The Swiss Life Group’s financial year at a glance: Course of business — The Group generated a net profit from continuing operations of CHF 324 million – an improvement of CHF 1.5 billion compared to the previous year. The net profit amounted to CHF 277 million (2008: CHF 345 million) and profit from operations came to CHF 562 million (2008: CHF –842 million). Return on equity was 4% (2008: 5%) while gross premium income rose by CHF 1.7 billion from the previous year’s level to around CHF 20.2 billion.
Employees — Swiss Life employs a workforce of 8200 worldwide, with around 7800 full-time equivalents.
citizens to take action. Ensuring our financial security is becoming the personal responsibility of each and every one of us. Life insurance, with its secure and flexible pensions solutions, will therefore gain in importance.
Swiss Life has emerged from the financial market crisis in good shape overall – thanks to our excellent net worth, our financial stability, our close and diverse client rela-
In Switzerland, we have succeeded in maintaining our strong position as the leading life and pensions provider. In France, Swiss Life is participating in a growth market which offers good opportunities for further development and, in Germany, we recorded stronger growth than the competition due to our excellent market position. Our on the economy – but also on our everyday lives. It is to be expected that, after the turbulence of recent years, calls for dramatic change are increasingly being heard. It is also perfectly understandable that the general public has become more mistrustful of the business world. But we must keep a sense of proportion and not jeopardise the achievements of a dynamic free market economy with over-regulation or allow fear and risk aversion to threaten economic and technological progress.
Swiss Life — Business Review 2009 and reorganisation activities, AWD is now well equipped to exploit opportunities in financial advisory services for private clients.
Swiss Life set the course for profitable growth in 2009. We are not interested in maximising profit in the short term. Our goal is to improve competitiveness and boost profitability on a sustainable basis. We, in the management team, thus launched the MILESTONE programme throughout the Group in 2009. This initiative will bring substantial changes to key areas of the value chain by 2012. Firstly, we are improving value to customers and boosting product profitability. Secondly, we are strengthening our distribution power – in terms of both the quality of advice and the expansion of channels. Thirdly, we are improving our operational efficiency and reducing costs. Fourthly, we are further strengthening our balance sheet and our capital base. And, finally, our fifth goal centres on the disciplined execution of our measures.
international business with high net worth individuals played a substantial role in boosting premium volume, helping us to increase our share of new business generated with modern products, and thus reduce our dependence on the financial results. Following its restructuring and the Corporate Executive Board, are committed to ensuring that, in the interests of our clients, investors and employees, Swiss Life reinforces its position as a key player in the international life and pensions market going forward.
Didn’t the financial crisis rock Swiss Life? We have emerged from the financial market crisis in good shape, which, in itself, is an achievement. The first half of 2009 still proved extremely difficult for the global economy, and, in particular, the financial industry. I’m proud that we, as a company, have overcome this crisis without needing support from the government or from the capital market. But we still have a lot of work ahead of us; the crisis did put some strain on Swiss Life.
“The first half of 2009 still proved extremely difficult for the global economy and, in particular, the financial industry. I’m proud that we, as a company, have overcome this crisis without needing support from the government or from the capital market.”
How exactly? The crisis forced us to take a good, hard look at our business. We failed to earn our cost of holding capital in recent years. We sold too many products with too moderate or inadequate margins and our costs remained too high. In addition, we did not exploit the full potential offered by AWD. We have since taken action. We are now tackling these issues so as to strengthen our position in the long term and to exploit our opportunities in the European life and pensions market.
How do you intend to tackle these challenges? The MILESTONE programme, which we implemented across the Group last August, will significantly strengthen Swiss Life in all key areas of its value chain. It has five main thrusts: Firstly, we want to enhance our customer value and
“As soon as demand for personal financial advice picks up again, we will get back on the road to success with a leaner and more dynamic AWD Group. Already AWD posted a positive operational result in the third quarter and the trend reversal continued into the fourth quarter.”
But the right life and pensions solution is one-of-a-kind, as distinctive as our advisors. Skilled at identifying the needs of their clients and their expectations and plans in life, our advisors always come up with unique pension plans. Discover what unites Swiss Life advisors and their clients in the photo editorial section of this Annual Report.
In the summer of 2008, Romana Geiges set up the “Zwärgliburg”
crèche in Langnau am Albis, which now has a staff of six. The primary teacher is currently studying pedagogy and environmental science at the University of Zurich. She has big plans for the future, hoping to establish a trilingual crèche in Zurich, to expand it into a kindergarten and then into a primary school.
As a young entrepreneur, I’m responsible for my staff. So, right from the start, one of my key needs was to offer my employees secure pensions. I contacted the General Agency in Horgen, where I received simple, straightforward advice, enabling me to provide my staff with the best suitable pension plan, despite my lack of insurance knowledge and my limited means. And if I have a query, Manuela Albisetti Stadler’s team gets back to me with the solution within 24 hours.
Many people setting up their own businesses have limited financial resources. A key element of my job is to show them that, nevertheless, providing pensions is still a top priority. For me, it’s important to build up a relationship of trust with my clients through regular contact so that I can deliver the exact solutions and security they need. Year after year. As with all my clients, I’m looking forward to helping Romana Geiges achieve her dreams.
Financial services providers, such as Swiss Life Group member AWD, experienced a difficult year. However, the last two quarters of 2009 already indicated that the trend line had an upward bias again. Both AWD and its main competitors managed to expand their client base. The broker channel will also gain in importance in the near future, boosted from the growth in life and pensions products.
One reason that business in the life insurance market was less affected by the financial crisis than other sectors is because, in times of uncertainty, clients have an increased need for security. The insurance industry’s significant economic role in retirement provisions also acted as a force for the stable development of the insurance market.
DISTRIBUTION AS A CORE COMPETENCE — In the past, one of the insurance companies’ greatest strengths resided in their tight control over the distribution channels, especially by means of their own exclusivity. Over the last 20 years, the insurance sector was affected by a breakdown of the value chain, which is why innovative distribution strategies are now increasingly important. They take into account the market’s requirement for a multi-channel strategy: Clients want choice.
To expand its position as the leading life and pensions provider in Switzerland and to implement its client-oriented growth strategy, Swiss Life has launched a series of initiatives. These include strengthening its own sales force, optimising the distribution organisation, further reducing the number of general agencies and intensifying its market development and customer relationship management activities. Swiss Life is also intensifying cooperation with AWD, with the aim of writing around 10% to 15% of new business in individual insurance through this distribution channel by 2012.
In the growing global business in sophisticated insurance solutions for high net worth individuals (private placement life insurance), Swiss Life is already one of the leading providers worldwide. This business area will remain the major engine of growth and driver of the targeted shift from traditional to modern products in the Swiss Life Group in the near future. Swiss Life plans to double its assets under management by 2012.
Through Corporate Solutions, Swiss Life offers employee benefit solutions to multinationals and key accounts. As one of the global leaders in this business, this division is another growth driver for Swiss Life. Plans are underway to systematically expand the global network of client relationships, thus strengthening growth in its traditional area.
Swiss Life successfully entered the Austrian market in the first quarter of 2010 with a business model specifically tailored to private clients.
Five main thrusts lie at the heart of the MILESTONE programme: 1. Consistent focus on modern life and pensions solutions with variable guarantees and risk products with the objective of enhancing customer value and boosting profitability 2. Ambitious leveraging of distribution power 3. Continual improvement in operational efficiency and a substantial reduction in costs 4. Reduction in earnings volatility and strengthening of the balance sheet 5. Disciplined execution of measures
2. Swiss Life is pursuing a multi-channel strategy in distribution which has proved its worth. On this basis, the Group wants to further increase distribution quality and productivity across the board. Swiss Life is therefore focusing on independent distribution channels such as banks, brokers and financial advisors like AWD, in addition to its own distribution network.
3. The cost savings objective of CHF 350 to CHF 400 million vis-à-vis 2008, announced in the context of the 2009 half-year results, has already led to a substantial improvement in the cost base; about half of the cost-cutting measures have already been implemented. In addition to the savings announced in August 2009 in Switzerland and at AWD, Swiss Life in Germany will eliminate the negative administrative cost result of EUR 25 million. Swiss Life in France is currently working on an efficiency boosting programme to support the growth strategy.
Swiss Life — Business Review 2009 4. A further objective is to reduce earnings volatility, while strengthening the balance sheet. On the one hand, Swiss Life is increasing the profitability of its in-force business. On the other hand, on the investment side, the company is continuing to work towards the goal of generating stable, sustainable investment income.
5. Swiss Life is strengthening its internal controlling process and focusing it consistently on the defined objectives. The Group is also developing a new set of key figures, by which the company can be measured more efficiently.
Swiss Life has set ambitious goals for 2012 within the framework of MILESTONE: – Doubling the new business margin to over 2.2% – Writing more than 70% of its new business with modern life and pensions solutions and risk products – 20% to 25% share of Swiss Life products in relevant AWD
product categories – CHF 350 to CHF 400 million lower costs than in 2008 – Return on equity of 10% to 12% – Dividend payout ratio of 20% to 40%
Fabien Spitz joined Swiss Life as a General Agent in 2003 and has a track record of over 20 years of experience in the insurance sector. Together with his team, he services the needs of around 3000 clients. Swiss Life’s portfolio in France includes life and pensions, health insurance and property insurance.
As a General Agent at Swiss Life, I embrace the principles of openness and honesty. To provide the right advice, I need to get to know each client’s individual situation in life and to identify the occupational risks specific to their field. I want my clients to understand the ins and outs of their insurance. Swiss Life’s image in France as a reliable and reputable company helps me greatly in my work.
Summary of Group Results — Swiss Life achieved an annual result from continuing operations of CHF 324 million in 2009, compared to a loss of CHF 1.1 billion the previous year. At the same time, the Group increased premium volume by 9% to CHF 20.2 billion. A financial result of CHF 4.6 billion and a very strong fourth quarter had a positive impact on the overall result.
Net earned premiums and policy fees 12 135 13 514 –10.2%
Financial result (without share of results of associates) 4 588 600 n/a
In CHF million 1 Insurance Switzerland 2 Insurance France 3 Insurance Germany 4 Insurance Other 5 AWD 6 Investment Management
FINANCIAL RESULT — Swiss Life posted a strong financial result for 2009 with low impairment losses. The high level of uncertainty on the capital markets brought about by the financial crisis persisted into the beginning of the year but eased noticeably in later months. The stabilisation of the market had a positive effect on the financial result. Direct investment income came to 3.8%, despite lower dividend income from equity investments and reduced income from hedge fund investments. In contrast to the previous year, asset changes relevant to the income statement showed a positive trend. Only a few impairments were required on the investment portfolio which were more than offset by realised and unrealised gains. Taking into account asset management costs, the net investment return came to 3.9% (2008: 0.3%). The total investment return of 5.4% (2008: 0.5%) also includes the asset changes directly reflected in equity. When the fair value of investments not reported at market value on the balance sheet is factored in, the overall performance was 7.5%. Substantially lower credit risk spreads, in particular, had a positive impact on fixed-income investments. The reduction in risks carried on the balance sheet in the second half of 2008 thus proved effective. Despite volatile market conditions and low interest rate levels, Swiss Life generated investment income which was significantly higher than the interest guaranteed to clients.
Margins and the value of new business are still unsatisfactory. Negative trends in the new business margin which fell from 1.1% in 2008 to 0.9% in 2009 were particularly disappointing. The value of new business remained flat at CHF 123 million in 2009, compared to CHF 119 million in 2008. These two indicators will gain in importance for Swiss Life, given the MILESTONE goals set for 2012. The Group aims to achieve a return on equity of 10% to 12%, increase its new business margin to around 2.2%, improve its cost base by CHF 350 to CHF 400 million from the 2008 level, pay a dividend of 20% to 40% of the net profit and achieve 70% of its new business from modern products and in the area of risk coverage. The 520 job losses in Switzerland announced in connection with MILESTONE were accompanied by a comprehensive package of measures, which were worked out with employee and management representatives and had already been deployed in the past. Even though the reorientation process of the employees in question is still ongoing in some cases, results are positive, proving that the support measures have, on the whole, been successful. Swiss Life has already found a new solution (including early retirement) for 75 of the 221 employees it has supported to date. 146 employees are still participating in the professional reorientation programme offered by Swiss Life.
CAPITAL BASE — Swiss Life has emerged from the financial crisis in good shape and has a solid capital base. Liabilities from insurance operations went up 8% to CHF 123 billion. Equity attributable to Swiss Life Group’s shareholders stood at CHF 7.2 billion on 31 December 2009, up 9% on the previous year’s level of CHF 6.6 billion. The Group solvency ratio on an IFRS basis increased to 164% at year end, up from 158% in 2008. The statutory solvency ratio climbed to 190% (2008: 176%) and the assets controlled by the Swiss Life Group came to CHF 148 billion (+10%).
I see myself as an intrapreneur – an entrepreneur within a company. Thanks to the independence my employer gives me and the trust I receive from my manager, I’m able to forge sustainable relationships with our banking clients. The mainstays of my business relationship with Swiss Life are a culture of give and take, combined with a spirit of openness and discretion.
On this basis, we join forces to create individually tailored pension solutions for our mutual clients – whatever their situation in life.
He has a strong track record in the PPLI area and is dedicated and committed to ensuring the independence of international high net worth individuals.
I enjoy working intensively with Mirabaud & Cie. to create tailored solutions for each individual client. This calls for honesty, discretion and loyalty – qualities which Swiss Life and Mirabaud & Cie.
Segment Reporting — Swiss Life reports its insurance business by country and also discloses separately the results of its cross-border segments Insurance Other, AWD and Investment Management. In 2009 Swiss Life generated an overall segment profit of CHF 632 million (2008: loss of CHF 726 million), to which Insurance Switzerland – at CHF 467 million – made the greatest contribution.
