liquidity at any time.
Swiss Life Beteiligungs GmbH, Hannover EUR 25 100.00% EUR 25 100.00%
Swiss Life Investment Management Holding AG, Zürich CHF 50 000 100.00% CHF 50 000 100.00%
LOANS TO GROUP COMPANIES — CHF 178 million of the loans to Group companies is classified as subordinated.
FREE RESERVES AND RETAINED EARNINGS — Free reserves and retained earnings comprise accumulated retained earnings which have not been distributed to the shareholders, or which have not been allocated to the reserve for treasury shares.
ISSUANCE OF CONVERTIBLE DEBT IN 2004 — On 10 June 2004 Swiss Life Holding issued CHF 317 million in 0.625% convertible bonds (2004 to 2010), convertible into Swiss Life Holding registered shares. The convertible bonds were repaid on 10 June 2010. The outstanding nominal value was CHF 43 million.
In 2010, no convertible bonds were converted into Swiss Life Holding shares.
STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER
Reduction in par value (incl. cancellation of treasury shares) –77 –211
The description of the compensation received by the members of the Board of Directors and the Corporate Executive Board and the tables showing the relevant amounts are based on those of 2009. The variable compensation to the Corporate Executive Board members, payable as a cash bonus for the 2010 financial year, which was determined by the Board of Directors at the beginning of 2011, is published in the compensation tables on an accrual basis as compensation for 2010. Likewise, the variable compensation payable in the form of blocked shares amounting to 10% of the fixed compensation, which was allocated to members of the Board of Directors at the beginning of 2011, is shown as part of the compensation for 2010.
COMPENSATION POLICY PRINCIPLES — The Board of Directors as a whole is responsible for establishing guidelines on the Group’s compensation policy (incl. bonuses and equity compensation plans) and on employee benefit institutions. The compensation policy underpins the performance culture required by the corporate strategy and forms part of the HR policy. The aim is to retain well-qualified employees and gain new, highly skilled staff. The compensation system is in line with the market environment and must be competitive. The individual overall compensation takes into account the employee’s professional skills, engagement and personal performance. It is made up of a basic salary, a variable bonus based on achievement of the annual objectives, which is generally paid in cash and possibly in shares, as well as a deferred mid- to long-term salary component (equity compensation plan) and contributions for occupational provisions and risk insurance.
The variable bonus in cash and possibly in shares is based on achievement of the annual objectives. It is determined on the basis of the actual performance of individuals or teams (performance-linked payment) in relation to the objectives set and the Swiss Life Group’s annual result (share in the company’s success). Quantitative and qualitative performance is also always assessed on the basis of the competencies required for the function held, such as professional expertise, entrepreneurship, task fulfilment,
Permanent employment contracts in Switzerland contain notice periods of between three and twelve months, depending on position and seniority. All current employment contracts with members of the Corporate Executive Board in Switzerland specify a notice period of twelve months. Contracts abroad are adapted to local circumstances.
PRACTICE AND PROCEDURE — Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for determining the level and make-up of compensation for its members, whereas the Nomination and Compensation Committee (NCC) is responsible for putting forward appropriate proposals. The Board of Directors also establishes the guidelines for the Group’s compensation policy. In doing so, it takes into consideration the compensation policies of other companies in the financial services industry, drawing its findings from publicly available information and, as necessary, studies by external experts. Comparable companies in the insurance sector in Switzerland used for the purposes of providing relevant information for the current compensation policy included Allianz, AXA, Baloise Insurance, Swiss Re and Zurich Financial Services.
The Board of Directors as a whole sets the level and distribution of the variable compensation pool for all employees on the basis of its compensation policy guidelines and taking into consideration a proposal by the Nomination and Compensation Committee. When determining the level of the allocation to the compensation pool, it takes into consideration the annual result, as well as medium-term planning and the degree of target achievement. The Board of Directors as a whole is also responsible for determining the individual compensation of members of the Corporate Executive Board. It carries out a semi-annual performance assessment of all members of the Corporate Executive Board, based on preparatory work by the Nomination and Compensation Committee. In addition, current aspects of HR policy and in particular succession planning are regularly discussed at meetings of the Board of Directors.
DIRECTORS — Compensation remitted to members of the Board of Directors in the year under review comprises the basic compensation, additional compensation in cash and a variable compensation component in the form of blocked shares amounting to 10% of the fixed compensation.
The basic compensation, which is paid 80% in cash and 20% in blocked Swiss Life Holding shares, takes into account membership of the Board of Directors of Swiss Life Holding and its subsidiary Swiss Life Ltd as well as membership of the individual Board Committees. The additional compensation in cash is commensurate to the function and workload and is determined annually by the Board of Directors. If the Swiss Life Group’s business operations have proved successful, a further, variable compensation component of up to a maximum of 15% of the fixed compensation may be remitted in the form of blocked Swiss Life Holding shares; this is decided upon by the Board of Directors, taking into consideration the business results. The shares are allocated at economic value, which is equal to the tax value, taking a blocking period of three years into account. The respective share price is also always published upon allocation.
EXECUTIVE BOARD — Compensation remitted to members of the Corporate Executive Board in the year under review comprises the basic salary, a variable bonus in cash and other compensation (child allowances, company cars, premium contributions to 3rd pillar pension plans). The members of the Corporate Executive Board also take part in a medium to long-term equity compensation plan, which is described in more detail below. They are insured for occupational benefits with Swiss Life’s employee benefits institutions.
The variable cash bonus is determined by the Board of Directors in accordance with the described compensation policy principles and based on the company result and the achievement of personal goals assessed in the employee appraisal procedure implemented throughout the Group (Group Performance System, GPS). The bonus is set at a maximum of 35% of total compensation (“bonus cap”) and requires that all objectives have been considerably exceeded.
An equity compensation plan exists as a mid- to longterm remuneration component for members of the Corporate Executive Board and other senior management members of the Swiss Life Group. Based on this plan, participants are granted future subscription rights to Swiss Life Holding shares in the form of Performance Share Units (PSUs). These subscription rights entitle them to receive Swiss Life Holding shares free of charge after a period of three years has elapsed, insofar as the relevant prerequisites have been satisfied at that point. The granting of this compensation component is in any case deferred for three years from the date of allocation until possible subscription of the shares and thus takes into consideration development in the meantime.
Pursuant to the regulations of the 2008, 2009 and 2010 equity compensation plans, two objective performance criteria have been defined, each weighted at 50%. The first criterion is the Total Shareholder Return on the Swiss Life Holding share (TSR Swiss Life Holding), requiring a performance of over 20% for a subscription right to shares to arise after three years. The second criterion involves a comparison of the Swiss Life Holding share’s TSR with the TSRs of the shares of the companies included in the Dow Jones STOXX 600 Insurance Index (TSR Outperformance). A subscription right arises if the performance on expiry of the three-year term is above the first quartile in comparison with the companies in question. Depending on the fulfilment of the two performance
2010 equity compensation plan criteria within the three-year period, the number of PSUs can increase by up to a factor of 1.5 (2008 and 2009 plans) or 2.0 (2010 plan) or drop to zero.
