Contents 4 Facts & Figures 6 Shareholders’ Letter 8 Summary of Group Results 12 Segment Reporting 24 Corporate Governance 29 Board of Directors 42 Corporate Executive Board 48 Swiss Life Compensation Report for the Financial Year 2014 65 Report of the Statutory Auditor 72 Risk Management 74 Market Consistent Embedded Value (MCEV) 76 Introduction 78 Summary of MCEV Results 88 Information by Market Unit 95 Methodology 102 Assumptions 107 Auditor’s Report on Embedded Value 109 Glossary and List of Abbreviations 112 Consolidated Financial Statements 114 Consolidated Statement of Income 115 Consolidated Statement of Comprehensive Income 116 Consolidated Balance Sheet 118 Consolidated Statement of Cash Flows 120 Consolidated Statement of Changes in Equity 121 Notes to the Consolidated Financial Statements 255 Report of the Statutory Auditor 257 Swiss Life Holding Financial Statements 258 Management Report 259 Statement of Income 260 Balance Sheet 261 Notes to the Financial Statements 268 Appropriation of Profit 269 Report of the Statutory Auditor 271 Share Performance and Historical Comparison
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The progress we have made with “Swiss Life 2015” is reflected in our figures for the past financial year. Let us pick out a few key points: Swiss Life has grown profitably and increased its premium income by 7% in local currency to CHF 19.1 billion. Our growth stems mainly from the home market of Switzerland, where we made significant gains in both group life and individual life business.
In spite of the persistent low interest rate environment, Swiss Life achieved a net investment result of 3.8% (2013: 3.9%). The Group’s fee and commission income also developed well, increasing significantly by 15% in local currency to CHF 1.3 billion. As a result, adjusted profit from operations stood at CHF 1182 million and net profit was up 4% to CHF 818 million (2013: CHF 784 million).
The success factors for Swiss Life’s promising figures are many and varied. They include our expertise in the field of comprehensive life and pensions advice, our competitive products and solutions, our asset and liability management, by which we match our long-term liabilities with a high-quality investment portfolio, our risk management, as well as our above-average investment performance and our ability to continuously improve our efficiency. It is our employees who have made this possible, and once again we would like to thank them warmly for their engagement.
In view of the successful financial year 2014 we will be proposing that the General Meeting of Shareholders approve in April this year an 18% increase in the dividend from CHF 5.50 to CHF 6.50 per share – once again in the form of a withholding tax-free distribution from the capital contribution reserves.
The key driver of growth was the home market of Switzerland, where total premium volume increased by 11% from CHF 9.0 billion to CHF 10.0 billion. Particularly in group life business, the high demand from SMEs for full insurance solutions in 2nd pillar occupational benefits (BVG) business continued unabated, with Swiss Life growing by 11% in this area, compared to just 1% for the market as a whole. In individual life business, premiums rose by 12%. At the same time, Swiss Life increased fee and commission income in the home market by 10% to CHF 182 million. Swiss Life in France also posted growth, with a 10% rise in premiums to EUR 4.2 billion. Its fee and commission income also increased, up 11% to EUR 223 million. In Germany, the strict focus on profitable business led to a 5% decline in premiums to EUR 1.3 billion. At the same time however, Swiss Life Germany recorded strong growth in fee and commission income with a 12% increase to EUR 349 million. Swiss Life International reported a 6% fall in premiums in local currency to CHF 2.5 billion, while growing fee and commission income by 4% to CHF 240 million.
In its external customer business, Swiss Life Asset Managers achieved organic net new assets of CHF 4.5 billion. Assets under management for external customers thus came to CHF 33.7 billion (+22%). Together with insurance mandates (CHF 149.3 billion), total assets under management at Swiss Life Asset Managers stood at CHF 183.0 billion as at the end of 2014, 18% up on the previous year. Of this amount, CHF 32.5 billion is invested in real estate. In addition, Swiss Life has real estate under administration for third-party clients amounting to a total of CHF 31.5 billion: CHF 16.7 billion of which originates from Livit and CHF 14.8 billion from CORPUS SIREO, a group acquired by Swiss Life on 1 October 2014. Total real estate under management and administration as at the end of 2014 thus came to CHF 63.9 billion.
other income 15 –2 n/a net insurance benefits and claims –15 218 –13 920 9.3%
Asset allocation on a fair value basis as at 31 December (insurance portfolio at own risk) Amounts in CHF million equity securities and equity funds 4 044 2.7% 2 435 1.9%
Segment Reporting In 2014, Swiss Life generated adjusted profit from operations across all segments of CHF 1182 million. This 4% increase over the previous year is due to higher premium income, the growth of fee and commission income and the further improvement of efficiency ratios. Net profit came to CHF 818 million in the period under review.
In the 2014 financial year, the Swiss Life Group maintained its focus on profitable growth and diversification of profit sources. Gross written premiums, policy fees and deposits received across all segments grew by 7% in local currency to CHF 19.1 billion (2013: CHF 18 billion). At the same time fee and commission income rose by 15% in local currency to CHF 1.3 billion.
Long-term initiatives including further optimisation of the multichannel strategy, the development of the service and product offering, improved customer centricity and renewed sustained cost reduction contributed to this pleasing result. The financial result of CHF 3.5 billion was 1% above the previous year. Net investment income rose 4% to CHF 3.1 billion.
According to the Swiss Insurance Association (SIA), life insurance premiums in Switzerland rose to CHF 32.5 billion, up 1.6% on the previous year. Market growth in group life business came to 1.4% and premiums for individual life business were up 2.0%. Swiss Life increased its premium volume by 11% in total to CHF 10.0 billion, thus again significantly outperforming the market as a whole. Group life business accounted for 84% of this result. Swiss Life increased its market share of group life business to 33.2% (2013: 30.3%) and of individual life business to 20.1% (2013: 18.5%), regaining its position as domestic market leader.
Swiss Life Switzerland reduced its operating expense by 2% in the year under review to CHF 898 million. This reduction was due to lower amortisation of deferred acquisition costs and another reduction in operational administrative costs.
The ongoing strategic optimisation of the product offering was a key driver for premium growth. In 2014, Swiss Life launched Swiss Life ProtectCare, a long-term care insurance solution for private clients, guaranteeing a lifelong pension in the event of a long-term care need. This product was developed in close cooperation with the health insurer Sanitas. The product family Swiss Life FlexSave, which has proved extremely popular among customers for years, received its latest addition with the Swiss Life FlexSave Junior Plan. The two established products Swiss Life FlexSave Invest and Swiss Life Protect have also been available to the cooperation partner Valiant since 2014. As a full-range provider, Swiss Life offers its corporate customers solutions to all their occupational pension requirements. The product offering, expanded over recent years, was further optimised in the year under review and aligned even more closely to customer requirements.
Swiss Life Switzerland is evolving from a pure life insurer to a comprehensive life and pensions and financial solutions provider, with a focus on developing its product and service offering and on closer customer interaction. The broker services offering for private residential property, Swiss Life Immopulse, launched in 2012, is a specific example of the drive to develop into a comprehensive life and pensions and financial solutions provider. In 2014, Swiss Life Immopulse further strengthened its position in the Swiss real estate market. The distribution successes – both in the core business and in the additional product categories of comprehensive life and pensions provision – testify to Swiss Life’s increased customer orientation. In 2014, the company started developing the online portal Swiss Life myWorld. In an initial phase, the employees of Swiss Life’s corporate customers will be able, from 2015, to access online via the portal all the information and documents pertaining to their occupational provisions and carry out simulations. With the addition of further functionalities, the online portal will be made available to Swiss Life Switzerland’s private clients in the second quarter of 2015.
other income 14 –4 n/a net insurance benefits and claims –11 333 –10 268 10.4%
Swiss Life in France increased its segment result to CHF 216 million (previous year: CHF 194 million). This increase resulted from the strong momentum in sales, the further improvement in the quality of new business and the higher technical and financial margins in all business areas.
Premiums for France, by type of insurance 3 Health insurance 4 Property
Swiss Life is positioning itself in Germany as a financial advisory and insurance company under one roof by managing all production and distribution organisations from a single source. The segment information comprises local insurance activities and the financial advisory companies operating in Germany under Swiss Life Select, tecis, HORBACH and Deutsche Proventus.
At the end of 2014 the proprietary financial advisory companies in Germany had 3012 trained and registered financial advisors under contract. Higher training and registration requirements in the financial services sector are making it harder to increase advisor headcount, although they are also improving the quality and sustainability of the advice on offer.
The International segment covers business with international high net worth individuals (PPLI), multinationals (Corporate Clients) and the financial advisory companies Swiss Life Select in Austria, the Czech Republic and Poland as well as Chase de Vere in the United Kingdom.
Corporate Clients specialises in global life and pensions solutions for multinationals. Thanks to the positive risk development and improved investment result, the profitability of its own balance sheet in Luxembourg was consolidated further. The Swiss Life Network, a leading independent provider of global employee benefits solutions, also consolidated its strong market position in 2014.
Fee income from the financial advisory companies rose markedly by CHF 7 million to CHF 140 million. UK business was the largest contributor to this result following its conversion to a fully fee-based advisory model in the wake of the ban on commission payments imposed by the Retail Distribution Review (RDR) since 2013. The units in Austria and the Czech Republic also increased their fee income.
In 2014, Swiss Life Asset Managers achieved a segment result of CHF 187.5 million, corresponding to an increase of CHF 21.3 million or 12.8% compared to the previous year. Thanks to new asset inflows and positive market development, assets under management increased by a total of CHF 27.9 billion to CHF 183.0 billion. Proprietary assets increased to CHF 149.3 billion and assets invested in investment funds and external customer mandates increased to CHF 33.7 billion. Thanks to a greater volume of assets under management, income rose by 20.6%. At the same time, operating costs grew by 30.1% due to business expansion, particularly in external customer business.
The expansion of business with external customers led to a net inflow of assets under management of CHF 6.9 billion. This was due principally to the growth of institutional mandates in fixed income and real estate. This also includes CHF 2.4 billion in assets following the acquisition of CORPUS SIREO.
Swiss Life Asset Managers significantly strengthened its position in Germany through the acquisition of CORPUS SIREO and, at the same time, positioned itself as a leading European real estate service provider with over CHF 60 billion in real estate under management and administration. Swiss Life Asset Managers can use this solid platform to further its growth strategy in external customer business and strengthen its position in core markets.
Swiss Life – Annual Report 2014 report on pages 48 to 66 takes into consideration the regulations on transparency stipulated in the Compensation Ordinance and FINMA circular 2010/1 on minimum standards for remuneration schemes of financial institutions.
Deutsche Bank AG, Taunusanlage 12, 60325 Frankfurt am Main, Germany, reported in a publication of 12 December 2014 that it held 1 621 298 shares of Swiss Life Holding, equivalent to a 5.05% share of the voting rights. At the same time Deutsche Bank AG held sales positions in the amount of 4.72% of the voting rights (1 512 727 equity swaps).
The full disclosures can be found on the publication platform of the SIX Swiss Exchange’s disclosure office at www.six-exchange-regulation.com/index_en.html, “Obligations” area, “Disclosure of Shareholdings ” section and “Significant Shareholders” subsection.
There were no changes in capital in 2014. The distribution of CHF 5.50 per share, which was approved by the General Meeting of Shareholders on 23 April 2014, was made out of the capital contribution reserve.
Shares 32 081 054 fully paid Swiss Life Holding registered shares with a par value of CHF 5.10 each were outstanding on the balance sheet date. Subject to the ten per cent limit on voting rights set out in the Articles of Association (cf. the section on “Shareholders’ participation rights” on page 67), each share grants the right to one vote at the General Meeting of Shareholders.
Additional information on the Swiss Life share is available in the section “Share Performance and Historical Comparison” on pages 271 and 272.
On the balance sheet date of 31 December 2014, the Board of Directors was composed of the following members: Name Main function Additional functions Year appointed 1
Rolf Dörig — Born 1957, Swiss national Chairman of the Board of Directors bild Rolf Dörig laid the groundwork for his professional career by obtaining a doctorate in law (Dr. iur.) from the University of Zurich before being called to the bar in Zurich. 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.