Swiss Life emerged from the financial crisis in good shape to present solid results for the 2009 financial year. The company posted a profit of CHF 467 million in its home country Switzerland, CHF 159 million in France and CHF 92 million in Germany. The Investment Management segment contributed CHF 77 million to the overall segment profit, whereas Insurance Other and AWD reported losses of CHF 43 million and CHF 92 million, respectively. Gross written premiums, policy fees and deposits received for all segments increased from CHF 18.5 billion to CHF 20.2 billion.
INSURANCE SWITZERLAND — Swiss Life posted a segment result of CHF 467 million in Switzerland for 2009. The financial result for the Swiss business recovered strongly and came to CHF 2.7 billion. Direct investment income declined slightly on the back of lower hedge fund distributions and reduced dividend income from equities. Unlike in the 2008 financial year, which saw impairments on equities and hedge funds, capital gains performed well in 2009, contributing CHF 73 million to the financial result.
According to the Swiss Insurance Association (SIA), premiums in the Swiss life insurance market receded 1.9% to CHF 27.9 billion. This reflected a 3.6% decrease in group insurance and a 2.4% increase in individual insurance. At CHF 7.5 billion, Swiss Life’s premium income remained at a high level. 77% of the premiums were written in occupational benefits insurance. Premium income in group insurance declined 3.4% on the prior-year figure, after adjustment for a one-off impact, lowering Swiss Life’s market share to 29.6%. Swiss Life grew its premium volume in individual insurance by 2.0%, bringing its market share to 19.4%.
Despite the decrease in premium volume, Swiss Life posted a much healthier segment result in Switzerland, thanks to its enhanced competitiveness and sharper focus on client needs.
Swiss Life — Business Review 2009 further expanded its competency center for autonomous and semi-autonomous pension funds, which is operated by Swiss Life Pension Services.
In keeping with the new product range, adjustments were made to the organisational structure within both the company and the sales force. Sales managers were also appointed within the sales force and the number of general agencies was reduced from 58 to 42. The agencies are now based in key sales regions and have benefited from investments made in their locations. In 2009, the Swiss Life Group intensified its cooperation with brokers and focused on boosting its distribution power through its multi-channel strategy, leading to a considerable rise in business production through brokers (incl. AWD).
For 2010, plans are in the pipeline to introduce additional modern life and pensions products with variable guarantees and risk products, which tie up less capital and generate lower costs. Swiss Life also plans to offer topicbased advisory services, to expand its range of advisory services for investment funds and pension funds, and to introduce a new semi-autonomous standard solution for collective foundations. Execution of the measures to boost efficiency by 2012 is on track and will lead to a further reduction in administrative costs.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 7 518 8 172 –8.0%
Net earned premiums and policy fees 7 288 7 963 –8.5%
INSURANCE FRANCE — Swiss Life posted a segment result of CHF 159 million in France on the back of the considerably higher financial result of CHF 983 million.
Net earned premiums and policy fees 2 952 3 618 –18.4%
The German life insurance market advanced 7% in 2009. Swiss Life increased its premium volume by 10% (15% in local currency) to CHF 2.2 billion on the back of demand for its multiple award-winning supplementary occupational disability insurance, as well as the capitalisation product Swiss Life Cash Growth. Net insurance benefits and policyholder participation climbed 9% on the previous year, mainly due to the rise in policyholder participation to CHF 305 million. Operating costs went up 3% and new business premiums jumped 110% to CHF 686 million. Swiss Life grew its income from new business with periodic premium products by 5% to CHF 155 million, reversing the market trend.
Swiss Life will broaden its distribution channel mix further in 2010. The company is introducing a new service
Premiums for Germany, by type of insurance concept for banks in order to tap into new market potential and to acquire new target groups for its attractive single premium business and other solutions. Swiss Life will continue to focus on its traditional strengths in the growth segment of brokers and multiple agents, as well as on independent financial services providers.
At CHF 5.3 billion, gross written premiums, policy fees and deposits received were almost twice that generated in 2008. The results of the two largest units are presented below.
Corporate Solutions specialises in global life and pensions solutions for multinationals. In 2009 it met its profitability and premium volume targets by strengthening its client relationships. With new premium growth of 30%, Corporate Solutions confirmed its position as the global leader in the market for comprehensive employee benefit solutions. In 2010 it plans to advance its growth and profitability, despite the challenging market environment, by providing attractive solutions geared to the current requirements of its clients.
AWD — The AWD segment posted a loss of CHF 92 million for 2009, compared to a loss of CHF 41 million the previous year. In addition to one-off and restructuring charges, this figure also includes expenditure for the amortisation of customer relationship assets taken on in the acquisition. AWD has been included in the accounts of the Swiss Life Group since March 2008. As a result, the previous year’s figures include sales revenues and costs for only nine months, thus permitting only a limited comparison.
At the end of 2009, the AWD Group had 5726 fully trained and registered financial advisors, as well as 2902 trainee advisors under contract. As a result of the withdrawal from Romania and Croatia, the number of advisors at the turn of the year decreased by 384 to 5342. In the year under review, AWD advisors serviced the needs of 267 777 clients – a rise of 8% – and acquired 173 866 new clients (including Romania and Croatia).
to new business and positive trends, assets under management increased by CHF 5 billion to over CHF 116 billion. Insurance assets climbed CHF 4 billion to over CHF 106 billion. Assets invested in funds and third-party mandates rose to around CHF 10 billion. The previous year’s decline in assets under management was mainly offset in the year under review. Although substantial cost savings were again achieved in the 2009 financial year, expenses remained on a par with last year because of the large investments made in modern infrastructure.
The Investment Management segment implemented measures to further improve efficiency in the year under review. It outsourced management of its Swiss mortgage portfolio, centralised management of its Group-wide third-party mandates and stepped up its cooperation with insurance units on product development and distribution. For instance, the Swiss Life Investment Foundation in Switzerland now offers its clients the opportunity to invest in real estate products.
To date, the new survey has been carried out in France, where the 2009 engagement value came to 43%. The European financial industry benchmark shows an average value of 49%, with the top quartile scoring much higher at 71%. The peer comparison values indicate that there is room for improvement. Plans are underway to implement appropriate measures next year focusing on issues which positively impact on the engagement value and which the employees surveyed frequently cited as requiring improvement.
Swiss Life’s success is built on the trust clients, partners, staff and shareholders place in the company. Their trust stems from the high quality services delivered and is reinforced by Swiss Life’s commitment to responsible corporate conduct which transcends its actual field of business. To achieve sustainable success, a motivated workforce, a recognisable and credible brand and a strategy in step with social developments and needs are crucial.
TALENT DEVELOPMENT — Swiss Life has a strong track record of offering opportunities for further development to employees and management on an ongoing basis, thereby enhancing employee loyalty. Swiss Life continually opens up new perspectives for employees and managers who demonstrate a high level of performance and the required potential. Employees who have been selected for a management career are decentrally managed in talent pools and prepared for their future roles with various training modules.
In August 2009 the company launched an extensive series of measures, including a cost-cutting programme, to improve its competitiveness by driving profitable growth. Swiss Life has thus introduced initiatives in all its markets to boost client orientation, efficiency and profitability. A large proportion of the savings envisaged under the costcutting programme are being achieved at AWD and the Swiss Life Group’s Swiss Division.
Since 2007, Swiss Life in Germany has been supporting the Nicolaidis Foundation, a non-profit organisation for widows, widowers and their children. In particular, the foundation supports children’s and youth projects with a focus on creativity and experiential learning.
Last year, the Private Placement Life Insurance unit dispensed with gifts for business partners and instead donated a large sum of money to the Lo Tedhal hospice in Brazil which provides treatment for pain and palliative care to advanced cancer patients and aims to give them a better quality of life.
The AWD Group has committed itself for many years to social, scientific and cultural causes. The AWD-Stiftung Kinderhilfe Foundation, established in 1991, is essentially run by AWD Group advisors and employees, and helps improve the life chances and development opportunities of disadvantaged children. The foundation continued its major medical aid project in West Africa in 2009. The Noma project in Sokoto is dedicated to the education and surgical rehabilitation of victims of a disease caused by a mixed infection which results in serious facial defects. The AWD-Stiftung Kinderhilfe Foundation also funded life-saving operations in collaboration with other foundations, and supported important projects in Kyrgyzstan, the Czech Republic and Slovakia. The foundation was also active in Germany, Austria and Switzerland.
POLITICS — For retirement provisions to function effectively, account must be taken of current demographic and economic challenges. Thus, Swiss Life is involved at various levels of the political debate. Swiss Life also supports politically active employees who volunteer for public office, thus helping to strengthen the tradition of providing service to the community.
In Germany, at the Salon Palais Leopold series of events held several times a year in Munich, decision makers from the worlds of business, politics, academia and the media engage in regular dialogue on key social and political issues. Since 2007, Swiss Life has provided a platform for dialogue at its Munich Specialist Forum series of events for corporate clients, business partners and experts working in the occupational pensions field. The third German Swiss Life Pension Day in October 2009 also enjoyed broad public interest.
BRAND MANAGEMENT — 2009 has shown once again that, in all markets, Swiss Life is a solid brand whose values and Swiss origin act as important door openers. In the year under review, a new brand promise has been developed to underscore Swiss Life’s forward-looking attitude and to further focus its positioning. Sponsorship commitments boost the recognition value and relevance of the Swiss Life brand.
Since its introduction at the start of 2004, development of the Swiss Life brand has been very positive in all markets, as reflected in the brand’s recognition value and regular image surveys. When breaking into new markets too, the brand, combined with its Swiss origin, has been shown to wield great power and to be an important door opener. The established AWD brand is managed as before as an independent brand.
BRAND POSITIONING — Based on its Swiss origin, its over 150 years of experience and its expertise as a life and pensions specialist, Swiss Life offers its clients long-term and flexible solutions for a secure future. The Swiss Life brand is founded on the qualities of expertise, future orientation and, in particular, trustworthiness.
VALUES — With its corporate values of expertise, proximity, openness, clarity and engagement, Swiss Life is committed to a professional, personal and comprehensible corporate culture – with respect to its clients, staff, shareholders and society.
Dr Bellotto used to work at the University of Zurich in the area of basic biomolecular research. Nowadays, he specialises in oncology and haematology, advising the top ten pharmaceutical groups in the world as an international, independent marketing consultant. The combination of rationality and creativity and his freedom to concentrate on his core strengths and responsibilities motivate him afresh to come up with new, tailor-made solutions for his clients.
I’m a true cosmopolitan, so independence for me means working, thinking and living on an international and multicultural level. Fabio Zanella recognised this. He understood my situation in life and my personal priorities. He also realised that my main concern is pension planning and, not so much, tax optimisation.
Together, we came up with a life and pensions product which allows my wife and me to look towards a financially secure future.
Fabio Zanella joined Swiss Life’s General Agency in Novaggio as an insurance advisor in 2002. In terms of Swiss Life as an employer, the qualified financial advisor appreciates in particular that
Swiss Life concentrates on its core business of life and pensions, has built up a wealth of expertise in this area, and focuses on the specific needs of its clients.
My relationship with Dr Manolo Bellotto is based on great mutual respect. When he approached Swiss Life a year ago, our aim was to come up with a solution that optimally meets his short, medium and long-term needs – and I think we have succeeded in doing just that. Thanks to the forward-looking pensions plan we created, Dr Bellotto can devote his time and energy to his work and life.
In view of the new composition of members in the Board of Directors following the Annual General Meeting of 7 May 2009, Swiss Life discontinued the office of Delegate of the Board of Directors and split the Chairman’s Committee into two separate committees: In order to optimise the corporate governance environment, a Chairman ’s and Corporate Governance Committee and an independent Nomination and Compensation Committee have been formed. As part of this new organisational structure, the office of Second Vice Chairman has been created. The Second Vice Chairman chairs the Nomination and Compensation Committee.
GROUP STRUCTURE — Swiss Life Holding was established in 2002 and has its registered office in Zurich. It has been listed on the SIX Swiss Exchange since 19 November 2002. Swiss Life Holding brings together all the Swiss Life Group companies and activities under a single holding company. The holding company structure makes it easier to effect investments, enter into partnerships or cooperation agreements and execute capital market transactions. Transparency is also improved by separating the interests of shareholders from those of insured persons.
The operational management structure as at 31 December is shown on page 51.
SHAREHOLDERS — The following shareholders disclosed participations of registered shares exceeding the 3% reportable threshold stipulated under the Stock Exchange Act: Barclays Plc, England, informed on 12 February 2008 that on that date it held, directly or indirectly, a total of 1 474 185 registered shares of Swiss Life Holding, which corresponded at that time to 4.22% of the voting rights of Swiss Life Holding.
Dodge & Cox, USA, notified on 6 March 2008 that it held through the Dodge & Cox International Stock Fund 1 645 000 registered shares or 4.71% of the voting rights of Swiss Life Holding.
Carsten Maschmeyer, Germany, reported on 23 December 2008 that a group consisting of him and his two sons, Marcel Jo Maschmeyer and Maurice Jean Maschmeyer, and the companies CM Vermögensverwaltung GmbH & Co. KG and CM Vermögensverwaltungs-Geschäftsführungs GmbH held a total of 1 944 616 registered shares and 230 000 further purchase positions of Swiss Life Holding, corresponding to a 6.22% share of the voting rights (cf. also on page 59 details on share ownership as at 31.12.2009 of currently serving Board of Director and Corporate Executive Board members).
