The Swiss Life Group’s 2016 financial year at a glance: Business overview — The Swiss Life Group once again increased its earnings power in 2016: net profit grew by 5 % to CHF 926 million. Adjusted profit from operations rose by 5% year-on-year, to CHF 1.4 billion. The main driver of the increase in earnings power is the successful expansion of the fee business, with premium income down by 8% year-on-year to CHF 17.4 billion. The decline is primarily a result of the consistent focus on profitability and capital efficiency. The Group grew its fee income by 5% to CHF 1.4 billion. In 2016, Swiss Life achieved direct investment income of CHF 4.3 billion, which was the same as 2015. The net investment yield was 3.3%. This good return allowed Swiss Life to again strengthen the insurance reserves by about CHF 1 billion.
Our progress demonstrates the persistence with which we are implementing our plans as part of the “Swiss Life 2018” strategy, and we thank our employees most sincerely for their commitment, which enables Swiss Life’s continuing development.
That development will centre on three topics in years to come. First there is “regulation”, or to be more precise the solvency regime known as the Swiss Solvency Test (SST). Capital requirements in Switzerland are roughly two times higher than solvency provisions in Europe, according to a study by the University of St. Gallen. The excessive capital requirements harm SMEs that depend on our services, policyholders and the entire insurance industry, both as an employer and as a pillar of the Swiss economy and financial centre. We are headed in the wrong direction here, and we are disadvantaging customers, shareholders and working Switzerland in equal measures.
The third topic is the influence of new technologies. Humans, machines and algorithms will join forces to create a future in which new skills are in demand. Routine work, repetitive and dangerous activities will be increasingly taken over by robots and machines in the near future. Thus we will be challenged to integrate the interplay of innovation and continuity, as well as the new customer requirements arising from the digital world, into our everyday work. We will do this with circumspection and in a way that allows us to lead Swiss Life into a successful future – in gratitude for the company of our customers, investors and employees along the way.
Swiss Life reports regularly on its strategic priorities and associated financial objectives. In November 2015, Swiss Life presented its current Group-wide programme, “Swiss Life 2018”. The Group-wide programme is based on the “Swiss Life 2015” and Milestone programmes, both now successfully concluded, which sustainably consolidated Swiss Life’s competitive position despite a difficult environment.
Alongside profitability, margin management and cost efficiency, disciplined asset and liability management remain central to Swiss Life’s market success. Swiss Life’s long investment duration and robust direct investment income enable it to withstand the current low interest rate environment and protect the interest margin. The investment strategy is structured so that consistent asset and liability management ensures the interest rate margin remains protected for decades. The company can thus meet its customer guarantees, even if the low interest rate environment endures over the long term.
To promote quality of earnings and earnings growth, Swiss Life is prioritising four profit sources: the savings result, the risk result, the fee result and the cost result. Swiss Life will increase the resilience of its business model by continuing the expansion of its fee business, which is comparatively capital-light. Swiss Life will continue to consistently focus all business processes on customers. In addition, Swiss Life will increase overall investment by well over CHF 100 million within three years to further the development of the business model, and thus lay the foundations of the Group’s future success. Swiss Life invests in consulting, digitalisation and organic growth. Such investments include automating processes, and thus further reducing costs. In addition, thanks to improved customer centricity, it has also been possible to augment customer satisfaction and loyalty as well as the Net Promoter Score.
CHF 750 million. – To free up resources for investment, we will make additional cost savings of CHF 100 million by 2018. We will invest these funds in digitalisation, quality of advice and organic growth initiatives, which should keep operating costs (without Asset Managers) stable.
– We also aim to remit at least CHF 1.5 billion in cash to the holding company cumulatively over the next strategic phase.
As part of its reporting on annual and semi-annual results, Swiss Life regularly provides detailed information on the current status of its strategic implementation and the progress of its objectives achievement. Swiss Life’s product strategy and innovations in designing its offering are presented in the “Products and Services” chapter on pages 95 and 96. In view of its varied positioning in the relevant markets, Swiss Life uses a multi-local approach. Swiss Life also reports on its strategic thrusts and investments by individual divisions in its segment information (pages 14 to 25).
Summary of Group Results The Swiss Life Group once again increased its earnings power in 2016: net profit grew by 5% to CHF 926 million. Adjusted profit from operations rose by 5% year-on-year, to CHF 1.4 billion during the year under review. The main driver of the increase in earnings power is the successful expansion of the fee and commission business, referred to as fee business.
In CHF million 1 Switzerland 2 France 3 Germany 4 International 5 Asset Managers
Swiss Life Switzerland increased its operating profit by 7% to CHF 812 million. The fee result contributed CHF 12 million (2015: CHF –4 million) and the risk result accounted for CHF 253 million (2015: CHF 267 million). The savings result was CHF 534 million (+2%); and the cost result also made a positive contribution (plus CHF 16 million). In France, Swiss Life posted a 2% increase, to EUR 224 million. The savings and risk results were both positive at EUR 175 million (+8%) and EUR 90 million (+9%), respectively. The fee result came to EUR 39 million (–9%). Swiss Life in Germany posted a contribution of EUR 115 million to the result (–5%), driven by a savings result of EUR 63 million (–26%), a fee result of EUR 57 million (+52%) and a risk result of EUR 28 million (+6%). Swiss Life International achieved a segment result of EUR 41 million (+6%). The main driver was the fee result at EUR 31 million (+6%), while the risk result added EUR 6 million (–2%) and the savings result EUR 9 million (+12%). Swiss Life Asset Managers contributed CHF 243 million to the Group result, which equates to an 8% increase: +19% in third-party asset management and +4% in proprietary asset management.
In the home market of Switzerland, premium volume decreased by 6% to CHF 9.9 billion. This was due in particular to maintaining the discerning underwriting policy in group life business, with premium income totalling CHF 8.4 billion (–6%). Swiss Life continued its full-range provider strategy in its group life business: the share of new business with semi-autonomous solutions more than doubled to 26% (2015: 11%). In individual life business, Swiss Life achieved a premium volume of CHF 1.5 billion (–7%).
Assets under management in real estate came to CHF 43.5 billion. Swiss Life also administers CHF 28.8 billion in real estate for third parties. With a total of CHF 72.3 billion under management and administration, the company is one of Europe’s leading real estate managers.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 17 366 18 853 –8%
Equity securities and equity funds 7 609 5.0% 5 744 3.9%
According to the Swiss Insurance Association (SIA), life insurance premiums in Switzerland fell to CHF 30.5 billion, down 6% on the previous year. In Group life business, the market posted an overall premium decline of 6.2% and a 5.4% reduction in premiums for individual life business. In 2016 Swiss Life posted total premium volume of CHF 9.9 billion, a decline of 6%. Group life business accounted for 85 % of this result. Swiss Life increased its market share of group life business increased to 35.1% (2015: 34.9%). In individual life business, a market share of 19.8% (2015: 20.6%) was slightly lower year-on-year due to the strict focus on profitability. Swiss Life remains market leader in its home market.
Insurance benefits, including changes in insurance reserves, fell by 10% to CHF 11.0 billion, a reduction mainly attributable to lower savings premiums and the associated decline in requirement for reserves.
The range of individual insurance offerings saw continued emphasis on capital-efficient products. Successful roll-outs like Swiss Life Premium Comfort and Swiss Life Premium Immo Living have shown how economic conditions can be mastered without neglecting customers’ fundamental requirements: predictability and security. Swiss Life Calmo IncomePlan, an innovative product that provides a guaranteed income to top up AHV and pension fund benefits, has also proved popular. Innovative package solutions will also take on increasing significance in years to come. Pivotal backbone products such as Swiss Life FlexSave remained prominent in 2016, thanks to consistent guidance of the range of offerings and a meticulous price and benefit adjustments.
Customers experience Swiss Life as the leading provider of comprehensive life and pensions and financial solutions for a longer self-determined life. In this respect, the expansion of its service and product offering and a complete, synchronised customer experience via analogue and digital channels are a fundamental part of Swiss Life in Switzerland’s strategy. 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.
For 2017, Swiss Life in Switzerland will focus on its long-term initiatives to strengthen its core business as part of the “Swiss Life 2018” strategy, to strengthen its product, service and advisory offering and expand the scope for customer access. Digital transformation initiatives including the use of analogue and digital channels play a key role in this strategy.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 9 876 10 534 –6%
Overall and in an uncertain market environment, the French insurance market remained stable in 2016. Savings and retirement business posted a decline of 1%, while health, death and disability insurance as well as property and casualty business grew by 5% and 2%, respectively. Swiss Life in France had a stable premium volume of CHF 4.5 billion (2015: CHF 4.5 billion), with the focus in new business remaining on profitability and quality. Premium income in savings and retirement provisions sank slightly, by 4% in local currency. The share of premium income from unit-linked contracts was again very high (42%), and thus well above the market average of 20%, thanks to the private insurer strategy and the bonus distribution policy for customers in the premium segment. The share of unit-linked contracts in new business reached a particularly high level: 58%. In health, death and disability insurance, the reorientation of business activities continued, with pronounced new business production in group standard business and death and disability insurance. This made up for the decline in private health insurance following the health reform launched on 1 January 2016, and revenues remained at a steady level. With its distribution of savings products, Swiss Life Banque Privée once again contributed to business with high net worth individuals. All in all, fee and commission income fell by 2% under pressure of market conditions not amenable to banking and despite higher revenues from unit-linked life insurance.
In 2017 Swiss Life in France aims to continue its profitable growth via its product and services range in life insurance and its group business offering for high net worth individuals. Swiss Life will also ensure better satisfaction of customer expectations thanks to initiatives in the area of digitalisation, and intends to offer appropriate, high-value financial services and consulting.
In CHF million 1 adjusted for the Group’s internal trademark fees, both levied and received (Swiss Life brand) 2 restated
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 4 507 4 536 –1%
Swiss Life is positioning itself in Germany as a leading provider of pensions and financial solutions under one roof by managing all production and distribution organisations from a single source. The segment information comprises local insurance activities and the financial advisory companies operating in Germany under Swiss Life Select, Tecis, Horbach and Proventus.
Swiss Life Germany had premium volume in 2016 of CHF 1.3 billion, a fall of 8% (2015: CHF 1.4 billion ). The core product areas of Swiss Life Germany are employee insurance, occupational pensions, long-term care insurance and modern guarantee concepts. Premium volume was especially affected by declining single-premium contributions in individual insurance due to the consistent focus on profitability. New business premiums rose year-on-year in local currency by 7%. Insurance benefits and bonus distribution rose significantly, mainly due to the increased expiration of taxprivileged contracts with 12-year maturities.
Swiss Life Germany continued to pursue strict cost management. Administrative costs adjusted for one-offs remained at the previous year’s level in local currency.
The challenging market conditions look set to persist in 2017. Nevertheless, Swiss Life expects a positive development in its insurance business due to the extension and updating of its product range complemented by its efficient distribution structure. In financial consulting, Swiss Life expects the number of advisors to increase, which should have a positive impact on business development.
In the year under review, the International segment achieved a result of CHF 45 million, a growth of 8% over the previous year (2015: CHF 42 million). The improvement can be ascribed to progress in operations and continuing cost discipline. Fee and commission income fell to CHF 213 million (2015: CHF 225 million). Gross written premiums, policy fees and deposits received came to CHF 1.7 billion (2015: CHF 2.5 billion).
The Global Employee Benefits Solutions business area concentrates on global provisions solutions for multinational companies. Sustained positive risk development and increased reserves enabled it to further consolidate profitability on its own balance sheet in Luxembourg. The Swiss Life Network, a leading independent provider of global employee benefits solutions, also consolidated its strong market position in 2016.
Fee income from the financial advisory companies fell by CHF 9 million to CHF 122 million, mainly due to negative currency effects in connection with pound sterling and a decreased contribution from proprietary IFA channels.
In autumn 2016 the new “Swiss Life Global Solutions” sub-brand was launched. The new brand presence is intended to strengthen the market position for international insurance solutions and support the continuous development of the business model. Overall, Swiss Life International is also targeting an increase in its fee and commission income and risk result.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 1 718 2 453 –30%
In 2016 Swiss Life Asset Managers posted a segment result of CHF 243 million (2015: CHF 242 million). Adjusted for the extraordinary foreign currency profit in 2015 (CHF 17 million ), this corresponds to a rise of CHF 18 million, or 8%. Assets under management by Swiss Life Asset Managers increased overall by CHF 18.9 billion to CHF 204.2 billion. Proprietary assets rose to CHF 154.6 billion and assets invested in investment funds and third-party customer mandates increased to CHF 49.6 billion. Revenues grew by 5% during the year under review. Adjusted operating costs rose by 8%, driven by continuing growth in third-party business, mainly in the real estate area.
In CHF million 1 adjusted for the Group’s internal trademark fees, both levied and received (Swiss Life brand)
This report describes the essential features of corporate governance within the Swiss Life Group. The structure below largely follows the Directive on Information Relating to Corporate Governance issued by the SIX Swiss Exchange, which came into force on 1 December 2016. The compensation report on pages 51 to 68 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.
The disclosures of shareholdings that exceed the disclosure threshold on the balance sheet date of 31 December 2016 are shown below. In accordance with the disclosure requirements, the percentage figures given relate to the share capital and number of outstanding shares pursuant to the Articles of Association applicable at the time of the relevant disclosure.
BlackRock Inc., 55 East 52nd Street, New York 10055, USA, reported in a publication of 16 December 2015 that it held through various companies a total of 5.076% of the voting rights for Swiss Life Holding (1 266 572 shares, 24 113 voting rights from equity derivatives and 337 805 voting rights transferred from a third party to exercise at its own discretion).
A table showing the shareholder structure is provided in the section “Share Performance and Historical Comparison” on page 349.
The capital structure of Swiss Life Holding was as follows on the balance sheet date: – Ordinary share capital: CHF 163 614 125.10, divided into 32 081 201 fully paid registered shares with a par value of CHF 5.10 each
In 2016, the convertible bond (2013–2020) issued by Swiss Life Holding Ltd in the amount of CHF 500 000 000 was partially converted, whereby another 147 new registered shares were created. The ordinary share capital thus increased by CHF 749.70 from CHF 163 613 375.40 to CHF 163 614 125.10. There were no further changes with regard to equity capital; the distribution of CHF 8.50 approved by the General Meeting on 26 April 2016 was made from the capital contribution reserve.