Wolf Becke — Born 1947, German national Member of the Board of Directors bild Wolf Becke studied mathematics, physics and economics at the Universities of Bonn and Freiburg and obtained a degree in mathematics. Between 1973 and 1977, he worked as a research assistant at the Mathematical Institute of the University of Freiburg and earned a doctorate in science. In 1978 Wolf Becke joined Hamburger Internationale Rückversiche rung AG (HIR), where he was employed in various positions until 1990, ultimately responsible for the Life and Health Reinsurance, Finance and Accounting and Investments divisions. He then moved to Hannover Re and E+S Rück. From 1992 to 1999, as a member of the Executive Board, he was responsible for both global life and health insurance business, and for non-life business in Asia, Africa and Australasia. From 1999 until his retirement for age reasons at the end of 2011, Wolf Becke concentrated on his responsibilities as CEO of the life and reinsurance business area (Hannover Life Re).
Other appointments: – Hannover Life RE America, Vice Chairman of the Board of Directors – Hannover Life RE Bermuda, Member of the Board of Directors – Hannover Life RE Ireland, Member of the Board of Directors – Hannover Life RE Australasia, Member of the Board of Directors – AEGON Blue Square Re N.V., Member of the Board of Directors
Adrienne Corboud Fumagalli will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding on 27 April 2015.
Other appointments: – Federal Communications Commission (ComCom), Member – CSEM Swiss Center for Electronics and Microtechnology Inc, Member of the Board of Directors – Plumettaz SA, Member of the Board of Directors – Fondation pour l’innovation technologique (FIT) in Lausanne, President – Fondation EPFL Innovation Park, President
Ueli Dietiker — Born 1953, Swiss national Member of the Board of Directors bild Certified accountant Ueli Dietiker started his career at Ernst & Young. He later assumed management responsibility in the finance division at Motor-Columbus Ltd. From 1995 to 2001 he worked at Cablecom Holdings Ltd, most recently as CEO. In 2001 he switched to the Swiss telecommunications company Swisscom Ltd where he held several positions of responsibility. From 2002 until 2006 he was
Ueli Dietiker will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding on 27 April 2015.
Audit Committee – Zuckermühle Rupperswil AG, Member of the Board of Directors – thunerSeespiele AG, Member of the Board of Directors – BLS Ltd. and BLS Netz AG, Member of the Board of Directors and Member of the
Frank W. Keuper will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding on 27 April 2015.
Henry Peter will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding on 27 April 2015.
After initially working as an Assistant for Media Law at the Institute for Constitutional and Administrative Law at the University of Berne, and practising business and media law in Zurich, Washington DC and Geneva, she served as Secretary General at SIG Holding AG from 1992 to 1995. She then became a Member of the Executive Board of WICOR HOLDING AG (“WEIDMANN Group”), Rapperswil in 1995, where she was Head of Corporate Development and, from 1998, Head of the Business Area Electrical Technology Asia/Pacific. She has held the positions of Chief Executive Officer and Delegate of the Board of Directors of WICOR HOLDING AG since 2001.
Administration. In this function he was notably a member of the Liechtenstein OECD delegation and Governor of the European Bank for Reconstruction and Development (EBRD) in London for four years. Klaus Tschütscher went on to start his political career as a member of government of the Principality of Liechtenstein. Initially he was Deputy Prime Minister from 2005 to 2009, responsible in particular for Justice and Economic Affairs. From 2009 to 2013 Klaus Tschütscher
Swiss Life – Annual Report 2014 was Prime Minister and Finance Minister of Liechtenstein. He has received various awards and international distinctions. Since his withdrawal from politics, Klaus Tschütscher has been a member of the Board of Directors of Swiss Life Holding Ltd. Klaus Tschütscher is an honorary member of the Board of Trustees of the charitable foundation “Football is more” (FIM). Since his withdrawal from politics, Klaus Tschütscher has been a member of the Board of Directors of Swiss Life Holding Ltd.
Klaus Tschütscher will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding on 27 April 2015.
After serving for 11 years on Swiss Life Holding’s Board of Directors, Peter Quadri stepped down from the Board of Directors with effect from the General Meeting of Shareholders on 23 April 2014. Adrienne Corboud Fumagalli was newly elected to the Board of Directors.
The Chairman’s Committee held eleven meetings during the year under review. The average duration of a meeting was around two hours. The meetings were attended by all members, including the Group CEO and the Group CFO.
Swiss Life – Annual Report 2014 management and related performance-based and market consistent compensation. The fundamental duties and responsibilities of the Compensation Committee are set out in Article 12 of the Articles of Association as amended on 23 April 2014.
The Compensation Committee 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 Compensation Committee meets at least three times a year.
During the year under review, the Compensation Committee convened a total of seven times. Each session lasted for around two hours on average. There was full attendance at all meetings. In the year under review, the Chairman of the Board of Directors also attended meetings of the Compensation Committee in relation to nomination and succession planning issues in the Board of Directors and Corporate Executive Board.
In the year under review, the Audit Committee convened five times, with a meeting lasting around three hours on average. There was full attendance at all meetings, with the exception of two meetings, at each one of which one member was unable to attend. The Chairman of the Board of Directors was present at four meetings of the Audit Committee. The Group CEO was present at all meetings with the exception of one, and the Group CFO and the Head of Corporate Internal Audit, as well as 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.
The Corporate Executive Board bears responsibility in particular for the implementation of the corporate strategy, for the conditions governing business operations and for financial guidance. It is further responsible for preparing the resolutions for the Board of Directors and its committees,
Swiss Life – Annual Report 2014 and for monitoring the implementation of these decisions in the Group. It is vested with the authority to rule on business referred to it by the Board of Directors, the Board of Directors’ committees and the Chairman of the Board of Directors, insofar as approval or a decision is not reserved exclusively to the delegating body.
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. The Internal Control System (ICS) is another instrument available to the Board of Directors for information and controlling purposes. Further details are available in the “Risk Management” section on page 72.
The Corporate Executive Board is responsible for the implementation of the corporate strategy, for the establishment of conditions governing business operations and for financial guidance. It is responsible for the preparation of the resolutions for the Board of Directors and its committees, and for monitoring the implementation of these decisions in the Group. The Corporate Executive Board is vested with the authority to rule on business referred to it by the Board of Directors, the Board of Directors’ committees and the Chairman of the Board of Directors, insofar as decision or approval is not reserved exclusively to one of these.
Group Communications & Strategic Marketing * Member of the Corporate Executive Board ** Member of the Corporate Executive Board since 1 January 2015
Management structure of the Swiss Life Group as at 31 December 2014
On 31 December 2014 the Corporate Executive Board of Swiss Life Holding was composed of the following members: Member of the Corporate Executive Name Function Board since
(until December 2014) – Stiftung Technopark Zürich, Member of the Board of Trustees (until December 2014) – TECHNOPARK Management Ltd, Vice Chairman of the Board of Trustees
(until December 2014) – economiesuisse, Member of the Executive Board – American Chamber of Commerce, Member of the Financial Services Chapter Board
Other appointments: – Sanitas Krankenversicherung and Sanitas Beteiligungen AG, Member of the Board of Trustees and the Board of Directors – Valiant Holding AG and Valiant Bank AG, Vice Chairman of the Board of Directors – Swiss Insurance Association (SIA), Member of the Managing Board – Zurich Chamber of Commerce, Member of the Board – German-Swiss Chamber of Commerce, Member of the Board – Financial Market Authority (FMA) Liechtenstein, Member of the Board of Directors
bild Charles Relecom graduated from the University of Namur (Belgium) with a degree in mathematics and went on to gain a master’s degree in Actuarial Science at the University of Louvain (Belgium). He began his career in 1978 as Chief Actuary and Chief Technology Officer at Swiss Life in Belgium. In 1984 he moved to the head office in Zurich, where he played a significant role in setting up the International Divi sion. From 1988 to 1994 he worked for ELVIA Life as Director of Sales in the key accounts business. In 1994 he moved to «La Suisse» and, in 1998, was appointed CEO of the non-life business and Chief Actuary. In 2000 he became the CEO of «La Suisse», a position he held until 2005 when the company was integrated into the Swiss Life Group. Following the integration, Charles Relecom returned to Swiss Life in Belgium, initially as the CEO of Zelia S.A. and, from February 2006, as CEO for the entire Belgian business.
Member of the Corporate Executive Board as of 1 January 2015
From 2004 to 2007 Nils Frowein was CFO of financial services provider MLP, where he was heavily involved in laying the strategic foundations for the company. Nils Frowein joined AWD as deputy Chief Executive Officer in January 2008. He was initially Chief Financial Officer and was appointed Chief Operating Officer on 1 September 2008. Between 2009 and 2010 he additionally took charge of the Swiss business of AWD as acting CEO. Since 2010 he has also been Chairman of the Swiss Life subsidiary Chase de Vere in the UK and since 2011 Chairman of the Supervisory Board of Swiss Life Select Austria.
The Ordinance against Excessive Compensation in Listed Stock Companies (Compensation Ordinance, VegüV) came into force on 1 January 2014. In order to implement these provisions, the General Meeting of Shareholders of Swiss Life Holding resolved on 23 April 2014 on a corresponding proposal by the Board of Directors to amend the Articles of Association. The amendments take account of the new requirements and powers of the General Meeting of Shareholders in relation to corporate governance and compensation.
Since 2009, Swiss Life has given shareholders the opportunity to hold a separate advisory vote at the General Meeting on the compensation report for the relevant financial year. The outcome of the vote is important for the Board of Directors in their assessment and structuring of compensation. A vote on the compensation report will continue to be held in the future in line with good corporate governance practice.
– For the Board of Directors: The exclusively fixed compensation until the 2016 ordinary General Meeting.
The compensation policy underpins the performance culture required by the corporate strategy and is 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
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. They are based on the achievement of annual objectives defined in advance for a period of three years as part of medium-term planning and determined on the basis of the actual performance of individuals or teams in relation to the objectives set (performance-linked payment) and on the degree of achievement of the Swiss Life Group targets as reflected in its annual result (share in the company’s success). Quantitative and qualitative performance is assessed also 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.
The share in the company’s success is measured using quantitative Group targets (Key Performance Indicators, KPIs), which are defined in advance for the following three years as part of mediumterm planning. The main KPIs for the medium-term planning are, besides the annual profit, the planned cost savings, the risk and fee result, new business profitability, the return on equity and solvency (Swiss Solvency Test, SST). In order to avoid conduct aimed at the short-term achievement of key indicators with a higher weighting, the individual KPIs are not mechanistically weighted in advance. Their individual weighting is determined at the end of each financial year by the Board of Directors as a whole on the basis of a proposal by the Compensation Committee taking all developments into account and consideration (discretionary decision).
Finally the Board of Directors as a whole is responsible for determining the individual compensation of members of the Corporate Executive Board.
Swiss Life – Annual Report 2014 available for their compensation and to offset any disadvantages in connection with the change of job; this does not require the approval of the General Meeting of Shareholders.
The members of the Board of Directors are granted exclusively fixed compensation. This is paid 70% in cash and 30% in Swiss Life Holding shares; the shares are subject to a three-year blocking period.
For the period from the 2014 Annual General Meeting of Shareholders to the 2015 General Meeting, the Board of Directors determined the compensation for the members of the Board of Directors, with the exception of the Chairman, at the same level as for the 2012 and 2013 financial years. For the Chairman of the Board of Directors the fixed compensation in cash and in blocked shares was reduced by CHF 240 000 to CHF 1 200 000 as from the 2014 General Meeting of Shareholders. In relation to the 2014 calendar year, this amounts to compensation in cash and in blocked shares of CHF 1 280 401.
Rolf Dörig, Chairman of the Board of Directors 1 008 000 2 618 432 060 1 440 060 286 416 – 1 726 476 6 3 The allocation of shares was effected on 14.06.2013 and 13.12.2013 at the stock exchange closing price of CHF 155.20 and CHF 176.20 respectively. Taking into account the blocking period of three years, the economic value, which is equal to the tax value, is CHF 130 309 and CHF 147 941 respectively. When allocating the blocked shares (30% of fixed compensation), the calculated units are rounded up to the next whole number.
Salary is determined annually by the Board of Directors, on the basis of a proposal by the Compensation Committee, taking into account the individual member’s function-related responsibility and the current market conditions.
The amount of the variable compensation (short-term variable compensation in cash and equity compensation plan as a long-term variable compensation component) is limited in the Articles of Association of Swiss Life Holding to a maximum of 181% of the fixed basic salary (“bonus cap”, upper limit for the variable compensation).