The number of PSUs entitling the participant to receive shares after the three-year term is determined in accordance with the following: One half of the PSUs allocated is multiplied by the factor resulting from the TSR Swiss Life Holding target being met, and the other half by the factor resulting from the TSR Outperformance target being met. The factor is 1 or 100%, if a performance of 30% (2008 and 2009 plans) or 35% (2010 plan) is achieved for the first performance criterion, the TSR Swiss Life Holding. Interim values are determined by linear interpolation. In the case of the second performance criterion, TSR Outperformance, the factor is 1 or 100%, if the TSR Swiss Life Holding is equal to the median of the benchmark index (Dow Jones STOXX 600 Insurance Index).
The sum is the number of PSUs, which translates into an entitlement to an equal number of Swiss Life Holding shares.
3 Pursuant to the fund regulations, occupational provisions were financed by the employer and the employee at a ratio of 2/3 to 1/3.
Amounts in CHF Expenditure for Compensation in cash Compensation in blocked shares5 occupational provisions
Total of basic sation for sation ExtraAdditional compen- compen- 2009 finan- in cash ordinary Aggregate
6 Pursuant to the pension fund regulations, occupational provisions were financed by the employer and the employee at a ratio of 2/3 to 1/3.
7 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 188 645 in the year under review.
BOARD IN 2010 — The compensation table below shows the bonus in cash for the 2010 financial year which was determined by the Board of Directors at the beginning of 2011. It is disclosed on an accrual basis as compensation for 2010.
The members of the Corporate Executive Board did not receive any compensation in shares for the 2010 financial year. They are participating in the current equity compensation plan, which provides for the allocation of Performance Share Units.
Aggregate total compensation in cash and in shares and Extra- occupational
5 Regular contribution of CHF 185 230 and supplementary payment of CHF 48 990 in accordance with the pension fund regulations due to an increase in insured salary. 6 Regular contribution of CHF 848 645 and supplementary payment of CHF 128 265 in accordance with the pension fund regulations due to an increase in insured salary. 7 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV/FAK amounted to a total of
The members of the Corporate Executive Board did not receive any compensation in shares for the 2009 financial year.
Other members of Corporate Executive Board 1 4 552 366 2 625 000 217 423 7 394 789 – 0 7 394 789 1 Eight individuals were taken into account in the period under review. In the case of Reto Himmel (left 31.03.2009), Thomas Müller (left 30.06.2009) and Thomas Buess (joined 01.08.2009), the compensation for 2009 membership of the Corporate Executive Board is disclosed on a pro-rata basis. The departing members of the Corporate Executive Board had a contractual twelve-month notice period, for which the agreed benefits were paid. The compensation given in this regard to former members of the Corporate Executive Board totalled CHF 1 515 379 (salary, other compensation and pension contributions).
Other members of Corporate Executive Board 630 099 8 024 888 4 Pursuant to the pension fund regulations, occupational provisions were financed by the employer and the employee at a ratio of 2/3 to 1/3.
TOTAL CORPORATE EXECUTIVE BOARD 58 551 1 Total number of PSUs allocated in the years 2008, 2009 and 2010 in connection with the relevant equity compensation plan. The PSUs represent future subscription rights that entitle the individuals concerned to receive SLH shares after a period of three years, provided that the relevant conditions are then met.
31.12.2009 — As at the balance sheet date, acting members of the Board of Directors and the Corporate Executive Board (including closely related parties) held the following number of registered Swiss Life Holding shares and future subscription rights to Swiss Life Holding shares in the form of Performance Share Units (PSUs).
Balance carried forward from previous year 3 609 395 3 958 859
Balance carried forward to new account 3 793 683 3 609 395
TOTAL PROFIT SHOWN IN THE BALANCE SHEET 203 793 683 43 609 395
As statutory auditor, we have audited the financial statements of Swiss Life Holding Ltd, which comprise the statement of income, balance sheet and notes to the financial statements (pages 180 to 194), for the year ended
Peter Lüssi Reto Zemp Audit expert Audit expert Auditor in charge
PUBLISHER — Swiss Life Holding Ltd, Zurich EDITORIAL RESPONSIBILITY — Swiss Life Group Communications, Zurich CONCEPT AND DESIGN — Eclat AG, Erlenbach, Canton of Zurich PHOTOGRAPHY — Franz Rindlisbacher and Gerry Amstutz, Zurich; Stefan Kröger, Hanover PRODUCTION — Management Digital Data AG, Schlieren, Canton of Zurich PRINTERS — Neidhart + Schön Group, Zurich © Swiss Life Holding Ltd, 2011
Workforce — 8100 employees, accounting for about 7500 full-time positions, were working for the Swiss Life Group worldwide at the end of 2010.K
2010 proved a very successful year for Swiss Life. The results speak for themselves and confirm that we have made substantial progress. As a Group we are steadily expanding our entrepreneurial scope.
Solvency Test (SST), in force since January 2011, have major implications. An analogous solvency model (Solvency II) is set to come into force in Europe in 2013 at the earliest. We certainly welcome its introduction, but it is of crucial importance for the Swiss insurance industry that the SST is construed in a reasonable manner and coordinated with the European model. And this is what we are advocating at Swiss Life.
In what sense? They represent Swiss Life and hold the key to market success. With our MILESTONE revitalisation programme, we are ensuring that Swiss Life will sustainably boost its competitiveness and achieve profitable growth. It is entirely thanks to our employees’ engagement that we have made such great progress with MILESTONE. The programme has already changed the way we run our business. Our employees played a major role in bringing about these changes, and often initiated them. This deserves the greatest recognition.
With a doubling of profits to CHF 560 million, you and your teams have delivered a strong performance. Will you achieve the 2012 goals earlier than planned? Of course we are delighted with the good result. As the management team, however, we must be aware that the figures are no more but also no less than an initial stage victory, important though it may be. The disciplined implementation of our plans and resolute reduction of costs are now paying off. But there are still a few challenges lying ahead on the path we have taken with MILESTONE. And we also do not expect the markets to provide us with much of a tailwind in the year ahead. Our goals for 2012 continue to present a challenge – so we see no reason to adjust them now.
Investors take a sceptical view of the insurance industry and of life insurers in particular. Why is this? There is no doubt that the repercussions of the financial crisis are still being felt. The fact that the insurance industry came through the crisis reasonably well has not eradicated investor scepticism. The relatively low stock market valuation of life insurance companies is due to two factors. One is the historically low level of interest rates. This dulls the appetite for life and pensions products and makes it very difficult to generate appropriate investment returns without taking on too many risks. In addition, there are uncertainties about how the new solvency regulations for companies will be implemented. In Switzerland, this refers to the Swiss Solvency Test (SST), and in Europe, Solvency II. Investors do not like uncertainty.