Additional information on the Swiss Life share is available in the section “Share Performance and Historical Comparison” on pages 348 and 349.
Swiss Life Holding shares are not subject to any limitations on transferability. According to the Articles of Association, resolutions for the introduction, amendment or repeal of limitations on transfer ability must be put before the General Meeting of Shareholders and must be approved by two thirds of the voting shares represented and by an absolute majority of the share par value represented.
Swiss Life – Annual Report 2016 register as a nominee. The voting right representation is restricted to 10% of the share capital over all, where by nominees who are connected with regard to capital or voting rights under uniform management or contractual agreement will be counted as a single shareholder. The Board of Directors may approve exceptions to these restrictions on registration, observing the principle of responsible judgement. No such exemptions were granted during the period under review.
As at 31 December 2016, Swiss Life Holding and its Group companies had not granted any options on rights to participate in Swiss Life Holding.
No member of the Board has any significant business relationship with Swiss Life Holding or any other Group companies. The members of the Board of Directors of Swiss Life Holding also make up the Board of Directors of Swiss Life Ltd.
2 Member of the Board of Directors of Swiss Life Ltd since 2000.
Other appointments: – Adecco S.A., Chairman of the Board of Directors – dormakaba Holding Ltd, Vice Chairman of the Board of Directors – Danzer Holding AG, Member of the Supervisory Board – Walter Frey Holding AG, Member of the Board of Directors
Gerold Bührer — Born 1948, Swiss national First Vice Chairman of the Board of Directors bild Gerold Bührer graduated in economics (lic. oec. publ.) from the University of Zurich in 1972. Following 17 years with the Union Bank of Switzerland as a member of senior management in its financial sector and a Member of the Executive Board of its fund investment company, he joined Georg Fischer Ltd in 1991, where he served as a Member of its Executive Board (Finances) from 1991 until 2000.
Gerold Bührer will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 25 April 2017.
Other appointments: – Vontobel Holding Ltd and Bank Vontobel Ltd, Vice Chairman of the Board of Directors and
Ueli Dietiker will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 25 April 2017.
Audit Committee – Zuckermühle Rupperswil AG, Member of the Board of Directors – thunerSeespiele AG, Member of the Board of Directors
– Renaissance KMU Schweizerische Anlagestiftung, Member of the Board of Trustees) – Emaform AG, Member of the Board of Directors (since November 2016)
Frank W. Keuper — Born 1953, German national Member of the Board of Directors bild Frank W. Keuper studied social and economic sciences at Vienna University of Economics and Business and obtained a doctorate in the same subject. He started his career in the insurance sector in 1985 at the Albingia insurance group as assistant to the Management Board and later became Head of Sales and Marketing. After switching to the Zurich insurance group he returned to Albingia in 1992 and served as a member of the Management Board from 1994 until 2000. He later assumed responsibility as a member of the Management Board at AXA Versicherung AG for the Private and Corporate Clients division as well as Damages. From 2004 until 2007 he managed DBV Winterthur Holding AG as Chairman of the Management Board and was simultaneously a member of the Management Board of the Winterthur Group. From 2007 until 2012 Frank W. Keuper was CEO of AXA Konzern AG and a member of the Executive Committee of AXA Group in Paris.
Frank W. Keuper will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 25 April 2017.
Henry Peter will be put forward for re-election as Member of the Board of Directors and for election as member of the Compensation Committee at the General Meeting of Shareholders of Swiss Life Holding on 25 April 2017.
Audit Committee – Swiss Olympic Association, Vice Chairman of the disciplinary chamber in charge of doping cases
Franziska Tschudi Sauber — Born 1959, Swiss national Member of the Board of Directors bild Franziska Tschudi graduated in law at the University of Bern and passed her bar exam there in 1984. She studied law at Georgetown University, Washington, D.C., earning an LL.M. in 1986, and passed the bar exam for the US states of New York and Connecticut in 1987. Franziska Tschudi completed postgraduate studies at the University of St. Gallen (1991 to 1993), receiving an Executive
MBA. After initially working as an Assistant for Media Law at the Institute for Constitutional and Administrative Law at the University of Bern, and practising business and media law in Zurich, Washington, D.C. 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.
Klaus Tschütscher will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 25 April 2017.
Wolf Becke will stand down from the Board of Directors, of which he has been a member for five years, at the next General Meeting of Shareholders of Swiss Life Holding on 25 April 2017 due to reaching the statutory age limit. The Board of Directors of Swiss Life Holding will propose Stefan Loacker for election to the Board of Directors.
The Chairman’s Committee held nine meetings during the year under review. Each session lasted for around two hours on average. The meetings were attended by all members, including the Group CFO and the Group CEO (with one exception).
During the year under review, the Compensation Committee convened a total of six times. Each session lasted for around one-and-a-half hours on average. There was full attendance at all meetings. In the year under review, the Chairman of the Board of Directors also attended meetings of the Compensation Committee in relation to nomination and succession planning issues in the Board of Directors and Corporate Executive Board.
In the year under review, the Audit Committee convened five times, with a meeting lasting about two hours on average. There was full attendance at all meetings, with the exception of two meetings, where one member was unable to attend. The Chairman of the Board of Directors was present at two meetings of the Audit Committee. The Group CEO attended four meetings. 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 Articles of Association of Swiss Life Holding can be seen at www.swisslife.com, “The Swiss Life Group” area, “Corporate Governance” section, “Organisation and principles” subsection (www.swisslife.com/statuten). The Organisa tional Regulations are also on the Swiss Life internet page, “The Swiss Life Group” area, “Corporate Governance” section, “Organisation and principles” and “Organisational regulations” subsections (www.swisslife.com/de/swisslifegruppe/ organisation).
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 74.
Management structure of the Swiss Life Group as at 31 December 2016
Other appointments: – economiesuisse, Member of the Executive Board – American Chamber of Commerce, Member of the Financial Services Chapter Board – Swiss Innovation Park Foundation, Member of the Foundation Board and of the Business
Ivo Furrer — Born 1957, Swiss national Chief Executive Officer Switzerland (CEO Switzerland) (until 31 March 2017)
bild After completing his business administration and economics studies at the University of St. Gallen and a two-year research activity at the Institute of International Economics, Thomas Buess launched his career in insurance in 1985. From 1985 to 1993 he assumed various positions in the area of finance at the ELVIA Group. In 1994 he joined Zurich Financial Services Group as Chief Financial Officer and
Other appointments: – Swiss Insurance Association (SIA), Chairman of the Finance and Regulation Committee
Markus Leibundgut —Born 1969, Swiss national Chief Executive Officer Germany (CEO Germany) (until 31 March 2017) Chief Executive Officer Switzerland (CEO Switzerland) (from 1 April 2017)
In April 2014 Markus Leibundgut was appointed Chief Executive Officer Germany (CEO Germany) and Member of the Corporate Executive Board of the Swiss Life Group. He will take over from Ivo Furrer as Chief Executive Officer Switzerland (CEO Switzerland) from April 2017.
bild After studying law at the University of St. Gallen, Stefan Mächler (lic. iur. HSG) spent 18 years working for the Credit Suisse Group in the capital market and asset management areas. After nine years abroad and various posts in Tokyo, Osaka, Seoul and Frankfurt, he returned to Switzerland in early 1999 and was appointed Managing Director of Sales & Marketing Europe and Switzerland at Credit Suisse Asset
Nils Frowein was appointed Chief Executive Officer of the International market unit (CEO International ) on 1 January 2013, and Member of the Corporate Executive Board of the Swiss Life Group on 1 January 2015.
On 6 December 2016, Swiss Life announced that Markus Leibundgut, CEO of Swiss Life Germany, would take over from Ivo Furrer as CEO of Swiss Life Switzerland with effect from 1 April 2017. Ivo Furrer will leave the Corporate Executive Board at the end of March 2017 and pursue his career outside Swiss Life. Jörg Arnold will succeed Markus Leibundgut as CEO Germany with effect from 1 July 2017.
With regard to the compensation system, the key principles of the compensation policy of the Swiss Life Group are regulated by the Articles of Association. The members of the Board of Directors are granted exclusively fixed compensation. This is paid partly in blocked Swiss Life Holding shares, with the amount, date of allocation and duration of the blocking period set by the Board of Directors. The members of the Corporate Executive Board are entitled to a fixed basic salary and, if applicable, a short- and long-term variable compensation component. The variable compensation for members of the Corporate Executive Board has been limited under the Articles of Association to a maximum 181% of the fixed basic salary.
At the General Meeting of Shareholders of 26 April 2016, the following compensation was approved for the Board of Directors and Corporate Executive Board: – For the Board of Directors: The maximum total amount of fixed compensation until the next ordinary General Meeting in 2017 in the amount of CHF 3 440 000 in total.
In the same way, the General Meeting on 25 April 2017 will be asked to approve the exclusively fixed compensation for the Board of Directors until the 2018 ordinary General Meeting, the short-term variable compensation component for the Corporate Executive Board for the 2016 financial year and the maximum total amount of fixed compensation (basic salary incl. ancillary costs and occupational provisions) and of the long-term variable compensation component (equity compensation plan) for the 2018 financial year.
The proposed budget/maximum amount for the fixed and long-term variable compensation for the Corporate Executive Board for the 2018 financial year represents an upper limit, which would only be exhausted in the case of exceptional business performance. The Board of Directors will determine the fixed compensation and the long-term variable compensation component for the Corporate Executive Board at the beginning of 2018 and will detail the key underlying factors in the respective compensation report, on which the shareholders can in turn hold an advisory vote.
The Articles of Association of Swiss Life Holding can be viewed online and printed out at www. swisslife.com, “The Swiss Life Group” area, “Corporate Governance” section, “Organisation and principles” subsection (www.swisslife.com/statuten). For stipulations on compensation and on the approval of compensation for the Board of Directors and the Corporate Executive Board, particular reference is made to Articles 14–16 of the Articles of Association.
Additional information on compensation and benefit expenditure for the management and employees of the Swiss Life Group can be found in the Consolidated Financial Statements (notes 23 and 29) on pages 278 to 287 and 300 to 301. The information according to Art. 663c of the Swiss Code of Obligations regarding the shareholdings of members of the Board of Directors and the Corporate Executive Board is shown in the Notes to the Swiss Life Holding Financial Statements on pages 338 to 340.
Short-term variable compensation component (Bonus in cash and possibly in shares and, if applicable, deferred compensation in cash)
Within the framework of the compensation arrangements for members of the Corporate Executive Board, “deferred compensation in cash” was introduced on 1 January 2012 as a new compensation component related to the short-term variable compensation. On the basis of the corresponding
Swiss Life – Annual Report 2016 regulations, a portion of the short-term variable cash compensation determined by the Board of Directors is not paid immediately but after a period of three years has elapsed and provided that the regulatory requirements are satisfied at that point. The allocated deferred compensation in cash represents an entitlement during the three-year deferral period. The underlying “deferred cash plan” also provides for adjustment and reclaiming mechanisms (clawback). A full or partial reduction of the deferred compensation is provided for in the following cases: negative impact of the key figures applying to the allocation of deferred compensation due to a restatement of the annual accounts or damage to Swiss Life as a result of a violation of statutory, regulatory or compliance standards by participants in the plan. If the employment relationship is terminated by a participant during the three-year deferral period for deferred compensation in cash, the entitlements expire worthless (retention component). For the 2016 financial year, the Board of Directors has determined that, as in the previous year, as from a variable compensation amount in cash of CHF 500 000, 23% of the total variable compensation in cash is to be allocated as deferred compensation in cash.
Since 2011 participants in the equity compensation plan have been allocated Restricted Share Units (RSUs) on 1 April (2011–2013 equity compensation plans) or on 1 March (equity compensation plans from 2014). The RSUs grant the holder future subscription rights, entitling them to receive Swiss Life Holding shares free of charge after a three-year period has elapsed. The attribution of shares after the expiry of the three-year deferral period is effected on a 1:1 basis (1 RSU = 1 share): the plan is therefore very simple, transparent throughout the whole term and directly linked to the performance of the Swiss Life Holding share price. The value of RSUs during the three-year term develops linearly with the Swiss Life Holding share price and thus symmetrically corresponds with shareholder interests. 56 members of Swiss Life Group senior management participated in the 2013 equity compensation plan, in which a total of 74 630 RSUs were allocated; 18 590 in total to the Corporate Executive Board, of which 3360 to Bruno Pfister, in his capacity as Group CEO at the time. 57 members of Swiss Life Group senior management participated in the 2014 equity compensation plan. A total of 57 223 RSUs were allocated; 14 432 in total to the members of the Corporate Executive Board, of which 4226 to Bruno Pfister as Group CEO at the time. Altogether 51 members participated in the 2015 equity compensation plan, in which a total of 51 660 RSUs were allocated; 13 288 in total to the Corporate Executive Board, of which 3644 to Patrick Frost in his capacity as Group CEO since 1 July 2014. 51 members of Swiss Life Group senior management participated in the 2016 equity compensation plan, in which a total of 51 270 RSUs were allocated; 14 586 in total to the Corporate Executive Board, of which 3478 to Patrick Frost, in his capacity as Group CEO. A total of 58 members of Swiss Life Group senior management participated in the 2017 equity compensation plan. A total of 43 768 RSUs were allocated: 12 177 in total to the members of the Corporate Executive Board, of which 3017 RSUs to Patrick Frost as Group CEO.
The compensation takes into account membership of the Board of Directors of Swiss Life Holding and its subsidiary Swiss Life Ltd, as well as membership of the individual Board Committees, and is commensurate with the individual’s function and workload.
As Chairman of the Board, Rolf Dörig is affiliated to the employee benefits institutions of Swiss Life for the purpose of occupational provisions. No such affiliation exists for other members of the Board of Directors and no contributions have been made on their behalf. Based on the regulations of the employee benefits institutions Rolf Dörig’s active affiliation as Chairman of the Board was terminated at the end of May 2016. Therefore the regulatory duty to pay contributions in the form of insured and employer contributions for Rolf Dörig’s occupational provisions no longer applies as of 1 June 2016.
At the General Meeting of 25 April 2017, the Board of Directors will submit for approval to the shareholders the maximum amount of fixed compensation for the Board of Directors for the new term from the 2017 ordinary General Meeting until the 2018 ordinary General Meeting.