SHAREHOLDER STRUCTURE — On the balance sheet date a total of 194 867 shareholders and nominees were listed in the Swiss Life Holding share register, of which about 4800 were institutional shareholders. Taken together, the shareholders entered in the share register held around 56% of the shares issued. More than half of these shares were owned by shareholders domiciled in Switzerland. Around one quarter of the registered shares were in private hands.
REGISTRATIONS — Swiss Life Holding shares are not subject to any limitations on transferability. Swiss and foreign banks and securities brokers may be entered in the share register as nominees if they are holding shares of Swiss Life Holding in their custody for the account of the beneficial owners. Professional asset managers may also be registered as nominees if, in a fiduciary capacity, they have deposited Swiss Life Holding shares for the account of third parties with Swiss or foreign banks or securities brokers in their own name. Nominees are required to be subject to banking or financial market supervision.
FUNCTION — The Board of Directors is responsible for all matters that are not reserved for the consideration of the Annual General Meeting of Shareholders (formally the supreme decision-making body of a public limited company) under the terms of the law or by the company’s Articles of Association. In line with its non-transferable duties prescribed by law the Board of Directors is responsible, in particular, for the ultimate direction of the Group, as well as the supervision of the Corporate Executive Board.
ELECTIONS AND TERMS OF OFFICE — Pursuant to the Articles of Association, the Board of Directors may consist of a minimum of five and a maximum of fourteen members. The members of the Board are elected by the General Meeting of Shareholders for a maximum term of three years, and on an individual basis.
STAGGERED TERMS OF OFFICE — Due to the staggered terms of office, it is ensured that, in so far as possible, an equal number of members will come up for re-election every year. Thus, with respect to the annual re-elections, an important prerequisite has been established for ensuring continuity on the Board of Directors.
COMPOSITION — In the year under review, no member of Swiss Life Holding’s Board of Directors exercised any duties relating to operational management within the Swiss Life Group. Furthermore, no such duties were exercised by any Board members during the past three financial years, with two exceptions: Rolf Dörig, who held the position of Chairman of the Group’s Corporate Executive Board until his election to the Board of Directors in May 2008, and Carsten Maschmeyer, who was Co-CEO of AWD until March 2009.
The members of the Board of Directors of Swiss Life Holding also make up the Board of Directors of Swiss Life Ltd.
MEMBERS OF THE BOARD OF DIRECTORS — On the balance sheet date, the Board of Directors was composed of the following members: Year appointed/ Name Main function Additional functions re-elected Elected until
AL Gerold Bührer graduated in economics (lic. oec. publ.) from the University of Zurich in 1972. Following 17 years with the Union Bank of Switzerland as a member of senior management in its financial sector and a Member of the Executive Board of its fund investment company, he joined Georg Fischer AG in 1991, where he served as a Member of its Executive Board (Finances)
from 1991 until 2000. He began working as an independent economic consultant in 2001 and, since the end of 2006, holds the office of Chairman of economiesuisse. Gerold Bührer was a Member of the Grand Council of the Canton of Schaffhausen from 1982 to 1991 and, from 1991 to 2007, a Member of the Swiss Parliament (National Councillor).
Board of Directors – Swiss National Bank, Berne, Member of the Bank
Volker Bremkamp will be put forward for re-election at the Annual General Meeting of Swiss Life Holding on
AL Paul Embrechts received his master’s degree in mathematics from the University of Antwerp (Belgium) in 1975 and his doctorate (Dr. sc. [Math.])
from the Catholic University of Leuven (Belgium) in 1979. Between 1975 and 1983 he held a post as Research Assistant at the Catholic University of Leuven. From 1983 to 1985 he was a Lecturer in Statistics at the Imperial College, University of London, before taking up a position as Lecturer at the University of Limburg (Belgium) from 1985 to 1989. Since 1989 he has held the position of Professor of Mathematics at the Swiss Federal Institute of Technology (ETH) in Zurich.
Other appointments: – Swiss Pool for Aviation Insurance, Chairman – Captive Mutual (Schweiz) AG, Baar, Chairman of the
Other appointments: – Sigurd Rück AG, Zurich, Chairman of the Board of
Board of Directors – Casino de Montreux SA, Montreux, Vice Chairman of the Board of Directors / Chairman of the Audit Committee
Other appointments: – Vontobel Holding AG, Zurich, Member of the Board of
Washington DC, earning an LL.M., and passed the bar exam for the US states of New York and Connecticut in 1987. Franziska Tschudi completed postgraduate studies at the University of St. Gallen (1991 to 1993), receiving an Executive MBA. After initially working as an Assistant for Media Law at the Institute for Constitutional and Administrative Law at the University of Berne, and practising business and media law in Zurich, Washington DC and
RESIGNATIONS — Bruno Gehrig resigned from his position as Chairman of the Board of Directors of Swiss Life Holding after the Annual General Meeting on 7 May 2009 because of his election to UBS Ltd’s Board of Directors in October 2008. After serving for six years, Pierfranco Riva also stepped down from the Board of Directors of Swiss Life Holding due to reaching the statutory age limit. At the 2009 Annual General Meeting, Frank Schnewlin, the former CEO of the Baloise Group and former Member of Zurich Financial Services Group’s Executive Board, and Carsten Maschmeyer, founder and longstanding Head of the AWD Group, were newly appointed to the Board of Directors.
INTERNAL ORGANISATIONAL STRUCTURE — The Board of Directors issued the Organisational Regulations setting forth the internal organisational structure and the duties and competencies of the Board of Directors, the Board of Directors’ committees, the Chairman of the Board of Directors and the Corporate Executive Board.
MITTEE — The Chairman’s and Corporate Governance Committee assists both the Chairman of the Board of Directors in performing his leadership and coordination
INVESTMENT AND RISK COMMITTEE — The Investment and Risk Committee assists the Board of Directors in matters concerning investment management, financial management and risk management within the Group. The tasks of the Investment and Risk Committee include drafting proposals on the principle features of asset and liability management (ALM) and submitting them to the Board of Directors, determining the investment policy, assessing capital adequacy, verifying compliance with guidelines on investments, and establishing the risk tolerance in insurance and investment operations.
If required, the Board of Directors and its individual committees regularly invite all or some members of the Corporate Executive Board and in-house specialists to its meetings. Outside the meetings, each member of the Board of Directors may request information about the course of business from the Corporate Executive Board subject to the prior notification of the Chairman of the Board of Directors.
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. Swiss Life’s Internal Control System (ICS) also serves the Board of Directors for information and controlling purposes. Further details are available in the “Risk Management” section on page 33.
BRUNO PFISTER — Born 1959, Swiss national Group Chief Executive Officer (Group CEO)
AL After graduating with a degree in economics from the University of Augsburg, Klaus G. Leyh worked for two years as a market researcher and advisor in the consumer goods industry. In 1995 he changed to the insurance sector, building up Generali’s Market Research department in Munich. He subsequently held management positions in marketing, product management and e-business at Generali Lloyd Versicherung AG, AXA Colonia Konzern and ARAG Lebensund Krankenversicherung, and received a Master of Business Research (MBR) from the Ludwig Maximilian University of Munich. In 2001 Klaus G. Leyh joined Swiss Life in Germany as the head of its e-commerce and e-business activities and was assigned responsibility for distribution service, control and promotion in 2002. From January 2006 to September 2008 he held the position of Chief Market Officer and Member of the Executive Board of Swiss Life in Germany with responsibility for the entire sales force, distribution management, service and control.
International Economics, Thomas Buess launched his career in insurance in 1985. From 1985 to 1993 he assumed various positions in the area of finance at the ELVIA Group. In 1994 he joined Zurich Financial Services Group as Chief Financial Officer and Member of the Executive Committee of the Swiss P&C business unit. From 1997 to 1999 he was Chief Financial Officer of all Swiss operations. In 1999 Thomas Buess moved to the USA as Chief Financial Officer of Zurich Financial Services Group’s North American business area. In 2002 he was appointed Group Chief Financial Officer and Member of the Group Management Board. Thomas Buess went on to head the reorganisation of the life insurance business before assuming the role of Chief Operations Officer of Zurich Financial Services Global Life in 2004. In January 2009 he moved to Allianz Group as Head of Operational Transformation.
PATRICK FROST — Born 1968, Swiss national Group Chief Investment Officer (Group CIO)
AL Patrick Frost studied at the ETH in Zurich and the universities of Cologne, Basel and Zurich, obtaining degrees in natural science (dipl. Natw. ETH, 1993), economics (Dr. rer. pol., 1998) and law (lic. iur., 2001). He began his professional career in 1996 as a portfolio manager and analyst in financial engineering at Winterthur Group. Between 1999 and 2001 he was employed as a Senior Bond Portfolio Manager at Winterthur Investment Management Corp. in New York. He became the Head of Global Fixed Income at Winterthur Group in 2001, where he played a key role in the further strategic development of its asset management.
MANFRED BEHRENS — Born 1955, German national Chief Executive Officer AWD (CEO AWD)
RESIGNATIONS — Reto Himmel, Group Chief Technology & Operations Officer (Group CTO), left the Corporate Executive Board on 31 March 2009 due to the discontinuation of the corporate executive Group CTO function because of the transfer of areas of the Group IT & Operations division into the Swiss business management structure.
THE GROUP’S NEW MANAGEMENT — The management team of the Swiss Life Group has changed over the past approximately 18 months. With the appointment of
Matthias R. Aellig as the new Group CRO at the beginning of 2010, Bruno Pfister, Group CEO, has now completed his team.
Dr Dietlind von Laßberg worked in the tourism research area from 1990 to 2008, becoming a manager. In 2009 she set up her own business as a real estate broker and management consultant.
What impressed me about the comprehensive advisory services offered by Hermann Schweigert was his sound knowledge of the real estate sector, coupled with his great expertise in the area of insurance. He provided me with specialist support that went way beyond insurance issues and played a large part in my decision to go it alone and set up my own business. And he showed me that I can do all this, yet still be financially independent – which is a good feeling.
Further details on compensation and benefit expenditure for the management and employees of the Swiss Life Group can be found in the Financial Statement section of the Annual Report. In addition, the compensation of the members of the Board of Directors and the Corporate Executive Board, and their participation interests, are shown in the notes to the Swiss Life Holding Financial Statements.
COMPENSATION POLICY PRINCIPLES — Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for establishing the guidelines on the Group’s compensation policy (incl. bonuses and equity compensation programmes) and with regard to employee benefit institutions. The compensation policy underpins the performance culture required by the corporate strategy and forms part of the HR policy. The aim is to retain qualified employees and recruit new, highly skilled staff.
PRACTICE AND PROCEDURE — Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for determining the level and make-up of compensation for its members, whereas the Nomination and Compensation Committee is responsible for putting forward corresponding proposals. The Board of Directors also establishes the guidelines for the company’s compensation policy. In doing so, it takes into consideration the compensation policies of other organisations of comparable size and in comparable industries, drawing its findings from publicly available information and, as necessary, studies by external experts. Based on these guidelines, the Nomination and Compensation Committee also submits proposals to the Board of Directors with regard to the determination and distribution of the bonus pool for all employees and determination of the compensation for the individual members of the Corporate Executive Board.
Two members of the Board of Directors resigned in the 2009 financial year. Bruno Gehrig resigned from his position as Chairman of the Board of Directors of Swiss Life Holding after the Annual General Meeting on 7 May 2009 due to his election to the Board of Directors of UBS Ltd in October 2008. After serving for six years, Pierfranco Riva also stepped down from the Board of Directors at the 2009 Annual General Meeting due to reaching the statutory age limit. Two new members were appointed: Frank Schnewlin and Carsten Maschmeyer.
In 2008 the following personnel changes took place in the Corporate Executive Board: Bruno Pfister was appointed Group CEO with effect from 9 May 2008 to replace Rolf Dörig, who was elected to the Board of Directors at the Annual General Meeting of 8 May 2008 and thus stepped down from the Corporate Executive Board. In addition, Manfred Behrens joined the Corporate Executive Board as CEO Germany with effect from 9 May 2008. He went on to assume the position of Co-CEO of AWD on 1 September 2008. CEO France, Charles Relecom, and the new CEO Germany, Klaus Leyh, joined the Corporate Executive Board on 1 July 2008 and 1 October 2008, respectively. Paul Müller handed over his position as CEO Switzerland to Ivo Furrer as of 1 September 2008.
In the 2009 financial year, the composition of the Corporate Executive Board changed as follows: Reto Himmel, Group Chief Technology & Operations Officer (Group CTO), left the Corporate Executive Board effective 31 March 2009 due to the discontinuation of the Group CTO function. Thomas Buess joined the Board as of 1 August 2009 as the new Group Chief Financial Officer (Group CFO), replacing Thomas Müller who resigned from the Corporate Executive Board with effect from
On the balance sheet date, the following compensation was received by acting members of the Board of Directors of Swiss Life Holding: Compensation in cash in CHF Shares with three-year blocking period
Until leaving the Board of Directors at the Annual General Meeting of 7 May 2009, Bruno Gehrig was paid compensation in cash to the amount of CHF 272 917 in his capacity as Chairman of the Board of Directors. As part of his basic compensation, Pierfranco Riva received for the same period compensation in cash of CHF 34 167 and 82 shares, which were subject to a three-year blocking period.
As Chairman of the Board of Directors, Bruno Gehrig was affiliated to the employee benefits institutions of Swiss Life for the purpose of occupational provisions and obtains the corresponding pension benefits under the pension fund regulations. Rolf Dörig, in his former role as Delegate of the Board of Directors and current position as Chairman of the Board, is also insured for occupational provisions with the employee benefits institutions of Swiss Life. No such affiliation exists for other members of the Board of Directors; no contributions have been made on their behalf.