In the same way the allocation of future subscription rights to Swiss Life Holding shares (equity compensation plan, RSU plan) is dependent on the respective target achievement. The cash bonus thereby serves as a reference, whereby the deferred compensation components (RSU plan and deferred compensation in cash) are considered as a whole and together with the cash bonus are subject to the upper limit specified in the Articles of Association.
The compensation for members of the Corporate Executive Board for the 2014 financial year is reported in detail in the 2014 compensation table below. Patrick Frost, Chairman of the Corporate Executive Board (Group CEO) since 1 July 2014, received the highest compensation of the members of the Corporate Executive Board in the 2014 financial year; accordingly his compensation is disclosed individually.
The short-term variable compensation component for the Corporate Executive Board of a total CHF 3 949 081 (cash bonus of CHF 3 368 081 and deferred compensation in cash of CHF 581 000), which was determined by the Board of Directors at the beginning of 2015 for the 2014 financial year and will be proposed to the General Meeting of Shareholders on 27 April 2015 for approval, is disclosed in the following compensation table on an accrual basis as compensation for the 2014 financial year (accrual method). The members of the Corporate Executive Board did not receive any compensation in shares for the 2014 financial year; they are participating in the current equity compensation plan that provides for the allocation of so-called Restricted Share Units (RSUs).
The long-term variable compensation component in the form of the equity compensation plan (RSU plan 2015) is also reported in the compensation table for the 2014 financial year, which serves as the basis for the amount of the allocation and the corresponding number of allocated RSUs (accrual method).
3 The short-term variable compensation component for the 2014 financial year (bonus and deferred compensation in cash) was determined by the Board of Directors at the beginning of 2015 for the 2014 financial year.
4 Child allowances (CHF 8650), company cars (CHF 23 426), premium contributions to 3rd pillar pension plans (CHF 104 112), other (CHF 3721), each in total.
Patrick Frost, Group CEO from 01.07.2014 205 224 0 1 929 966
Other members of Corporate Executive Board 1 406 000 9 644 1 985 409 12 911 000 7 The variable deferred compensation in cash is paid out after a deferral period of three years, provided the requirements are satisfied at that point.
9 For the 2015 RSU plan beginning 01.03.2015 the 2014 financial year forms the basis for the amount of the allocation and the corresponding number of allocated RSUs. The allocation of RSUs on 01.03.2015 was effected at a fair value of CHF 205.87, as calculated by an independent consultancy firm.
3 Child allowances (CHF 4300), allowance for years of service (CHF 7032), company cars (CHF 68 056), premium contributions to 3rd pillar pension plans (CHF 99 092), other (CHF 10 919), each in total.
Other members of Corporate Executive Board 1 168 476 0 9 119 246 4 Pursuant to the pension fund regulations, occupational provisions were financed by the employer and the employee at a ratio of 70% to 30%.
5 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 514 967 in the year under review.
Aggregate total compensation incl. deferred compensation in cash and RSUs Amount 6 Number Amount (amount)
Other members of Corporate Executive Board 767 000 10 206 2 077 329 11 963 575 6 The variable deferred compensation in cash is paid out after a deferral period of three years, provided the requirements are satisfied at that point.
Swiss Life – Annual Report 2014 1 audited 2 “Closely linked parties” are natural persons and legal entities (in the sense of Art. 678 of the Swiss Code of Obligations and Art. 16 of the Compensation Ordinance) that have close personal, economic, legal or de facto ties with members of governing bodies. This typically includes spouses, minor children, companies controlled by members of governing bodies, and natural or legal persons serving as members of governing bodies in a fiduciary capacity.
SLH shares 1 Total number of RSUs allocated in the years 2012, 2013 and 2014 in connection with the relevant equity compensation plan. The RSUs represent future subscription rights that entitle the individuals concerned to receive SLH shares after a period of three years, provided that the relevant conditions are met at that point.
Shareholdings as well as future subscription rights to Swiss Life Holding shares as at 31 December 2013 are shown in the Notes to the Swiss Life Holding Financial Statements on page 267.
We have audited the sections on pages 55 to 56 and 60 to 62 of the accompanying compensation report of Swiss Life Holding Ltd for the year ended 31 December 2014.
Auditor’s responsibility Our responsibility is to express an opinion on the accompanying compensation report. We conducted our audit in accordance with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the compensation report complies with Swiss law and articles 14–16 of the Ordinance.
Opinion In our opinion, the compensation report of Swiss Life Holding Ltd for the year ended 31 December 2014 complies with Swiss law and articles 14–16 of the Ordinance.
In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of his own shares and those he represents. Legal entities and partnerships which are connected through capital, voting rights, uniform management or in any other way, as well as individuals or legal entities and partnerships which act in concert by virtue of agreement, as a syndicate or in any other way, are deemed to be a single person. Any amendment to or revocation of restrictions on voting rights must be approved by at least two thirds of the voting shares represented at the General Meeting of Shareholders and an absolute majority of the share par value represented. The Board of Directors can permit exceptions to this limit on the basis of its discretionary powers; during the year under review, no such exceptions were granted.
In 2014 PwC received additional fees totalling around CHF 1.5 million (2013: CHF 1.4 million), approximately CHF 0.6 million of which was for financial advisory services, CHF 0.2 million for fiscal advisory services and CHF 0.6 million for the audit of the Market Consistent Embedded Value (MCEV) report. The remainder consists of fees for actuarial, strategic, legal and other advisory services. All services were performed in compliance with the relevant independency regulations set forth in the Swiss Code of Obligations and the Audit Supervision Act.
Swiss Life will hold an Investors’ Day on 25 November 2015 to provide information on the future strategy and business development.
Risk management is a key component of Swiss Life’s management process. The respective committees of the Corporate Executive Board and the Board of Directors monitor and take decisions in the area of risk management; these are then incorporated into the annual planning process. On the one hand, they comprise qualitative assessments from a strategic perspective and taking into consideration operational risks and the internal control system (ICS). On the other hand, quantitative elements for each insurance unit, such as risk budgeting and investment strategy, are included in asset and liability management. Based on the overall risk capacity and risk appetite and taking account of regulatory requirements, limits are set in the individual units for the financial risks incurred, according to which the investment targets are pursued. 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.
Swiss Life uses analytical methods to ensure that strategic risks are dealt with adequately in what continues to be a very challenging economic environment. In its strategic risk management process, Swiss Life incorporates all the information on risks and the risk/return characteristics in its strategic decisions. A thorough understanding of the interplay of individual risks is essential to take into account the factors influencing risks during strategy development so that these factors can be steered appropriately.
Operational risk management (ORM) at Swiss Life includes the methods and processes used for the identification, assessment and steering or avoidance of operational risks. ORM defines operational risk as the danger that losses may result from shortcomings or failures in internal processes, people or systems, or from external events. Swiss Life’s ICS consists of the entirety of procedures, methods and measures prescribed by the Board of Directors and the Corporate Executive Board to ensure the orderly conduct of business. The focus is on the reliability of financial reporting, the effectiveness of business processes and compliance with laws and regulations issued to protect the company’s assets.
Economic capital 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 in order to maximise the company value is based on a risk/reward trade-off. For risk and capital management decisions, Swiss Life 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 on the basis of loss distributions using a specified risk measure. The overall capital requirement is obtained by taking into consideration respective diversification effects.
Continuous monitoring of solvency under the SST is conducted on a monthly basis; calibration is updated based on the full SST calculations as at the beginning of each calendar year and as at mid-year.
Swiss Life has established a target capital level in line with its rating ambition. Within the capital analysis, in addition to assessing capital adequacy, Standard & Poor’s also evaluates the quality of capital with respect to its structure (including the share of equity and hybrid capital). Capital adequacy is monitored on an ongoing basis according to Standard & Poor’s capital model.
Following the rating upgrade in May 2012, the rating agency Standard & Poor’s has once again recognised the operational advances of Swiss Life and raised the rating outlook in May 2014 from “stable” to “positive”. The current rating for Swiss Life Ltd is therefore “A– with positive outlook”.
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 2014; 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 free surplus (FS): additional capital allocated to the covered business above the required capital
Swiss Life – Annual Report 2014 2 Summary of MCEV Results 2.1 Key results
Benefiting from continued operational improvements, Swiss Life increased its MCEV in 2014 from CHF 11 378 million to CHF 12 901 million and generated, in an environment of declining interest rates, a value of new business of CHF 255 million (CHF 289 million in 2013).
Present value of new business premium (PVNBP) 14 414 12 929
The value of new business profited from substantially increased volumes while the considerable decline of the interest rates had a negative effect. The resulting pressure on new business profitability was partly mitigated by active new business steering across the Group.
The value of covered business increased by 14%. Operating MCEV earnings contributed substantially to this increase by profitable new business and a high operating return on the in-force business supported by margin management and favourable demographic experience.
The following graph and table show the MCEV by components, together with the previous year’s results.
The value of in-force business increased by 15%. This improvement is due to a higher certainty equivalent value and an overall lower deduction for TVOG, while the cost of residual non-hedgeable risks increased, mostly due to discounting effects.
Driven by the Swiss and French business, the new business volume (PVNBP) increased by 11%. This, in combination with active new business steering, pricing discipline and cost efficiency
The table below shows the development of Group MCEV split by components from 31 December 2013 to 31 December 2014.
The opening adjustment of the Group MCEV represents the distribution in 2014 to shareholders out of the capital contribution reserve of CHF 5.50 per share corresponding to a total of CHF 176 million as described in the Consolidated Financial Statements (note 26), and currency exchange rate effects of CHF 1 million.
The closing adjustments result mainly from the transfer of funds between covered and noncovered business and currency exchange rate developments.
Expected existing business contribution (reference rate) 8 –3 16 21 21
Expected existing business contribution (in excess of reference rate) 8 0 298 306 363
Opening adjustments Opening adjustments represent dividend payments from covered to non-covered business.
Value of new business Value of new business contributions from free surplus and required capital sum up to the new business strain of CHF –133 million (2013: CHF –106 million). This represents the shareholders’ share in acquisition expenses for new business. The VIF-component of CHF 388 million (2013: CHF 394 million) is the value of future profits from new business.
Economic variances Economic variances represent the change in embedded value by replacing the starting economic scenarios by the closing ones. Effects from deviations between actual and expected investment returns are included here. Overall, the economic variances had a positive impact on MCEV. Strong real estate and equity performances and slightly reduced credit spreads were positive; the continued disciplined asset liability management mitigated the effect of the challenging interest rate environment.
Other non-operating variances Other non-operating variances encompass effects relating to government-set parameters, tax impacts and changes in the regulatory environment. It mainly relates to the introduction of the Life Insurance Reform Act in Germany.
The economic sensitivities are assumed to occur after the new business contracts have been sold, indicating how the value of in-force business and the value of new business written would be affected by economic shocks.
100 bp increase of interest rates (reference rates) 530 5% 74 29%
25% increase in equity / property implied volatilities –322 –3% –14 –6%
–1 580 2.7 Reconciliation of IFRS net asset value to Group MCEV
Value of in-force business 7 315 1 Goodwill adjustments correspond to goodwill of covered business with the exception of CHF 90 million from French operations (see section 3.2). 2 Group MCEV includes CHF 927 million of goodwill and intangible assets as part of the unadjusted IFrS net assets for non-covered business.
Swiss Life – Annual Report 2014 3 Information by Market Unit 3.1 Market units
Swiss Life – Annual Report 2014 3.2 Results by market unit
ValuE OF IN-FOrCE BuSINESS 5 240 1 405 380 290 7 315
Time value of financial options and guarantees 261 –470 –143 –21 –373
Frictional costs of required capital –214 –61 –4 –19 –298 1 The value for France includes CHF 90 million in goodwill and intangible assets originating from the non-life and non-health insurance operations.
Time value of financial options and guarantees –25 –325 –140 –13 –502
Switzerland New business consists of new contracts and new coverages on existing contracts. Within group life business, replacements and newly insured persons entering existing group life contracts are not accounted for as new business.
The value of new business remains at a high level due to increased volumes in both group and individual life, where a single premium product with flexible and lower guarantees was launched, which mitigated the challenging capital market environment that led to a lower new business margin.
In life, the share of unit-linked business was further increased. Higher new business volumes and a revised profit-sharing approach limited the negative effects of the challenging capital market environment.
Germany The value of new business of the German business unit decreased due to substantially lower interest rates. This was partly counteracted by an improved business mix with an increased share of risk products, the enhanced product offering in savings and long-term care, as well as disciplined surplus sharing. The selective new business approach resulted in lower production, which was addressed by acquisition expense reductions.