3 Pursuant to the pension fund regulations, occupational provisions were financed by the employer and the employee at a ratio of 70% to 30%. Rolf Dörig’s active affiliation to the occupational benefits institutions was terminated at the end of May 2016; therefore the regulatory duty to pay employer contributions no longer applies as of 1 June 2016.
The fixed basic 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.
Swiss Life again increased its earnings power during the year under review in spite of a renewed fall in interest rates. The medium-term targets were clearly exceeded. Adjusted profit from operations was up again from the previous year’s high level at CHF 1.4 billion, an increase of 5% over 2015. Likewise IFRS net profit also increased by 5% year-on-year and insurance reserves were again significantly strengthened in favour of policyholders. The risk and fee result and profitability of new business both exceeded their medium-term targets, as did adjusted return on equity, which was, as in the previous years, at the upper end of the target range of 8–10%. In view of the extremely low interest rate environment the 10% increase in the value of new business was particularly pleasing. The solvency target was, based on the internal SST model approved with conditions, achieved from a quantitative and qualitative perspective. Finally, targets for cost savings and the strengthening of Swiss Life Holding’s financial substance and payout capacity were also met.
For the 2016 financial year, the General Meeting of Shareholders of 27 April 2015, as mentioned at the start of the Compensation Report, had approved a maximum total amount of the fixed compensation and the long-term variable compensation component (equity compensation plan) for the Corporate Executive Board of CHF 12 800 000, based on the Articles of Association applicable on 1 January 2015. In line with this, the Board of Directors set a fixed compensation at the beginning of 2016 (basic salary incl. ancillary costs and occupational provisions) of CHF 9 385 173 in total for the members of the Corporate Executive Board. It also granted future subscription rights worth CHF 3 145 618, as long-term variable compensation under the 2016 RSU plan, to the members of the Corporate Executive Board, at the start of April 2016, for the extraordinarily good performance in 2015, when Swiss Life again had increased its operational effectiveness and achieved profitable growth; these rights entitle the holder to receive Swiss Life Holding shares following a three-year vesting period, provided the requirements are satisfied at that point. The approved budget was applied to the sum of CHF 12 530 791 in view of the excellent business development.
At the General Meeting of Shareholders of 25 April 2017, the Board of Directors will again submit for approval the maximum amount of the fixed compensation and long-term variable compensation component (equity compensation plan) for the Corporate Executive Board for the 2018 financial year.
The compensation for members of the Corporate Executive Board for the 2016 financial year is reported in detail in the 2016 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 2016 financial year; accordingly his compensation is disclosed individually.
The short-term variable compensation component for the Corporate Executive Board of a total CHF 4 437 500 (cash bonus of CHF 3 825 500 and deferred compensation in cash of CHF 612 000), which was determined by the Board of Directors at the beginning of 2017 for the 2016 financial year and will be proposed to the General Meeting of Shareholders on 25 April 2017 for approval, is disclosed in the following compensation table on an accrual basis as compensation for the 2016 financial year (accrual method). The members of the Corporate Executive Board did not receive any compensation in shares for the 2016 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 2017) is also reported in the compensation table for the 2016 financial year, which serves as the basis for the amount of the allocation and the corresponding number of allocated RSUs (accrual method).
Expenditure for occupational provisions for members of the Corporate Executive Board in the period under review amounted to CHF 1 701 061. This includes the ordinary annual employer contribution of CHF 273 146 for the occupational benefits of Patrick Frost, Group CEO.
The stated amounts do not include social security contributions (AHV/IV/ALV/FAK) payable by the employer under the law. The respective expenditure is shown in footnote 6 of the 2016 compensation table.
3 The short-term variable compensation component for the 2016 financial year (bonus and deferred compensation in cash) was determined by the Board of Directors at the beginning of 2017 for the 2016 financial year.
Total Total compensation Bonus for 2015 Other compensation in cash and Salary paid in 2016 4 compensation 5 in cash Number Amount shares (amount)
3 The salary amounts also include tax-equalisation payments and international travel expenses totalling CHF 1 178 820.
9 The RSUs represent future subscription rights that entitle the individuals concerned to receive Swiss Life Holding shares after a period of three years, provided the requirements are satisfied at that point.
As at the balance sheet date of 31 December 2016, acting members of the Board of Directors and the Corporate Executive Board (including closely linked parties) held the following number of registered Swiss Life Holding shares and future subscription rights to Swiss Life Holding shares in the form of Restricted Share Units (RSU): Board of Directors
In the form of an overview, the following additional information is provided on the Swiss Life Group compensation systems for the 2016 financial year: In CHF (unless otherwise indicated)
We have audited the sections on pages 59 and 63 to 65 of the accompanying compensation report of Swiss Life Holding Ltd for the year ended 31 December 2016.
In addition to its comprehensive Annual Report and Financial Statements, Swiss Life Holding also publishes its half-year results. Furthermore, in May and November of each year, it publishes specific details on the previous quarter. All Swiss Life’s annual reports since 1998 and all half-year reports since 2001 can be accessed on the internet at www.swisslife.com, “Investors & Shareholders” area, “Results & Reports” section, “Reports” and “Annual Reports” subsection (www.swisslife.com/ de/geschaeftsberichte). A report detailing the key facts and figures on business operations is sent out on an annual basis to all the shareholders listed in the share register.
The key risk management elements are presented and discussed below. Additional comments on the risk management principles and procedures plus the risk budgeting process, asset liability management and the management of insurance risks (including mortality, disability and longevity ) are described in Note 5 of the consolidated financial statements.
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 internal control system (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.
Swiss Solvency Test The Swiss Solvency Test (SST) sets out the capital requirements valid for insurance companies and groups in Switzerland. It was enacted in 2006 with the revised Insurance Supervision Law and corresponding Insurance Supervision Ordinance and constituted a reporting requirement during a five-year transition period before it ultimately became binding on 1 January 2011. The SST is a principles-based framework where the main objective is the alignment of the required capital with the underlying risks. The SST capital requirements are based on the understanding that insurers will meet their obligations towards policyholders even under difficult conditions. Swiss Life uses an internal model to calculate the available and required capital for the SST. Based on this internal model, which has been conditionally approved by FINMA, Swiss Life meets the capital requirements.
Economic capital For risk and capital management decisions, Swiss Life uses an integrated approach. 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 is based on a risk/return trade-off. The economic risk capital is determined bottom-up for each large business unit and takes into account market, credit and insurance risks. These risks are calculated on the basis of loss distributions using a specified risk measure. The overall capital requirement is obtained by taking into consideration respective diversification effects.
Corporate Responsibility Swiss Life produces the Corporate Responsibility Report to show how it understands the term corporate responsibility and implements the concept in practice. Corporate responsibility applies to business operations, the role of Swiss Life as an employer and its responsibility to society and the environment. The reporting corresponds to the guidelines of the Global Reporting Initiative (GRI).
You would like to hear from us how we assume corporate responsibility, and just how sustainably we think and act. Perhaps you are considering investing in our company, or coming to work for us. Whether you are a customer, a shareholder or a potential employee, you have the same right to insist on transparency. In our field, sustainable corporate leadership is the sine qua non for long-term success.
The publication of our first Corporate Responsibility Report last year was the occasion for some crucial in-house discussions, which led to a more intensive debate about sustainability issues. And this gave rise in turn to practical measures. For example, we have created a steering committee on corporate responsibility at the Corporate Executive Board level. In addition, the report has been expanded in many places and we are now providing more detailed information on such things as responsible investing, our role as property owner and what matters to us when we select and cooperate with partners and suppliers.
We view our commitments under the aegis of our guiding theme, “longer self-determined life”, as part of our overall socio-political responsibility. This is the very heart of our business; it is the responsibility we necessarily bear to our children’s and grandchildren’s generations. As cofounder of the modern pension system, we have a duty to ensure that our descendants are also able to lead their longer lives in self-determination and with confidence. What’s needed for this to happen – in addition to the appropriate products and services – are functioning pension systems and, last but not least, a heightened awareness among citizens of the significance of private provisions. That is why we get actively involved in the public debate, make our position clear and attempt to communicate facts and know-how. It is a topic that is close to my heart, personally. It affects every one of us, and will concern us for a long time to come.
We are at the centre of public life and very much aware of our social responsibility. That is why we engage in public dialogue around the subject of
Our success is based on the competence and performance of our employees.
We create attractive working conditions, we support our employees with further training, talent and management programmes and o�er varied career prospects in a traditional Swiss company.
As a co-founder of modern occupational provisions, Swiss Life believes it has a responsibility towards current and future generations. As a result, the company plays an active role Group-wide in the public debate about a longer self-determined life and has made it a guiding theme.
Its social engagement in the domestic market of Switzerland – and in large part at all major locations abroad – is connected to the guiding theme and designed to promote confidence and self-determination.
– Group CEO (Chairman) – Corporate Executive Board members in Switzerland – General Counsel
Representatives of Group Communications and Strategic Marketing, Public A�airs, Human Resources and the Perspectives Foundation
Responsibilities The core team implements the CR strategy, as well as corresponding programmes, at the behest of STC CR.
The contents of the materiality matrix were established in 2015 as part of a multi-level materiality process involving internal and external stakeholders. Based on qualitative and quantitative interviews with the Swiss Life Corporate Executive Board, a project group comprising specialists from Investor Relations, Asset Managers, Human Resources and Corporate Communication worked on selected key themes for Swiss Life, discussed them with selected stakeholders and refined them in structured interviews. Finally, the completed materiality matrix was approved and ratified by the Corporate Executive Board (G4–18). The matrix is reviewed annually and amended when necessary. In 2016 the subject of human rights was expanded and the central issue “Future regulatory and demographic trends” was renamed “Demographic change”.
2 The report comprises Swiss Life’s main locations in Switzerland, France and Germany and refers to all company entities within the scope of consolidation (Annual Report 2016, pages 317–321; G4–17).
Demographic change The consequences of demographic change affect people in many ways. Swiss Life wants to offer its customers solutions that will allow them to have a longer self-determined life. In addition, Swiss Life contributes to the public debate on longevity and securing retirement provisions.
Responsibility in our business operations Customer centricity Customer centricity is a strategic thrust of Swiss Life. That’s why we regularly measure our customer’s satisfaction and incorporate the results into the way we develop our products and services.
Products and services Swiss Life has 160 years of experience in developing products and services in its life insurance and pensions business. The Swiss Life product strategy thus combines optimal customer value with profitability for the company.
Swiss Life has developed its sustainability reporting according to the GRI guidelines and implements the guidelines according to the requirements of the “core” option (GRI–G4 indicators), taking into account the industry-specific requirements for financial services providers (financial sector disclosures). GRI stands for Global Reporting Initiative. It is an independent, international organisation with a framework for sustainability reporting, which has evolved into an international standard. The GRI aims to provide support to companies, governments and NGOs in focusing on those areas of interest to companies and their stakeholders. The standardised, key figure-based format of the reports also contributes to the comparability and transparency of sustainability reporting.
Responsibility for employees Employee commitment and development The Swiss Life culture is based on mutual respect, trustworthy cooperation and the recognition and appreciation of performance. That is the platform underpinning the company’s success.
Equal opportunities and non-discrimination Mutual respect, equality of treatment and non-discrimination are all parts of Swiss Life’s corporate culture.
Diversity and equal opportunities Equality of opportunity and respect for all employees are equally important at our company.
One consequence of growing life expectancy is that people in some professions are retiring later. This has repercussions for employers, who must become more flexible, develop new perspectives for the various stages of a career and offer new working models. Swiss Life is already involved in this process and is currently working on measures and offers, which contribute to helping their own staff to perform and stay motivated. That applies to employees at all stages of their career – including beyond the normal retirement age.
Swiss Life – Annual Report 2016 la vie est déjà toute tracée. |
The guiding theme of a “longer self-determined life” provides the basis for Swiss Life›s marketing and communication activities. Advertising and online campaigns in Switzerland, Germany, Austria and France aim to motivate people to meet the opportunities and challenges that result from a longer life.
« Ich will auch später mein Leben selbst in die Hand nehmen. »
Information on the survey results on intergenerational solidarity are available here: www.swisslife.com/en/hub/generations.html
– Design innovative and value creating bundles of products, services and advice targeted to specific needs of segments
– Increase customer engagement through optimal services at every contact point, appropriate level of service quality with customer friendly operations (seamless IT, accessible and professional customer service, short response time)
All customer feedback is analysed locally by the customer centricity managers and their teams to derive improvements and amendments to processes and offers. Swiss Life has established processes for this feedback, which are now embedded in the organisation.
Since digital platforms were launched, the customer has also been able to view documents 24/7 and ask for changes to be made. In addition, there is a chat function to communicate with an advisor by day. The growing number of users shows that Swiss Life has responded to a significant need on the part of its customers.
In addition to its external customer perspective, Swiss Life wants to know how its employees view the company’s customer orientation. An online questionnaire is issued every year to this end. The Employees’ Customer Centricity Index (ECCI) summarises the results. In 2016, the index was down slightly with 78 points (prior year: 81 points).
– In Germany, customer feedback is displayed on screens in the office buildings. Focus groups have also been set up to generate future working models to promote innovation and productivity. The aim is to encourage staff to always see the customer’s perspective and rethink and adjust processes and offers to make them more customer-friendly.
– Employees in France are invited to take part in “innovathons”. which are workshops where about 150 employees provide ideas on how to improve or redesign current processes. This promotes innovation and incorporates the customer’s view in line with the idea that “employees are customers too”.
A good advisor knows his or her customers and is familiar with their family situation, jobs and long-term goals. New customer relationship management (CRM) systems have been launched in a number of divisions to make customer information more complete and more accessible. These systems simplify working processes and support advisors in their everyday business. This more structured approach to individual customer management led to more appointments and completed transactions in Switzerland during the year under review. The number of customers per advisor was reduced in the UK to enable advisors to devote more time to their customers.
Innovations in the product range in 2016 1 Products which are either new or enhance1 customer value 2 Other products in the market
1 Current products whose customer value was increased further during the year.
Swiss Life sets great store by transparent and accessible information about product and service offerings. Swiss Life supports customer-oriented advice by providing clear and comprehensive documentation. Swiss Life holistically promotes the comprehensibility and transparency of its products and services. Thus there are supporting video sequences on the various insurance and provisions topics available on the local internet pages or customer portals, along with publications for download.