Within the framework of the compensation arrangements, a long-term equity compensation programme was introduced in 2004 for members of the Corporate Executive Board and other members of senior management within the Swiss Life Group. Based on the programme, participants are granted future subscription rights in the form of Performance Share Units (PSUs) on Swiss Life Holding
In the 2008 equity compensation programme, 47 members of the Swiss Life Group senior management took part. A total of 52 618 PSUs were allocated; 23 695 to the Corporate Executive Board, of which 5924 were allocated to Bruno Pfister in his capacity as CEO International up to 8 May 2008 and as Group CEO from 9 May 2008. In accordance with the compensation regulations pertaining to the Board of Directors, Rolf Dörig, who held the position of Group CEO up to 8 May 2008, was not allocated any PSUs for the 2008 financial year due to his election to the Board of Directors on 8 May 2008 and resultant resignation from the Corporate Executive Board. Consequently, he was also not allocated any PSUs for the 2009 financial year.
The shares allotted to the members of the Board of Directors in the period under review formed part of their basic compensation, 80% of which was granted in cash and 20% in shares of Swiss Life Holding. The shares are subject to a three-year blocking period.
In 2008 Rolf Dörig held the position of Group CEO of Swiss Life until the Annual General Meeting of 8 May 2008; after his election at the Annual General Meeting of May 2009, he assumed the function of Delegate of the Board. His compensation for 2008 is disclosed in its entirety under the compensation to the Corporate Executive Board.
The highest total compensation for a member of the Board of Directors of Swiss Life Holding in the period under review was received by Rolf Dörig as Delegate of the Board of Directors and, following the Annual General Meeting of 7 May 2009, Chairman of the Board. The compensation granted in the form of cash, shares and contributions to occupational provisions for the 2009 financial year was as follows: In CHF
4 Compensation received as Group CEO until 8 May 2008 and subsequently as Delegate of the Board of Directors. Rolf Dörig did not receive any cash bonus or variable compensation for the 2008 financial year.
UTIVE BOARD — Bruno Pfister received the highest total compensation for a member of the Corporate Executive Board in the period under review.
The compensation granted in 2009 in the form of cash, shares and contributions to occupational provisions was as follows: In CHF
Total compensation 2009 3 in cash and shares 2 178 553 including annual contribution to occupational provisions of CHF 175 801 2 354 354 in cash and shares 5 1 053 193 including annual contribution to occupational provisions of CHF 156 648 1 209 841 including additional contribution to occcupational provisons of CHF 598 500 6 1 808 341 1 Including cash bonus of 925 000 for the 2009 financial year, determined at the beginning of 2010, and other compensation in cash (child allowances, company car, premium contribution ).
In addition to compensation in the form of cash, shares and contributions to occupational provisions, Bruno Pfister was allocated 6500 future subscription rights in the form of Performance Share Units (PSUs) as part of the three-year equity compensation programme. These entitle him to Swiss Life Holding shares as at 1 April 2012, provided that the relevant requirements have then been met. Depending on how the two defined performance criteria develop, the number of PSUs can increase by up to a factor of 1.5 or drop to zero. On the allocation date of 1 April 2009, the fair value of one PSU was CHF 51.22.
Taking into account the mathematical value of the PSUs allocated, which came to CHF 332 930, Bruno Pfister’s total compensation for 2009 amounted to
RIGHT OF REPRESENTATION — The Articles of Association stipulate that a shareholder may be represented by a legal representative, or, if a written power of attorney exists, by another shareholder entitled to vote, by a management representative, by an independent voting representative or by a representative of deposited shares.
REQUIRED MAJORITIES — In addition to the resolutions provided for by law, a qualified majority of two thirds of the voting shares represented and an absolute majority of the share par value represented is required to change provisions concerning restrictions on voting rights, to dissolve the company by means of liquidation, to dismiss more than one third of the members of the Board of Directors and to change these provisions of the Articles of Association.
VOTING SYSTEM — Based on a corresponding authorisation in the Articles of Association, the presiding officer at Swiss Life Holding’s General Meeting of Shareholders generally requests for votes to be taken electronically.
The full corporate governance report is provided in the Financial Statements (www.swisslife.com/report).
Financial assets at fair value through profit or loss 10 21 997 16 916 19 399
Financial assets available for sale 11 51 855 43 163 68 588
Financial assets held to maturity 13, 32 6 432 7 159 3 624
Intangible assets including intangible insurance assets 17 4 576 4 651 3 151
Acquisitions of non-controlling interests – – – – – – – –9 –9
By year-end 2009, Swiss Life’s share price had noticeably recovered and, with a plus of 82%, was the best performer on the Swiss Market Index. At the Annual General Meeting in May, the shareholders approved a distribution of profit of CHF 5 per share and authorised a reduction of the share capital to the amount of the share buyback programme executed in 2008. For the financial year 2009, the Board of Directors proposes a distribution of profit of CHF 2.40 per share.
Performance Dow Jones STOXX 600 Insurance Index (in %) +13 –47
Total dividend payout to shareholders (in CHF million) 27.07.2009 160 29.07.2008 596
Financial result (without share of results of associates) 4 588 600 4 923 5 364 7 056
Equity holders of Swiss Life Holding 278 350 1 345 933 860
PUBLISHER — Swiss Life Holding Ltd, Zurich CONCEPT AND DESIGN — Eclat AG, Erlenbach, Canton of Zurich PHOTOGRAPHY — Beat Schweizer, Berne (photo editorial, photos in CEO Interview and Shareholders’ Letter), Stephan Knecht, Zurich (group photo), Franz Rindlisbacher and Gerry Amstutz, Zurich (portraits in Corporate Governance section) PRODUCTION — Management Digital Data AG, Schlieren, Canton of Zurich PRINTERS — NZZ Fretz AG, Schlieren, Canton of Zurich © Swiss Life Holding Ltd, 2010
The cover shot shows the business woman and Swiss Life corporate client Sandrine Londot striking a dance pose, while her advisor, Fabien Spitz from Strasbourg’s General Agency, recreates the move with his hands.
Content 4 Corporate Governance 10 Board of Directors 18 Corporate Executive Board 22 Report on compensation 33 Risk Management 34 Market Consistent Embedded Value (MCEV) 36 Introduction 37 Summary of MCEV Results 44 Information by Market Unit 49 Methodology 54 Assumptions 57 External Auditors’ Statement 58 Glossary and List of Abbreviations 60 Consolidated Financial Statements 62 Consolidated Statement of Income 63 Consolidated Statement of Comprehensive Income 64 Consolidated Balance Sheet 66 Consolidated Statement of Cash Flows 68 Consolidated Statement of Changes in Equity 69 Notes to the Consolidated Financial Statements 174 Report of the Statutory Auditor 176 Swiss Life Holding Financial Statements 177 Review of Operations 178 Statement of Income 179 Balance Sheet 180 Notes to the Financial Statements 195 Appropriation of Profit 196 Report of the Statutory Auditor
The measures and mechanisms introduced by Swiss Life to ensure good corporate governance work well in practice; however, specific adjustments are examined on an ongoing basis in order to adapt the organisational structure to current circumstances and to implement improvements.
The operational management structure as at 31 December 2009 is shown on page 18.
Axa Group, 25 Avenue Matignon, 75008 Paris, France, disclosed in the publication of 16 December 2009 that the group consisting of AXA Rosenberg Investment Management Ltd., 9a Devonshire Square, London EC2M4YY, AXA Rosenberg Group LLC, 4 Orinda Way, Orinda, California 94563, AXA Equitable Life Insurance Company,
BlackRock, Inc., 40 East 52nd Street, New York 10022, USA reported in a publication of 9 January 2010 that a group consisting of BlackRock Asset Management Japan Limited, Marunouchi Trust Tower Main, -8-3 Marunouchi, Chiyoda-ku, Tokyo 100-8217, BlackRock Advisors UK Ltd, Murray House, 1 Royal Mint Court, London EC3N 4HH, BlackRock Investment Management (UK) Ltd., 33 King William Street, London EC4R 9AS,
At the Annual General Meeting of 8 May 2008 it was decided to reduce the par value by CHF 17, i.e. from CHF 34 to CHF 17 per registered share, thereby decreasing the share capital to CHF 594 327 463, divided into 34 960 439 registered shares. As a result of the par value reduction, the conditional capital fell to CHF 42 219 517, divided into 2 483 501 registered shares with a par value of CHF 17 each. The 0.625% convertible bond issue (2004–2010) was again partially converted in 2008, creating 124 115 new registered shares. As at 31 December 2008 the ordinary share capital thus increased to shares with a par value of CHF 17 each, and the conditional capital decreased to CHF 40 109 562, divided into 2 359 386 registered shares with a par value of CHF 17 each.
Swiss Life — Financial Statements 2009 par value of CHF 12). At the same time the conditional share capital was reduced to CHF 28 312 632 (2 359 386 registered shares, each with par value of CHF 12). In 2009 no conversions were made on the 0.625% convertible bond (2004–2010).
Further information on the convertible bond can be found in the “Convertible Bonds and Options” section below.
Additional information on the Swiss Life share is available in the section “Information on Share Performance and Historical Comparison” on pages 70 and 71 in the Business Review.
CONVERTIBLE BONDS AND OPTIONS — One convertible bond issue was outstanding on the balance sheet date, the Swiss Life Holding 0.625% issue (2004–2010) amounting to CHF 317 000 000. The specific conditions attached to these convertible securities and further information on them can be found in the Consolidated Financial Statements (Note 20) as well as in the issue prospectus of 8 June 2004.
Prior to accepting appointments to the Board of Directors of other companies, the members of Swiss Life Holding ’s Board of Directors must receive the approval of the Board of Directors at Swiss Life Holding. Information on additional board mandates held by individual members of the Board of Directors is presented in the following.
Rolf Dörig Chairman Chairman’s and Corporate Governance Committee, Chairman 2008 2011
AL Rolf Dörig laid the groundwork for his professional career by obtaining a doctorate in law (Dr. iur.) from the University of Zurich before being called to the bar in Zurich. Joining Credit Suisse in 1986, he assumed a number of executive responsibilities in various areas of banking and in different geographical markets. As a Member of the Executive Board, he was assigned responsibility for Swiss Corporate and Retail Banking from 2000 onwards. In 2002 he assumed the role of Chairman Switzerland of Credit Suisse Group. Following his move to the Swiss Life Group, Rolf Dörig held the positions of Chairman of the Corporate Executive Board from November 2002 to May 2008 and Delegate of the Board of Directors from May 2008 to May 2009.
Council – Züblin Real Estate Holding Ltd., Zurich, Member of the
AL Frank Schnewlin studied at the University of St. Gallen (lic. oec. HSG), the London School of Economics (Master of Science) and the Harvard Business
– Horizon21, Pfaeffikon, Canton of Schwyz, Member of the Insurance Linked Securities Advisory Committee
VOLKER BREMKAMP — Born 1944, German national Member of the Board of Directors
PAUL EMBRECHTS — Born 1953, Belgian national Member of the Board of Directors
AL Paul Embrechts received his master’s degree in mathematics from the University of Antwerp (Belgium) in 1975 and his doctorate (Dr. sc. [Math.]) from the
Maschmeyer founded the company Allgemeiner Wirtschaftsdienst Gesellschaft für Wirtschaftsberatung und Finanzbetreuung mbH. In 1998 he was appointed Chairman of the Board of Management of AWD Holding AG and, in 2000, launched an initial public offering of shares in AWD. Carsten Maschmeyer was Co-CEO of AWD from September 2008 until March 2009 with responsibility for strategic development and opening up new markets. In May 2009 he was appointed Member of the Board of Directors of Swiss Life Holding. In January 2010 he founded MaschmeyerRürup AG – an independent and internationally focused advisor on the implementation of modern retirement planning concepts for key players in banking and insurance as well as governments. He heads the company as Chairman of the Board.
Other appointments: – AWD Children’s Aid Foundation, Hanover, Chairman of the Election Committee – Society for the Promotion of the International
Directors – Cassa Pensioni della Città di Lugano, Member of the
– Otis, Fribourg, Member of the Board of Directors – Autogrill Switzerland LTD, Olten, Member of the
Board of Directors – Swiss Olympic Association, Berne, Vice Chairman of the disciplinary chamber in charge of doping cases
PETER QUADRI — Born 1945, Swiss national Member of the Board of Directors
Peter Quadri will be put forward for re-election at the Annual General Meeting of Swiss Life Holding on 6 May 2010.
RESIGNATIONS — Bruno Gehrig resigned from his position as Chairman of the Board of Directors of Swiss Life Holding after the Annual General Meeting on 7 May 2009 because of his election to UBS Ltd’s Board of Directors in October 2008. After serving for six years, Pierfranco Riva also stepped down from the Board of Directors of Swiss Life Holding due to reaching the statutory age limit. At the 2009 Annual General Meeting, Frank Schnewlin, former CEO of the Baloise Group and former Member of Zurich Financial Services Group’s Executive Board, and
Carsten Maschmeyer, founder and longstanding head of the AWD Group, were newly appointed to the Board of Directors.
INTERNAL ORGANISATIONAL STRUCTURE — In accordance with the Articles of Association, the Board of Directors issued the Organisational Regulations setting forth the internal organisational structure and the duties and competencies of the Board of Directors, the Board of Directors’ committees, the Chairman of the Board of Directors and the Corporate Executive Board. The Organisational Regulations are reviewed regularly and adjusted where necessary, most recently on 8 May 2009. They are available on the internet at www.swisslife.com, “About Swiss Life” area, “Organisation” section (www.swisslife.com/en/organisation).
Four standing committees support the work of the Board of Directors as a whole: the Chairman’s and Corporate Governance Committee, the Nomination and Compensation Committee, the Investment and Risk Committee, and the Audit Committee. The Board of Directors may establish other committees to be entrusted with special tasks.