Expected existing business contribution (reference rate) 12 6 2 1 21
Switzerland Opening adjustments reflect the dividend payment to the Swiss Life Holding net of dividends received.
The positive experience variances relate to improved persistency and other variances of actual development versus expectations. Also balance-sheet strengthening measures, such as a reduction of technical interest rates, had positive impacts.
The positive other operating variances relate mostly to the update of the spread applied for the valuation of the hybrid debt.
Operating earnings of CHF 397 million correspond to a return of 17% on MCEV. In addition to the expected business contribution, this is driven by a revised profit-sharing approach with an increased financial margin, the profit contributions of the non-projected businesses, updated loss ratios in health and a revised commission scheme in individual protection and health business.
Closing adjustments are the effects of the difference between the closing euro exchange rate and its opening forward rate.
Closing adjustments relate to the aforementioned effects of currency exchange rates.
(see below) 3. Cost of residual non-hedgeable risks (CNHR) 4. Frictional costs of required capital (FC)
The economic capital for cost of credit risk has been projected based on mathematical reserves. An annual charge of 4% has been applied to the resulting projected economic capital.
All assets and liabilities reflect the actual positions as at valuation date.
Hybrid debt In accordance with the MCEV Principles (G3.4), hybrid debt allocated to covered business is valued by discounting the corresponding coupon and nominal payments (liability cash flows) with reference interest rates and spreads that would be used by capital markets for debt with similar characteristics. For the spread used, see section 5.1.1.
For the calculation of the MCEV and the value of the new business as at valuation date, 2000 economic scenarios are used, ensuring 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.
Swiss Life – Annual Report 2014 4.5 Dynamic management actions and policyholder behaviour
As described in section 3.1, covered business relates to the operations in: – Switzerland – Germany – France – Luxembourg – Liechtenstein – Singapore
The market consistent calibration of the economic scenarios is based on traded market instruments at the valuation date wherever possible. This includes nominal and real yield curves, interest rate volatility and equity volatilities. Where market data is not available or the market is not liquid enough, the model calibration is based on best estimate assumptions. This notably includes correlations, exchange rate volatilities and real estate volatilities.
The underlying liquidity premium is determined by applying the formula Maximum (0; 50%*(corporate credit spread over swap –40bp)), where the corporate spreads over swap are measured with appropriate market indices. For the corporate credit spread over swap rates for the three currencies euro, US dollar and British pound, we use the quotation from Markit©3 instead of using the twostep approach as described in the QIS 5 guidance. For Canadian dollar we use the quotation from BofA Merrill Lynch. For the spread over swap rates for Swiss franc we use a SIX Swiss Exchange Bond Index (SBI® Corporate) composed of investment grade, foreign and domestic corporate issues in Swiss francs.
As some of Swiss Life’s liabilities are running longer than asset durations are available on financial markets in sufficient depth and liquidity, an extrapolation of yields is needed to assess swap rates beyond this horizon. Swiss Life uses the approach for extrapolation prescribed by EIOPA for QIS 5.
The whole yield curve is shifted for the 100bp increase/decrease in reference rate sensitivity including the extrapolated part beyond terms where market data is used for calibration of the reference rates.
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.1.1.2 Swap rates as at 31 december 2013
5.1.2 Volatility assumptions Volatility assumptions for the year-end 2014 and 2013 calculations are derived from market data as at 31 December 2014 and 2013.
The interest rate volatilities are based on implied volatilities of at-the-money receiver swaptions. The tables below show rates for euro and US dollar with 20-year tenors and rates for Swiss franc with 10-year tenors.
5.1.2.3 Equity option implied volatilities as at 31 december 2014 and 31 december 2013
The property volatilities are based on best estimate assumptions considering historical data.
5.1.2.4 Property volatilities used for the calculation as at 31 december 2014 and 31 december 2013
Volatility 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 15% for 2014 and 17% for 2013.
Fixed risk premiums are used for other risky assets. Return assumptions for equity and property are derived from the 10-year swap rates, plus a risk premium; see table 5.1.5.1 below.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the MCEV Report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the MCEV Report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation of the MCEV Report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of the principles used and the reasonableness of significant estimates made, as well as evaluating the adequacy of the overall presentation of the MCEV Report.
This report has been prepared solely for the Board of Directors of Swiss Life Holding Ltd in accordance with the terms of our engagement letter. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown except where explicitly agreed by our prior consent in writing. This report does not extend to any financial statements of Swiss Life Holding Ltd.
Net asset value (NAV) The net asset value is the market value of assets attributed to the covered business over and above that required to back liabilities for covered business.
Benefits and claims under investment contracts with discretionary participation –932 –826
Share of other comprehensive income of associates 0 0 adjustments relating to items that may be reclassified:
revaluation surplus on investment property –3 6 remeasurements on defined benefit pension liability –297 –2 adjustments relating to items that will not be reclassified:
Intangible assets including intangible insurance assets 17 2 972 2 937
Premiums, policy fees and deposits received, net of reinsurance 15 239 14 385
Benefits and claims paid, net of reinsurance –11 539 –12 223
financial instruments at fair value through profit or loss 566 833
Distribution out of capital contribution reserve 26 – –176 – – – –176 – –176 equity-settled share-based payments – 9 – – – 9 – 9
Distribution out of capital contribution reserve 26 – –144 – – – –144 – –144
Issuance of convertible debt (equity component) 26 – 46 – – – 46 – 46 equity-settled share-based payments – 8 – – – 8 – 8
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.
2.2 Changes in accounting policies offsetting financial assets and liabilities (amendments to ias 32) In December 2011, application guidance was added to IAS 32 Financial Instruments: Presentation to address inconsistencies identified in applying some of the offsetting criteria. This included clarifying the meaning of ‘currently has a legally enforceable right of set-off’ and that some gross settle ment systems may be considered equivalent to net settlement. No significant impact arose from the implementation of the amendments as at 1 January 2014 on the consolidated balance sheet of the Swiss Life Group.
Novation of Derivatives and Continuation of hedge accounting (amendments to ias 39) In June 2013, Novation of Derivatives and Continuation of Hedge Accounting (Amendment to IAS 39 Financial Instruments: Recognition and Measurement) was issued in order to provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. The amendment is applicable for annual periods beginning on or after 1 January 2014. No significant impact arose from the implementation of the amendments on the consolidated financial statements of the Swiss Life Group ifriC 21 levies In May 2013, the International Accounting Standards Board issued IFRIC 21 Levies. This Interpretation addresses the accounting for a liability to pay a levy if that liability is within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. It also addresses the accounting for a liability to pay a levy whose timing and amount is certain. The Interpretation is applicable for annual periods beginning on or after 1 January 2014. The implementation of the Interpretation did not have a material impact on the consolidated financial statements.
The following amended Standards and Interpretations are not relevant to the Swiss Life Group: – Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
The Group’s consolidated financial statements include the assets, liabilities, income and expenses of Swiss Life Holding and its subsidiaries. A subsidiary is an entity over which Swiss Life Holding has control. Control is achieved if Swiss Life Holding has the power over the subsidiary, is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to use its power to affect its returns. Subsidiaries are consolidated from the date on which effective control is obtained. All intercompany balances, transactions and unrealised gains and losses on such transactions have been eliminated. A listing of the Group’s subsidiaries is set out in note 36. The financial effect of acquisitions and disposals of subsidiaries is shown in note 28. Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions.
foreign currency exchange rates foreign currency translation On consolidation, assets and liabilities of Group entities denominated in foreign currencies are translated into Swiss francs at year-end exchange rates. Income and expense items are translated into Swiss francs at the annual average exchange rate. Goodwill reported before 1 January 2005 is translated at historical exchange rates. Goodwill for which the acquisition date is on or after 1 January 2005 is carried in the foreign operation’s functional currency and is translated into Swiss francs at year-end exchange rates. The resulting translation differences are recorded in other comprehensive income as cumulative translation adjustments. On disposal of foreign entities, such translation differences are recognised in profit or loss as part of the gain or loss on the sale.
foreign currency transactions For individual Group entities, foreign currency transactions are accoun ted for using the exchange rate at the date of the trans action. Outstanding balances in foreign currencies at year-end arising from foreign currency transactions are translated at year-end exchange rates for monetary items while historical rates are used for non-monetary items. Those non-monetary items in foreign currencies recorded at fair values are translated at the exchange rate on the revaluation date.
All derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair value as assets when favourable to the Group and as liabilities when unfavourable. Gains and losses arising on remeasurement to fair value are recognised immediately in profit or loss, except for derivatives that are used for cash flow hedging.
financial assets available for sale (afs) Financial assets classified as available for sale are carried at fair value. Financial assets are classified as available for sale if they do not qualify as held to maturity, held for trading, loans and receivables or if they are not designated as at fair value through profit or loss. Gains and losses arising from
loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments. Loans include loans originated by the Group and investments in debt instruments which are not quoted in an active market and for which no intention of sale in the near term exists. Loans are initially recognised at fair value, net of transaction costs, or direct origination costs. Subsequent measurement is at amortised cost using the effective interest method.
financial assets at amortised cost The Group assesses at each balance sheet date if there is objective evidence that a financial asset or a group of financial assets is impaired. It is assessed whether there is objective evidence of impairment individually for financial assets that are individually significant and collectively for financial assets that are not individually significant.
A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Held-to-maturity securities and loans and receivables are assessed for impairment when a significant decrease in market value related to credit risk arises, namely after a downgrade of a debtor’s rating below single B– after initial recognition (i.e. CCC or lower according to Standard and Poor’s or equivalent) or when payments of principal and/or interest are overdue by more than 90 days. If there is objective evidence that an impairment loss
financial assets carried at fair value (available for sale) At each balance sheet date, an assessment is made whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of an equity instrument classi fied as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered objective evidence of impairment. In this respect, a decline of 30% or more is regarded as significant, and a period of 12 months or longer is considered to be prolonged. In such a situation, the impairment loss – measured as the difference between the acquisition cost and the current fair value – is removed from other comprehensive income and recognised in profit or loss. After recognition of an impairment loss, any further declines in fair value are recognised in profit or loss, and subsequent increases in fair value are recognised in other comprehensive income.
Available-for-sale debt securities are assessed for impairment when a significant decrease in market value related to credit risk arises, namely after a downgrade of a debtor’s rating below single B– after initial recognition (i.e. CCC or lower according to Standard and Poor’s or equivalent) or when payments of principal and/or interest are overdue by more than 90 days. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event after the impairment loss was recognised, the impairment loss is reversed through profit or loss.
Discretionary participation features (Dpf) Discretionary participation features are defined in IFRS 4 Insurance Contracts as contractual rights to receive, as a supplement to guaranteed benefits, additional benefits which are likely to be a significant portion of the total contractual benefits and whose amount or timing is contractually
Policyholder deposits For investment-type contracts, savings premiums collected are reported as deposits (deposit accounting). The liabilities relating to these contracts comprise the accumulation of deposits received plus interest credited less expenses, insurance charges, and withdrawals.
liability adequacy test If the actual results show that the carrying amount of the insurance liabilities together with anticipated future revenues (less related deferred acquisition costs (DAC) and related intangible assets) are not adequate to meet the future obligations and to recover the unamortised DAC or intangible assets, the entire deficiency is recognised in profit or loss, either by reducing the unamortised DAC or intangible assets or by increasing the insurance liabilities. The liability adequacy test is performed at portfolio level at each reporting date in accordance with a loss recognition test considering current estimates of future cash flows including those resulting from embedded options and guarantees.
embedded options and guarantees in insurance contracts Insurance contracts often contain embedded derivatives. Embedded derivatives which are not closely related to their host insurance contracts are separated and measured separately at fair value. Exposure to embedded options and guarantees in insurance contracts which are closely related or which are insurance contracts themselves, such as guaranteed annuity options or guaranteed interest rates, is reflected in the measurement of the insurance liabilities.
separate account/unit-linked contracts/private placement life insurance Separate account contracts represent life insurance contracts with a separated part that is invested in assets managed for the account and risk of the Swiss Life Group’s customers according to their specific investment objectives. Separate account liabilities are included in insurance liabilities. Separate account liabilities include the right of the policyholder to participate in the performance of the underlying assets.