Due diligence in advising and how to deal with complaints Conduct towards customers
Swiss Life incurred no monetary penalties or fines during the year under review, nor did the company make any settlements in connection with corruption charges.
Swiss Life reports regularly on its strategic priorities, its medium-term business goals and associated financial objectives. In November 2015 Swiss Life presented its Group-wide programme “Swiss Life 2018”. In addition to its further expansion of fee and commission business, Swiss Life aims to consistently focus all business processes on its customers and invest in the continuing development of its business model. The investments are to be primarily in digitalisation, quality of advice and organic growth initiatives. With these measures, Swiss Life is laying the groundwork for the company’s sustainable profitability.
At the heart of Swiss Life’s mission as an asset manager for its proprietary insurance companies and for third parties – such as pension funds, other insurers and private investors via collective investments – are the protection of customer funds and the optimal allocation of risk capital. Invested assets must be secure, profitable and liquid in their entirety.
Assets under Management1 – breakdown by asset classes 1 Bonds 2 Real estate 5 Mortgages 6 Alternative investments 1 Total AuM Insurance Mandates and third-party clients
As an asset manager, Swiss Life represents its customers’ interests. The company is aware of its responsibility, as demonstrated by its actions in investment allocation and the exercise of its voting rights.
Swiss Life also takes further criteria for sustainable investing into account per asset class, in addition to the regulatory requirements of the supervisory authorities in the various countries where the company is present. When investing, a company’s reputation also plays a role in the selection process: behaviour damaging to a given company’s reputation leads to a lower valuation, which affects an investment’s legal and economic viability.
Satisfaction of Swiss Life's general expectations regarding people, the environment and compliance
In its own operations, Swiss Life sets great store by high ecological and social standards and expects its business partners and suppliers to also meet high sustainability standards, and to fulfil their responsibility to their employees and society.
Swiss Life in Switzerland prefers products and services from companies that have implemented a certified environmental protection system (ISO 14001 or EMAS). In addition, companies must have a compliance system that ensures obedience with all valid laws.
Swiss Life in Germany and France do not yet request a certified environmental protection system according to ISO 14001 or EMAS. However, they are evaluating the implementation of similar standards.
Swiss Life promotes projects and institutions in the fields of culture, science, education and the environment and research. Swiss Life lives up to its socio-political responsibility regarding active exchange with politicians and associations.
As an insurance company, Swiss Life plays an important role in a healthy economy: Swiss Life assumes risks and offers people the chance to look to the future with confidence. But Swiss Life’s economic contribution is much more than that. As a long-term investor, Swiss Life contributes to the stability of the financial centre. As one of Europe’s leading institutional real estate investors and owner of Switzerland’s largest private real estate portfolio, Swiss Life invests several hundred million francs every year in the renewal of its properties, and is thus also a key principal on the Swiss construction scene. Swiss Life helps to shape the urban landscape of Switzerland and creates living and working space. As a tax payer, Swiss Life contributes to the economy and offers jobs and training opportunities.
That includes adequate capital requirements: excessive capital requirements are forcing Swiss insurers to carry significantly higher capital costs than their foreign competitors, which is in turn creating an uneven playing field on the international capital market. Swiss Life is thus representing the interests of its policyholders by lobbying against excessive regulation placing Swiss insurers at a disadvantage.
Swiss Life also fosters relationships with politicians and trade associations in France and Germany as part of its socio-political responsibility. Swiss Life Germany is represented on all the major committees of the German Insurance Association (GDV) and maintains regular contact with the Bundesverband der Verischerungskaufleute (BVK, a German association for self-employed insurance brokers) and the Verband unabhängiger Finanzdienstleistungs-Unternehmen in Europa (Votum, an association representing the interests of financial service providers operating throughout Europe).
Furthermore, Swiss Life cultivates direct contact with members of parliament at a regional and national level. In its dealings with politicians it is guided by the rules of the Swiss Life Group Code of Conduct, as specified in the internal directive “Code of Conduct”. These rules decree, for example, that donations in the home market of Switzerland to political parties are to be free of any obligation.
In Switzerland, parties of the political centre-right and individual politicians receive financial support mainly for their election campaigns. The total amount of support provided during the year under review was CHF 500 000. No donations are provided in Germany or France.
Swiss Life has been supporting charitable projects and institutions for years from the fields of culture, science, education and the environment and research. We focus on projects and initiatives promoting confidence and self-determination, which are connected to our Group-wide guiding theme “a longer self-determined life”.
The “Perspectives” Foundation founded in 2005 plays a leading role in the Swiss domestic market. The foundation supports charitable initiatives in the fields of health, science, education, culture and sport and spends CHF 1.3 to 1.5 million every year on sociable-charitable projects in Switzerland. During the reporting year, almost CHF 1.4 million was distributed among 125 projects and institutions. A film provides insights into the Perspectives Foundation’s projects: www.swisslife. com/perspektivenfilm
In France, all engagements are managed through the Fondation Swiss Life, founded in 2009. The Fondation Swiss Life works with charitable healthcare institutions, such as the Institut Curie or Association France Alzheimer. At the Institut Curie, Swiss Life finances research into immunotherapy, a promising, effective and less painful form of therapy for cancer patients. The Association France Alzheimer supports Swiss Life in its efforts to improve the well-being of those suffering with Alzheimer’s through artistic therapy, including museum workshops and concerts of vocal music held in the care homes. Swiss Life employees and business partners are also involved in these engagements.
Corpus Sireo, a German subsidiary of Asset Managers, supports the charitable “Cornelius Stiftung für Kinder suchtkranker Eltern” (Foundation for children of parents suffering from addiction ).
You can find further information on our charitable engagement and sponsoring activities under: www.swisslife.com/engagements
Swiss Life’s management and leadership culture is a product of its corporate values, which are based on its brand promise; this last expresses the way employees and management at Swiss Life think, feel and act. The resulting successful management and communication style is set out in the Swiss Life Group’s leadership priorities. Proceeding from this foundation, management and communication in day-to-day work mean the creation of credibility and trust, showing direction and providing perspective, and making goals reality together. In addition, managers must set an example.
– We act as if Swiss Life were our own business – We communicate openly and clearly – We trust, motivate, empower and support people – We develop efficient teams across the company – We deliver results on time – We accept accountability – follow through and act consequently
The Swiss Life Group performs an Employee Survey on the topic of engagement every two years. The focus of this survey is threefold: employees’ relationships with management, their work and the company.
Supplementary to the classic training options, learning content is also offered on a digital platform to allow management and employees to add to their qualifications efficiently without regard to time or place. The platform permits quick access to standardised management processes, skills-oriented training and other topics associated with social and methodological skills. Swiss Life enhances these offerings with customised training, advising and coaching.
Swiss Life provides targeted support to junior staff with potential. For example, employees displaying a high level of performance and potential are nominated each year for the talent programme. The initiative supports efforts to open up career paths within the company – in management, project management or specialist functions – with a view to filling key positions with qualified young staff from within Swiss Life.
The individual divisional talent pools help to prepare future first and second-level managers (team leaders and department heads) as well as project managers and specialists for their future roles through training modules and project work.
Mutual respect fosters trust and helps create a comfortable working atmosphere for employees. Personal well-being is also focus of the Employee Survey, which asks about such issues as diversity and inclusion, work-life balance, mutual respect, workload and workplace atmosphere. 82% of employees rate these factors as positive (9 percentage points over the external benchmark “Financial industry in Europe”)¹.
In accordance with valid national and international law, the Swiss Life Group follows fair employment procedures free of discrimination. Recruitment or promotion is based solely on ability, competence and potential in view of the requirements of the position in question. Fair and equal compensation for all employees is ensured by the Group-wide Group Compensation Policy. Swiss Life has used instruments for a number of years in all its major national companies to review and ensure equal pay for men and women. In Switzerland, for example, Logib software based on data provided by the Swiss Federal Statistical Office is used for that purpose. Logib is a self-test to check whether a company is applying equal pay to its employees. Swiss Life is within the brands set by Logib for equality of remuneration.
All employees of the Swiss Life Group have access to online offerings consisting of texts, short videos, checklists and learning programmes on the topic of “Health and well-being”, which they can use anytime and anywhere they like. The topics on the online platform are divided among three groups: meaningfulness, dealing with stress and dealing with others (line managers, colleagues ).
Germany Swiss Life Germany In 2016, seven works agreements were reached between the Executive board and the Works Council on the following topics for which co-determination is mandatory: – New regulation of occupational pensions, surviving dependants’ benefits and occupational disability insurance with low employee contribution – Summary and optimisation of seven individual regulations concerning “Regulations of working hours” in one framework agreement – Summary of individual regulations concerning e-learning programmes in a framework agreement on “e-learning platforms” – “Private internet use” for employees (up to 15 minutes a day) connected with the desire to use social media platforms as brand ambassadors for Swiss Life –“Regulation of basic salary increases in 2016 for non-pay-scale employees” – Regulation concerning the “Rollout of new service contracts, company cars and mobile devices”
Switzerland Nine members; the chairwoman enjoys 20% work dispensation for work on the staff committee, the vice chairwoman 15% and the members 10%.
In its own operations and in its capacity as an investor in property, Swiss Life supports energy-saving measures, renewable energies and the sparing use of resources. Swiss Life also supports its employees in using public transport on their way to and from work.
Proportion of paper with FSC label (in %) 54 39 75
TOTAL GREENHOUSE GAS EMISSIONS (IN T) 25 560 27 560 25 220
TOTAL ENERGY CONSUMPTION (IN MWH/FTE) 6 630 7 210 8 870
TOTAL GREENHOUSE GAS EMISSIONS (IN KG/FTE) 3 240 3 540 3 600
1 The VfU figures for 2016 come out in May and will be posted at swisslife.com/operationalecology.
In Switzerland, Swiss Life is a member of the Zurich Energy Model and has been drawing all its electricity for company buildings from renewable energy sources since October 2006. This has enabled the company to reduce its annual greenhouse gas emissions by over 1300 tonnes. The head office in Zurich is also heated and cooled with water from Lake Zurich. All the sanitary facilities at the Zurich office are equipped with water-saving installations, which allows Swiss Life Switzerland to save some three million litres of water each year. Rainwater has also been one of the water sources used for the sanitary facilities since 1999.
In Germany, the two main branch offices, in Garching near Munich and in Hanover, have repeatedly been awarded the Ecoprofit seal for their outstanding commitment to corporate environmental protection. The seal rewards efforts to reduce CO2 emissions and save resources. In Garching, for example, Swiss Life uses green electricity and has a new energy-efficient building whose heat requirements are covered by district heating from a local geothermal power station.
Since 2011, the Swiss Life Group has taken part in the Carbon Disclosure Project (CDP) survey. CDP is an independent charitable organisation, which holds the world’s most comprehensive collection of corporate information on climate change. In its first submission, Swiss Life scored 70 out of 100 index points for transparency (climate disclosure score). Swiss Life has steadily improved its score over recent years. In 2015, the company had 97 index points, placing it above the average for the financial sector in Switzerland. The methodology of the CDP evaluation was redesigned during the reporting year, and transparency and the contribution to climate protection are now to be integrated into one assessment. Swiss Life received a strong B rating in 2016.
All the departments of Swiss Life International work in modern, energy-efficient offices. Optimal workspace occupancy and digitalisation measures help to consistently reduce the company’s environmental impact. Employees are instructed to keep their paper consumption and generation of waste to a minimum. Furthermore, the number of parking spaces is limited to encourage staff to use public transport, and thus to help reduce CO2 emissions.
Swiss Life is one of Europe’s leading real estate investors and has the biggest private real estate portfolio in Switzerland. The long-term preservation and appreciation of properties is a key part of its investment strategy for policyholders and other customers. It is also a central goal of the sustainability strategy in real estate management. This includes outfitting buildings for the future. Swiss Life invests several hundred million francs a year in the upkeep of its properties, ensuring the responsible use of resources and active environmental management in doing so and meeting its responsibility of reducing the property portfolio’s environmental footprint.
G4-2 Sustainability driven risks, opportunities and impacts p. 78, p. 79 ORGANISATIONAL PROFILE
G4-4 Primary brands, products and services p. 4, p. 95, p. 131
G4-13 Significant changes during the reporting period p. 10–12, p. 317–321
G4-20 Material aspects and report boundaries within the organisation p. 83
G4-22 Corporate changes compared to the previous year No significant changes Significant changes in scope as well as report boundaries from G4-23 the previous period No significant changes STAKEHOLDER ENGAGEMENT
G4-27 Key topics and concerns raised by stakeholders p. 82 REPORT PROFILE
G4-LA4 Notice periods regarding significant operational changes p. 73 Occupational Health and Safety p. 116–117
G4-LA11 Employee performance and career development reviews p. 108 Diversity and Equal Opportunity p. 113–114
G4-LA12 Staff and management structure p. 34–39, p. 46–50, p. 113, p. 115 Equal Remuneration p. 114
G4-LA13 Basic salary ratio of women to men p. 114 Grievance Mechanisms p. 114
Total energy consumption (in 1000 MWh) 1 52.28 56.30 61.98 AR, p. 120
Electricity used (in 1000 MWh) 1 35.16 36.40 40.73 AR, p. 120
Total water use (in 1000 m3) 1 80 121 107 AR, p. 120
Environmental supply chain management policy yes yes yes yes AR, p. 101
1 The environmental data for 2016 come out in May and will be posted at swisslife.com/operationalecology. AR = Annual Report CDP = Carbon Disclosure Project
Total number of employees 7801 7595 7492 6992 AR, p. 109
Major layoffs in the last three years (affecting 10% of staff or over 1000 employees) no no no no
Major merger or acquisition in the last three years (affecting large proportion of staff) no no no no
Company monitors employee satisfaction on a regular basis yes yes yes yes AR, p. 110
Formal talent pipeline development strategy (forecasts hiring needs, actively develops new pools of talent) yes yes yes yes AR, p. 112
Leadership training and skills development yes yes yes yes AR, p. 112
Social supply chain management yes yes no no AR, p. 102
Sustainable supplier guidelines encompassing ESG areas that are publicly disclosed yes yes no no AR, p. 102
Employee training on anti-corruption/ethics yes yes yes yes Code of Conduct
Provide means for opting in or out of internal marketing yes yes yes yes
Voting shares held by largest shareholders or block >5% >5% >5% >5%
Number of women on Board 2 2 2 1 AR, p. 33
CEO total summary compensation (in CHF million) 3.8 3.6 2.9 4.2 AR, p. 63
Deviation from one share one vote yes yes yes yes AR, p. 30, p. 69
Board oversight of risk management yes yes yes yes AR, p. 219
Su pp or t in di vi du ali ty – Create confidence –
In 2016, the Swiss Life brand world was enhanced by the London-based real estate investment company Mayfair Capital Investment Management Ltd., which was incorporated into the Swiss Life Asset Managers brand.