Swiss Life satisfies the SST. What’s the problem? In principle, we welcome the introduction of the SST. Compared to the previous rules, under Solvency I, it definitely represents progress. It is more comprehensive and more explicit on how to assess a company’s risk capacity. Nevertheless, we do not yet agree with the approach taken by the regulators to the SST. Our views are not fundamentally different, but the calibration of the model is an issue. Some of the valuation approaches do not make sense. Also, its launch would seem to be a little premature. The counterpart to the SST at the European level, Solvency II, will not be introduced until 2013, at the earliest. This puts the Swiss insurance industry at a disadvantage.
“Swiss Life’s employees show a level of engagement above the average for the European financial industry. This is all the more significant because the challenging market and changes in the company in recent years have demanded a considerable amount of professionalism, flexibility and engagement from all our employees.”
management has accomplished in the last two years deserves the greatest respect. The formula for success is simple: hard work and a systematic approach.
Still, AWD keeps getting a bad press. How come? It is not today’s AWD which is attracting the bad headlines. These refer far more to transactions from years ago involving investments which were sold in the nineties and which did not perform as expected. Allegations made in Austria that AWD provided misleading advice are unfounded. This has already been confirmed in various court cases. AWD is regularly honoured by independent institutes for its service and the quality of advice it provides. One of the most highly recognised surveys in the German market recently gave AWD an above-average rating for customer satisfaction and an outstanding price-performance ratio. Moreover, AWD recently earned a top ranking in “Germany’s greatest service survey of all time”. AWD was found to be offering the best customer service of all the financial services providers.
How will Swiss Life ensure its success in the years ahead? We will continue to rely on the disciplined execution of our strategy and goals. Swiss Life has great opportunities in the life and pensions market. The most important trends which play a role in this regard remain unchanged. For one thing, with a rapidly ageing population, pension solutions are gaining in significance. For another, states are increasingly unable to finance pension systems to support their citizens after retirement. The gap has to be filled by private pension solutions. That’s our market, and it’s where we want to further expand our position. We aim to become a leading international specialist for risk, life and pensions solutions. We are committed to helping our clients create a financially secure future. For life.
NICOLE JÄGER Life coach and mother of three children, Wetzikon, Switzerland
MARKET POSITION —Diversified business portfolio as a sound foundation — Swiss Life is one of the top ten insurers in the European life insurance market. In addition to its domestic market of Switzerland, it operates in France and Germany with subsidiary companies and branch offices. Swiss Life also pursues cross-border business which, with locations in Liechtenstein, Luxembourg, Singapore and Dubai, benefits heavily from the local growth momentum.
As one of the leading life insurers in the Swiss domestic market, Swiss Life offers a wide range of corporate and personal solutions for all life and pension requirements and every risk situation. With a 19.5% market share, Swiss Life is the market leader in the private client segment. Its share of the more heavily concentrated group life segment is 29.2%, putting it in second place. The shift in new business towards modern life and pensions solutions and risk products, the reduction in the cost base and the expansion of multichannel distribution will continue to be given very high priority in 2011.
Swiss Life ranks second in the private health and disability insurance market.
In the strongly fragmented German market, Swiss Life is one of the leading providers of occupational pensions and disability solutions, with a market share of 1.7%. The company is aiming to build on its strong position in these areas and to drive forward the shift to more profitable life and pensions solutions with variable guarantees. Along with product innovation and the expansion of distribution channels, the focus is on improving operational excellence.
Swiss Life is a leading player in the growing global business of insurance solutions for high net worth individuals (Private Placement Life Insurance). Other business units such as Corporate Solutions, which provides employee benefits solutions to key accounts and multinationals, support Swiss Life’s cross-border business.
MARKET ENVIRONMENT — Life insurance market offers a wealth of opportunities — Confidence in private pension systems was scarcely affected during the financial crisis. National debt increases and savings measures introduced in various European countries will intensify the pressure on national pension systems. In order to compensate for demographic and economic trends, private and occupational pension funds will gain greater significance in the future.
OPERATIONAL EXCELLENCE — Operational excellence is a fundamental prerequisite if companies are to remain competitive in the attractive life and pensions market. Along with cost efficiency, improvements in service quality and faster product launches are essential.
PRODUCT INNOVATION — The new capital requirements are causing insurers to reduce guarantees on their balance sheets. However, guarantees respond to a real customer need, particularly in difficult times. In order to resolve this conflict of interest, innovative solutions are required, such as Swiss Life Champion Timeplan, a payout plan with guaranteed monthly payments.
CLIENT ACCESS — Efficient access to clients will be a key factor for a life insurance company’s success. A successful multichannel strategy can provide an important competitive advantage in this connection. The distribution of innovative products requires more than just a good salesperson. Clients would like to have advisory services stepped up and to be optimally supported over the years.
The focus is on six main thrusts directed at improving the company’s operational effectiveness. With the initiatives it has developed, which exert an influence on key parts of the value chain, Swiss Life also wants to take advantage of
2. Swiss Life is pursuing a multichannel strategy targeted at optimising distribution power. The Group would like to build on the solid basis in all units in order to increase quality and productivity in distribution. In addition to its proprietary distribution network, therefore, it is focusing on independent distribution channels, such as banks, brokers and financial advisors like AWD and, increasingly, on the internet.
3. In order to steadily improve operational excellence, Swiss Life is optimising corporate structures and processes in all parts of the value chain, and while lowering the cost base over the long term is raising the quality of its service.
4. Swiss Life aims to reduce earnings volatility and to preserve the balance sheet. On the one hand, it is focusing on increasing the profitability of in-force business and further diversifying sources of profit. On the other hand, on the investment side, the company is continuing to work towards the goal of generating stable, sustained income.
5. Swiss Life intends to ensure the disciplined execution of its plans by means of stricter internal controlling.
6. The Group hopes to further boost the above-average level of employee engagement as a basis for achieving the objectives in 2012.
We aim to become a leading international specialist for risk, life and pensions solutions
We are committed to helping our clients create a financially secure future. For life.
Our thrusts 1 Enhance customer value & new business profitability 2 Increase distribution quality and power 3 Improve operational excellence 4 Preserve the balance sheet and optimise in-force business 5 Drive disciplined execution 6 Engage employees
– Distribution power in all market units was enhanced by means of a number of initiatives, and AWD increased production volume of Swiss Life products by 9% to around CHF 800 million (on a comparable basis). At the same time, the objective remains for AWD to generate a 20-25% share of Swiss Life products in the relevant product categories.
– By comparison with the cost base of 2008, CHF 311 million had been saved by the end of 2010. 85% of the initiatives underlying the cost savings target of CHF 350400 million by 2012 have already been realised.