The Chairman’s and Corporate Governance Committee held eleven (ordinary and extraordinary) meetings during the year under review. The average duration of an ordinary meeting was around two hours. There was full attendance at all meetings, and the Group CEO was also present on each occasion.
NOMINATION AND COMPENSATION COMMITTEE — The Nomination and Compensation Committee (NCC) supports the Board of Directors with setting the compensation policy and with key personnel decisions regarding appointments to the highest levels of management and related performance-based and market consistent compensation.
During the period from its establishment on 8 May 2009 and 31 December 2009, the NCC convened twice. Each session lasted for around two hours on average. There was full attendance at both meetings.
Generally, the Group CIO and Group CFO attend the Investment and Risk Committee meetings or parts of meetings in an advisory capacity. The Group CEO may attend the meetings of the Investment and Risk Commit-
TIVE BOARD — The Organisational Regulations of Swiss Life Holding provide for the comprehensive delegation of the executive management responsibilities of the company to the Group CEO and the Corporate Executive Board, with the exception of those duties reserved for other bodies in accordance with the law, the Articles of Association or the Organisational Regulations themselves. The Articles of Association of Swiss Life Holding can be found at www.swisslife.com, “Shareholders & Analysts” area, “Swiss Life Share” section, “Articles of Association” (www.swisslife.com/association). The Organisational Regulations are also published on Swiss Life’s internet site at “About Swiss Life” area, “Organisation” section (www.swisslife.com/en/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 all compliance activities and on operational risk management within the Swiss Life Group. Swiss Life’s Internal
Control System (ICS) also serves the Board of Directors for information and controlling purposes. Further details on this system are available in the section “Risk Management ” on page 33.
Life in 1982, initially working in group insurance marketing and later assuming various project management roles relating to strategy development and expansion of Winterthur ’s international insurance business in Europe, Canada and the USA. In 1992 he relocated to the USA, where he worked in underwriting. From 1994 to 1997 he held a number of management positions at Winterthur International in London (including that of Managing Director) before being appointed Chief Underwriting Officer of this business area in 1998. In 1999 he moved to Credit Suisse Group, where he developed and implemented an internet bank in Luxembourg and was subsequently appointed Head of e-Investment Services Europe and member of the Personal Financial Services’ management. Ivo Furrer began working for Zurich Financial Services in 2002, initially in Germany as head of the international key account business, and in 2005 as a Member of the Global Corporate Executive Committee with responsibility for the development of key account and distribution management at global level. In 2007 he was
AL After graduating with a degree in economics from the University of Augsburg, Klaus G. Leyh worked for two years as a market researcher and advisor in the consumer goods industry. In 1995 he changed to the insurance sector, building up Generali’s Market Research department in Munich. He subsequently held management positions in marketing, product management and e-business at Generali Lloyd Versicherung AG, AXA Colonia Konzern and ARAG Lebens- und Krankenversicherung, and received a Master of Business Research (MBR) from the Ludwig Maximilian University of Munich. In 2001 Klaus G. Leyh joined Swiss Life in Germany as the head of its e-commerce and e-business activities and was assigned responsibility for distribution service, control and promotion in 2002. From January 2006 to September 2008 he held the position of Chief Marketing Officer and Member of the Executive Board of Swiss Life in Germany with responsibility for the entire sales force, distribution management, service and control.
– DEPFA Holding Verwaltungsgesellschaft mbH, Düsseldorf, Member of the Supervisory Board
The specifications below follow the directives on information relating to corporate governance issued by the SIX Swiss Exchange and take into consideration the transparency regulations set out in the Swiss Code of Obligations Art. 663bbis and Art. 663c. Further details 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 30). In addition, the compensation of the members of the Board of Directors and the Corporate Executive Board, and their participation interests, are shown in the notes to the Swiss Life Holding Financial Statements.
Within the framework of the compensation arrangements for the members of the Corporate Executive Board and other key performers within the Swiss Life Group, which were selected by the Corporate Executive Board with the approval of the Chairman of the Board of Directors, a long-term remuneration component was introduced in 2004 on the basis of corresponding regulations. This equity compensation programme was adjusted slightly from 2005 by defining specific performance criteria. These take account of both the performance of the Swiss Life Holding share and its performance vis-à-vis other companies. Based on the programme, participants are granted future subscription rights in the form of Performance Share Units (PSUs) on Swiss Life Holding shares, entitling them to receive Swiss Life Holding shares free of charge after a period of three years has elapsed, insofar as the relevant prerequisites have been satisfied. The number of PSUs can increase by up to a factor of 1.5 or drop to zero within three years, depending on how the performance criteria develop.
The equity compensation programmes for 2007, 2008 and 2009 continue to be based on two performance criteria, each with a 50% weighting. One criterion is the Total
Shareholder Return on Swiss Life Holding shares (TSR Swiss Life Holding), whereby a performance in excess of 20% is required for the subscription right to share allocation to arise. The TSR of the company’s own shares is also compared with the TSR of the shares of the companies included in the Dow Jones STOXX 600 Insurance Index (TSR Outperformance); on the basis of this criterion, a subscription right arises if the performance on expiry of the three-year term is above the first quartile in comparison with the companies in question.
2 Incl. cash bonus of CHF 3 550 000 for the 2009 financial year, determined at the beginning of 2010. 3 The Corporate Executive Board members were not paid a cash bonus for the 2008 financial year.
In 2008 the following personnel changes took place in the Corporate Executive Board: Bruno Pfister was appointed Group CEO with effect from 9 May 2008 to replace Rolf Dörig, who was elected to the Board of Directors at the Annual General Meeting of 8 May 2008 and thus stepped down from the Corporate Executive Board. In addition, Manfred Behrens joined the Corporate Executive Board as CEO Germany with effect from 9 May 2008. He went on to assume the position of Co-CEO of AWD on 1 September 2008. CEO France, Charles Relecom, and the new CEO Germany, Klaus Leyh, joined the Corporate
Compensation remitted to members of the Board of Directors comprised the basic compensation, compensation in cash and variable compensation in shares. The basic compensation takes into account membership of the Board of Directors of Swiss Life Holding and its subsidiary Swiss Life Ltd as well as membership of the individual Board Committees. It is partly paid in the form of blocked shares. The additional compensation in cash is commensurate to the function and workload and is determined annually by the Board of Directors. If Swiss Life Group’s business operations have proved successful, a further, variable compensation component may be remitted in the form of Swiss Life Holding shares. This is decided by the Board of Directors, taking into consideration the business results.
Part of basic for the 2009 compensation financial year Total 1 Delegate of the Board of Directors until 07.05.2009 / Chairman of the Board of Directors from 07.05.2009. 2 Member of the Board of Directors from 07.05.2009.
No shares were allocated to closely linked parties2 within the meaning of the law.
— In the period under review no additional honorarium or remuneration payments were made to the members of the Board of Directors or the Corporate Executive Board.
Expenditure for occupational provisions on behalf of the remaining members of the Corporate Executive Board totalled CHF 630 099.
The highest total compensation for a member of the Board of Directors of Swiss Life Holding in the period under review was received by Rolf Dörig as Delegate of the Board of Directors and, following the Annual General Meeting of 7 May 2009, Chairman of the Board. The compensation granted in the form of cash, shares and contributions to occupational provisions in the period under review was as follows: In CHF
UTIVE BOARD —As Group CEO, Bruno Pfister received the highest total compensation for a member of the Corporate Executive Board in the period under review.
4 Bruno Pfister served on the Corporate Executive Board in 2008 as CEO International until 8 May 2008 and, from 9 May 2008, as Group CEO. 5 For the 2008 financial year, the members of the Corporate Executive Board did not receive a cash bonus or variable compensation in shares. 6 Subsequent contribution in accordance with the pension fund regulations due to increase in salary.
Board of Directors – change these provisions of the Articles of Association
VOTING SYSTEM AND PROCEDURES — Based on a corresponding authorisation in the Articles of Association, the presiding officer at Swiss Life Holding’s General Meeting of Shareholders generally requests for votes to be taken electronically. Swiss Life Holding uses a certified electronic voting system which permits balloting with remote-controlled handsets and records the exact number of voting shares represented.
PricewaterhouseCoopers (PwC) serves as external statutory auditor for 68% of the Swiss Life Group companies that are directly or indirectly held by Swiss Life Holding under its scope of consolidation. The remaining auditing mandate for subsidiaries (32%) is carried out by BDO Deutsche Warentreuhand AG.
OF THE LEAD AUDITOR — The Articles of Association stipulate that the external auditor is to be elected by the General Meeting of Shareholders for one financial year at a time. When Swiss Life Holding was established in 2002, PwC was named as statutory auditor and Group auditor. Since then PwC has been re-elected without fail. PwC has also acted as statutory auditor and Group auditor for Swiss Life Ltd since 1994. Swiss Life Holding last invited tenders for its statutory auditor and Group auditor mandate for the 2008 financial year. On completion of the evaluation process, the Board of Directors, in accordance with the proposal of the Audit Committee, again nominated PwC as its statutory auditor and Group auditor at the General Meeting of Shareholders.
AUDITING FEES — In 2009 the auditing fees credited to PwC came to CHF 7.8 million (2008: CHF 7.3 million). This includes the fees for reviewing the 2009 half-year accounts.
In the year under review, representatives of the external auditors attended four of the five Audit Committee meetings, either in their entirety or for specific items on the agenda.
In addition to its comprehensive Annual Report and Financial Statements, Swiss Life Holding also publishes its half-year results. All Swiss Life’s annual and halfyear reports since 1997 can be accessed on the website, “Shareholders & Analysts” area, “Archive Reports” section (www.swisslife.com/en/annualreports). Twice a year, a report detailing the key facts and figures on business operations is sent to all the shareholders listed in the share register. For the last six years, the company has been holding an Investor’s Day annually; the most recent was held on 15 December 2009.
Contact details are available at the end of the Financial Statements.
Risk management is a key component of the Swiss Life Group’s management process. The respective committees of the Corporate Executive Board and the Board of Directors monitor and make decisions in the area of risk management; these are then incorporated into the annual planning process. On the one hand, they comprise qualitative assessments relating to the strategy, to operational risks and to the internal control system (ICS). On the other hand, quantitative elements for each insurance unit, such as risk budgeting and investment strategy, are included in asset and liability management. Based on risk capacity and risk appetite, limits are set in the individual units for the financial risks incurred, according to which the investment targets are set.
Index 36 1.1 Basis of Preparation 36 1.2 Covered Business and Non-Covered Business 37 2 Summary of MCEV Results 37 2.1 Group MCEV 37 2.2 MCEV of Covered Business 38 2.3 Value of New Business 39 2.4 Group MCEV – Analysis of Earnings 40 2.5 Covered Business – Analysis of Earnings 43 2.7 Reconciliation from IFRS Net Asset Value to Group MCEV 44 3 Information by Market Unit 44 3.1 Market Units 44 3.2 Results by Market Unit 49 4.1 MCEV Components for Covered Business 51 4.2 New Business 51 4.3 Asset and Liability Data 52 4.4 Economic Scenario Generator 52 4.5 Dynamic Management Actions and Policyholder Behaviour 52 4.6 Look-Through Principle 53 4.8 Employee Pension Schemes and Share-Based Payment Programmes 54 5.1 Economic Assumptions 56 5.2 Taxation and Legislation 56 5.3 Operating Assumptions 57 6 External Auditors’ Statement 58 7 Glossary and List of Abbreviations
1 Copyright © Stichting CFO Forum Foundation 2008 1 Introduction 1.1 BASIS OF PREPARATION
Swiss Life’s market consistent embedded value reporting follows the European Insurance CFO Forum Market Consistent Embedded Value Principles©1. The cost of credit risk from bonds is calculated and disclosed in addition to mandatory requirements from the Principles. Further details on the MCEV methodology are given in section 4.
Covered business includes all of Swiss Life’s life, health and pension business, with the exception of Swiss Life Insurance Solutions AG and Swiss Life Products (Luxembourg ) S.A. which are not yet material for MCEV purposes. Included are namely life businesses in Switzerland, France, Germany, Luxembourg and Liechtenstein. All other businesses such as investment management and AWD are included in the non-covered business at their IFRS net asset values. In the case of France, all business is included in covered business; the value of non-life insurance and non-health insurance business is their IFRS net asset value.
Swiss Life’s Group MCEV consists of the MCEV for covered business and of the IFRS net asset value for non-covered business.
The MCEV for covered business is broken down into the net asset value (NAV), i.e., the value of assets not backing liabilities, and the value of in-force business (VIF), i.e., the value of future profits emerging from operations and assets backing liabilities.
– The cost of residual non-hedgeable risks (CNHR) – The frictional costs of required capital (FC)
The following table shows MCEV key results as at 31.12.2009 compared to the results as at 31.12.2008: In CHF million Value of Net asset value in-force business Total Total
The Group MCEV includes the covered as well as the noncovered business. The covered business is valued according to the MCEV methodology; the resulting value is the MCEV. The value of the non-covered business included in the Group MCEV is the unadjusted IFRS net asset value.
The net asset value (NAV) of the covered business is the market value of assets allocated to the covered business, which are not backing liabilities. Goodwill and intangibles are not included in the net asset value. The required capital (RC) is that part of the net asset value whose distribution to shareholders is restricted. The free surplus (FS) is calculated as the difference between the total net asset value and the required capital. The NAV of the operations in France includes goodwill and intangible assets of their non-life and non-health insurance operations (see section 3.2).
The certainty equivalent value (CEV) is the present value of future shareholder profits – net of tax – under the certainty equivalent scenario. This scenario is derived from reference rates as at the respective valuation date. The CEV contains the part of the value of financial options and guarantees which materialises in the certainty equivalent scenario (also called intrinsic value of the financial options and guarantees).