Furthermore, with a uniform brand personality and clear corporate design guidelines, Swiss Life guarantees a standardised appearance at all brand contact points. The Swiss Life personality always centres on the customer: “We help our customers lead a longer self-determined life with confidence.”
In the home market of Switzerland, meanwhile, we focus on sports and cultural sponsorship in addition to classical advertising. For example, Swiss Life has sponsored the Swiss national football teams for over ten years, while in the cultural arena film is the cornerstone of its engagement: Swiss Life is the main sponsor of the Solothurn Film Festival for example.
Our new website – the foundation of Swiss Life’s digital brand world
Market Consistent Embedded Value (MCEV) The Group MCEV is a measure of the consolidated value of shareholders’ interest in the in-force business of the Swiss Life Group. It includes the insurance business covered by the MCEV methodology and all other businesses valued by its IFRS net asset value.
Covered business includes all of Swiss Life’s life, health and pension business as well as assumed external reinsurance. MCEV (and Group MCEV) are net of ceded external reinsurance. Included are namely insurance operations in Switzerland, France, Germany, Luxembourg, Liechtenstein and Singapore. All other businesses such as investment management and Swiss Life Select are generally included in the non-covered business at their IFRS net asset values, with the exception of France, where they are included in the covered business.
For details about the MCEV components, see section 4 on methodology. Please note that the notion of certainty equivalent value is equivalent to the notion of present value of future profits in the MCEV Principles.
Benefitting from strong operating earnings, Swiss Life increased its MCEV in 2016 from CHF 12 509 million to CHF 13 681 million and generated, in an ultra-low interest rate environment, a new business value of CHF 296 million (CHF 268 million in 2015).
Present value of new business premium (PVNBP) 13 842 15 643
CEV Certainty equivalent value TVOG Time value of options and guarantees CNHR Cost of non-hedgeable risks FC Frictional costs VIF Value of in-force business RC Required capital FS Free surplus NAV Net asset value MCEV Market consistent embedded value scaling indicative
The net asset value remained stable despite further reserve strengthening, increased dividends and financing of new business. Goodwill and other intangibles are not included in the net asset value, with the exception of France (see section 4.7).
Following market practice, Swiss Life aligned its definition of the valuation curves with Solvency II principles and specifications. This entailed, among other elements detailed in section 5.1.1, a reduction of the last liquid point for euro from 30 to 20 years, with a positive effect on the MCEV of France and Germany, while for Swiss francs a last liquid point of 15 years has been retained considering the Swiss capital market characteristics.
The cost of credit risk amounts to CHF –761 million for 2016 compared to CHF –693 million for the previous year.
Active new business steering led to an overall improved business mix with positive impacts on both the new business value and margin. In combination with continued pricing and cost discipline, these measures more than offset the impacts of the resulting decrease of volumes in Switzerland and lower capital market interest rates. The experience-based update of persistency assumptions, the refined interest rate model together with the move to the Solvency II valuation curve and other reassessments contributed positively overall.
Additional explanations about the new business methodology are given in section 4.2 of this report.
The table below shows the development of Group MCEV split by components from 31 December 2015 to 31 December 2016.
Other movements in IFRS net equity n/a 1 15 15 –40
The following comments refer mainly to the non-covered business as the analysis of earnings for the covered business is commented upon in detail in sections 2.5 and 3.2.
The operating MCEV earnings for non-covered business correspond mainly to the results from Swiss Life Asset Managers, Swiss Life Holding and distribution and insurance units outside the scope of covered business.
The non-operating MCEV earnings relate to borrowing costs and tax effects of the non-covered business. For Group MCEV, the change in non-operating MCEV earnings compared to 2015 arises almost entirely from the covered business.
The other movements in IFRS net equity (non-covered business only) include effects from equitysettled share-based payments, changes in unrealised gains and losses and effects from the sale and purchase of treasury shares.
The graph and table below show the analysis of earnings for the covered business in 2016.
Assumption changes Assumption changes refer to the impact of the change on assumptions such as future expense, surrender, mortality, morbidity and longevity rates. The positive assumption changes were driven by favourable experience of persistency in Switzerland and Germany as well as demography in France.
Other operating variance Other operating variance includes effects of the aforementioned refinement of the interest rate model and change of the valuation curves as well as true-up effects related to operating experience.
The sensitivities with regard to reference rates exhibit an asymmetry in line with the traditional participating business in the in-force business, which also increased due to the refined interest rate model and the reduced capital market interest rates. The sensitivities for interest rates reflect a ±100bp parallel shift of the entire valuation curve also covering negative interest rates and the extrapolated part.
Sensitivities relating to swaption implied volatilities are influenced by the Swiss group life business, where continued operating improvements have contained the cost of policyholder options and
Swiss Life – Annual Report 2016 guarantees, such that business-inherent shareholder options contribute to the time value of options and guarantees. As in the previous years, we disclose corresponding sensitivities of ±10%, which now relate to absolute instead of relative swaption implied volatilities.
100 bp increase of interest rates (reference rates) 740 6% 48 16%
100 bp decrease of interest rates (reference rates) –1 788 –16% –121 –41%
25% increase in equity / property implied volatilities –286 –3% –8 –3%
Value of in-force business 7 851 1 Goodwill adjustments correspond to goodwill of covered business with the exception of CHF 73 million from French operations (see section 3.2). 2 Group MCEV includes CHF 853 million of goodwill and intangible assets as part of the unadjusted IFRS net assets for non-covered business.
Swiss Life – Annual Report 2016 3 Information by Market Unit 3.1 Market units
Switzerland Swiss Life’s main business in the Swiss market is group life business with a full range of offerings. The individual new business includes modern savings and retirement products with flexible and lower guarantees, risk and annuity products. Swiss Life’s own sales force plays the major role in distribution, followed by brokers and Swiss Life Select. The business for assumed external reinsurance is included here.
France Swiss Life offers savings, annuity and risk products, as well as health insurance. New business for life insurance focuses on multi-support products, combining unit-linked and traditional savings components. The main distribution channels are brokers, tied agents and own sales force. Additionally, Swiss Life in France has developed strong relations with independent financial advisors and private banks.
International Swiss Life International offers a broad range of insurance solutions for wealthy individuals (Global Private Wealth) with insurance carriers in Luxembourg, Liechtenstein and Singapore, and for international companies (Global Employee Benefits) out of Luxembourg.
Time value of financial options and guarantees –387 –455 –107 –25 –974
Frictional costs of required capital –221 –75 –11 –20 –327 1 The value for France includes CHF 78 million in goodwill and intangible assets originating from the non-life and non-health insurance operations.
Switzerland The MCEV increased by CHF 273 million due to positive operating earnings including a value of new business of CHF 154 million.
Swiss Life in France is subject to a tax of 3% applied to dividends paid to the parent company in Switzerland. This tax is considered for the actual payment.
International The MCEV decreased by CHF 20 million, driven by a refinement of the fund projection in Global Private Wealth and higher future tax rates following the tax reform in Luxembourg. The good annual profit contributed to the increase of the net asset value and more than offset the dividend payment.
Value of new business before new business strain 220 151 31 25 428
New business annual premium equivalent (APE) 460 533 66 150 1 209 1 New business strain represents the effect on the net asset value from writing new business.
New business annual premium equivalent (APE) 622 491 66 230 1 408 1 New business strain represents the effect on the net asset value from writing new business.
The new business value and margin increased as a result of active new business steering across all lines of business. In particular, the substantially improved business mix in group life, repricings and product discontinuations in individual life as well as the good performance of the assumed reinsurance business offset the negative effects from the related volume decrease and lower capital market interest rates.
Economic variances relate mainly to the narrowed credit spreads and positive real estate performance more than offsetting the effects of lower interest rates.
Time value of financial options and guarantees (TVOG) The certainty equivalent value does not allow for the risk that the financial outcome for shareholders could differ from the one implied by the certainty equivalent scenario. This is of particular relevance when products or funds include guarantees or options for the policyholder such as: – guaranteed interest rates – discretionary profit-sharing and regulatory constraints, e.g. “legal quotes” – maturity guarantees – guaranteed minimum death benefits – guaranteed annuity options – surrender options
Swiss Life – Annual Report 2016 2 Copyright © 2009 JPMorgan Chase & Co. All rights reserved.
Equities, real estate, participations and alternative investments (hedge funds and private equity) are modelled separately using appropriate indices for the corresponding currencies.
Current initial market values of assets have been taken where available (“marked-to-market”), or estimated where there is no reliable market (“marked-to-model”), for example by discounting unquoted loan and mortgage asset proceeds. Local regulatory and accounting frameworks (such as the amortisation of bonds or lower of cost or market principle) are reflected.
Anticipated dynamic management actions and policyholder behaviour mainly concern the following areas: profit-sharing for participating life businesses, asset allocation and realisation of gains and losses, and assumed policyholder behaviour with regards to their contractual options. They are dependent on the economic scenario considered and reflect local regulations and type of business.
MCEV guidance requires that profits or losses incurred in service companies from managing covered business are measured on a “look-through” basis. This principle ensures that all profits and losses incurred in relation to the covered business are passed to the corresponding entity, and consequently incorporated into the value of in-force business.
The look-through principle is applied for asset management services, distribution services and corporate centre services. The profits or losses taken into account for these services are limited to those linked to the insurance business, after “legal quote” and taxes.
For the valuation of year-end 2016, the interest rate model was changed in order to allow for negative interest rates, including the calibration on absolute instead of relative swaption implied volatilities. Furthermore, the yield curve derivation was altered from the QIS5 approach to the current Solvency II principles and specifications.
The entire 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.
Swiss Life – Annual Report 2016 5.1.1.1 Swap rates as at 31 December 2016
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.1.1.2 Swap rates as at 31 December 2015
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.1.1.3 Volatility adjustment as at 31 December 2016 and 100% liquidity premium as at 31 December 2015
United States 15bp 1 No credit risk adjustment was applied as at 31 December 2015.
5.1.2 Volatility assumptions Volatility assumptions for the year-end 2016 and 2015 calculations are derived from market data as at 31 December 2016 and 2015.
Economy 1 year option 2 year option 5 year option 10 year option 15 year option 30 year option 5.1.2.2 Relative swaption implied volatilities as at 31 December 2015
5.1.2.3 Equity option implied volatilities as at 31 December 2016 and 31 December 2015
5.1.2.4 Property volatilities used for the calculation as at 31 December 2016 and 31 December 2015
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 16% for 2016 and 15% for 2015.
5.1.4.1 Forward inflation rates used for the calculation as at 31 December 2016
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.1.4.2 Forward inflation rates used for the calculation as at 31 December 2015
Tax assumptions for the projection of annual results have been set in line with the local tax regime. Tax losses carried forward are considered. Taxation rules are based on individual companies’ total results. Tax impact of future new business has not been allowed for. The following table 5.2.1 shows the corporate tax rates applied.
To the Board of Directors of Swiss Life Holding Ltd Zurich
Opinion We have audited the Market Consistent Embedded Value Report (“MCEV Report”) of Swiss Life Holding Ltd and its subsidiaries (the Group) for the year ended 31 December 2016.
In our opinion, the embedded value information included in the MCEV Report has been prepared, in all material respects, in accordance with the MCEV Principles issued by the European Insurance CFO Forum, as described in sections 1 and 4 of the MCEV Report.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsi bilities under those provisions and standards are further described in the “Auditor’s responsibilities for the audit of the MCEV Report” section of our report.
We are independent of the Group in accordance with the IESBA Code of Ethics for Professional Accountants, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
– Obtain an understanding of internal control relevant to the audit of the MCEV Report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of express ing an opinion on the effectiveness of the Group’s internal control.
– Evaluate the appropriateness of the Group’s accounting policies based on the MCEV Principles and the reasonableness of estimates and related disclosures made.
– Conclude on the appropriateness of the Board of Directors’ use of the going concern assumptions and, based on the audit evidence obtained, whether a material uncertainty exists related to events or con ditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the MCEV Report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s re port. However, future events or conditions may cause the Group to cease to continue as a going con cern.
Swiss Life – Annual Report 2016 7 Glossary and List of Abbreviations
Frictional costs of required capital (FC) The additional investment and taxation cost incurred by shareholders through investing required capital in the company compared to direct investment as individuals.
Required capital (RC) The required capital is the market value of assets, attributed to the covered business over and above that required to back liabilities for covered business, whose distribution to shareholders is restricted based on statutory solvency.