PROGRESS — Implementation of MILESTONE going to plan and yielding results — Thanks to the disciplined execution of MILESTONE and the high level of engagement displayed by its employees, Swiss Life has already made great progress in 2010 and is getting closer to achieving the objectives it set for 2012. The Group has become more profitable, more nimble and more competitive: Shift in product mix
Summary of Group Results — Swiss Life more than doubled its net profit in 2010 from CHF 277 million to CHF 560 million. This increase is mainly attributable to improvements at operational level, a reduction in costs and an outstanding investment result. The Group achieved profitable growth in all key markets. Thanks to the MILESTONE revitalisation programme, Swiss Life has made further substantial progress in improving margins and in capital management.
EARNING POWER — Positive performance in all business areas — The Swiss Life Group’s profit from operations climbed from CHF 562 million to CHF 694 million. Around 80% of the increase in profits was driven by operational improvements. All segments have made a valuable contribution. In Switzerland, Swiss Life increased its segment result by 4% to CHF 488 million, chiefly as a result
SOLVENCY — Solid capital base and improved solvency ratio — Swiss Life has a sound capital base. Shareholders’ equity stood at CHF 7.4 billion at the end of 2010, up 3% on the previous year’s CHF 7.2 billion. The Group’s solvency ratio climbed to 172% (2009: 164%). Without taking into account unrealised gains and losses on bonds, the solvency ratio was 166% (2009: 161%). Based on its internal model, Swiss Life comfortably meets the Swiss Solvency Test requirements.
Segment Reporting — Swiss Life not only reports its insurance business by country (Switzerland, France, Germany), it also discloses separately the results of its cross-border segments, namely Insurance Other, AWD, and Investment Management. In 2010, Swiss Life generated an overall segment profit from operations of CHF 694 million (2009: CHF 562 million). Insurance Switzerland made the strongest contribution to this solid result.
2010 was a strong year for Swiss Life. The company posted a profit of CHF 488 million in its home market Switzerland, CHF 82 million in France and CHF 102 million in Germany. The Investment Management segment generated a profit of CHF 103 million, and AWD a profit of CHF 43 million. Only the Insurance Other segment reported an investment-related loss (CHF 35 million).
According to the Swiss Insurance Association (SIA), premiums in the Swiss life insurance market increased by 2% to CHF 28.5 billion. Premiums rose by 5% in group insurance while declining by 6% in individual insurance. Overall, Swiss Life was able to increase its premium volume by 2% to CHF 7.6 billion, thereby matching the growth of the market. Occupational benefits insurance contributed 79% of premium income, a rise of 4% on the previous year. The market share in group insurance fell slightly to 29.2%. In individual insurance, premium income fell by 7%; the market share amounted to 19.5%. In the year under review, the sale of products through AWD (as measured on the basis of production volume) rose slightly to CHF 197 million.
Operating expenses declined by 11% to CHF 765 million. The actual reduction in costs amounted to 8% after adjustment for a positive one-off effect arising from the Swiss Life pension fund changeover from a defined benefit system to a defined contribution system in 2010. This further reduction in costs is the consequence of a sustainable efficiency programme that is yielding results in staff and advisor costs in particular. At the same time, investment has been channelled into the future: The main areas of focus include distribution and the new, efficient IT platform in group insurance.
Net earned premiums and policy fees 7 365 7 288 1.1%
The French insurance market experienced slight growth of 4%, with an increase of 16% in savings and pensions, 4% in health and disability insurance and 1% in property insurance.
Swiss Life in France generated premium volume of CHF 5.3 billion, which equates to a 9% increase in local currency terms. The increase in net inflow of 24% in savings and pension business, principally attributable to unit-linked insurance, was achieved in a market which – despite high net inflows of EUR 50 billion – nevertheless declined by 1%. At 22%, premium income derived from unit-linked insurance was also substantially above the market average of 13%, mainly due to the continuing success in 2010 of promotional campaigns for structured unit-linked products aimed at affluent and high net worth individuals. In this segment, Swiss Life Banque Privée achieved vigorous growth in 2010, posting an increase in net banking income of 25% and returning to profitability. In a highly competitive market, health and disability insurance grew by 3%, while property insurance remained at the prior-year level.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 5 307 5 297 0.2%
INSURANCE FRANCE — Swiss Life in France posted a segment result of CHF 82 million. Adjusted for the negative one-off effect of pension reform (CHF 80 million), this represents an increase of 10% in local currency terms. This is mainly attributable to the improved financial margin and efficiency gains, achieved through strict cost discipline.
The German life insurance market enjoyed growth of 6% in 2010. Premium volume declined 4% to CHF 2.1 billion, equivalent to a rise of 4% in local currency. Periodic premium income bucked the market trend, rising 2% (in local currency) to CHF 1406 million. The growth drivers were once again the multiple award-winning supplementary occupational disability insurance and the newly-introduced single-premium annuity insurance with premium refund. Insurance benefits and policyholder participation rose 10% overall in 2010, mainly attributable to the rise in policyholder participation to CHF 378 million on the back of the very good financial result. Operating expenses fell by 11% (3% in local currency ) while new business premiums increased by 9% (in local currency) to CHF 693 million.
The distribution of products through AWD, measured on basis of production volume, increased by 3% (in local currency +12%) to CHF 596 million.
Swiss Life will continue to rigorously pursue the shift to unit-linked insurance and risk products in 2011. The
Net earned premiums and policy fees 1 814 1 753 3.5%
Corporate Solutions specialises in global life and pensions solutions for multinationals. It increased its access to new business in all countries, and cemented its global market leadership as a provider of comprehensive employee benefits solutions. Growth will be targeted in 2011 too, in alignment with profitability. The emphasis will lie on customer orientation.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 5 206 5 263 –1.1%
tection Insurance (PPI). The segment posted a loss of CHF 35 million in the year under review (previous year: –10
For 2011, Investment Management is planning to implement the new asset management application in Germany. The launch is scheduled for the start of 2012. In the product area, the focus will lie on supporting the insurance units in the development of modern insurance products and on the introduction of new investment products.
In the year under review, AWD generated overall sales revenue of EUR 547 million (+3.5%). Commission income from new business rose by 4.7%. Sales of unit-linked products rose by 2.7%, while sales for life insurance and pension products rose by 13.7%. Sales of private health insurance increased by 0.3%, those of property and accident insurance by 8.1%. Sales of investment funds declined by 0.5%.
AWD has once again delivered solid profitability. Only in the Austria & CEE region is a need for further optimisation evident. In 2011, AWD will improve its processes further, with a view to meeting the medium-term financial targets in the Austria & CEE region too.