The time value of financial options and guarantees (TVOG) is calculated as the difference between the market consistent expected present value of future shareholder profits with all stochastic economic scenarios and the certainty equivalent value. The TVOG therefore represents the additional market price of financial options and guarantees in excess of the intrinsic value which is already allowed for in the reference scenario. The TVOG also includes the cost of credit risk related to investments in corporate bonds. The amount of credit risk on group level is CHF –476 million for 2009 compared to CHF –234 million for 2008. This change is mainly due to credit spread tightening.
The frictional costs of required capital (FC) are the present value of costs incurred by shareholders due to investment management expenses and taxes on the investments of restricted assets. They are calculated based on the required capital.
MCEV increased on both components NAV, especially on its free surplus part, and VIF. The main reason is the economic recovery. This is explained in more detail in section 2.5. The increase in cost of non-hedgeable risks is caused by the change of the valuation method for the French health business from the traditional to the market consistent approach, see section 3.2.
The value of new business (VNB) represents the value added by new business written in 2009. It is calculated consistently with the methodology and assumptions used for the business in force. The value of new business is calculated as the effect on MCEV from writing new business, i.e., it is the difference between the MCEV at year end and the MCEV which would have resulted, had no new business been written during the year.
PRESENT VALUE OF NEW BUSINESS PREMIUMS (PVNBP) 14 390 10 935
In CHF million Covered business Non-covered MCEV business IFRS Total Group MCEV Total Group MCEV
The non-operating MCEV earnings include positive economic variances on covered business (see next section). For non-covered business they relate to borrowing costs for the non-covered business. For 2008, the highly negative non-operating MCEV earnings originated from the economic developments in that year.
The table below shows the analysis of earnings for the covered business in 2009: In CHF million Free surplus Required capital VIF MCEV MCEV
Closing adjustments –222 16 8 –198 –250 1 This presentation of the analysis of earnings for the covered business is compliant with MCEV Principles, except that no indication of the expected existing business contribution in excess of the reference rate has been provided by Swiss Life.
OPERATING MCEV EARNINGS — The value of new business contributions from free surplus and required capital sum up to the new business strain of CHF –133 million. This represents the shareholders’ share in acquisition expenses for new business. The VIF-component of CHF 255 million is the value of future risk-adjusted profits from new business.
Transfers from value in force and required capital to free surplus include the shifts of the results of the preceding step to free surplus and shifts between free surplus and required capital. The total effect in this line is zero. Transfer from free surplus to required capital is due to the depressed economic conditions as of 31.12.2008, leading to a projected reduction of buffers eligible for covering the solvency requirements.
Swiss Life — Financial Statements 2009 increase in VIF. Within the NAV, the shift from free surplus to required capital originates from the higher than anticipated projected policyholder participation in the German operations.
ECONOMIC VARIANCES — These are by far the biggest effects on free surplus, required capital, and VIF. They originate from: – a much better corporate bond investment income for the reporting period than assumed at 31.12.2008 and a reduction of credit spreads on the bond portfolio over the amount implied by the liquidity premiums applied at 31.12.2008
– lower reference rates due to waiving the liquidity premiums and only little changes in swap rates for both Swiss francs and euro
– a better equity-type asset performance than assumed for the expected business contribution (reference rate)
CLOSING ADJUSTMENTS — These represent raising or pay-back of capital and currency exchange rate fluctuation. The major part is related to the integration of the French branch into the Swiss operation as described in section 2.4.
100 bp decrease of interest rates (reference rates) –1 535 –37% –82 –67%
Demographic 5% proportionate increase in mortality rates (death cover) –26 –1% –3 –3%
Required capital 100% statutory solvency capital 2 200 5% 17 14%
Swiss Life — Financial Statements 2009 2.7 RECONCILIATION OF IFRS NET ASSET VALUE TO
Swiss Life’s MCEV for covered business reflects the value of the shareholders’ interest in the life, health and pension business of the Swiss Life Group. This value includes the determination of best estimate liabilities for bonus and tax payments, which are derived from results based on local statutory accounting rather than on IFRS. Therefore local balance sheets and profit and loss accounts are the starting point for the projections. The net asset value (of assets not backing liabilities) is based on the local balance sheet, but adjusted at market value.
RECONCILIATION OF IFRS NET ASSETS TO GROUP MCEV AS AT 31 DECEMBER 2009
Value of in-force business 1 808 1 Goodwill adjustments correspond to goodwill of covered business with the exception of CHF 93 million from French operations (see section 3.2). 2 Group MCEV includes CHF 1 718 million of goodwill and intangible assets as part of the unadjusted IFRS net assets for non-covered business.
SWITZERLAND — Swiss Life’s main business in the Swiss market is group life business. The individual business includes all the typical traditional savings, risk and annuity products, as well as modern savings and retirement products with flexible guarantees. The share of the modern products is steadily increasing. Swiss Life’s own sales force plays the major role in distribution, followed by AWD.
FRANCE — The life insurance products sold through Swiss Life Assurance et Patrimoine consist mainly of savings and annuity products, while risk products play a minor role. New business focuses on multi-support products, combining traditional savings and unit-linked components. The main distribution channels are independent financial advisors and private banking. The health business is sold through Swiss Life Prévoyance et Santé.
GERMANY — Swiss Life sells traditional and modern products for individual and group life business. Disability insurance plays an important role. The main distribution channel is independent brokers, followed by financial advisors such as AWD.
INSURANCE OTHER — Swiss Life supplies private placement life insurance (PPLI) in Liechtenstein, Singapore and Luxembourg. In Luxembourg, Swiss Life also provides group insurance solutions for international and local corporate clients through Corporate Solutions.
The net asset value is influenced by the hybrid debt. It includes the – negative – difference between the market value of assets covering the hybrid debt in the statutory balance sheet and the marked-to-model value of the hybrid debt which is calculated as described in section 4.3. The increase in NAV is mainly a consequence of the annual operational profit and the increase in value of the assets covering equity and hybrid debt.
FRANCE — The MCEV of Swiss Life in France consists of the following three components: – The life business, which is concentrated in Swiss Life Assurance et Patrimoine
– Other companies in France which are accounted for by their IFRS net asset value
The observed increase in required capital can be explained by a noticeable decrease in the free part of the policyholder bonus fund (RfB). The negative free surplus stems from the assumed required coverage of 150% of statutory solvency. Free surplus would be positive at a 100% requirement of statutory solvency.
INSURANCE OTHER — The contributions of PPLI business to the total MCEV of Insurance Other accounts for about two thirds of the value.
The products of PPLI contain only very small financial guarantees, so the TVOG is negligible. The negative net asset value is explained by not taking into account the goodwill for the former insurance company CapitalLeben as part of Liechtenstein.
New business annual premium equivalent (APE) 262 507 153 199 1 122 1 New business strain represents the effect on the net asset value from writing new business.
For the 2009 MCEV closure, the recognition of new business premiums for Swiss group life business was changed: Incoming reserves for new insured individuals (“eingebrachte Freizügigkeitsleistungen”) replacing exiting ones are no longer recognised as premiums, as these reserves only compensate partly for outgoing reserves. This reduced the PVNBP for 2008 by roughly CHF 900 million. The increase in PVNBP starting from the adjusted 2008 value amounts to 15%. This also explains the decrease of the average annual premium multiplier.
INSURANCE OTHER — As the most important line of business in Insurance Other is private placement life insurance (PPLI), by far the biggest share of new business premiums consists of single premiums. This business generated almost the entire massive increase in single premium volume. The new business margin increased considerably compared to the previous year. This is related to pricing initiatives and higher average premium amounts.
Expected existing business contribution (reference rate) 22 52 2 5 80
The predominant effects in the analysis of earnings for every market unit are the economic variances – which are explained in section 2.5.
The experience variances stem mainly from a higher than assumed build-up of additional reserves with an overall slightly negative impact on the MCEV.
Most significantly, other operating variance reflects the impact of enhancements in the crediting and investment rules for individual business and the valuation model for modern products.
FRANCE — The introduction of the new strategic asset allocation for the life insurance business led to positive assumption changes.
In the economic variances for the French operations, the positive equity-type asset performance overcompensates for the negative effect from not accounting for liquidity premiums.
The effects of exchange rate fluctuations of the euro against the Swiss franc are shown in the closing adjustments.
GERMANY — The non-accounting for liquidity premiums and the comparatively lower decrease of credit spreads are the main reasons for the negative economic variance.
The deviation in assumption changes has been mainly caused by updated persistency assumptions for group business as well as revised assumptions for profit sharing.
The closing adjustments show a slight positive effect from the exchange rate fluctuation of the euro against the Swiss franc.
INSURANCE OTHER — Higher than anticipated surrender rates are the main reason behind the negative experience variance. This is related to the tax discussion between Liechtenstein and Germany and the recent economic environment.
FREE SURPLUS (FS) — The free surplus is the market value of any assets allocated to, but not required to support, the in-force covered business at the valuation date. The free surplus is calculated as the difference between the net asset value and the required capital.
The free surplus, unlike the required capital, is supposed to be immediately releasable and hence does not affect the frictional costs of required capital.
VALUE OF IN-FORCE BUSINESS (VIF) — The value of inforce business consists of the following components: 1. Certainty equivalent value (CEV) 2. Time value of financial options and guarantees
2 Copyright © 2009 JPMorgan Chase & Co. All rights reserved.
At the end of the projection, shareholders are assumed to meet any shortfall of assets against liabilities or to receive a part of any residual assets. The same applies to the certainty equivalent value.
Dependencies between credit risk and other financial risks have been modelled and lead to an increase in the capital for credit risk. No diversification with insurance risks (including surrender and expenses) has been allowed for.
The economic capital for cost of credit risk has been projected proportionally to the statutory solvency margin in the same way as for the CNHR (see below). The same charge for annual cost of capital has been applied to the resulting projected capital at risk.
The cost of residual non-hedgeable risks for risk factors such as mortality, morbidity, expenses and lapse rates is calculated under a cost of capital approach. It is defined as the present value of annual charges on the projected economic capital for residual non-hedgeable risk.
The initial capital for the CNHR has been calculated using the standard approach within the Swiss Solvency Test applied to Swiss Life’s MCEV framework. Therefore the corresponding economic capital is calculated by aggregating the stand-alone economic capital that corresponds to the following non-hedgeable risk factors: – Mortality – Longevity – Disability/morbidity – Recovery rates – Capital options – Lapses – Expenses
The economic capital for CNHR has then been projected proportionally to the statutory Solvency I margin.
The value of new business is calculated with economic scenarios and assumptions at end of period.
Equities, real estate, participations and alternative investments (hedge funds and private equities) are modelled separately using appropriate indices according to the corresponding volatilities and the corresponding geographical regions (Switzerland, Europe and USA).
HYBRID DEBT — The going-concern assumption stipulates that for MCEV the hybrid debt allocated to the covered business is valued assuming that the coupons and nominal are paid with certainty. The hybrid debt is valued in a market consistent way by discounting the corresponding liability cash flows with the reference rates without any credit spreads. This leads to a difference to the fair value reported in the Notes to the Consolidated Financial Statements.
The MCEV is calculated using a risk-neutral valuation, based on market consistent and arbitrage-free stochastic economic scenarios. Under this approach, the key economic assumptions are: – The reference swap rates – Interest rate and equity-type volatilities – Correlations between the economic risk factors – Inflation rates
The crediting rules for policyholders are consistent with current company practices and local regulatory environments, in particular regarding the existence of a “legal quote”. They ensure that the statutory solvency rules (Solvency I, including stress tests if legally required in the country), other legal requirements and target solvency margins are fulfilled for each projection year.
Lapse rates from policyholders have been dynamically modelled, depending on the difference between the credited rate to the policyholders and the policyholders’ expectations, which are based on benchmark market interest rates. Lapse parameters depend on the country and product line considered.
Covered business relates to the insurance operations in: – Switzerland – Germany – France: consolidated, including life and health business – Luxembourg – Liechtenstein
Swiss Life — Financial Statements 2009 5.1.2.1 SWAPTION IMPLIED VOLATILITIES AS AT 31 DECEMBER 2009
Economy 1 year option 2 year option 5 year option 10 year option 15 year option 30 year option
5.1.2.3 EQUITY OPTION IMPLIED VOLATILITIES USED FOR THE CALCULATION AS AT 31 DECEMBER 2008 AND 31 DECEMBER 2009
5.1.3 CORRELATION ASSUMPTIONS — The correlation assumptions between different asset classes are based on historical market data. The correlations between returns on equities and on 10-year zero coupon bonds are assumed to be 16% for 2009.
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 2008
Expense assumptions are reconciled with past and current experience. They do not account for future cost reductions. All the expected expense overruns affecting the covered business, such as overhead expenses and development costs in new markets have been allowed for in the calculations. Corporate costs are included in the expenses of market units by means of a look-through procedure (see section 4.6).
In our opinion, the Embedded Value Report at 31 December 2009 has been properly prepared on the basis of the MCEV Principles. Without qualifying our opinion, we draw your attention to the fact that areas of non-compliance with the guidance underlying the MCEV Principles have been disclosed by Swiss Life Holding AG in accordance with G1.4 of the MCEV Principles.
ANNUAL PREMIUM EQUIVALENT (APE) — Volume measure for new business. Sum of regular premiums from new business +10% of single premiums on business written during the period.
AVERAGE ANNUAL PREMIUM MULTIPLIER — The average annual premium multiplier is determined as the difference between PVNBP and the new business single premiums, divided by new business annual premiums.
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.