Consolidated Financial Statements 174 Consolidated Statement of Income 175 Consolidated Statement of Comprehensive Income 176 Consolidated Balance Sheet 178 Consolidated Statement of Cash Flows 180 Consolidated Statement of Changes in Equity 181 Notes to the Consolidated Financial Statements 181 1 General Information 182 2 Summary of Significant Accounting Policies 182 2.1 Basis of preparation 182 2.2 Changes in accounting policies 182 2.3 Reclassifications in the consolidated balance sheet 183 2.4 Consolidation principles 184 2.5 Foreign currency translation and transactions 184 2.6 Cash and cash equivalents 186 2.8 Financial assets 187 2.9 Impairment of financial assets 189 2.10 Investment property 190 2.11 Insurance operations 195 2.12 Property and equipment 195 2.13 Inventory property 196 2.15 Investment management 196 2.16 Commission income and expense 197 2.17 Intangible assets 199 2.18 Impairment of non-financial assets 200 2.19 Income taxes 200 2.20 Assets held for sale and associated liabilities 200 2.21 Financial liabilities 202 2.22 Employee benefits 203 2.23 Provisions and contingent liabilities 203 2.24 Treasury shares 203 2.25 Earnings per share 204 2.27 Forthcoming changes in accounting policies 207 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies 212 4 Segment Information
Swiss Life – Annual Report 2016 219 5 Risk Management Policies and Procedures 220 5.1 Risk budgeting and limit setting 220 5.2 Asset and liability management (ALM) 222 5.3 Contracts for the account and risk of the Swiss Life Group’s customers 223 5.4 Financial risk management objectives and policies 238 5.5 Insurance risk management objectives and policies 246 6 Earnings per Share 247 7 Premiums, Policy Fees and Deposits Received 248 8 Details of Certain Items in the Consolidated Statement of Income 252 9 Derivatives and Hedge Accounting 256 10 Financial Assets at Fair Value through Profit or Loss 257 11 Financial Assets Available for Sale 257 12 Financial Assets Pledged as Collateral 258 13 Loans and Receivables 260 14 Investment Property 261 15 Investments in Associates 263 16 Property and Equipment 264 17 Intangible Assets including Intangible Insurance Assets 268 18 Other Assets and Liabilities 269 19 Investment and Unit-Linked Contracts 275 21 Other Financial Liabilities 275 22 Insurance Liabilities 278 23 Employee Benefits 288 24 Income Taxes 299 28 Acquisitions and Disposals of Subsidiaries 300 29 Related Party Transactions 302 30 Fair Value Measurements 313 31 Offsetting Financial Assets and Liabilities 314 32 Guarantees and Commitments 316 34 Events after the Reporting Period 317 35 Scope of Consolidation 322 Report of the Statutory Auditor
Premiums earned on investment contracts with discretionary participation 985 1 009
Net gains/losses on financial instruments at fair value through profit or loss 5, 8 –420 81
Share of profit or loss of associates 5, 15 9 7
Premiums, policy fees and deposits received, net of reinsurance 15 380 15 004
Benefits and claims paid, net of reinsurance –13 157 –12 744
Acquisitions of subsidiaries, net of cash and cash equivalents 28 –17 –7
Cash and cash equivalents for the account and risk of the Swiss Life Group’s customers 2 489 2 625
Distribution out of capital contribution reserve 26 – –271 – – – –271 – –271
Changes in ownership interest in subsidiaries – – – – –1 –1 –1 –2
BALANCE AS AT END OF PERIOD 164 1 022 –49 1 849 9 191 12 177 81 12 258
No new or revised accounting standards or interpretations were adopted in 2016.
In order to improve consistency of presentation of items in the consolidated balance sheet, reclassifications have been made as follows.
As at 1 January 2015, ceded investment contracts with discretionary participation features (DPF) and ceded policyholder participation of CHF 101 million have been reclassified from loans and receivables to reinsurance assets (31.12.2015: CHF 102 million).
As at 1 January 2015, financial liabilities at fair value through profit or loss of CHF 24 325 million relating to unit-linked contracts have been reclassified to investment and unit-linked contracts (31.12.2015: CHF 22 615 million) and CHF 1090 million relating to non-controlling interests in investment funds have been reclassified to other financial liabilities (31.12.2015: CHF 2496 million ).
Swiss Life – Annual Report 2016 2.5 Foreign currency translation and transactions
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 or for net investment hedges.
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, loans and receivables or if they are not designated as at fair value through profit or loss. Gains and losses arising from fair value changes, being the difference between fair value and cost/amortised cost, are reported in other
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
Swiss Life – Annual Report 2016 interest are overdue by more than 90 days. If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
Impairment losses are presented in the income statement as part of net gains and losses on financial assets.
Recognition and measurement principles Subject to certain limitations, the Group uses its existing accounting policies for the recognition and measurement of insurance contracts and investment contracts with discretionary participation features that it issues (including related deferred acquisition costs and related intangible assets) and reinsurance contracts that it holds. The existing accounting policies for recognition and measurement have primarily been based on the requirements of the Generally Accepted Accounting Principles in the United States (status of US GAAP as of the first application of IFRS 4 Phase I).
Non-discretionary participation features Certain policyholder participation systems do not satisfy the criteria for discretionary participation features. These policy holder bonuses might be guaranteed elements. Some policyholder bonuses are based on benchmark interest rates which are credited to the policyholders. For certain products, policyholder bonuses are based on the development of biometric parameters such as mortality and morbidity. These policyholder bonuses are allocated based on the risk result of the contracts involved. The amount and timing of these bonuses are not subject to management discretion and are accrued to the policyholders’ liabilities based on the relevant contractual terms and conditions.
Amounts collected as premiums from investment-type contracts such as universal life and unitlinked contracts are reported as deposits. Only those parts of the premiums used to cover the insured risks and associated costs are treated as premium income. These include fees for the cost of insurance, administrative charges and surrender charges. Benefits recognised under expenses
Swiss Life – Annual Report 2016 include claims for benefits incurred in the period under review that exceed the related deposits under policyholder contracts and interest that is credited to the appropriate insurance policy accounts.
Insurance liabilities and liabilities from investment contracts with discretionary participation features Future life policyholder benefit liabilities These liabilities are determined by using the net-level-premium method. Depending on the type of profit participation, the calculations are based on various actuarial assumptions as to mortality, interest rates, investment returns, expenses and persistency, including a margin for adverse deviation. The assumptions are initially set at contract issue and are locked in except for deficiency.
Property and equipment are carried at cost less accumulated depreciation. Land is carried at cost and not depreciated. Depreciation is principally calculated using the straight-line method to allocate their cost to their residual values over the assets’ estimated useful life as follows: buildings 25 to 50 years; furniture and fixtures five to ten years; computer hardware three to five years.
The assets of these plans are generally held separately from the Group’s general assets in trusteeadministered funds. Defined benefit plan contributions are based upon regulatory requirements and/or plan terms. The Group’s defined benefit obligations and the related defined benefit costs are determined at each balance sheet date by a qualified actuary using the Projected Unit Credit Method.
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.
Swiss Life – Annual Report 2016 2.23 Provisions and contingent liabilities
In December 2016, the Interpretation IFRIC 22 Foreign Currency Transactions and Advance Consideration was issued. This Interpretation addresses how to determine the date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) on the derecognition of a non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration in a foreign currency. The date of the transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income (or part of it) is the date on which an entity initially recognises the non-monetary asset or non-monetary liability arising from the payment or receipt of advance consideration. An entity shall apply this Interpretation for annual reporting periods beginning on or after 1 January 2018. The Swiss Life Group is currently not affected by such transactions.
In September 2016, the International Accounting Standards Board published amendments to IFRS 4 Insurance Contracts “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts”. The amendments address concerns arising from implementing the new financial instruments standard, IFRS 9, before implementing the replacement standard that the Board is developing for IFRS 4. The amendments introduce an overlay approach which will give all companies that issue insurance contracts the option to recognise in other comprehensive income the volatility that could arise when IFRS 9 is applied before the new insurance contracts standard is issued. The amendments also include a deferral approach which will give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9. Such a deferral is available until the new insurance contracts standard comes into effect. But it cannot be used after 1 January 2021. The Swiss Life Group has assessed that its
In June 2016, the International Accounting Standards Board issued amendments to IFRS 2 Share-based Payment in which they clarify how to account for certain types of share-based payment transactions. The clarifications relate to vesting and non-vesting conditions of cash-settled share-based payments, share-based payment transactions with a net settlement feature for withholding tax obligations and a modification to the terms and conditions of a share-based payment that changes classification from cash-settled to equity-settled. The amendments are applicable to annual periods beginning on or after 1 January 2018. The Swiss Life Group does not expect a material impact of the amendments on its financial statements.
In January 2016, the International Accounting Standards Board published amendments to IAS 7 Statement of Cash Flows in order to improve information provided to users of financial statements about an entity’s financing activities. The amendments are effective for annual periods beginning on or after 1 January 2017. The Swiss Life Group will disclose the information required by the amendments.
In January 2016, IFRS 16 Leasing was issued by the International Accounting Standards Board. The new standard eliminates the classification of leases as either operating leases or finance leases for lessees. Instead all leases are treated in a way similar to finance leases applying the current standard IAS 17 Leases. The new Standard brings leases on-balance sheet for lessees, the effect being that reported assets and liabilities increase. IFRS 16 Leases replaces the straight-line operating lease expense with a depreciation charge for the lease asset and an interest expense on the lease liability. This change aligns the lease expense treatment for all leases. As a practical expedient, short-term and low-value leases are exempt from this treatment. The exemption permits a lessee to account for qualifying leases in the same manner as existing operating leases (IAS 17 Leases). For lessors, the accounting treatment from IAS 17 Leases is substantially carried forward. The new standard is effective for annual periods beginning on or after 1 January 2019. The Swiss Life Group is currently analysing the effect of the adoption of IFRS 16 on its financial statements.
Swiss Life – Annual Report 2016 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies
Policyholder options Policyholders are typically offered products which include options such as the right to terminate the contract early or to convert the accumulated funds into a life annuity at maturity. In case of early termination the policyholder receives a specified surrender value or a value which varies in response to the change in financial variables such as an equity price or an index. In the case of the conversion option, the policyholder has the right to convert an assured sum into a fixed life annuity. The option values typically depend on both biometric assumptions and market vari ables such as interest rates or the value of the assets backing the liabilities. In certain countries and markets, policyholder behavioural assumptions are based on own company records. The assumptions vary by product type and policy duration.
The interest rates used in actuarial formulae to determine the present value of future benefits and contributions caused by an insurance contract are called technical interest rates. The technical interest rates have to be approved by the regulator. In certain countries, the insurance liabilities are based on the technical interest rates.
Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by management (corporate executive board) in deciding how to allocate resources and in assessing performance.
Interest income from intercompany loans and intercompany guarantee fees charged and received have been excluded from the segment result. The statement of income for the year ended 31 December 2015 has been adjusted accordingly.
Switzerland, France, Germany and International primarily consist of life insurance operations and distribution units. The life insurance operations offer a broad range of life, pension, health, annuity and investment-type policies to both groups and individuals, including disability coverage. The Group’s strategy focuses primarily on life and pensions in Switzerland, France and Germany and on cross-border business from Liechtenstein, Luxembourg and Singapore. These segments also include a number of companies which hold investments mainly pertaining to life insurance.
“International” comprises the cross-border insurance operations in Liechtenstein, Luxembourg and Singapore, the Swiss Life Select units operating in Austria and the Czech Republic as well as Chase de Vere operating in the United Kingdom.
The statement of income and the balance sheet for the segments are provided in the following pages.
Net gains/losses on investment property 557 121 86 – – –1 763 – 763
Employee benefits expense –270 –184 –130 –55 –215 –9 –862 1 –861
Impairment of property and equipment and intangible assets – – – –4 – –3 –7 – –7 of which intersegment –217 –7 –43 –5 –33 –9 –314 314 of which intersegment –179 –7 –52 –11 250 –1 – –
Net gains/losses on financial assets –136 66 335 40 –1 –57 248 – 248
Impairment of property and equipment and intangible assets –16 – 0 – – – –16 – –16
Other expenses –114 –136 –77 –40 –83 –21 –472 –2 –474
Financial assets at fair value through profit or loss 5 316 10 527 1 261 16 485 0 – 33 590 – 33 590
Intangible assets including intangible insurance assets 615 402 1 406 235 182 1 2 840 – 2 840
Investment and unit-linked contracts 5 879 10 145 859 19 847 – – 36 730 – 36 730
Swiss Life – Annual Report 2016 5 Risk Management Policies and Procedures
The risk appetite is defined by the Board of Directors and expressed as an SST ratio limit. Furthermore, it is allocated by the Group Risk Committee of the Corporate Executive Board to the largest operations in the insurance business. These limits at unit level are used as a framework for the asset and liability management process, the objective of which is to define a strategic asset allocation. From this strategic asset allocation a scenario-based expected return is calculated, which forms the basis for the mid-term planning of the Group.
Swiss Life – Annual Report 2016 5.1 Risk budgeting and limit setting
The risk capacity and the determination of the risk appetite of the Swiss Life Group and its insurance operations as outlined above are primarily defined based on economic principles. As a result, the market values or best estimates of both the assets and the liabilities are obtained by discounting the cash flows generated by these assets and liabilities by direct observation of market values or with another appropriate discount rate. The available economic capital is defined as the difference of the economic value of the assets compared to liabilities. The available economic capital is used to cover the different risks to which the Swiss Life Group’s insurance operations are exposed by the nature of their activities. The decision on the risk appetite for each insurance operation rests with the Corporate Executive Board.
The strategic asset allocation is therefore determined on the basis of the insurance liabilities and the risk capacity of the Swiss Life Group’s insurance operations. The strategic asset allocation is reviewed at least once a year and adjusted if necessary.
TOTAL LIABILITIES LINKED TO ASSETS FOR THE ACCOUNT AND RISK OF THE SWISS LIFE GROUP’S CUSTOMERS 29 833 29 777
Net gains/losses on financial assets 8 426 228 –2 21 425 248
at fair value through profit or loss 8 –433 95 13 –15 –420 81
Insurance liabilities linked to assets for the account and risk of the Swiss Life Group’s customers 3 692
Some life insurance products with a savings component and investment contracts are subject to minimum guaranteed interest rates. The guaranteed rate differs according to the type of contract. In Switzerland for instance the minimum guaranteed interest rate for the occupational pensions segment (mandatory BVG savings account) stood at 1.25% in 2016 and will be reduced to 1.00% for 2017 (2015: 1.75%).
Equity price risk A decline in the equity market may lead to a reduction of the Swiss Life Group’s realised and unrealised gains/losses, which also negatively affects the Swiss Life Group’s results of operations and financial condition.
To reduce the credit exposure relating to derivatives a collateral management process is in place. Contractually all outstanding positions must be fully collateralised if they reach a very low agreed minimum transfer amount. The collateral is called daily. Counterparties for derivative transactions, over-the-counter and exchange-traded, have to be approved by both the Group Chief Risk Officer and the Group Chief Investment Officer. The minimum rating for a counterparty is generally A– (Standard & Poor’s or equivalent) for the Swiss Life Group’s insurance operations. During periods of market turmoil reliance on ratings is of limited value; therefore an additional qualitative and quantitative counter party monitoring process has been established to allow for immediate proactive measures.