In Switzerland, “My Milestones” was initiated in April 2010, with a three-day intensive workshop for managers. This produced 29 measures which are already being or are about to be implemented. The “My Milestones” team award was instituted for teams who have performed particularly well – improving customer service, increasing efficiency or enhancing innovation. The first award in September 2010 went to a nine-person IT team who created a self-service portal for IT services to make everyday work easier. The second award in December 2010 was presented to two employees in western Switzerland for their improvements to sales force and customer services cooperation.
PERSONAL ENGAGEMENT — Employees go the extra mile — In 2010, Swiss Life conducted a new-style employee survey across the Group for the first time. The main objective of the survey was to evaluate the attitude of
The Swiss Life Group engagement value is 56%. This is well above the average for companies in the European financial sector (50%), but below the level of the most successful companies in the peer group (70%). For the key performance indicators (KPIs) “teamwork orientation” and “empowerment”, the Swiss Life Group even produced values which are above average for the best companies in the European financial sector. Above-average values were also achieved in “leadership” and “results orientation”; only in “customer orientation” and “innovativeness” were values slightly low.
As a result of the survey findings, measures were taken to introduce improvements in all Swiss Life Group units. The “My Milestones” programme and the employee survey are aimed at boosting the development of the company and employees in such a way as to establish a performance culture which is in line with the corporate strategy.
TRAINING AND DEVELOPMENT — High investment in development for all employees — Swiss Life puts a strong emphasis on more than just the training of future managers. The internal or external training and development of non-managerial employees is likewise important to the 1 Apprentices and trainees 14% 2 Specialist training, social and methodological skills 63% 3 Management and talent development 23%
Group. Specialists or project managers receive targeted training. Swiss Life in Switzerland pays the full fees for the Insurance College of Higher Vocational Education and Training and for training as a Swiss Certified Insurance Specialist. In addition, 56 young people are currently doing courses to obtain qualifications in three specialist areas, and 16 interns or trainees are gaining work experience in the life insurance business.
SOCIAL PARTNERSHIP — Exemplary cooperation between employers and employees — Cooperation with the Europa Forum (European Works Council) was again stepped up in 2010. The nine-person committee with representatives from four countries generally meets several times a year. It deals with transnational information and consultation on topics which affect all Swiss Life employees. The Europa Forum was founded in 1996. In 2006 it was given a new charter, which represents one of the leading voluntary agreements in Europe and serves as a model for other European companies. The main theme in the Europa Forum for 2010 was MILESTONE, the package of measures launched in autumn 2009 to improve Group-wide efficiency.
In Switzerland the MILESTONE programme entails, among other things, a reduction of 520 positions by 2012. Accompanying the reduction process, Swiss Life is implementing a programme of measures which were worked out with the social partners and have been in force since 2005. In 2010, 273 employees in Switzerland underwent professional reorientation. They were individually supported and assisted by a team of specialists. The internal professional reorientation support programme is very highly rated by those affected (5.7 out of 6 points).
The strategy- and value-oriented behaviour required of employees is described in the Group Competency Model (GCM) which was adapted to the new corporate strategy in 2009. Greater emphasis is given in the updated competency model to such aspects as innovativeness, managing change and customer orientation.
INTEGRITY AND COMPLIANCE — Legally and ethically correct business conduct paramount — A Code of Compliance has been in force at Swiss Life since 2006. This contains specific rules of conduct which show employees what they must observe in relation to legal and supervisory requirements and internal instructions. Adherence to these rules is a prerequisite for legally and ethically correct business conduct, to which Swiss Life is unequivocally committed.
SOCIAL ENGAGEMENT — Caring support for people in need — All Swiss Life’s national companies and their employees support people in need and a range of meaningful projects. In Switzerland the Perspectives Foundation funds domestic charitable initiatives in the fields of health, science, education, culture and sport, focusing on integration and education. Created on the occasion of Swiss Life’s 150th anniversary in 2005, the Perspectives Foundation donates more than CHF 1 million every year. In 2010 it supported 85 projects. The Foundation also donated considerable sums to relief organisations offering emergency aid following the earthquake in Haiti and the floods in Pakistan. In addition, Swiss Life’s sales force supported various local organisations. The real estate sector of Swiss Life is also socially active, building a hostel in Winterthur that provides reasonably priced accommodation for 105 students.
In Germany, Swiss Life has been providing support since 2007 for the Nicolaidis Foundation, a non-profit organisation for widows, widowers and their children.
COMMUNITY SERVICE — Full support for voluntary work — Swiss Life is committed to the principle of voluntary public service. For Swiss Life, as a company operating in the social insurance area, it is important that society should function smoothly and its members should be well integrated. Voluntary public service means taking personal action in matters of public life, in effect unpaid work for the whole community. An unpaid commitment in society and the private economy promotes a sense of community and public welfare, and it enhances social skills.
At present about 40 employees are voluntarily active in Switzerland in a political or judiciary function, holding executive, legislative, or judiciary office at commune or cantonal level, on school boards, church councils and welfare authorities. Other employees sit on the central committees of political parties within their communes or cantons. These office-holders cover the whole gamut of political parties, and about a third of them belong to no party. Every year Swiss Life organises an event for its socially engaged employees. The theme in 2010 was the changes occurring in the Swiss political party landscape.
Swiss Life is in permanent contact with politicians of all parties, for example on occupational benefit issues (conversion rate, minimum interest rate, statutory minimum distribution ratio). Among other themes, the company is actively involved in the total revision of the Federal Law on Insurance Contracts (VVG). Swiss Life runs an annual event for young politicians, for which an attractive and informative programme is drawn up.
The company conducts its dialogue with the public and decision makers on insurance- and pension-related topics through the industry groupings and professional associations. It plays an active part in the committee work of the professional associations and specialist bodies. The Chairman of the Board of Directors of Swiss Life is a Member of the Board Committee of the national business association economiesuisse, while the Group CEO is a Member of the Board and the Board Committee of the
Swiss Insurance Association (SIA). In fact the company is particularly well represented in the SIA. The CEO of the Swiss Division chairs the central Life Insurance Committee; the Group CFO is a Member of the Finance and Regulation Committee, and further experts represent Swiss Life in some 15 committees and working groups.
Other representatives of Swiss Life Management are likewise active in local industry associations in other markets.
Swiss Life also has a clear commitment in the teaching and research fields at colleges of further education and universities. A considerable number of employees teach at various institutions, and Swiss Life also sponsors the Walter Saxer Prize for actuarial studies at the Swiss Federal Institute of Technology (ETH) in Zurich.
Since 2006, Swiss Life in Switzerland has been using electricity exclusively from renewable energy sources. In this way, the company has been able to reduce its GHG emissions by about 5650 tonnes; the use of electricity by the
Swiss Life — Business Review 2010 business premises now produces almost no GHG emissions at all. Since January 2010 Swiss Life in Germany has also been drawing electricity exclusively from renewable sources. As a result, its GHG emissions have fallen by a further approximately 1000 tonnes.