Assets associated with separate account/unit-linked contracts and private placement life insurance are included in financial assets designated as at fair value through profit or loss, investment property, derivatives and cash and cash equivalents. The related income and gains or losses are included in the income statement under the respective line items. The Group has allocated on a rational basis the proportion of acquisition costs related to the insurance and deposit components, respectively. The accounting policy for deferred acquisition costs applies to the portion of acquisition costs associated with the insurance component, and the policy for deferred origination costs applies to the other portion (see 2.16 Intangible assets).
Revenue from sales is recognised when construction is complete and legal title to the property has been transferred to the buyer. Revenue and related costs of sales are presented in other income as realised gains/losses from sales of inventory property.
Costs primarily comprise commissions paid to independent financial advisors, fees for asset management and other (advisory) services.
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 in other comprehensive income (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 other comprehensive income and is also reflected in the amount of DAC in the balance sheet (“shadow accounting”).
Assumptions used to estimate the future value of expected gross margins and profits are evaluated regularly and adjusted if estimates change. Deviations of actual results from estimated experience are reflected in profit or loss.
Computer software Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight-line basis for the expected useful life up to three years. Costs associated with developing or maintaining computer software programs are recognised as an expense as incurred. Development costs that are directly associated with identifiable software products controlled by the Group and that will probably generate future economic benefits are capitalised. Direct costs include the software development team’s employee costs. Computer software development costs recognised as assets are amortised using the straight-line method over their useful lives, not exceeding a period of three years.
financial liabilities at fair value through profit or loss Financial liabilities at fair value are irrevocably designated as at fair value at initial recognition. Financial liabilities are designated as at fair value through profit or loss in the following instances: – Financial liabilities where the insurance benefits are linked to unit values of investment funds or relate to private placement life insurance.
Borrowing costs presented in the consolidated statement of income relate to the interest expense on the financial liabilities classified as borrowings whilst interest expense presented in the consolidated statement of income relates to interest expense on insurance and investment contract deposits and other financial liabilities.
other financial liabilities For deposits with fixed and guaranteed terms the amortised cost basis is used. Initial recognition is at the proceeds received, net of transaction costs incurred. Subsequently, they are stated at amortised cost using the effective interest method. Any difference between the proceeds (net of trans action costs) and the redemption value is recognised in profit or loss over the period of the deposits. For repurchase agreements, initial recognition is at the amount of cash received, net of transaction costs incurred. Subsequently, the difference between the amount of cash initially received and the amount of cash exchanged upon maturity is amortised over the life of the agreement using the effective interest method.
The amount recognised in the consolidated balance sheet represents the present value of the defined benefit obligations reduced by the fair value of plan assets. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans.
Remeasurements, comprising actuarial gains and losses, the effect of the changes of the asset ceiling and the return on plan assets (excluding interest) are reflected immediately in the consolidated balance sheet and in other comprehensive income in the period in which they occur. Such remea surements recognised in other comprehensive income will subsequently not be reclassified to profit or loss. Past service cost is recognised in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit asset or liability. Defined benefit costs comprise service costs and net interest expense which are presented in the income statement under employee benefits expense.
share-based payments The Group operates equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the shares is recognised in profit or loss with a correspond ing 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.
Swiss Life – Annual Report 2014 2.26 forthcoming changes in accounting policies
The International Accounting Standards Board published in September 2014 amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures. The amendments relate to sale or contribution of assets between an investor and its associate or joint venture. A full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a trans action involves assets that do not constitute a business, even if these assets are housed in a subsidiary. The amendments will be effective prospectively for annual periods beginning on or after 1 January 2016.
– Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets (Clarification of Acceptable Methods for Depreciation and Amortisation)
Swiss Life – Annual Report 2014 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies
Estimates and judgements in applying fair value measurement to financial instruments and investment property are described in note 30.
impairment of held-to-maturity and available-for-sale debt instruments and loans and receivables
Swiss Life – Annual Report 2014 investment returns Assumptions relating to investment returns are based on the strategic asset allocation. From this gross investment return, projected asset management fees are deducted to obtain a net investment return.
Swiss Life – Annual Report 2014 statement of income for the year ended 31 December 2014
Premiums earned on insurance contracts 8 789 2 815 1 491 49 – 11 13 156 –81 13 075
Net gains/losses on financial assets 2 025 112 463 16 0 15 2 631 – 2 631
Net gains/losses on financial instruments at fair value through profit or loss –1 787 15 –198 2 0 –25 –1 992 – –1 992
Net insurance benefits and claims –11 333 –2 288 –1 591 –9 – 2 –15 218 0 –15 218 employee benefits expense –254 –198 –150 –65 –152 –5 –823 2 –821
Impairment of property and equipment and intangible assets 0 – –12 – – – –12 – –12 other expenses –114 –162 –94 –47 –67 –24 –508 –3 –512 of which inter-segment –296 44 –44 –5 –27 –10 –339 339 unallocated corporate costs –66
Policy fees earned on insurance contracts 9 16 – 0 – – 25 – 25
Policy fees earned on investment and unit-linked contracts 43 121 28 86 – – 278 – 278
Benefits and claims under insurance contracts –9 456 –2 149 –1 644 –25 – 10 –13 265 63 –13 201
Impairment of property and equipment and intangible assets –1 – –6 0 – – –6 – –6 of which inter-segment –299 38 –38 –8 –21 –8 –336 336 unallocated corporate costs –65
Net profit 784 additions to non-current assets 2 258 252 130 3 5 0 2 648 – 2 648
Swiss Life – Annual Report 2014 balance sheet as at 31 December 2014
Income tax liabilities 1 991 total liabilities aND equity 192 854
Financial assets available for sale 56 954 16 022 6 493 1 104 37 461 81 071 – 81 071
Financial assets pledged as collateral 826 1 173 – – – – 1 999 – 1 999
liabilities linked to assets for the account and risk of the swiss life group’s customers
at fair value through profit or loss (FvPl) 8 –2 016 846 24 –2 –1 992 844
Share of profit or loss of associates 3 7 – – 3 7
The main objective of the ALM process is to ensure that the Swiss Life Group’s insurance operations can meet their commitments to policyholders at all times while also adequately compensating shareholders for making risk capital available. Based on the economic principles of risk management and on the risk appetite definition applied in the risk budgeting process, ALM comprises the following main activities: the determination of the strategic asset allocation and of the risk capital and exposure sublimits.
The ALM process has been applied in all large insurance operations of the Swiss Life Group.
Swiss Life – Annual Report 2014 5.4 financial risk management objectives and policies
hedging The Swiss Life Group uses derivatives within the strict limits set by the applicable insurance legislation and by internal guidelines. Derivatives are primarily used to manage the exposure to foreign exchange rates, interest rates, equity securities and counterparties. The main instruments include index futures and option structures in stock markets, bond futures and swaps in order to manage duration, currency forwards and options in order to manage currency risk and credit default swaps or credit default swap indices and options on credit default swap indices in order to manage counterparty risk. Within certain limits, derivatives are used to enhance returns on the existing portfolio. The types of derivatives generally permitted for usage within the Swiss Life Group as well as the list of allowed over-the-counter trading partners have been approved by the Group Risk Committee.
Insurance liabilities linked to assets for the account and risk of the Swiss life group’s customers 2 760
ToTal INTereST-SeNSITIve INSuraNCe lIaBIlITIeS 63 146 25 534 90 88 771
A portion of Swiss Life’s investment portfolio comprises investments in funds which hold securities issued by non-public companies (private equity). These investments may be illiquid or may only be disposed of over time or at a loss, and they may not produce adequate returns or capital gains. If Swiss Life were required to liquidate some or all of the investments in its private equity port folio, the proceeds of such liquidation may be significantly less than the amount paid for, or the carrying amount of, such investments.
Counterparty risk is primarily managed by counterparty exposure limits and diversification in a broad debtor universe. The specific credit risk is managed through the holding of credit default swaps or credit default swap indices and options on credit default swap indices. A credit default swap provides insurance to the debt holder against a default of the debt issuer. It is traded overthe -counter and itself underlies the collateral management process described above. The credit default swap index is a hedge on credit risk of a basket of counterparties and is an over-the-counter derivative. A put option on a credit default swap index provides protection against adverse credit spread movements in the underlying basket of counterparties and is traded over-the-counter.
For fixed-income assets the total exposure per counterparty is aggregated and reported to the Group Risk Committee. Ratings and single positions above a certain level with regard to fixedincome assets are reported to management on a regular basis. The exposure to individual counterparties is also managed by other mechanisms such as the right to offset where counterparties are both debtors and creditors of the Group. In addition, limits regarding single counterparty exposure are in place which depend on the rating and amount of exposure in relation to total investments. Information reported to management includes assessment of bad debts. Where there exists a certain exposure to individual policyholders due to size of the contract, or homogenous groups of policyholders, a financial analysis equivalent to that conducted for reinsurers is carried out.
Debt securities pledged as collateral 2 763 1 999 – – 2 763 1 999
Debt securities classified as loans 6 088 6 365 – – 6 088 6 365 loaNS aND reCeIvaBleS
Policy and other originated loans 3 171 1 227 – – 3 171 1 227 oTHer aSSeTS
total exposure to CreDit risk 128 135 110 717 8 549 8 106 136 684 118 823
The following table shows the extent to which collateral and other credit enhancements mitigate credit risk in respect of the maximum exposure to credit risk: Credit risk mitigation – collateral held and other credit enhancements as at 31 December 2014
Policy and other originated loans 3 311 1 447 64 – 1 340 6 3 171
ToTal oTHer loaNS aND reCeIvaBleS 3 215 3 512 2 766 581 104 5 463 74 15 715 exposure to credit risk of debt instruments – credit rating by class as at 31 December 2013
ToTal oTHer loaNS aND reCeIvaBleS 3 883 3 582 1 097 508 105 4 026 48 13 249
Policy and other originated loans 8 – –2 – 6 –
entities with functional currency CHF – –6 475 –17 607 –2 527 –60 –2 942 entities with functional currency eur – – –2 837 –422 – –23
Swiss Life – Annual Report 2014 exposure to liquidity risk as at 31 December 2014
Swiss Life – Annual Report 2014 exposure to liquidity risk as at 31 December 2013
more than up to 1 month 1–3 months 3–12 months 1–5 years 5–10 years 10 years Total
Insurance contracts are contracts under which one party (the insurer) agrees to compensate the other party (the policyholder) if a specified uncertain future event affects the policyholder. The Group’s insurance entities neither generally accept nor generally deny insurance coverage to applicants, but ensure that all the insurance risks are identified and thoroughly assessed, and that the insurance premiums accurately reflect the risk taken. The amount and type of risk taken must be in line with the Group’s risk policy and strategy, and must also meet the profitability targets.
In CHF million retirement annuities – in payment 778 741 retirement annuities – deferred 410 414
Disability income and other annuities – deferred 15 000 14 750 life benefits insured by type of insurance – individual life
In CHF million whole life and term life 25 571 25 484
underwriting strategy Underwriting is the process of selecting and classifying insurable risks. The underwriting strategy attempts to ensure that the risks underwritten are profitable and well diversified in terms of type of risk and level of insured benefits. Life insurance underwriting is performed to ensure that the premiums and the general conditions of the insurance policies are adequate for the risks to be insured. The first step in the underwriting process is to determine which individual risks can be accepted. The second step is to place the accepted risks into groups of similar levels of risk. Both processes must be conducted objectively and consistently. The Group sets limits for the acceptance of insurance coverage arising from new and renewal business. Medical selection is part of the Group’s underwriting procedures, whereby premiums are charged to reflect the health condition and family medical history of the applicants. The limits relate to sums at risk, maximum insured losses or present value of premiums at the contract or insured person level. Depending on the type of business and the limit exceeded, the new or renewed contract must be approved by the corresponding risk committee or senior management. Contracts exceeding the set limits are tested individually for profitability according to predefined procedures before approval. Certain contracts which include specific risks relating to derivatives or demographic risk factors for which no reliable data is available must be submitted for approval irrespective of the amount of coverage offered. Insurance coverage exceeding set limits is subject to regular internal reporting requirements. Additionally, it must be ensured that the underwriting practices are in line with local laws.
Non-life The Swiss Life Group has non-life operations mainly in France covering risks associated with accident and health (disability) as well as property and casualty.