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 over-
Swiss Life – Annual Report 2016 the-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 at fair value through profit or loss 581 635 5 738 5 785 6 319 6 421
Debt securities available for sale 85 895 84 884 – – 85 895 84 884
Debt securities pledged as collateral 2 942 2 109 – – 2 942 2 109
Senior loans available for sale 2 058 – – – 2 058 –
TOTAL OTHER LOANS AND RECEIVABLES 3 242 2 505 1 558 1 254 1 727 4 657 53 14 997
Exposure to credit risk of debt instruments – credit rating by class as at 31 December 2015
Additionally, foreign currency translation of the Group’s equity would be affected by a strengthening /weakening of foreign currency exchange rates. If at the balance sheet date the euro exchange rate had been 1% higher/lower, total equity would have been higher/lower by approximately CHF 38 million (2015: CHF 34 million).
At the operational level, rolling forecasts are in place to address situational liquidity risk, which primarily arises on unexpected calls on cash resources from claims, amounts payable at maturity and surrenders arising from insurance and investment contracts. To overcome unexpected liquidity shortfalls at times asset disposals are not desired, repurchase agreements are used to ensure short-term refinancing at minimal cost.
Financial assets at fair value through profit or loss 3 969 3 095 3 483 3 202 27 479 27 293 34 931 33 590
Investment and unit-linked contracts 272 264 10 509 9 856 26 140 26 610 36 920 36 730
The nature of insurance risk can be summarised as follows: Mortality and longevity Mortality and longevity risks reflect the financial consequences of insured people dying sooner or living longer than expected, respectively. For example, a life insurer with an annuity portfolio making payments to the policyholders until their death is financially exposed to those individuals who live longer than expected. Conversely, an insurer writing life insurance business that pays out amounts contingent on death of the policyholders is exposed to increases in mortality levels.
Disability income and other annuities – deferred 6 877 7 045
At end of year of loss occurrence 416 345 392 323 311 303 335 342 296 267 n/a
CURRENT ESTIMATE OF CUMULATIVE CLAIMS 226 221 253 257 293 276 281 309 322 267 2 705
LIABILITIES FOR THE CURRENT AND 9 PREVIOUS YEARS 17 17 28 26 65 58 59 93 131 154 647
Swiss Life – Annual Report 2016 1Copyright © Stichting CFO Forum Foundation 2008
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.
The market consistent embedded value of the Swiss Life Group amounted to CHF 13.7 billion as at 31 December 2016 (2015: CHF 12.5 billion). Due to different valuation principles, changes in the embedded value are typically not reflected to the same extent in the consolidated balance sheet and consolidated statement of income of the Swiss Life Group and vice versa.
The market consistent embedded value calculations are based on economic scenarios which are calibrated to market conditions at valuation date. Best estimate assumptions were made regarding a number of factors, in particular asset allocation, policyholder participation, development of costs and claims, policyholder behaviour, mortality and morbidity. Business is assumed to be continuing at the same level (going concern) and the current cost ratios – adjusted for inflation – are thus assumed to hold good for the future as well. Future costs from taxation and investment management expenses on assets backing solvency capital funded by the shareholders, and which underpins the insurance business, are charged to the MCEV. The Swiss Life Group calculates the embedded value for all its life and health insurance companies. All other companies are taken into account at their IFRS net asset value. As a consequence, embedded value sensitivities do not affect the value of these companies.
An analysis of sensitivity indicates to what extent the embedded value is affected by variations in risk factors. The analysis is based on changes in the assumptions used in the embedded value calculation whereby a specific risk factor is changed while holding all other assumptions constant (unless they are directly associated). In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. In the event of a change in a specific risk factor, the effect of anticipated management actions, such as different allocations to policyholder participation and dynamic policyholder behaviour, is as a consequence considered in the analysis. The changes in a specific risk factor are applied to the entire projection period.
At 31 December 2016, if the interest rates had been 100 basis points lower, the embedded value would have been CHF 1788 million lower (2015: CHF 1428 million lower).
At 31 December 2016, if the market value of equity securities and property had been 10% lower, the embedded value would have been CHF 882 million lower (2015: CHF 958 million lower).
At 31 December 2016, if the equity securities and property implied volatilities had been 25% lower, the embedded value would have been CHF 221 million higher (2015: CHF 273 million higher).
Weighted average number of shares outstanding 31 879 422 31 829 018
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING FOR DILUTED EARNINGS PER SHARE 34 080 594 34 022 719
DILUTED EARNINGS PER SHARE FOR THE NET RESULT ATTRIBUTABLE TO EQUITY HOLDERS OF SWISS LIFE HOLDING (IN CHF) 27.27 25.85
Swiss Life – Annual Report 2016 8 Details of Certain Items in the Consolidated Statement of Income
Associates at fair value through profit or loss 1 – –13
Assets for the account and risk of the Swiss Life Group’s customers 1 747 –315
Liabilities linked to assets for the account and risk of the Swiss Life Group’s customers –734 300
TOTAL OTHER INCOME 66 210 1 The cost of inventory property sold was CHF 79 million (2015: CHF 93 million).
Change in liability for future life policyholder benefits, gross 398 488
Net benefits and claims under investment contracts with discretionary participation 1 009 1 053
Amortisation of present value of future profits (PVP) 17 3 1
Derivatives designated as fair value hedges 97 29 113 50 11 746 9 582
Derivatives designated as net investment hedges 5 – 19 – 2 057 –
Interest rate swaps to hedge available-for-sale bond portfolios 11 27 4 540 53 32 28 53
Currency forwards to hedge non-monetary investments 18 23 5 043 522 599 616 539
TOTAL DERIVATIVES DESIGNATED AS FAIR VALUE HEDGES 29 50 9 582 575 632 644 592
In 2016, hybrid debt denominated in euro was used to protect non-monetary investments (hedge funds, equity securities and real estate funds) against adverse movements in euro exchange rates. No such hedges were in place as at 31 December 2015.
Effective portion Ineffective recognised portion Years in other recognised Years expected comprehen- in expected to affect Assets Liabilities sive income profit or loss to occur profit or loss
In 2016, a gain of CHF 26 million was reclassified from other comprehensive income to profit or loss (2015: gain of CHF 8 million), of which CHF 17 million were included in investment income (2015: CHF 8 million), and CHF 9 million in net gains/losses on financial assets (2015: nil).
Financial assets for the account and risk of the Swiss Life Group’s customers 5 27 479 27 293
TOTAL FINANCIAL ASSETS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS 34 931 33 590
TOTAL FINANCIAL ASSETS AVAILABLE FOR SALE 88 578 86 680 11 677 9 345 100 256 96 026
Classification as assets held for sale and other disposals –3 –623
Crédit et services financiers (CRESERFI), Paris 33.4% 44 – 1 – 1
BALANCE AS AT END OF PERIOD 539 51 58 27 676
BALANCE AS AT END OF PERIOD –186 –34 –48 –15 –283
TOTAL PROPERTY AND EQUIPMENT AS AT END OF PERIOD 367 17 12 11 407 of which assets held under a finance lease – – 1 – 1 1 includes elimination of fully depreciated assets
BALANCE AS AT END OF PERIOD 9 12 1 319 1 431 15 21 1 343 1 464
BALANCE AS AT END OF PERIOD –520 –66 –130 0 –716
Net carrying amount of goodwill 287 287 149 149 104 105 43 27
Net carrying amount of goodwill 152 152 433 438 70 76 655 666
TOTAL OTHER ASSETS 844 471 1 of which CHF 295 million pledged as security for loans (2015: CHF 103 million)
Swiss Life – Annual Report 2016 19 Investment and Unit-Linked Contracts
Investment contracts with discretionary participation features (DPF) 14 642 13 762 105 100 14 537 13 662
Investment contracts without DPF at fair value through profit or loss 30 330 343 – – 330 343
Liabilities released for payments on death, surrender and other terminations –1 725 –1 625
Effect of changes in actuarial assumptions and other movements 333 171
On 27 September 2016, Elm B.V., a Dutch repackaging vehicle, issued EUR 600 million in fixed to floating rate subordinated perpetual notes (at an issue price of 99.707%) secured by 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 19 May 2027 or on any interest payment date thereafter, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The interest has been fixed at 4.50% p.a. until 19 May 2027. If the notes are not redeemed on 19 May 2027, the interest will be the aggregate of the three-month Euribor and a margin of 5.10% p.a.
On 4 April 2011, Swiss Life Ltd issued subordinated perpetual callable bonds in the amount of CHF 325 million. CHF 75 million were additionally issued in June 2011 and CHF 100 million in October 2011. The bonds were guaranteed by Swiss Life Holding, had no fixed maturity date and were first callable on 4 October 2016 upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The interest has been fixed at 5.25% p.a. until 4 October 2016. The bonds were redeemed on the first call date on 4 October 2016.
On 12 April 2007, ELM B.V., a Dutch repackaging vehicle, issued EUR 700 million in fixed to 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 three-month Euribor and a margin of 2.50% p.a.
Swiss Life AG CHF 471 CHF 471 +4.200% 2012 2022 468 468
Swiss Life AG EUR 700 EUR 590 5.849% 2007 2017 633 640
In December 2013, Swiss Life Holding issued CHF 500 million in senior unsecured convertible bonds due in 2020. The coupon was set at 0%. The bonds may be converted into registered shares of Swiss Life Holding at the option of the holder. The initial conversion price was set at CHF 243.97 (in 2016 adjusted to CHF 236.80, valid since 28 April 2016). The proceeds from the issue of the convertible bonds have been split between a liability component and an equity component. The fair value of the liability component at issue date amounted to CHF 450 million and was calculated using a market interest rate for an equivalent non-convertible bond. The residual amount of CHF 50 million represented the value of the option to convert the instrument into Swiss Life Holding shares and was included in share premium. Transaction costs of CHF 6 million were deducted from the liability and costs of CHF 1 million were recognised in share premium.
In 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 six years and a CHF 200 million tranche with a tenor of ten years. The unsecured senior bonds bear coupons of 1.125% p.a. and 1.875% p.a., respectively. Settlement took place on 21 June 2013.
Swiss Life Holding AG CHF 225 1.125% 2013 2019 224 224
In January 2016, the mortgage loan of CHF 156 million granted to GENBLAN AG matured and was redeemed.
Non-controlling interests in investment funds 30 3 295 2 496 22 Insurance Liabilities
Claims under non-life insurance contracts 851 872 164 170 687 702
Claims under life insurance contracts 6 078 6 102 97 84 5 981 6 018 of which for the account and risk of the Swiss Life Group’s customers 3 692 3 167 – – 3 692 3 167
Effect of changes in actuarial assumptions and other movements 645 1 355
Deposits released for payments on death, surrender and other terminations during the year –333 –401
Insurance liabilities linked to assets for the account and risk of the Swiss Life Group’s customers 3 692 3 167
Other benefits comprise survivors’/orphans’ pensions and/or lump-sum payments in case of death as well as disability pensions (if disabled before retirement age) and transfer of vested benefits in case of job changes. In these plans, which cover nearly all of the Group’s employees in Switzerland, the cost of the benefits is funded by payment of insurance premiums to group insurance contracts issued by Swiss Life Ltd (self-insurance) and is borne by the employer. In addition, the administration expenses of the plans are also borne by the employer since the personnel managing the plans are Swiss Life employees.
BALANCE AS AT END OF PERIOD –3 537 –3 325 of which amounts owing to
At 31 December 2016, if the discount rate had been 50 basis points higher (lower), the defined benefit obligation would have decreased by CHF 258 million (increase CHF 293 million). At 31 December 2015, if the discount rate had been 50 basis points higher (lower), the defined benefit obligation would have decreased by CHF 240 million (increase CHF 272 million).
At 31 December 2016, if the future expected salary growth had increased (decreased) by 50 basis points, the defined benefit obligation would have increased by CHF 20 million (decrease CHF 19 million). At 31 December 2015, if the future expected salary growth had increased (decreased) by 50 basis points, the defined benefit obligation would have increased by CHF 18 million (decrease CHF 18 million).
At 31 December 2016, if the average life expectancy had increased by one year (for both men and women), the defined benefit obligation would have increased by CHF 113 million. At 31 December 2015, if the average life expectancy had increased by one year (for both men and women), the defined benefit obligation would have increased by CHF 105 million.
Duration of the defined benefit obligation (weighted average no. of years) 15.6 15.5
The contributions expected to be paid for the year ending 31 December 2017 are CHF 66 million. These contributions include amounts payable under insurance contracts issued to defined benefit plans covering own employees.
For 2016, 2015, 2014, 2013 and 2012 participants in the share-based payment programme are allocated restricted share units (RSUs). RSUs grant the holder future subscription rights, entitling him or her to receive Swiss Life Holding shares free of charge after a three-year period has elapsed and if certain conditions are fulfilled.
The 2016 equity compensation plan is based on the new Group-wide programme “Swiss Life 2018”. For the purpose of supporting the achievement of the respective corporate goals, performance criteria have been determined by the Board of Directors analogously to the previous year’s objectives: IFRS profit (50% weighting), the risk and fee result (25% weighting) and cash to Swiss Life Holding for further strengthening of the financial substance and payout capacity (25% weighting).
The RSU programmes also provide for adjustment and reclaiming mechanisms (clawback).
NET DEFERRED INCOME TAX ASSETS/LIABILITIES –1 673 –83 –203 –3 3 –1 959
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 amount of such temporary differences was approximately CHF 8.7 billion as at 31 December 2016 (2015: CHF 7.4 billion). If such amounts from entities controlled by the Group are ever distributed, no material tax liabilities would be incurred due to participation exemption rules, unrecognised tax loss carryforwards and applicable double taxation treaties.
Unused amounts reversed –3 0 –14 –13 –6 –1 –23 –15
Foreign currency translation differences 0 –2 –1 –7 0 –1 –1 –10
BALANCE AS AT END OF PERIOD 11 18 49 66 16 18 75 101
In 2016, a distribution to shareholders out of the capital contribution reserve of CHF 271 million (CHF 8.50 per registered share) was made (2015: CHF 207 million, CHF 6.50 per registered share).
Net investment hedges – gross 9 –85 – – – –85 – – – – –85
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
Reclassification of policyholder participation and income tax effects – –53 – 53 – – – – – –
Net other comprehensive income before non-controlling interests –294 –947 58 27 –1 156 –5 –60 – –65 –1 221 1 Amount relates to debt securities reclassified to loans in 2008 (note 13).
Economic and statutory capital requirements and the profit target are the main elements determining the risk budgets. Based on the overall risk budget set by the Investment and Risk Committee of the Board of Directors, the Group Risk Committee of the Corporate Executive Board defines the risk limits for the particular business units. Adherence to these limits is checked on a monthly basis.