Swiss Life partly uses rainwater for its sanitary facilities, and at the Zurich premises installation of efficient water supply fittings lowered water consumption by three million litres compared with the previous year.
Swiss Life in France launched an environmental information campaign in 2010 aimed at economical use of paper and office supplies. When properties were renovated, the environmentally relevant standards were exceeded. In addition, the national company joined the 10:10 project run by the environmental organisation Good Planet. The objective is to reduce the company’s CO2 output by 3% per year.
Swiss Life in Germany has been taking part in the climate protection programme “ECOPROFIT” since 2008. As a result of the measures taken, the company saves 91 000 kWh of electricity annually at its Munich location and has reduced its annual CO² output by 58 tonnes. In December 2010 it was again awarded the Munich ECOPROFIT company certificate for 2009/2010 for its exceptional commitment to corporate environmental protection. AWD undertakes constant improvement and renewal of its technical installations. The numerous measures implemented since 2001 have yielded energy savings of over 4.5 million kWh.
The Swiss Life Group is one of the leading private real estate owners in Switzerland. As part of its environmental initiatives over the last six years, it has fitted 10 000 of its rental properties with water meters for consumptionbased billing. Contracts were concluded in 2010 for the purpose of using lake water for heating and cooling a number of properties in Zurich. The use of alternative energy sources is being investigated for various renovation projects.
In 2010 Swiss Life once again took part in the Carbon Disclosure Project (CDP), in which an independent nonprofit organisation conducts the world’s largest survey of corporate information on climate change. So far, however, the data the company has provided are not yet comprehensive enough for inclusion in the Carbon Disclosure Leaders Index (CDLI). To improve dialogue with the various stakeholders on sustainable corporate management, Swiss Life is aiming to produce reports in line with the Global Reporting Initiative (GRI) standard by 2012.
Swiss Life’s Perspectives Foundation donates approximately CHF 1 million per year to support charitable initiatives, focusing particularly on integration and education. In 2010, for example, the Foundation provided a financial boost for the Surprise Association’s “Luckybreak job” project.
Since 1997 Surprise has been helping people who have fallen on hard times to draw on their own resources and reduce their need for outside help. The non-profit-making institution based in Basel runs integration projects in the fields of work, sport and culture. The Surprise Association finances its operations by selling its magazine “Surprise” on the street and through donations and contributions from foundations and companies.
– Without any training or notable job experience but with a stack of serious personal and social problems, Mr S. became a street vendor for Surprise. Despite some setbacks, he steadily gained stability through the new experience of a clearly structured day. After a year of this activity, he was offered a part-time “lucky-break job” at the Surprise sales office in Basel. There, financial support, coaching by the Surprise team and flexible working hours enabled him to embark on commercial training. He has already gained his diploma in office management and is about to finish a business diploma course. Having left Surprise and the “lucky-break job” programme, Mr S. now has a “real” commercial job in the Basel region.
– Mr B. is 56 years old and has a “luckybreak job” in Surprise’s sales organisation and on-site services. Even in a phase of great personal adversity when beset by ill health and family problems, he always worked reliably with good will and a sense of responsibility. The realistic and measurable annual objectives he was given formed a structure that provided incentive and support. Although his overall situation is not yet stable and long-term financial independence is not yet within his reach, he has made unmistakable progress.
BRAND POSITIONING — Better control of brand-relevant success factors — In the brand management context, Swiss Life mapped out a course in 2010 for implementation of transnational measures in 2011, which are designed to give a much keener edge to its brand positioning. The brand managers laid the foundation for central measurement, analysis and control of all the brandrelevant success factors. The successful qualitative positioning survey undertaken hitherto in the three major markets of Switzerland, France and Germany is being supplemented with a quantitative measurement of brand perception. The initial results of this success rating exercise will be available in mid 2011. Based on those, the features of brand image in the organisational units will be appropriately honed and the Group-wide positioning of the Swiss Life brand and the claim “The future starts here.” will be further consolidated.
Swiss Life’s positioning statement stands on the three pillars of reference status, independence and Swissness. They form the mainstay of the claim “The future starts here.” For a service brand, which is what Swiss Life is, this implies challenges and obligations for the employees, who are called on to assume the role of brand ambassadors in the positioning process. Their expertise, openness, engagement, proximity and clarity bring the brand values home to the customers in a tangible, meaningful way.
The operational management structure as at 31 December 2010 is shown on page 52.
SHAREHOLDERS — Detailed disclosures of significant shareholdings can be found on the publication platform of the SIX Swiss Exchange’s disclosure office at www.sixexchange -regulation.com, “Obligations” area, “Disclosure of Shareholdings” section and “Significant Shareholders ” subsection (www.six-exchange-regulation.com/ obligations/disclosure/major_shareholders_en.html).
Carsten Maschmeyer, Germany, reported in the publication of 23 December 2008, that he and his two sons, Marcel Jo Maschmeyer and Maurice Jean Maschmeyer, as well as the asset management firms CM Vermögensverwaltung GmbH & Co. KG and CM VermögensverwaltungsGeschäftsführungs GmbH, held 1 944 616 Swiss Life Holding registered shares and 230 000 other purchase positions of Swiss Life Holding, which corresponded to a 6.22% share of the voting rights (cf. also on page 62 details on share ownership as at 31 December 2010 of currently serving Board of Directors and Corporate Executive Board members).
Talanx AG, Germany, reported in a publication of 20 May 2009, that one of its groups, consisting of AmpegaGerling Investment GmbH, Talanx AG and Talanx Beteiligungs-GmbH & Co. KG, held 2 987 988 shares of Swiss Life Holding, equivalent on that day to 8.52% of the voting rights.
– Conditional share capital: CHF 22 650 105.60 divided into 2 359 386 registered shares with a par value of CHF 9.60 each
REGISTRATIONS — Swiss Life Holding shares are not subject to any limitations on transferability. Swiss and foreign banks, securities brokers and companies acting on their behalf may be entered in the share register as nominees if they are holding shares of Swiss Life Holding in
FUNCTION — The Board of Directors is responsible for all matters that are not reserved for the consideration of the General Meeting of Shareholders (formally the supreme decision-making body of a public limited company) under the terms of the law (Art. 698 of the Swiss Code of Obligations OR) or by the company’s Articles of Association. In line with its non-transferable duties prescribed by law the Board of Directors is responsible, in particular, for the ultimate direction of the Group, as well as the supervision of the Corporate Executive Board.
ELECTIONS AND TERMS OF OFFICE — Pursuant to the Articles of Association, the Board of Directors shall consist of no fewer than five and no more than fourteen members. The members of the Board are elected by the General Meeting of Shareholders for a maximum term of three years, and on an individual basis.