Cumulative payments to date –240 –248 –231 –200 –248 –252 –247 –233 –223 –130 –2 253 effect of discounting – – – – – – – – – – –
lIaBIlITIeS For THe CurreNT aND 9 PrevIouS yearS 13 20 29 31 49 49 88 98 138 211 726 liabilities for prior years 227
Approximately 1.4% in terms of earned insurance premiums was ceded as at 31 December 2014 (2013: 1.5%).
other risk transfer Risk transfer primarily takes the form of reinsurance. Alternative forms of risk transfer (such as securitisation) require the formal approval of the Group Risk Committee. No significant alternative form of risk transfer is used by the Group at present.
At 31 December 2014, if the longevity improvement parameter had increased by 5%, the embedded value would have been CHF 22 million lower (2013: CHF 15 million lower).
At 31 December 2014, if morbidity had been 5% higher, the embedded value would have been CHF 59 million lower (2013: CHF 48 million lower).
At 31 December 2014, if the swaption implied volatilities (interest rates) had been 25% higher, the embedded value would have been CHF 61 million lower (2013: CHF 202 million higher).
At 31 December 2014, if the equity securities and property implied volatilities had been 25% lower, the embedded value would have been CHF 263 million higher (2013: CHF 189 million higher).
Net result attributable to equity holders of Swiss life Holding 814 781 weighted average number of shares outstanding 31 904 630 31 947 309
Net result attributable to equity holders of Swiss life Holding 814 781 elimination of interest expense on convertible bonds 7 1 reSulT uSeD To DeTermINe DIluTeD earNINgS Per SHare 821 782 weighted average number of shares outstanding 31 904 630 31 947 309 adjustments (number of shares)
DIluTeD earNINgS Per SHare For THe NeT reSulT aTTrIBuTaBle To equITy HolDerS oF SwISS lIFe HolDINg (IN CHF) 24.11 24.22
Swiss Life – Annual Report 2014 7 Premiums, Policy Fees and Deposits Received
Deposits received under insurance and investment contracts 4 831 4 518 groSS wrITTeN PremIumS, PolICy FeeS aND DePoSITS reCeIveD 19 102 17 969
Swiss Life – Annual Report 2014 8 Details of Certain Items in the Consolidated Statement of Income
Interest income on loans and receivables 836 901 other interest income 3 9
Interest rate derivatives 168 72 equity derivatives –18 –62 other derivatives –8 –1
Change in liability for future life policyholder benefits, gross 4 484 3 207
Change in liability for future life policyholder benefits, gross 457 495
ToTal NeT INSuraNCe BeNeFITS aND ClaImS 15 218 13 920 interest expense
Interest expense on deposits under insurance contracts 22 69 79 other interest expense 29 36
Insurance agent and broker commissions 839 783 asset management and banking commissions 64 65 other commissions and fees 37 22
Derivatives designated as cash flow hedges 744 76 – 144 3 584 4 284
The Swiss Life Group used interest rate swaps to hedge available-for-sale fixed-rate bonds in USD against changes in the fair value attributable to interest rate risk. The nominal amount of these bonds as at 31 December 2014 was nil (2013: USD 1.6 billion).
Forward contracts are used as hedging instruments to protect investments in hedge funds against adverse movements in British pound and US dollar exchange rates.
Derivatives designated as cash flow hedges as at 31 December 2014
ToTal DerIvaTIveS DeSIgNaTeD aS CaSH Flow HeDgeS 76 144 –658 0 0 4 284 n/a n/a
In 2014 and 2013, the Group used forward starting swaps and forward starting bonds to hedge the exposure to variability in interest cash flows arising on the highly probable purchase of bonds in order to achieve an adequate yield level for reinvestments.
FINaNCIal aSSeTS DeSIgNaTeD aS aT FaIr value THrougH ProFIT or loSS Notes money market instruments 0 1
ToTal FINaNCIal aSSeTS DeSIgNaTeD aS aT FaIr value THrougH ProFIT or loSS 32 389 31 486
FINaNCIal lIaBIlITIeS DeSIgNaTeD aS aT FaIr value THrougH ProFIT or loSS
Share of net assets of investment funds attributable to non-controlling interests 1 090 2 358
ToTal FINaNCIal aSSeTS avaIlaBle For Sale 84 567 78 242 12 595 2 829 97 162 81 071
ToTal DeBT SeCurITIeS PleDgeD aS CollaTeral 2 763 1 999 total fiNaNCial assets pleDgeD as Collateral 2 763 1 999
Debt securities previously classified as available for sale 5 617 5 863 –6 –6 5 611 5 857 other debt securities classified as loans 477 508 – – 477 508 reCeIvaBleS
Interest income accrued on impaired loans was CHF 0.4 million as at 31 December 2014 (2013: CHF 0.5 million). The Group’s loan port folio is monitored closely through the review of information such as debt service, annual reports and assessments. This information is evaluated in light of current economic conditions and other factors such as diversification of the property portfolio. This evaluation is part of the regular review to determine whether the allowance for potential loan losses is warranted. Management believes that the allowance for loan losses is sufficient. However, management cannot predict with assurance the impact of future economic circumstances or how the mortgage and real estate portfolios would be affected by various economic circumstances.
As at 1 July 2008, certain financial assets were reclassified from financial assets available for sale to loans due to the disappearance of an active market. The financial assets reclassified primarily consist of corporate debt instruments and debt instruments relating to emerging markets. The fair value as at 1 July 2008 of the financial assets reclassified amounted to CHF 14 966 million. At the date of reclassification the effective interest rate ranged from 0.8% to 9.7%, and the amount of cash flows expected to be recovered was estimated at CHF 32 658 million. In 2008, unrealised losses of CHF 740 million were recognised in other comprehensive income in respect of these assets.
Fair value as at 31 December 6 539 6 711 gains (+)/losses (–) that would have been recognised in other comprehensive income if the assets had not been reclassified
Classification as assets held for sale and other disposals –654 –805 gains/losses from fair value adjustments 288 505
In July 2013, the Swiss Life Group increased its share in TECHNOPARK Real Estate LTD, Zurich, from 33.3% to 66.6%. From that date, TECHNOPARK Real Estate LTD, Zurich, is fully consolidated and no longer included in investments in associates.
Crédit et services financiers (CreSerFI), Paris 33.4% 47 0 1 – 1 –
Share of net assets (carrying amount) 47 47 12 12 n/a n/a uNreCogNISeD SHare oF loSS
for the period – – – – n/a n/a cumulatively – – – – n/a n/a
Swiss Life – Annual Report 2014 16 Property and Equipment property and equipment for the year 2014
BalaNCe aS aT eND oF PerIoD 570 54 61 27 713 aCCumulaTeD DePreCIaTIoN aND ImPaIrmeNT
Swiss Life – Annual Report 2014 property and equipment for the year 2013
land and Furniture other Notes buildings and fixtures Hardware equipment Total
Swiss Life – Annual Report 2014 other intangible assets for the year 2014
The acquisition of Prigest, Paris, in November 2013 led to the recognition of goodwill of CHF 8 million.
Swiss Life – Annual Report 2014 projection covers a three-year period for Lloyd Continental and CORPUS SIREO. Due to the duration of the insurance and investment contracts a five-year period was used for CapitalLeben. The calculations for Lloyd Continental, CORPUS SIREO 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 152 152 485 494 82 81 719 727
Customer relationships The acquisition of CORPUS SIREO Holding GmbH & Co. KG, Cologne, in October 2014 led to the recognition of customer relationships of CHF 62 million.
Investment contracts without discretionary participation at fair value through profit or loss 262 193 of which for the account and risk of the Swiss life group’s customers
investment contracts without discretionary participation 179 182 investment contracts with discretionary participation with deposit accounting
In CHF million addition from acquisition of insurance portfolio – 194
BalaNCe aS aT eND oF PerIoD 11 167 10 728 investment contracts with discretionary participation with actuarial valuation
In CHF million accretion of interest 33 27 liabilities released for payments on death, surrender and other terminations during the year –476 –331 effect of changes in actuarial assumptions and other movements 6 2
Swiss Life – Annual Report 2014 method on the basis of appropriate mortality and interest rate assumptions. These amounts relate to contracts issued in Switzerland.
Deposits released –13 –5 other movements 0 –2 reclassifications and other disposals 1 –3
In November 2012, Swiss Life Insurance Finance Ltd. offered to existing lenders under the subordinated perpetual step-up loan placed in 1999 by Swiss Life Ltd to purchase their loan holdings against a consideration consisting of both a cash component and a credit component. Altogether, EUR 265 million and CHF 290 million were purchased from lenders. The cash component amounted to a total of CHF 139 million. The credit component consists of a tranche of a subordinated dated step-up loan newly issued by Swiss Life Ltd. The subordinated dated step-up loan placed in connection with the offer amounts to CHF 471 million, is guaranteed by Swiss Life Holding, has a tenor of thirty years and is first repayable on 30 November 2022 at the option of the issuer, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The interest rate is 6-month Libor plus a margin of 4.20% p.a. until 30 November 2022. If the loan is not redeemed on 30 November 2022, the margin increases by 1%.
On 12 April 2007, ELM B.V., a Dutch repackaging vehicle, issued EUR 700 million in fixed/ floating rate subordinated perpetual notes to finance loan notes granted to Swiss Life Ltd, which are guaranteed by Swiss Life Holding. Swiss Life Ltd may repay the loan notes in full on 12 April 2017 or on any interest payment date thereafter, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The notes bear interest from 12 April 2007 to 12 April 2017 at a rate of 5.849% p.a. If the notes are not redeemed on 12 April 2017, the interest will be the aggregate of Euribor 3-month deposits and a margin of 2.5%.
In March 1999, Swiss Life Ltd privately placed a subordinated perpetual step-up loan comprising three simultaneous advances of EUR 443 million (at a rate of interest of Euribor plus a margin of 1.05%, increased by 100 basis points as from April 2009), CHF 290 million (at a rate of interest of Libor plus a margin of 1.05%, increased by 100 basis points as from April 2009) and EUR 215 million (at a rate of interest of Euribor plus a margin of 1.05%, increased by 100 basis points as from October 2009). In 2009, Swiss Life Ltd renounced the right to call the loan on its first call date. Following the purchase offer by Swiss Life Insurance Finance Ltd. in 2012, EUR 192 million remain outstanding. Swiss Life Ltd renounced the right to call the loan on the second optional call date in April 2014 and can next call it in 2019 or at five-year intervals thereafter, at its discretion, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority.
Swiss life ag CHF 471 CHF 471 +4.200% 2012 2022 468 468
Swiss life ag CHF 500 CHF 500 5.250% 2011 2016 496 494
Swiss life ag 1 eur 700 eur 590 5.849% 2007 2017 708 721
In May 2013, Swiss Life Holding raised CHF 425 million debt through the issuance of a CHF public bond dual tranche transaction, split into a CHF 225 million tranche with a tenor of 6 years and a CHF 200 million tranche with a tenor of 10 years. The unsecured senior bonds bear coupons of 1.125% and 1.875%, respectively. Settlement took place on 21 June 2013.
Claims under life insurance contracts 6 193 6 270 85 90 6 108 6 180
ToTal INSuraNCe lIaBIlITIeS aND reINSuraNCe aSSeTS 106 136 101 432 397 396 105 739 101 035 of which for the account and risk of the Swiss life group’s customers 5 2 760 2 200 – – 2 760 2 200 unearned premiums
Net additions from acquisition of insurance portfolio 293 – – – 293 –
Claims incurred, benefits paid and surrenders –8 093 –7 923 –37 –28 –8 056 –7 895 effect of changes in actuarial assumptions and other movements 1 257 881 –4 –7 1 261 888 reclassifications and other disposals 18 – – – 18 –
Swiss Life – Annual Report 2014 of retirement. Most plans are funded and the funding is governed by local requirements and with respect to the liability (determined based on actuarial methods) based on the plans’ benefit promises. For several plans, contributions are not only made by the employer, but also by the employee (generally as a part of gross salaries).
For some plans, the level of old-age pensions is determined by yearly amounts. Contributions are made in the form of premiums to an individual insurance contract with Swiss Life Germany. The premium is a fixed amount, determined by the rules of the pension plan, and depends on the employee’s status. Every three years, there is an adjustment of the contribution amount due to the general development of salaries in the German insurance industry. There is a risk that the employer has to make additional payments in case that the benefits of the individual insurance contract do not cover the benefits promised by the plan. Other benefits comprise lump-sum payments in case of death as well as disability pensions (if disabled before retirement age). The levels of these benefits are determined as fixed amounts by the plan depending on the employee’s status. This part of the plan is also covered by insurance contracts with Swiss Life Germany.
risks covered With respect to their defined benefit plans the Group faces the risks of adverse development of the prominent actuarial/financial assumptions such as discount rates, mortality assumptions and future salary growth inherent in the measurement of the plan liabilities. If the high-quality corporate bond yields (which are the basis for assessing the discount rate) decrease, the present value of the defined benefit obligation would increase which would lead to a higher defined benefit liability in the consolidated balance sheet. However, this effect would be partly offset by the increase in the value of bonds in the plan assets. A higher defined benefit obligation would also result if the average life expectancy (longevity) or the rate of future salary growth were higher than the corresponding values reflected in the financial/actuarial parameters.