Swiss Life – Annual Report 2016 28 Acquisitions and Disposals of Subsidiaries
Through the purchase of additional shares, the Swiss Life Group obtained control of RheinCOR Projektentwicklung GmbH, Cologne in 2015.
Asset management and other commission income 2 – – 2 1
Assets for the account and risk of the Swiss Life Group’s customers 23 840 23 300 1 323 1 243 2 316 2 750 27 479 27 293
Non-controlling interests in investment funds – – 2 418 1 926 877 570 3 295 2 496
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.
Other derivatives: Other derivatives mainly comprise credit default swap indices. CDS indices are valued using the discounted cash flow method for the fee and the contingent leg. Main inputs for the valuation are the swap curve and the CDS par spreads quoted in the market.
Investments in associates: The valuation methods of investments in associates categorised as level 3 of the fair value hierarchy are identical to the methods outlined for level 3 private equity investments and real estate funds.
BALANCE AS AT END OF PERIOD – 13 0 2 315 1 328 2 316 23 801 29 773
BALANCE AS AT END OF PERIOD – 15 1 1 707 1 283 2 750 21 557 27 313
for assets held at the end of the period – 0 6 10 –18 –380 648 266 1 including associates at fair value through profit or loss
During 2016, debt securities of CHF 76 million (2015: CHF 183 million) were transferred from level 1 into level 2 due to reduced frequency of price quotations, and debt securities of CHF 190 million (2015: CHF 415 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 2016: nil (2015: CHF 10 million) from level 1 into level 2, and CHF 21 million (2015: CHF 15 million) from level 2 into level 1.
Total gains/losses recognised in profit or loss – – 0 0 12 1 12 1
BALANCE AS AT END OF PERIOD – – 150 124 877 570 1 027 693
Total gains/losses recognised in profit or loss 31 52 –18 –374 763 655
at the end of the period – – –12 –1 – –
Investment contracts without discretionary participation 1 0 9 0 9 1 Carrying amount approximates fair value. 2 excluding non-controlling interests in investment funds
Gross amounts of recognised financial assets before offsetting 1 885 2 113 – – 1 885 2 113
NET AMOUNTS PRESENTED IN THE BALANCE SHEET 1 885 2 113 – – 1 885 2 113
Contractual obligations to purchase or construct investment property 1 380 1 138
Other contingent liabilities and commitments 465 452 1 of which relating to investments in associates 2 2
The Group has issued financial guarantees and similar instruments. Financial guarantees provide for specified payments to be made to reimburse the holder for a loss incurred in the event that a client fails to make payment when due.
The Group has entered into various operating leases as a lessee. Rental expenses for these items totalled CHF 44 million for the year ended 31 December 2016 (2015: CHF 41 million). Minimum lease payments totalled CHF 41 million in 2016 (2015: CHF 41 million).
Contractual obligations for repairs and maintenance of investment property amounted to CHF 214 million as at 31 December 2016, which are included in this line item (2015: CHF 152 million ).
Securities pledged under repurchase agreements 1 2 942 2 109 2 942 2 109
Securities lent in exchange for securities received 4 613 3 619 4 613 3 619
Other financial assets pledged – 1 – 1 1 of which can be sold or repledged by transferee 2 942 2 109 2 942 2 109
Securities received as collateral in exchange for securities lent 5 125 3 619
Other securities received 76 82 34 Events after the Reporting Period
Livit AG, Zürich AM 100.0% 100.0% Asset management & Real estate
Sobrado Software AG, Cham CH from 29.09.2015 66.7% 66.7% Information technology
Swiss Life Intellectual Property Management AG, Zürich Other 100.0% 100.0% Services
Swiss Life REIM (Switzerland) AG, Zürich AM 100.0% 100.0% Asset management
Swiss Life Asset Management (France), Levallois-Perret AM 100.0% 100.0% Asset management
CORPUS SIREO Asset Management Commercial GmbH, Heusenstamm AM 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Asset Management Residential GmbH, Köln AM 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Asset Management Retail GmbH, Köln AM 100.0% 100.0% Asset management & Real estate
SELECT Bauprojektentwicklung GmbH, Köln AM 100.0% 100.0% Asset management & Real estate
SL Beteiligungs-GmbH & Co. Immobilien V KG, Garching b. München DE from 08.06.2016 100.0% 100.0% Real estate
Swiss Life Beteiligungen GmbH, Garching b. München DE until 14.07.2016 – –
Swiss Life Vermittlungs GmbH, Garching b. München DE 100.0% 100.0% Services 1 Segment (CH = Switzerland, AM = Asset Managers, IN = International, FR = France, DE = Germany)
CORPUS SIREO International S.à r.l., Luxembourg AM 100.0% 100.0% Asset management & Real estate
CS Stella (LUX) S.à r.l., Luxembourg CH from 16.11.2015 100.0% 100.0% Asset management & Real estate
Swiss Life Immo-Arlon, Société Anonyme, Strassen Other 100.0% 100.0% Real estate
Swiss Life Insurance Solutions S.A., Strassen Other until 28.06.2016 – –
Swiss Life Products (Luxembourg) S.A., Strassen CH 100.0% 100.0% Life insurance/Reinsurance
Chase de Vere IFA Group Plc, London IN 100.0% 100.0% Finance
Swiss Life Select CEE Holding GmbH, Wien IN 100.0% 100.0% Holding
Adroit Investment (Offshore) Ltd., Grand Cayman CH 100.0% 100.0% Private equity
Swiss Life Insurance Finance Ltd., Grand Cayman Other 100.0% 100.0% Finance 1 Segment (CH = Switzerland, AM = Asset Managers, IN = International, FR = France, DE = Germany)
Swiss Life Select Ceska Republika s.r.o., Brno IN 100.0% 100.0% Services
In our opinion, the consolidated financial statements (pages 174 to 321) give a true and fair view of the consolidated financial position of the Group as at 31 December 2016 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.
As key audit matters the following areas of focus have been identified: – Models and assumptions used to calculate future life policyholder benefits – Recoverability of Goodwill – Valuation of investment property
We chose profit before tax and policyholder participation as the benchmark because, in our view, it is a prevailing indicator for the performance of the Group as it is free from management’s decisions regarding profit allocation and thus, more representative of a Group’s activities.
We agreed with the Audit Committee that we would report to them misstatements above CHF 3 million identified during our audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons.
Policyholders’ benefits represent the estimated future benefit liability for traditional life insurance policies and include the value of accumulated declared bonuses or dividends that have vested to policyholders. The reserves for life benefits for participating traditional life insurance policies are calculated using a net level premium valuation method. The calculation of reserves depends on the type of profit participation and is based on actuarial assumptions, such as guaranteed mortality benefits, interest rates, persistency, expenses and investment return, plus a margin for adverse deviations.
Further, our audit procedures focused on the Swiss future life policyholder benefits as with 78% they make up the majority of the future life policyholder benefits on the Group’s balance sheet.
Our audit procedures relating to actuarially determined liabilities primarily consist of testing the models used in developing these balances, reviewing management’s assumptions in light of current market conditions, industry developments and policyholder behaviour, and obtaining comfort over the completeness and accuracy of underlying data used in the calculations. We examined the biometric assumptions, such as mortality and disability and additional assumptions, such as investment return in light of the current market environment, the expected development within the industry as well, as the behaviour of insurers.
Based on the work performed, we determined that the methodologies and assumptions used in the valuation of actuarially determined future life policyholder benefits are reasonable and in line with financial reporting requirements and industry accepted practice.
As elaborated in note 17 – Intangible Assets including Intangible Insurance Assets – Goodwill represents the excess of the fair value of the consideration transferred and the amount of any non-controlling interest recognised, if applicable, over the fair value of the assets and liabilities recognised at the date of acquisition.
The existing goodwill amounts to CHF 1238 million as a result of various business combinations, mainly Swiss Life Select, Lloyd Continental, CapitalLeben and Corpus Sireo. Goodwill is subject to management testing, at least annually, for impairment at the cash generating unit level.
The recoverable amounts have been determined on a value-in-use basis and use cash flow projections based on financial budgets approved by the management and the board of directors. The calculations are based on present values that traditionally use a single set of estimated cash flows and a single discount rate. The cash flow projections cover a three-year, or five-year period, respectively, and consider a terminal value after such period, based on long-term growth assumptions in the various geographical markets, which is material to the overall value-in-use
As the actual cash flows naturally vary from planned projections, management have created detailed sensitivity analyses. The sensitivity analyses provide insights as to the recoverability of goodwill when the assumptions used in the planned projections, individually or as a whole, are not met.
We obtained the mid-term planning documents for the individual cash generating units, as approved by management and the board of directors, including details on certain planned activities supporting the expected development. In particular, we challenged management as to the feasibility of reaching the planned cash flows. As part of our procedures, we have been supported by our valuation experts.
An element of placing trust in planned cash flows is the extent they were reached in the past. Where actual results varied from planned results, we inquired as to the reasons and potential impact they may have, in reaching future goals.
As for the long-term growth rate used at the end of the mid-term planning period, we compared it to the economic environment and industry trends.
As set out in note 14 – Investment Property – property held for investment purposes amount to CHF 23 801 million.
The valuation of investment property is determined either on the basis of periodic independent valuations or by using discounted cash flow projections. Ordinarily the valuation of each investment property is determined by an independent recognised valuation expert on an annual basis. The fair value of an investment property is measured based on its highest and best use.
– examined the formal aspects, in particular the compliance with real estate valuation standards,
– examined the valuation parameters (discount rate and operating costs) and compared these to market data.
We consider the valuation methodology, and the underlying valuation parameters used, to be reasonable.
The Board of Directors is responsible for the other information in the annual report. The other information comprises all information included in the annual report, but does not include the consolidated financial statements, the stand-alone financial statements and the remuneration report of Swiss Life Holding Ltd and our auditor’s reports thereon.
The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with IFRS and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements
A further description of our responsibilities for the audit of the consolidated financial statements is located at the website of EXPERTsuisse: companies. This description forms part of our auditor’s report.
Swiss Life Holding Financial Statements 332 Management Report 333 Statement of Income 334 Balance Sheet 335 Notes to the Financial Statements 338 Disclosure of compensation to the Board of Directors and the Corporate Executive Board in accordance with Art. 663bbis of the Swiss Code of Obligations (CO) and Art. 14–16 of the Federal Ordinance against Excessive Compensation in Listed Stock Companies, and disclosure of the shareholdings of members of the Board of Directors and the Corporate Executive Board in accordance with Art. 663c of the CO
Swiss Life Holding increased its profit in the 2016 financial year to CHF 359 million (2015: CHF 349 million).
As at the end of the year Swiss Life Holding had assets (liquid funds, debt securities, investment funds and equities) of CHF 1440 million. Liquid funds reduced from CHF 183 million to CHF 119 million, and debt security, investment fund and equity holdings increased from CHF 1001 million to CHF 1321 million. All debt securities are eligible for repo transactions. Earnings from investments in bonds and fund units rose from CHF 29 million to CHF 36 million.
All loans granted internally and external investments in foreign currencies are hedged with currency futures. The cost of hedging during the reporting period was CHF 16 million (2015: CHF 9 million). An adjustment of CHF 220 million to various subsidiaries was made following the annual assessment of participations. The investment book value thus declined from CHF 3936 million to CHF 3716 million.
A value adjustment of CHF –220 million in total was made to Swiss Life Deutschland Holding, Swiss Life International Holding AG and Swiss Life Schweiz Holding AG following the annual assessment of participations.
Loans to Group companies CHF 604 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.
Issue of a convertible bond in 2013 On 2 December 2013, Swiss Life Holding launched a bond issue in the amount of CHF 500 million with a coupon of 0%, maturing in 2020. The bonds may be converted into registered Swiss Life Holding shares. The conversion price is set at CHF 236.80.
Contingent liabilities 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 4447 million at the balance sheet date.
TOTAL PROFIT SHOWN IN THE BALANCE SHEET 359 050 770 349 331 790
We have audited the financial statements of Swiss Life Holding Ltd, which comprise the balance sheet as at 31 December 2016, income statement for the year then ended and notes, including a summary of significant accounting policies.
We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those provisions and standards are further described in the “Auditor’s responsibilities for the audit of the financial statements” section of our report.
We tailored the scope of our audit in order to perform su�cient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the entity, the accounting processes and controls, and the industry in which the entity operates.
As key audit matter the following area of focus has been identified: – Valuation of participations
Materiality The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Annually, management analyse participations to assess valuation adjustments. For the analysis significant judgement is applied, to determine assumptions, in relation to future business results, and applied discount rates, on projected cash flows. We consider our audit procedures in this area as particularly important, due to the size of the balance sheet position and level of significant assumptions.
Management test the valuation of individual participations through a comparison of the book value of each participation to the respective IFRS equity value or value in use. Management utilise the equity value of each participation determined for the IFRS closings. For the calculation of the value in use, an extensive valuation analysis using cash flow projections, based on mid-term planning approved by the management and the board of directors, is performed.
For participations where the book value exceeds the IFRS equity value, we audited the underlying valuation analysis.
An element of placing trust in planned cash flows is the extent they were reached in the past. Where actual results varied from planned results, we inquired as to the reasons and potential impact they may have in reaching future goals and assessed the key drivers which contributed to the deviation.
We consider the valuation approach, and the assumptions and parameters used within, as a reasonable and adequate basis for the assessment of the participation value recorded on the balance sheet. The audit evidence obtained through our audit procedures was sufficient and suitable to assess the valuation of participations.
Share Performance and Historical Comparison The Swiss Life share price developed strongly in 2016, closing the year at CHF 288.20. This amounts to an appreciation of 6%, or 9% taking into account the dividend distribution of CHF 8.50.
Dow Jones STOXX 600 Insurance Index (in EUR) 31.12. 269.66 285.56 250.55 228.22 177.11
Total dividend payout to shareholders (in CHF million) 30.04. 271 207 176 144 144
Net insurance benefits and claims –14 064 –15 516 –15 218 –13 920 –13 819
Equity holders of Swiss Life Holding 922 872 814 781 98
Number of employees (full-time equivalents) 7 801 7 595 7 492 6 992 7 046 1 equity excl. unrealised gains/losses on bonds