COMPOSITION — In the year under review, no member of Swiss Life Holding’s Board of Directors exercised any duties relating to operational management within the Swiss Life Group. Furthermore, no such duties were exercised by any Board members during the three financial years preceeding the reporting period, with two exceptions: Rolf Dörig, who held the position of Chairman of the Group’s Corporate Executive Board until his election to the Board of Directors in May 2008, and Carsten Maschmeyer, who was Co-CEO of AWD until March 2009.
AL Rolf Dörig laid the groundwork for his professional career by obtaining a doctorate in law (Dr. iur.) from the University of Zurich before being called to the bar in Zurich. Joining Credit Suisse in 1986, he assumed a number of executive responsibilities in various areas of banking and in different geographical markets. As a Member of the Executive Board, he was assigned responsibility for Swiss Corporate and Retail Banking from 2000 onwards. In 2002 he assumed the role of Chairman Switzerland of Credit Suisse. Following his move to Swiss Life, Rolf Dörig held the positions of Chairman of the Corporate Executive Board from November 2002 to May 2008 and Delegate of the Board of Directors from May 2008 to May 2009.
He became Chairman of the Board of Directors of Swiss Life Holding Ltd in May 2009.
Gerold Bührer will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding Ltd on 5 May 2011.
Board of Directors – Swiss National Bank, Berne, Member of the Bank Council – Züblin Real Estate Holding Ltd, Zurich, Member of the Board of Directors
AL Volker Bremkamp joined Albingia Versicherungs AG in Hamburg (a subsidiary of Guardian Royal Exchange plc, London) in 1963, receiving his qualifications as an insurance expert in 1965. Between 1969 and 1971 he was employed by various insurance companies and brokers in London and Paris. He returned to Albingia Versicherungs AG, Hamburg, in 1971, serving as an Executive Director from 1978 to 1989 and, from 1989 to 2000, as Chief Executive Officer of Albingia Lebensversicherungs AG and of Albingia Versicherungs AG. Between 1995 and 1999 Volker Bremkamp was an Executive Director and, at the same time, Group Executive Director, Continental Europe, of Guardian Royal Exchange plc, London, which was taken over by the AXA Group in 1999. From 1999 to 2000 he held the position of Executive Director of AXA Colonia Konzern AG, Cologne (holding company of AXA Germany). He has been Managing Director of BMB Bremkamp Management - und Beteiligungs-GmbH since 2000.
from the Catholic University of Leuven (Belgium) in 1979. Between 1975 and 1983 he held a post as Research Assistant at the Catholic University of Leuven. From 1983 to 1985 he was a Lecturer in Statistics at Imperial College London, before taking up a position as Lecturer at the University of Limburg (Belgium) from 1985 to 1989. Since 1989 he has held the position of Professor of Mathematics at the Swiss Federal Institute of Technology (ETH) in Zurich.
Member of the Advisory Board – Leibniz University, Hanover, Honorary Senator
Other appointments: – Sigurd Rück Ltd, Zurich, Chairman of the Board of Directors – Cassa Pensioni della Città di Lugano, Member of the Board of Directors – Casino de Montreux SA, Montreux, Vice Chairman of the Board of Directors/Chairman of the Audit Committee
Business Area Electrical Technology Asia/Pacific. She has held the positions of Chief Executive Officer and Delegate of the Board of Directors of WICOR HOLDING AG since 2001.
Franziska Tschudi will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding Ltd on 5 May 2011.
INTERNAL ORGANISATIONAL STRUCTURE — The Board of Directors has issued Organisational Regulations setting forth the internal organisational structure and the duties and competencies of the Board of Directors, the Board of Directors’ committees, the Chairman of the Board of Directors and the Corporate Executive Board. Four standing committees support the work of the Board of Directors as a whole.
MITTEE — The Chairman’s and Corporate Governance Committee (Chairman’s Committee) assists both the Chairman of the Board of Directors in performing his leadership and coordination duties and the Board of Directors with issues relating to corporate governance. The Committee also supports the Board of Directors in key strategic decisions.
The performance of the Corporate Executive Board and the contributions made by the individual members are regularly discussed and evaluated by the Chairman’s and Corporate Governance Committee, the Nomination and
Board have a direct management role with functional management responsibility for cross-divisional competencies. The members of the Corporate Executive Board are responsible for setting objectives, financial planning, HR management and achievement of objectives within their division. They issue directives for their division within the context of legal and regulatory requirements, the relevant regulations and the Group directives valid for the Group as a whole.
On 31 December 2010 the Corporate Executive Board of Swiss Life Holding was composed of the following members: Member of the Corporate Executive
Member of the Executive Board of Swiss Life in Germany with responsibility for the entire sales force, distribution management, service and control.
International Economics, Thomas Buess launched his career in insurance in 1985. From 1985 to 1993 he assumed various positions in the area of finance at the ELVIA Group. In 1994 he joined Zurich Financial Services Group as Chief Financial Officer and Member of the Executive Committee of the Swiss P&C business unit. From 1997 to 1999 he was Chief Financial Officer of all Swiss operations. In 1999 Thomas Buess moved to the USA as Chief Financial Officer of Zurich Financial Services Group’s North American business area. In 2002 he was appointed Group Chief Financial Officer and Member of the Group Management Board. Thomas Buess went on to head the reorganisation of the life insurance business before assuming the role of Chief Operating Officer of Zurich Financial Services Global Life in 2004. In January 2009 he moved to Allianz Group as Head of Operational Transformation.
Other appointments: – Castle Alternative Invest AG, Freienbach, Member of the Board of Directors (until 17 May 2011) – Technopark Zurich, Member of the Board of Trustees
The specifications below follow the directives on information relating to corporate governance issued by the SIX Swiss Exchange and take into consideration the transparency regulations set out in the Swiss Code of Obligations Art. 663bbis and Art. 663c as well as Circular 2010/1 of the Swiss Financial Market Supervisory Authority FINMA on minimum standards for remuneration schemes of financial institutions. Further information on compensation and benefit expenditure for the management and employees of the Swiss Life Group can be found in the Consolidated Financial Statements (Notes 24 and 31). In addition, the compensation of the members of the Board of Directors and the Corporate Executive Board, and their participation interests, are shown in the Notes to the Swiss Life Holding Financial Statements.
The share in the company’s success is measured using quantitative Group objectives (Key Performance Indicators, KPIs). The main KPIs, besides the key figures relating
Swiss Life — Business Review 2010 to annual profit, costs, business volume, return on equity and solvency, are the profitability of in-force and new business and margin development.
An equity compensation plan exists as a mid- to longterm salary component within the framework of the compensation arrangements 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 Nomination and Compensation Committee. Based on this plan, participants are granted future subscription rights to Swiss Life Holding shares in the form of Performance Share Units (PSUs). 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. The granting of this compensation component is in any case deferred for three years from the date of allocation and thus takes into consideration development in the meantime.