Swiss Life – Annual Report 2014 amounts recognised as defined benefit assets/liabilities
Insurance contracts not eligible as plan assets under IFrS 1 440 1 424
changes in demographic assumptions 4 –2 effect of business combinations –19 –
BalaNCe aS aT eND oF PerIoD –3 097 –2 700 of which amounts owing to
Benefit payments –77 –64 effect of reclassifications and other disposals 3 –
A sensitivity analysis was performed for each significant actuarial assumption that shows the impact on the defined benefit obligation of changes in the respective actuarial assumption that were reasonably possible at the balance sheet date. The calculation is done by leaving all other assumptions unchanged (i.e. at their value used in the calculation of the defined benefit obligation implicit in the net defined benefit asset/liability in the consolidated balance sheet as at end of
At 31 December 2014, if the discount rate had been 50 basis points higher (lower), the defined benefit obligation would have decreased by CHF 221 million (increase CHF 251 million). At 31 December 2013, if the discount rate had been 50 basis points higher (lower), the defined benefit obligation would have decreased by CHF 156 million (increase CHF 173 million).
At 31 December 2014, if the average life expectancy had increased by one year (for both men and women), the defined benefit obligation would have increased by CHF 105 million. At 31 December 2013, if the average life expectancy had increased by one year (for both men and women), the defined benefit obligation would have increased by CHF 88 million.
The contributions expected to be paid for the year ending 31 December 2015 are CHF 63 million. These contributions include amounts payable under insurance contracts issued to defined benefit plans covering own employees.
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 amounted to CHF 1 million in 2014 (2013: CHF 1 million).
The RSUs granted in 2014 and 2013 are based on the Group-wide programme “Swiss Life 2015”. On the basis of the medium-term planning 2013–2015, performance criteria relating to cost efficiency (50% weighting), risk and fee result (25% weighting) and IFRS profit (25% weighting) have been determined by the Board of Directors. After expiry of the three-year period of the RSU plan, the target value for each performance criterion according to the medium-term planning 2013–2015 is compared with the actual result achieved. The share allocation corresponds to the number of allocated RSUs (1 RSU = 1 share) if all three performance criteria have been achieved or exceeded after the three-year period has elapsed; overperformance does not lead to a higher share allocation. If the targets are only partly achieved, the share allocation is correspondingly reduced based on the weighting of the performance target concerned or the RSUs expire worthless.
The RSUs granted under the programmes in 2011–2014 are without additional performance leverage. The attribution of shares after the expiry of the three-year deferral period will be effected, if certain conditions are fulfilled, on a 1:1 basis (1 RSU = 1 share). The value of the RSUs during the three-year term develops linearly with the Swiss Life Holding share price and symmetrically corresponds with shareholder interests.
In 2012, the number of RSUs granted under this programme amounted to 94 040. The fair value at the mea surement date amounted to CHF 93.77. The date of grant was 1 April 2012.
The expense recognised for share-based payment amounted to CHF 12 million in 2014 (2013: CHF 11 million).
Swiss Life – Annual Report 2014 share-based payment programmes (restricted share units)
Balance as at employee Balance as at 1 January Issued departures vested end of period
Income tax calculated using the expected weighted-average tax rate 270 245
NeT DeFerreD INCome Tax aSSeTS/lIaBIlITIeS –1 336 –48 538 –3 –29 –1 –877 1 relating to equity component of convertible debt
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. The foreign entities are controlled by the Group and these earnings are not expected to be repatriated in the foreseeable future. The amount of such temporary differences was approximately CHF 8.0 billion as at 31 December 2014 (2013: CHF 4.4 billion). If such amounts are ever repatriated, no material tax liabilities would be incurred due to participation exemption rules, unrecognised tax loss carryforwards and applicable double taxation treaties.
Total unused amounts reversed –1 –6 –21 –20 0 –3 –23 –29 unwinding of discount and effect of
reclassifications and other disposals – – 3 – –3 – – –
BalaNCe aS aT eND oF PerIoD 28 54 84 129 16 17 128 200 restructuring
Under the “Swiss Life 2015” programme, provisions for restructuring were set up in Germany, Switzerland, Liechtenstein and Luxembourg in 2014 and 2013. The outflow of the amounts is expected within the following one to two years.
As at 31 December 2014 and 2013, the share capital of SLH consisted of 32 081 054 fully-paid shares with a par value of CHF 5.10 each. In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of own shares or shares they represent. Conditional share capital was CHF 30 600 000.00 as at 31 December 2014 (2013: CHF 30 600 000.00).
SHareS ISSueD aS aT eND oF PerIoD 32 081 054 32 081 054
Sales of treasury shares – –3 880 allocation under equity compensation plans –70 642 –26 034
BalaNCe aS aT eND oF PerIoD 192 697 188 600 foreign currency translation differences
Items presented in other comprehensive income are grouped on the basis of whether they will be reclassified subsequently to profit or loss when specific conditions are met, and those that will not be reclassified.
Items that will not be reclassified to profit or loss comprise: – Revaluation surplus on the transfer of owner-occupied property to investment property following a change in use evidenced by the end of owner-occupation.
The following table provides information relating to amounts recognised in accumulated other comprehensive income: accumulated other comprehensive income for the year 2014
remea- gains/ sure- losses revalu- ments Foreign financial gains/ ation net currency assets losses surplus defined translation available cash flow other investment benefit other Notes differences for sale hedges items Total property liability items Total
Summarised financial information for subsidiaries with material non-controlling interests is as follows: In CHF million
Profit or loss allocated to non-controlling interests 2 0 1 2
Swiss Life – Annual Report 2014 28 Acquisitions and Disposals of Subsidiaries assets and liabilities from acquisitions
Fair value of equity interest(s) held before acquisition – 43 aCquISITIoN-relaTeD CoSTS
In October 2014, the Swiss Life Group acquired a 100% share in CORPUS SIREO Holding GmbH & Co. KG, Cologne, the leading independent real estate asset management service provider in Germany. Goodwill arose on the acquisition because of expected synergies and leveraging effects with existing business.
In November 2013, the Swiss Life Group increased its share in Prigest, Paris, from 25% to 100%.
In July 2013, the Swiss Life Group increased its share in TECHNOPARK Real Estate LTD, Zurich, from 33.3% to 66.6%.
Total asset management and other commission income 1 – – 1 0
Commission expense –1 – – –1 –1 employee benefits expense – –19 – –19 –20
For the years ended 31 December 2014 and 2013, no impairment allowance has been made for doubtful debts in respect of the amounts owed by related parties. This assessment is undertaken each financial year by examining the financial position of the related party and the market in which the related party operates.
“Guarantees provided” relates to a bank loan granted to an associated company of the Group in relation to property under construction.
Swiss Life – Annual Report 2014 30.1 assets and liabilities measured at fair value on a recurring basis financial instruments As a general rule, fair values of financial instruments are based on quoted prices sourced from wellknown independent price providers such as Bloomberg. Model-based level 2 and level 3 valuations of financial instruments are applied to a minority of the assets.
Investment contracts without discretionary participation – – 262 193 – – 262 193
level 2: valuation techniques and inputs Level 2 financial instruments carried at fair value include debt instruments, equity securities, investment funds, alternative investments, over-the-counter derivatives as well as investments in associates.
Debt instruments: Debt instruments categorised as level 2 of the fair value hierarchy comprise government, supranational, and corporate bonds for which prices are only available on an irregular basis or with a significant time lag. The price for such assets is obtained from an independent, acknowledged market data provider, which refers to quotes of recent transactions with the same or similar, actively traded bonds and systematically derives a comparable price for those less liquid securities. Alternatively, if such a derived price is missing, level 2 fair values of debt instruments are measured on a discounted cash flow basis using risk-adjusted discount factors. Main inputs to determine the discount factor are zero coupon yield curves and observable, rating-implied flat spreads to account for credit risk.
Over-the-counter derivatives: Level 2 fair values of over-the-counter derivatives on currencies, interest rates, and equities are based on theoretical valuations with observable market data from well-known data providers as inputs. The fair value measurement is based on acknowledged, well-established models. In certain cases, the market quotes used in those models may be slightly adjusted to better reflect specific market behaviour, e.g. volatility smiles.
Equity derivatives: Over-the-counter equity-index options are theoretically valued using the Black-Scholes model. Main inputs are the current spot value and the dividend yield of the underlying index. The implied volatility is taken from similar exchange-traded equity index options.
In the exceptional case that a theoretical valuation of an OTC derivative is not available in Swiss Life’s asset management system the fair value is provided by counterparties. The appropriateness of such quotes is validated by Swiss Life off system based on established models using observable market data as input.
Investment funds: Level 3 fair values of investment funds are primarily related to real estate funds. The valuation of the underlying property investments is done by independent appraisers using generally accepted valuation techniques (mainly discounted cash flow). The appraisers consider the general economic situation and the individual condition of the property investments. Main input factors applied in the discounted cash flow method are estimates on rental income and vacancies, projections of non-recoverable running costs (e.g. property taxes), maintenance costs, and risk-adjusted discount rates, which are determined individually for each property.
Swiss Life – Annual Report 2014 investment property The following table shows the fair value hierarchy of investment property as at 31 December: In CHF million valuation technique –
Total level 3: valuation techniques and inputs Discounted cash flow models used for investment property consider the present value of net cash flows to be generated from the property, taking into account expected rent growth rate, vacancy rate, rent-free periods, other costs not paid by tenants, maintenance costs and investment plans. The expected net cash flows are discounted using risk-adjusted discount rates. Location- and property-related criteria are reflected in the discount rate for each property. The criteria reflect the micro- and macro-location characteristics as well as the relevant parameters of the current management situation.
Total gains/losses recognised in profit or loss – 5 –18 27 36 577 0 288 915
BalaNCe aS aT eND oF PerIoD – 46 33 1 182 1 083 3 750 7 19 596 25 697 unrealised gains/losses recognised in profit or loss
Total gains/losses recognised in profit or loss – 6 0 10 40 5 1 505 567
for assets held at the end of the period – 5 0 5 –9 4 1 481 488 1 including assets attributable to non-controlling interests of investment funds
During 2014, debt securities of CHF 197 million were transferred from level 1 into level 2 due to reduced frequency of price quotations, and debt securities of CHF 321 million were transferred from level 2 into level 1 due to available quoted prices. Changes in fund pricing frequency (daily/ weekly) resulted in the following transfers of investment funds during 2014: CHF 493 million from level 1 into level 2, and CHF 63 million from level 2 into level 1.
The transfers between the levels of the fair value hierarchy have been made at the end of the reporting period.
liabilities measured at fair value based on level 3 for the year 2014
Total gains/losses recognised in profit or loss – – 0 0 0
Investment contracts without discretionary participation 11 36 11 36 1 Carrying amount approximates fair value
receivables and other financial liabilities The carrying amounts of receivables and other financial liabilities represent a reasonable estimate of fair value as the effect of discounting is immaterial and changes in credit risk are not significant. Such instruments include insurance receivables and payables, demand and short-term deposits and repurchase agreements. The disclosure of the fair value hierarchy is not applicable for these instruments.
Swiss Life – Annual Report 2014 31 Offsetting Financial Assets and Liabilities
The following financial assets and liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements: offsetting financial assets
Financial Cash collateral instruments pledged amouNTS aS aT 31 DeCemBer 2014
Private equity commitments 95 115 other capital commitments 511 727 operating lease commitments 136 100
Not later than 1 year 38 20 later than 1 year and not later than 5 years 93 66 financial guarantees
The Group has entered into various operating leases as a lessee. Rental expenses recognised in income for these items totalled CHF 39 million for the year ended 31 December 2014 (2013: CHF 39 million). Minimum lease payments totalled CHF 39 million in 2014 (2013: CHF 39 million).