Consolidated Financial Statements 62 Consolidated Statement of Income 63 Consolidated Statement of Comprehensive Income 64 Consolidated Balance Sheet 66 Consolidated Statement of Cash Flows 68 Consolidated Statement of Changes in Equity 69 Notes to the Consolidated Financial Statements 69 1 General Information 69 2 Summary of Significant Accounting Policies 69 2.1 Basis of preparation 69 2.2 Changes in accounting policies 71 2.3 Consolidation principles 71 2.4 Foreign currency translation and transactions 72 2.5 Cash and cash equivalents 73 2.7 Financial assets 74 2.8 Impairment of financial assets 75 2.9 Investment property 76 2.10 Insurance operations 79 2.11 Property and equipment 80 2.13 Investment management 80 2.14 Asset management and other commission income 80 2.15 Intangible assets 82 2.16 Impairment of non-financial assets 82 2.17 Income taxes 82 2.18 Assets held for sale and associated liabilities 82 2.19 Discontinued operations 82 2.20 Financial liabilities 83 2.21 Employee benefits 84 2.22 Provisions and contingent liabilities 84 2.23 Treasury shares 84 2.24 Earnings per share 84 2.26 Forthcoming changes in accounting policies 86 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies 90 4 Segment Information 101 5 Risk Management Policies and Procedures 101 5.1 Contracts for the account and risk of the Swiss Life Group’s customers 102 5.2 Risk budgeting and limit setting 102 5.3 Asset and liability management (ALM) 103 5.4 Financial risk management objectives and policies 115 5.5 Insurance risk management objectives and policies
Net gains/losses on financial instruments at fair value through profit or loss 5, 8 315 1 853
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31 DECEMBER
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER
Net foreign currency gains/losses on cash and cash equivalents 43 69
Net cash flows from financial instruments at fair value through profit or loss 1 487 –84 financial assets available for sale –7 501 2 672 financial assets held to maturity 675 –3 998 investment property –386 –256 other operating assets and liabilities –135 3 342
NET CASH FLOWS FROM OPERATING ACTIVITIES BEFORE INCOME TAX –126 4 536
Cash and cash equivalents as at 1 January 9 408 4 555
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2008
Capital contributions from non-controlling interests – – – – – – – 10 10
BALANCE AS AT END OF PERIOD 596 2 690 –1 167 –195 –445 5 130 6 609 43 6 652
The Swiss Life Group is one of Europe’s leading providers of life insurance and pension solutions. In Switzerland, France and Germany, the Group offers individuals and corporations comprehensive advice and a broad range of products through its own sales force as well as brokers and banks. Swiss Life provides international corporations with employee benefits solutions from a single source, and is one of the global leaders in structured life and pension products for international high net worth individuals. The AWD Group has been part of the Swiss Life Group since 2008. Hanover-based AWD is one of the leading European financial services providers in the medium and high-income client segments and offers its clients personal and holistic financial planning in eight countries.
The following events had an influence on the period under review: REDUCTION IN PAR VALUE
As approved by the shareholders at the General Meeting of Swiss Life Holding Ltd (hereinafter referred to as
“Swiss Life Holding”) on 7 May 2009, a reduction in par value of CHF 5 per registered share was effected in 2009. The payout took place on 27 July 2009 and amounted to CHF 159 million.
The General Meeting of Shareholders of 7 May 2009 also authorised the Board of Directors to cancel the 3 003 500 Swiss Life Holding shares bought back through a second trading line as part of the share buyback programme.
In the period under review, no convertible bonds were converted into Swiss Life Holding shares (2008: conversion into 124 115 Swiss Life Holding shares).
ANCE SHEET — Insurance and other receivables and loans have been reclassified to loans and receivables. Insurance and other payables and deposits have been reclassified to other financial liabilities. Liabilities relating to holiday and bonus accruals have been reclassified from insurance and other payables to employee benefit liabilities. The effect is set out in note 37.
OF CASH FLOWS — Deposits received CHF 2401 million and benefits and claims CHF 1497 million relating to unit-linked contracts have been reclassified from premiums, policy fees and deposits received, net of reinsurance, and benefits and claims paid, net of reinsurance, to net cash flows from financial instruments at fair value through profit or loss in 2008.
In September 2007, the International Accounting Standards Board issued a revised version of IAS 1 Presentation of Financial Statements. The revised Standard gives preparers of financial statements the option of presenting income and expense items and components of other comprehensive income, either in a single statement of comprehensive income with subtotals, or in two separate statements (a separate income statement followed by a statement of comprehensive income). This enables readers to analyse changes in equity resulting from transactions with owners in their capacity as owners (such as dividends ) separately from “non-owner” changes (such as transactions with third parties). The revised Standard came into effect for the annual periods beginning on 1 January 2009. The Swiss Life Group has elected to present two separate statements: a separate income statement and a statement of comprehensive income.
In March 2009, the International Accounting Standards Board issued amendments to IFRS 7 Financial Instruments: Disclosures. The amendments relate to enhanced disclosures about fair value measurements and liquidity risk. The amendments do not have an impact on the consolidated statement of income or the balance sheet. One of the main changes it involves is that existing IFRS 7 fair value disclosures should be made separately for each class of financial instruments. A three-level hierarchy for fair values is established: level 1 – quoted prices; level 2 – observable inputs to fair value measurements; and level 3 – unobservable inputs to fair value measurements. A maturity analysis should be made for derivative financial liabilities. The amendments are effective for annual periods beginning on or after 1 January 2009. However, an entity will not be required to provide comparative information in the first year of application.
The following amendments to Standards and new Interpretations are mandatory for the first time for the finan-
Swiss Life — Financial Statements 2009 cial year beginning on 1 January 2009, but are not currently relevant for the Swiss Life Group: IFRIC 13 Customer Loyalty Programmes
IAS 1 Presentation of Financial Statements and IAS 32 Financial Instruments: Presentation – Amendments relating to disclosure of puttable instruments and obligations arising on liquidation
The Group’s consolidated financial statements include the assets, liabilities, income and expenses of Swiss Life Holding and its subsidiaries. A subsidiary is an entity in which Swiss Life Holding owns directly or indirectly more than 50% of the voting rights, or in which it otherwise has the power to exercise control over operations. Subsidiaries are consolidated from the date on which effective control is obtained. All intercompany balances, transactions and unrealised gains and losses on such transactions have been eliminated. A listing of the Group’s principal subsidiaries is set out in note 38. The financial effect of acquisitions and disposals of subsidiaries is shown in note 28. Associates for which the Group has between 20% and 50% of the voting rights and/or exercises significant influence are accounted for using the equity method. The Group’s share of net income for the year is recognised as a share of results of associates and the ownership interest in the investment is recorded in the balance sheet at an amount that reflects its share of the net assets. The Group’s share of net income is included from the date on which significant influence begins until the date on which significant influence ceases. Unrealised gains arising from transactions with associates are eliminated to the extent of the
Group’s interest. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. The carrying amount includes goodwill on the acquisition. A listing of the Group’s principal associates is shown in note 15.
FOREIGN CURRENCY TRANSLATION — On consolidation, assets and liabilities of Group entities denominated in foreign currencies are translated into Swiss francs at year-end exchange rates. Income and expense items are translated into Swiss francs at the annual average exchange rate. Goodwill reported before 1 January 2005 is translated at historical exchange rates. Goodwill for which the agreement date is on or after 1 January 2005 is carried in the foreign operation’s functional currency and is translated into Swiss francs at year-end exchange rates. The resulting translation differences are recorded directly in equity as cumulative translation adjustments. On disposal of foreign entities, such translation differences are recognised in income as part of the gain or loss on the sale.
FOREIGN CURRENCY TRANSACTIONS — For individual Group entities, foreign currency transactions are accounted for using the exchange rate at the date of the transaction. Outstanding balances in foreign currencies at yearend arising from foreign currency transactions are translated at year-end exchange rates for monetary items while historical rates are used for non-monetary items. Those non-monetary items in foreign currencies recorded at fair values are translated at the exchange rate on the revaluation date.
Derivatives embedded in other financial instruments or in insurance contracts which are not closely related to the host contract are separated and measured at fair value, unless they represent surrender options with a fixed strike price embedded in host insurance contracts and host investment contracts with discretionary participation features. Changes in the fair value are included in income.
– Certain financial assets which share a risk with other financial instruments and give rise to opposite changes in fair value that tend to offset each other (“economic 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, held for trading, loans and receivables or if they are not designated as at fair
A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Held-to-maturity securities and loans and receivables are assessed for impairment when a significant decrease in market value related to credit risk arises, namely after a downgrade of a debtor’s rating below single B– after initial recognition (i.e. CCC or lower according to Standard and Poor’s or equivalent) or when payments of principal and/or interest are overdue by more than 90 days. If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that 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 the income statement. If a loan or held-tomaturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
Investment property includes completed investment property and investment property under construction. Completed investment property consists of investments in residential, commercial and mixed-use properties primarily located within Switzerland.
Investment property under construction is also measured at fair value with changes in fair value being recognised in the income statement. However, where the fair value is not reliably determinable, the property is measured at cost until either its fair value becomes reliably measurable or construction is completed.
CRETIONARY PARTICIPATION FEATURES — For investment contracts that contain discretionary participation features (see below) the same recognition and measurement principles as for insurance contracts apply. For investment contracts without discretionary participation features the recognition and measurement rules for financial instruments apply.
The accounting for the amounts identified as DPF has been done as follows: In jurisdictions where no statutory minimum distribution ratio (“legal quote”) exists, the contractual right to receive, as a supplement to guaranteed benefits, additional
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.
CONTRACTS — Insurance contracts often contain embedded derivatives. Embedded derivatives which are not closely related to their host insurance contracts are separated and measured separately at fair value. Exposure to embedded options and guarantees in insurance contracts which are closely related or which are insurance contracts themselves, such as guaranteed annuity options or guaranteed interest rates, is reflected in the measurement of the insurance liabilities.
Assets associated with separate account/unit-linked contracts and private placement life insurance are included in financial assets designated as at fair value through profit or loss, investment property, derivatives and cash and cash equivalents. The related income and gains and losses are included in the income statement under the respective line items. The Group has allocated on a rational basis the proportion of acquisition costs related to the insurance and deposit components, respectively. The accounting policy for deferred acquisition costs applies to the portion of acquisition costs associated with the insurance component and the policy for deferred origination costs applies to the other portion (see 2.15 Intangible assets).
TION FEATURES — On acquisition of a portfolio of insurance contracts or a portfolio of investment contracts with discretionary participation features (DPF), either directly from another insurer or through the acquisition of a subsidiary undertaking, the Group recognises an intangible asset representing the present value of future profits (PVP) embedded in the contracts acquired. The PVP represents the difference between the fair value of the contractual rights acquired and insurance obligations assumed and a liability measured in accordance with the accounting policies for insurance contracts and investment contracts with DPF. The PVP is determined by estimating the net present value of future cash flows from the contracts in force at the date of acquisition. For acquired insurance and investment contracts with DPF, future positive cash flows generally include net valuation premiums while future negative cash flows include policyholders ’ benefits and certain maintenance expenses.
Deferred tax assets are recognised only to the extent that it is probable that future taxable profits will be available against which they can be used. For unused tax losses a deferred tax asset is recognised to the extent that it is probable that these losses can be offset against future taxable profits. Deferred tax liabilities represent income taxes payable in the future in respect of taxable temporary differences.
Financial liabilities are recognised in the balance sheet when the Swiss Life Group becomes a party to the contractual provisions of the instrument. A financial liability
BORROWINGS — Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings.
Insurance contracts issued to a defined benefit pension plan covering own employees have generally been eliminated. However, certain assets relating to these plans qualify as plan assets and are therefore not eliminated. These plans are accounted for as partially funded plans.
Swiss Life — Financial Statements 2009 how hedge accounting should be performed with regard to identifying inflation as a hedged risk and hedging with options. The amendment will be effective for annual periods beginning on or after 1 July 2009. No impact on the consolidated financial statements is expected from the adoption of this amendment.
In November 2008, IFRIC 17 Distributions of Non-cash Assets to Owners was released by the International Financial Reporting Interpretations Committee. The Interpretation clarifies that a dividend payable should be recognised when the dividend is appropriately authorised and is no longer at the discretion of the entity. An entity should measure the dividend payable at the fair value of the net assets to be distributed. The difference between the dividend paid and the carrying amount of the net assets distributed should be recognised in profit or loss. The Interpretation will be effective for annual periods beginning on or after 1 July 2009. No impact on the consolidated financial statements is expected from the adoption of this amendment.
The principal methods and assumptions used by the Group in estimating the fair value of the following financial instruments are as follows: – Fair values for debt and equity securities are generally based upon quoted prices in active markets, if available. In inactive markets, information about prices from recent transactions with the same or similar instruments, quotes from brokers, indices and other input are taken into consideration in the determination of fair values. A market is deemed no longer active if prices available do not represent regularly occurring market transactions on an arm’s length basis. Furthermore, the volume of trading activity has declined significantly and bid/ask spreads have widened above a certain level.
– Fair values for derivative financial instruments are obtained from quoted market prices and/or option pricing models as appropriate.
MORBIDITY AND DISABILITY — For the individual and group life business in Switzerland internal tables are in place. In the individual life business, the internal disability rates are based on the Swiss Insurance Association statistics and reflect the average situation of the past in the Swiss market. In the individual life business, only reactivation is considered, whereas increased mortality is also taken into account in group life business. In the individual life business, disability tables are usually reviewed every five years when new statistics from the Swiss Insurance Association become available.
In other markets, standard industry disability tables, national statistics and own company records are applied. Standard valuation pricing principles are typically validated against the client-specific disability experience.
INVESTMENT RETURNS — Assumptions relating to investment returns are based on the strategic asset allocation. For certain asset classes, a fixed return is used, centrally set by the Group. From this gross investment return, projected asset management fees are deducted to obtain a net investment return.