2010 equity compensation plan have been increased over the 2008 and 2009 plans to the extent that 35% performance (previously 30%) is required in the TSR Swiss Life Holding for factor 1 and at least 50% performance (previously 40%) for the maximum factor. The maximum factor has in turn been increased from 1.5 or 150% to 2 or 200%.
ERNING BODIES — The following compensation in cash was received by acting members of the Board of Directors and the Corporate Executive Board during the period under review: In CHF
Compensation remitted to members of the Board of Directors comprises the basic compensation, additional compensation in cash and possibly variable compensation in the form of blocked shares. The basic compensation, which is paid 80% in cash and 20% in blocked Swiss Life Holding shares, takes into account membership of the Board of Directors of Swiss Life Holding and its subsidiary Swiss Life Ltd as well as membership of the individual Board Committees. The additional compensation in cash is commensurate to the function and workload and is determined annually by the Board of Directors. If Swiss Life Group’s business operations have proved successful, a further, variable compensation component of up to a maximum of 15% of the fixed compensation may be remitted in the form of blocked Swiss Life Holding shares; this is decided by the Board of Directors, taking into consideration the business results.
Compensation remitted to members of the Corporate Executive Board comprises the basic salary, a variable bonus in cash, other compensation (child allowances, allowance for years of service, company cars, premium contributions to 3rd pillar pension plans), as well as possible variable compensation in the form of shares. The members of the Corporate Executive Board also take part in a mid- to long-term equity compensation plan which, as mentioned above, entitles them to Swiss Life Holding shares after a period of three years has elapsed, provided that the relevant requirements have been satisfied at that point.
At Corporate Executive Board level, the amount of the bonus depends 60% directly on the company’s success. As mentioned above, the following key figures are included in the Key Performance Indicators (KPIs) used to assess company success: The annual profit, costs, business volume, return on equity and solvency, as well as the profitability of in-force and new business and margin performance. The weighting of the individual KPIs is determined by the Board of Directors. 40% of the bonus is based on Corporate Executive Board members’ achievement of specified
Some of the shares allotted to the members of the Board of Directors in the period under review form part of their basic compensation, 80% of which was granted in cash and 20% in blocked Swiss Life Holding shares. The remaining shares were allotted at the beginning of 2011 as variable compensation amounting to 10% of the fixed compensation based on the good business results in the 2010 financial year. All shares are subject to a three-year blocking period.
The number of future subscription rights to Swiss Life Holding shares allocated in the context of the above-mentioned equity compensation plan to members of the Corporate Executive Board in the form of Performance Share Units (PSUs), the exercise of which depends on the fulfilment of specific performance criteria, is shown in table form in the Notes to the Swiss Life Holding Financial Statements.
The compensation granted to Rolf Dörig in the period under review in the form of cash, shares and contributions to occupational provisions was as follows: In CHF
Shares 1 302 399 2731 SLH shares with three-year blocking period1
Total compensation 2010 in cash and shares 1 262 399 including annual contribution to occupational provisions of CHF 195 656 1 458 054
REQUIRED MAJORITIES — In addition to the resolutions provided for by law, a qualified majority (corresponding to at least two thirds of the voting shares represented and an absolute majority of the share par value represented) is required in order 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, or change these provisions of the Articles of Association.
VOTING SYSTEM AND PROCEDURES — Based on a corresponding authorisation in the Articles of Association, the presiding officer at Swiss Life Holding’s General Meeting of Shareholders generally requests that votes be taken electronically.
AUDITING FEES — In 2010 the auditing fees credited to PwC came to CHF 9.2 million (2009: CHF 7.8 million). This includes the fees for reviewing the 2010 half-year accounts.
ADDITIONAL FEES — In 2010 PwC received additional fees totalling around CHF 3.7 million for advisory services (2009: CHF 3.0 million), approximately CHF 1.6 million of which was for actuarial advisory services, CHF 1.7 million for fiscal and financial advisory services and CHF 0.3 million for strategic advisory services. The remainder resulted from legal and other advisory services. The advisory services were performed in compliance with the relevant independency regulations set forth in the Swiss Code of Obligations and the Audit Supervision Act.
The external auditors submit regular written reports on the status of the auditing work. They also submit detailed reports on the half-year and annual financial statements. At the end of the year, the external auditors draw up a comprehensive report for the attention of the General Meeting of Shareholders and a detailed report on the financial year just completed for the attention of the Audit Committee, the Board of Directors and the Swiss Financial Market Supervisory Authority FINMA.
Swiss Life communicates actively and openly both within and outside the company. Key facts and figures about the Swiss Life Group can be accessed at www.swisslife.com. Furthermore, 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.
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 and half-year reports since 1997 can be accessed on the website, “Shareholders & Analysts” area, “Archive Reports” section (www.swisslife.com/ en/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. For the last seven years, the company has been holding an annual Investor’s Day; the most recent was held on
Contact details are available at the end of the Business Review Section.
The full corporate governance report is provided in the Financial Statements (accessible at www.swisslife.com/ report).
Net gains/losses on financial instruments at fair value through profit or loss 5, 8 4 250 315
Financial assets held to maturity 14, 33 5 229 6 432
Purchases of treasury shares – – –1 – – – –1 – –1
Purchases of treasury shares – – –127 – – – –127 – –127
Sales of treasury shares – –360 583 – – – 223 – 223
Cancellation of treasury shares 27 –51 –635 686 – – – – – –
Performance Dow Jones STOXX 600 Insurance Index (in %) +2 +13
Market capitalisation (in CHF million) 30.12. 4 337 30.12. 4 235
Net insurance benefits and claims –12 704 –11 884 –12 915 –13 268 –12 012
Net result from discontinued operations – –47 1 488 6421 378
Number of employees (full-time equivalents) 7 483 7 820 8 291 8 556 8 693 1 Including reserve release of CHF 304 million due to change in Dutch law. 2 Up to 2008, traditional embedded value methodology used; from 2009, market consistent embedded value methodology applied.
The Business Review and the Financial Statements for 2010 can be found at: www.swisslife.com/report
CAUTION REGARDING FORWARD-LOOKING STATEMENTS This document may contain projections or other forward-looking statements related to Swiss Life that are subject to known and unknown risks, uncertainties and other important factors. The reader should be aware that these statements are only projections which could differ materially from the actual results, financial situation, development, performance or expectations and that therefore no undue reliance should be placed on such forward-looking statements. Neither Swiss Life nor any of its directors, officers, employees or advisors, nor any other person connected or otherwise associated with Swiss Life, makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this document. Neither Swiss Life nor any of its directors, officers, employees or advisors, nor any other person connected or otherwise associated with Swiss Life, shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this document. All forward-looking statements are based on the data available to Swiss Life at the time the present document was compiled. Unless otherwise required by applicable law, Swiss Life assumes no responsibility to publicly update or alter its forward-looking statements or to adapt them, whether as a result of new information, future events or developments or any other reason.