Swiss Life – Annual Report 2014 33 Collateral assets pledged as collateral
The following table provides details of financial assets which have been sold or otherwise transferred, but which do not qualify for derecognition because substantially all risks and rewards of ownership are retained. Repurchase agreements and securities lending transactions are discussed in notes 2.7 and 12. Securities pledged under other transactions include debt securities pledged as collateral under reinsurance contracts issued and debt securities pledged as collateral under prime broker contracts to cover margins due in respect of derivative transactions. Other financial assets pledged include cash collateral provided for OTC derivative liabilities.
The Group holds marketable securities as collateral in respect of the following transactions: In CHF million
Swiss Life – Annual Report 2014 34 Future Minimum Lease Payments under Non-Cancellable Operating Leases – Lessor
Swiss Life – Annual Report 2014 36 Scope of Consolidation switzerland
Swiss life Products (luxembourg) S.a., Strassen, Branch Zürich, Zürich De until 26.08.2014 – –
Swiss life Select International Holding ag, Zürich IN from 01.02.2013 100.0% 100.0% Holding
TeCHNoParK Immobilien ag, Zürich CH from 23.07.2013 66.7% 66.7% real estate liechtenstein
CitCor residential verwaltungs gmbH, Düsseldorf am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo asset management retail gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo Broadway acquisition gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo Holding gmbH & Co. Kg, Köln am from 01.10.2014 100.0% 100.0% Holding
CorPuS SIreo Investment residential Berlin gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo Investment residential No. 2 gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo Investment residential No. 24 S.à.r.l. – Branch Köln, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo makler Frankfurt gmbH, Frankfurt am main am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo makler gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo Projektentwicklung Düsseldorf gmbH, Köln am from 01.10.2014 99.9% 100.0% asset management & real estate
CorPuS SIreo Projektentwicklung Köln-west gmbH, Köln am from 01.10.2014 99.9% 100.0% asset management & real estate
CorPuS SIreo Projektentwicklung lessingstrasse gmbH, Köln am from 01.10.2014 99.9% 100.0% asset management & real estate
CorPuS SIreo Projektentwicklung wohnen Bonner Strasse gmbH, Köln am from 01.10.2014 99.9% 100.0% asset management & real estate
CorPuS SIreo Projektentwicklung wohnen gmbH, Köln am from 01.10.2014 99.9% 100.0% asset management & real estate
Swiss Life – Annual Report 2014 germany (continued) Segment 1 Consolidation period group share Direct share Principal activity
Financial Solutions ag Service & vermittlung, garching b. münchen De 100.0% 100.0% Services
FreCor Projektentwicklung und wohnbau gmbH, Köln am from 01.10.2014 76.0% 76.0% asset management & real estate
IC Investment Commercial No. 5 gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate maicor Projektentwicklung winterhafen gmbH, mainz am from 01.10.2014 74.2% 74.2% asset management & real estate
Pegasus acquisition gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
Sl Beteiligungs-gmbH & Co. grundstücksverwaltung Kg, garching b. münchen De 100.0% 100.0% real estate
Sl Beteiligungs-gmbH & Co. Immobilien III Kg, garching b. münchen De 100.0% 100.0% real estate
Sl Beteiligungs-gmbH & Co. Immobilien Iv Kg, garching b. münchen De from 22.01.2014 100.0% 100.0% real estate
Sl Beteiligungs-gmbH & Co. Immobilien ost Kg, garching b. münchen De 100.0% 100.0% real estate
SlPm Schweizer leben Pensionsmanagement gmbH, garching b. münchen De 100.0% 100.0% Services
Swiss life assurance Solutions S.a., Branch germany, münchen other until 10.03.2014 – –
Swiss life Beteiligungen gmbH, garching b. münchen De 100.0% 100.0% Holding
Swiss life Deutschland vertriebsservice gmbH, Hannover De from 21.08.2013 100.0% 100.0% Services
Swiss life Insurance Solutions S.a. Branch germany, münchen other 100.0% 100.0% life insurance/reinsurance
Swiss life Invest gmbH, münchen am from 06.06.2013 100.0% 100.0% asset management
Swiss life Pensionskasse ag, garching b. münchen De 100.0% 100.0% life insurance
Swiss life Products (luxembourg) S.a. Branch germany, münchen De 100.0% 100.0% life insurance/reinsurance
CorPuS SIreo Investment residential No. 24 S.à.r.l., luxembourg am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo Projektentwicklung münchen II S.à.r.l., luxembourg am from 26.11.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo retailCenter management S.à.r.l., luxembourg am from 17.12.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo retailCenter-Fonds Deutschland SICav-FIS, luxembourg am from 22.12.2014 100.0% 100.0% asset management & real estate
Swiss life assurance Solutions S.a., Strassen other 100.0% 100.0% Non-life insurance
Swiss life gIo S.à.r.l., Strassen am from 07.11.2013 100.0% 100.0% asset management
Swiss life Immo-arlon, Société anonyme, Strassen other 100.0% 100.0% real estate
Swiss life real estate management I S.à.r.l., Strassen De from 03.11.2014 100.0% 100.0% real estate united kingdom
Chase de vere Private Client Trustees limited, london IN 100.0% 100.0% Dormant
Chase de vere Trustees limited, leicestershire IN until 01.09.2014 – –
Swiss life International Services ag, Branch austria, wien CH 100.0% 100.0% Services
Segment 1 Consolidation period group share Direct share Principal activity reNaISSaNCe oFFICe SPrl, Bruxelles Fr 100.0% 100.0% real estate reNaISSaNCe reSIDeNTIal, Bruxelles Fr 100.0% 100.0% real estate
Segment 1 Consolidation period group share Direct share Principal activity adroit Investment (offshore) ltd., grand Cayman CH 100.0% 100.0% Private equity adroit Partnerships (offshore) l.P., grand Cayman CH 100.0% 100.0% Private equity
Swiss life Financial Services (Cayman) ltd., grand Cayman other 100.0% 100.0% Services
Swiss life Insurance Solutions ag, Branch Italy, milano other until 11.03.2013 – –
1 Segment (CH = Switzerland, am = asset managers, IN = International, Fr = France, De = germany)
Swiss life Private Placement (middle east) limited, Dubai IN until 22.04.2013 – –
As statutory auditor, we have audited the consolidated financial statements of Swiss Life Holding Ltd, which comprise the consolidated statement of income, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of cash flows, consolidated statement of changes in equity and notes to the consolidated financial statements (pages 114 to 254), for the year ended 31 December 2014.
Ray Kunz Nebojsa Baratovic Audit expert Audit expert Auditor in charge
The annual profit of Swiss Life Holding consisted mainly of dividends, guarantee fees and interest income within the Group, as well as investment income. Dividend payments received by the holding company from subsidiaries increased substantially from CHF 19 million to CHF 232 million.
Guarantee fees including processing fees for new loans remained stable at CHF 44 million. Swiss Life Investment Management Holding AG was granted a loan of EUR 150 million to purchase the German real estate asset management service provider CORPUS SIREO. In addition, new loans amounting to a total of CHF 67.6 million were made available to Swiss Life Germany and Swiss Life Liechtenstein to finance the insurance business. Driven by the new loans, the volume of loans to Group companies rose from CHF 426 million to CHF 638 million. All loans in foreign currencies are hedged with currency futures. As a result of the early repayment of one loan towards the end of the previous year and the fact that most of the new loans were not granted until the end of the year, interest earned on internal loans declined from CHF 43 million to CHF 25 million. This negative effect was partly compensated by higher investment income of CHF 16 million (2013: CHF 7 million) due to a reallocation of liquid funds to bonds. The total value of participations grew from CHF 3918 million to CHF 3946 million in the period under review.
As at the end of the year Swiss Life Holding has assets (liquid funds, time deposits, bonds and investment funds) of CHF 1088 million. Due primarily to the reallocation of assets, liquid funds and time deposits reduced from CHF 763 million to CHF 287 million, while bond and investment fund holdings increased from CHF 420 million to CHF 801 million. All bonds are eligible for repo transactions.
Cash and cash equivalents 287 503 time deposits and similar investments – 260
Receivables from third parties 0 0 tOtal CURReNt assets 323 845
Direct share swiss life ltd, Zurich CHf 587 350 100.00% CHF 587 350 100.00%
swiss life Deutschland Holding gmbH, Hannover eur 25 100.00% eUR 25 100.00%
swiss life schweiz Holding ag, Zürich CHf 250 100.00% CHF 250 100.00%
loans to Group companies CHF 549 million of the loans to Group companies is classified as subordinated.
Major shareholders The following shareholders hold over 5% of Swiss Life Holding’s share capital: as % of total share capital
Share capital As at 31 December 2014, the share capital of Swiss Life Holding consisted of 32 081 054 fullypaid shares with a par value of CHF 5.10 each. In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of his own shares and those he represents. As at 31 December 2013, Swiss Life Holding had 32 081 054 registered shares outstanding with a par value of CHF 5.10 per share. Conditional share capital was CHF 30 600 000.00 as at 31 December 2014 (2013: CHF 30 600 000.00).
Swiss Life – Annual Report 2014 legal reserves Legal reserves comprise the general reserves (plus the additional paid-in capital in excess of the par value, net of transaction costs), the reserve for treasury shares (equivalent in value to own Swiss Life Holding shares held by the Swiss Life Group) and the capital contribution reserve of CHF 1070 million. Following the distribution of CHF 5.50 per share, the capital contribution reserve was reduced by CHF 176 million during the year under review from CHF 1246 million to CHF 1070 million as at 31 December 2014. Of this amount CHF 899 million is recognised by the Federal Tax Administration, while the legal qualification of CHF 171 million is still open and is to be reassessed according to future legal developments.
Contingencies Swiss Life Holding acts as warrantor for all Swiss Life Ltd liabilities with regard to the various tranches of the subordinated perpetual step-up loans (hybrid debt), which amounted to an equivalent value of CHF 3061 million at the balance sheet date.
financial assets pledged as collateral In the year under review, Swiss Life Holding pledged liquid assets in the amount of CHF 22 million as margin cover for currency forward transactions.
balance as at 1 January 32 32 total general reserves 32 32
balance as at 1 January 26 17 allocation to reserve for treasury shares 6 9 total reserve for treasury shares 32 26
Reserve for treasury shares –6 –9 pROFIt sHOwN IN tHe balaNCe sHeet
Future weakening of the euro will have no negative impact on the equity of Swiss Life Holding, since it does not include any foreign exchange components. After a review of the participations in the euro area, the weakening of the euro will have no effect on their intrinsic value. Future reductions in interest or dividend income will have only a minor impact on the net result of Swiss Life Holding.
Corporate executive board slH shares patrick Frost, group CeO 10 000 markus leibundgut 500 stefan mächler 500 tOtal CORpORate exeCUtIve bOaRD 24 584
Share ownership/participation rights as at 31 December 2013 As at 31 December 2013, 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 Restricted Share Units (RSUs).
balance carried forward to new account 301 707 1 090 961 tOtal pROFIt sHOwN IN tHe balaNCe sHeet 259 301 707 91 090 961
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 259 to 267), for the year ended 31 December 2014.
Swiss Life – Annual Report 2014 report on other legal requirements
Global equity markets recorded solid gains in 2014. This trend was supported by the expansionary monetary policy of central banks. Despite seeing positive signs on the macroeconomic environment, central banks tried to address potential deflationary fears with their policies, which pushed rates in Switzerland and Germany to unprecedented lows. In this environment, Swiss Life’s share price performed strongly. With a performance of 28% the shares are well above the Swiss Market Index performance (+10%) and the European insurance index Dow Jones STOXX 600 Insurance (+10%). At the Annual General Meeting in April 2014, the shareholders approved a withholding tax-free distribution out of the capital contribution reserve of CHF 5.50 per share.
Performance Swiss Market Index (SMI) (in %) +10 +20 +15 –8 –2
Dow Jones STOXX 600 Insurance Index (in EUR) 31.12. 250.55 228.22 177.11 133.25 154.45
Performance of Dow Jones STOXX 600 Insurance Index (in %) +10 +29 +33 –14 +2
Dividend yield on year-end price (in %) 30.12. 2.33 2.43 3.71 5.21 1.78
Net insurance benefits and claims –15 218 –13 920 –13 819 –12 614 –12 704
Equity holders of Swiss Life Holding 814 781 98 605 557
Number of employees (full-time equivalents) 7 492 6 992 7 046 7 168 7 483