Goodwill is tested for impairment annually (in autumn), or more frequently if events or changes in circumstances indicate that goodwill might be impaired. The recoverable amounts of the business relating to the goodwill have been determined based on value-in-use calculations. These calculations require the use of estimates which are set out in note 17.
Deferred tax assets are recognised for unused tax-loss carryforwards and unused tax credits to the extent that realisation of the related tax benefit is probable. The assessment of the probability with regard to the realisation of the tax benefit involves assumptions based on the history of the entity and budgeted data for the future.
Non-life operations involve operations in France and mainly include property and casualty, liability and motor insurance. These operations are included in the segment “Insurance France”.
“Investment Management” refers to the management of assets for institutional clients and the Group’s insurance business, as well as the provision of expert advice for such clients.
“AWD” comprises the Hanover-based AWD Group, which was acquired by the Swiss Life Group on 19 March 2008. The AWD Group specialises in personal and holistic financial planning for medium and high-income customer segments. The Proventus Group, which was acquired in November 2008, is also included in this segment.
The insurance operations in the Netherlands and Belgium, which were disposed of on 29 April 2008, are presented as a separate segment “Insurance (Discontinued)”.
Banca del Gottardo, Lugano, was disposed of on 7 March 2008. For the purposes of segment reporting, Banca del Gottardo, Lugano, is presented as a separate segment “Banking (Discontinued)”.
The statement of income and the balance sheet for the segments are provided on the pages below:
Benefits and claims under insurance contracts –7 774 –2 203 –1 833 –55
Net gains/losses on financial instruments at fair value through profit or loss 2 185 –407 92 –3
Net gains/losses on investment property 142 57 –5 0 of which inter-segment 94 1 5 –7
Financial assets at fair value through profit or loss 2 013 7 265
Financial liabilities at fair value through profit or loss 1 171 899
Financial liabilities at fair value through profit or loss 1 047 1 078
Group risk management produces a consolidated risk report which consolidates the main quantitative elements of the risk management of the Swiss Life Group’s operations.
The assets relating to certain life insurance and investment contracts are managed for the account and risk of the Swiss Life Group’s customers (separate account/unitlinked contracts, private placement life insurance). They are segregated and managed to meet specific investment objectives of the policyholders. The assets back the insurance liabilities and the financial liabilities arising from these contracts. The fair values of the liabilities reflect the fair values of the assets. Certain contracts with unit-linking features contain guaranteed minimum insurance benefits. The liabilities relating to this part are included in the insurance liabilities.
The risk capacity and the risk appetite of the Swiss Life Group’s insurance operations are primarily defined based on economic principles. Consequently, 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 with an appropriate discount rate. The risk capital available is defined as the difference of the economic value of the assets compared to liabilities. The available risk 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 final decision on the risk appetite for each insurance operation rests with the Corporate Executive Board.
The liabilities are largely predefined in terms of amount and timing of the payments and the associated assumptions are regularly reviewed. The corresponding asset portfolios mainly comprise fixed-income instruments. This way, the impact of interest rate fluctuations and the risk capital consumption are strategically optimised under a risk/return point of view, thus ensuring that the policyholders receive the benefits they were promised. Policyholders benefit from the ensuing investment returns in the form of discretionary participation, while shareholders benefit from an increase in the value of their investment in the Swiss Life Group.
The ALM process has been applied in all relevant insurance operations of the Swiss Life Group.
TOTAL INSURANCE LIABILITIES WITH EMBEDDED DERIVATIVES NOT SEPARATED AND FAIR VALUED 86 135 84 744
HEDGING — The Swiss Life Group uses derivatives within the strict limits set by the applicable insurance legislation and by internal guidelines. Derivatives are primarily used to manage the exposure to equity securities, interest rates, counterparties and foreign exchange rates. The main instruments include index futures and option structures in stock markets, bond futures and swaps in order to manage duration, currency forwards in order to manage currency risk and credit default swaps in order to manage counterparty risk. Within certain limits, derivatives are used to enhance returns on the existing portfolio. The types of derivatives generally permitted for usage within the Swiss Life Group as well as the list of allowed over-thecounter trading partners have been approved by the Group Risk Committee.
Minimum guaranteed interest rate 6 – 8% – – 9 9
TOTAL INTEREST-SENSITIVE INSURANCE LIABILITIES 57 489 28 534 112 86 135
TOTAL INTEREST-SENSITIVE INSURANCE LIABILITIES 57 421 27 207 116 84 744
Insurance liabilities for the account and risk of the Swiss Life Group’s customers – – – 952
In addition to the strategic optimisation of the net interest rate risk exposure at an economic level, the Group has
Hedges in place with respect to the Swiss Life Group’s equity investments are designed to reduce the exposure to declines in equity values but would not prevent an impairment loss in the event that the impairment criteria were met.
To reduce the credit exposure relating to derivatives a collateral management process has been established. Contractually all outstanding positions must be fully collateralised if they reach a very low agreed minimum transfer amount. The collateral is called at least weekly, but in times of turbulent markets the frequency is increased. As leverage is not permitted, certain coverage rules apply with regard to cash or long positions. Counterparties for derivative transactions, over-the-counter and exchangetraded, have to be approved by both the Group Chief Risk Officer and the Group Chief Investment Officer. The minimum rating for a counterparty is A– (Standard & Poor’s or equivalent) for the Swiss Life Group’s insurance operations. During the ongoing period of market turmoil reliance on ratings is of limited value; therefore an additional qualitative and quantitative counterparty monitoring process has been established to allow for immediate proactive measures.
Debt instruments available for sale 47 166 38 273 – – 47 166 38 273
Financial assets held to maturity 6 432 7 159 – – 6 432 7 159
CREDIT RATING AS AT 31 DECEMBER 2009 of which collateralised 115
CREDIT RATING AS AT 31 DECEMBER 2008 of which collateralised 4
CURRENCY RISK — The Swiss Life Group operates internationally and its exposures to currency risk primarily arise with respect to the euro, US dollar and British pound. Most of the investments and liabilities are denominated in Swiss francs, euros and US dollars, the values of which are subject to exchange rate fluctuations. The Group operates with various functional currencies (predominantly Swiss francs and euros). Its financial position and earnings could be significantly affected by a weakening of said foreign currencies against the Swiss franc.
The Swiss Life Group’s European insurance and investment operations (excluding Switzerland) generally invest in assets denominated in the same currency as their insurance and investment liabilities, which mitigates the currency risk for these operations. As a result, currency risk arises from recognised assets and liabilities denominated in other currencies and net investments in foreign operations. Although the Swiss Life Group actively engages in currency management to reduce the effect of exchange rate fluctuations on its assets and liabilities, particularly by hedging against the risk of such movements in relation to part of its investments denominated in euros and in US dollars, significant movements in exchange rates could adversely affect the Swiss Life Group’s earnings and financial position, including the value of its investment portfolio. Foreign exchange exposure is hedged to a large extent in line with the strategic asset allocation. The
Group’s hedging arrangements are directed at covering its exposure mainly from an economic perspective. The instruments which the Swiss Life Group uses to hedge exposure may not be perfectly correlated to the related assets, so the Group will still be exposed to losses if the value of the hedge and the value of the underlying asset or liability do not correspond appropriately.
Debt instruments at fair value through profit or loss 89 2 545 – – – 5 077 7 711
Debt instruments available for sale 16 682 25 444 4 556 451 33 – 47 166
Financial assets held to maturity – 6 432 – – – – 6 432
Other financial liabilities –3 556 –2 789 –9 –19 –12 – –6 385
LIQUIDITY RISK — Liquidity risk is the risk that not enough cash resources may be available to pay obligations when due (primarily obligations arising from the insurance business and debt) at a reasonable cost. The Swiss Life Group is exposed to liquidity risk which primarily arises on calls on its cash resources from claims, amounts payable at maturity and surrenders arising from insurance and investment contracts. The Swiss Life Group
TOTAL INSURANCE AND POLICYHOLDER PARTICIPATION LIABILITIES 94 684 335 363 4 257 9 217 80 512
TOTAL INSURANCE AND POLICYHOLDER PARTICIPATION LIABILITIES 91 494 635 290 3 580 8 536 78 453
Assets held for sale 2 4 – – – – 2 4
Current income tax assets 26 11 – – – – 26 11
Current income tax liabilities 286 229 – – – – 286 229
NATURE OF INSURANCE RISK — When designing a new product or reviewing an existing one, care has to be taken that the product neither includes systemic risk nor provides incentives for adverse selection. The product should meet the market’s needs. The Swiss Life Group generally favours transparent and simple product design with minimised model risk and a reliable pricing basis with sufficient statistical data available. Insurance risk arises when biometric parameters deviate adversely from expectations and thus from the premium rates agreed with the policyholder. The uncertainty in the estimation of future benefit payments and premium receipts for long-term insurance contracts is due to the unpredictability of long-term
changes in overall levels of mortality and disability, for instance. Furthermore, deviations from the expected outcome of a portfolio can also arise because of random fluctuations. The impact of random fluctuations depends on the extent of diversification within a portfolio of contracts, that is, on the size of the portfolio.
In Switzerland, the Swiss occupational pensions (BVG) segment of the group life insurance business is a significant part of the Group’s overall life insurance business. The BVG business provides an example of a minimum return guarantee. The guarantee takes the form of the right to convert an assured sum into a life annuity at a guaranteed conversion rate: The prevalent annuity conversion rates for the mandatory part of the BVG business is set at 7.00% for men (retirement age 65) and 6.95% for women (retirement age 64) for retirements in 2010 (7.05% for men and 7.00% for women for retirements in 2009). Under an amendment to the BVG legislation, which took effect on 1 January 2005, the rate will be reduced in stages
Disability income and other annuities – deferred 7 964 7 679
UNDERWRITING STRATEGY — Underwriting is the process of selecting and classifying insurable risks. The underwriting strategy attempts to ensure that the risks underwritten are well diversified in terms of type of risk and level of insured benefits. Life insurance underwriting is performed to ensure that the premiums and the general conditions of the insurance policies are consistent with the risks to be insured. The first step in the underwriting process is to determine which individual risks can be accepted. The second step is to place the accepted risks into groups of roughly equivalent levels of risk. Both processes must be conducted objectively and consistently. The Group sets limits for the acceptance of insurance coverage arising from new and renewal business. Medical selection is part of the Group’s underwriting procedures, whereby premiums are charged to reflect the health condition and family medical history of the applicants. The limits relate to sums at risk, maximum insured losses or present value of premiums at the contract or insured person level. Depending on the type of business and the limit exceeded, the new or renewed contract must be approved by a specific investment and risk committee or senior management. Contracts exceeding the set limits must be
At end of accident year 535 447 454 447 407 519 474 388 437 n/a 8 years later 490 – – – – – – – – n/a
Effect of discounting – – – – – – – – – –
Management reviews reinsurance programmes covering treaty, type, risks covered and retention on a regular basis. A process, competencies and limits are set up for the approval of reinsurance programmes and their modification. To ensure that the Group’s principles are observed, guidelines on reinsurance have been introduced.
The market consistent embedded value of the Swiss Life Group amounted to CHF 6.9 billion as at 31 December 2009 (2008: CHF 6.3 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.
At 31 December 2009, if the longevity improvement parameter had increased by 5%, the embedded value would have been CHF 50 million lower (2008: CHF 42 million lower).
At 31 December 2009, if the interest rates had been 100 basis points lower, the embedded value would have been CHF 1535 million lower (2008: CHF 1747 million lower).
At 31 December 2009, if the swaption implied volatilities had been 25% higher, the embedded value would have been CHF 347 million lower (2008: CHF 376 million lower).
At 31 December 2009, if the swaption implied volatilities had been 25% lower, the embedded value would have been CHF 345 million higher (2008: CHF 284 million higher).
At 31 December 2009, if the market value of equity securities and property had been 10% lower, the embedded value would have been CHF 997 million lower (2008: CHF 1057 million lower).
At 31 December 2009, if the euro had strengthened by 10% against the Swiss franc, the embedded value would have been CHF 249 million higher (2008: CHF 229 million higher).
At 31 December 2009, if the euro had weakened by 10% against the Swiss franc, the embedded value would have been CHF 249 million lower (2008: CHF 229 million lower).
Weighted average number of shares outstanding 31 374 354 32 169 248 31 374 354 32 169 248 31 374 354 32 169 248
Under the accounting principles adopted, deposits received under insurance and investment contracts are not recognised as income: In CHF million
NET EARNED PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 19 981 18 207
Change in liability for future life policyholder benefits, gross 700 –1 113
In CHF million Fair value assets Fair value liabilities Contract/notional amount
Derivatives designated as fair value hedges 10 54 15 16 2 068 1 550
TOTAL FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 21 997 16 916
TOTAL FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS 16 001 10 805
TOTAL FINANCIAL LIABILITIES DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS 900 1 078 951 1 078 11 Financial Assets Available for Sale
Securities pledged as collateral (reclassified) 327 – 3 – 330 –
In CHF million Cost/amortised cost Gross amount Allowance for impairment losses (carrying amount)
Investment contracts ceded to reinsurers 49 – – – 49 –
BALANCE AS AT END OF PERIOD 5 3 15 15 20 18
Interest income accrued on impaired loans from continuing operations was CHF 2 million as at 31 December 2009 (2008: CHF 2 million). The Group’s loan portfolio is monitored closely through the review of information such as debt service, annual reports and assessments. This information is evaluated in light of current economic conditions and other factors such as diversification of the property portfolio. This evaluation is part of
Swiss Life — Financial Statements 2009 the regular review to determine whether the allowance for potential loan losses is warranted. Management believes that the allowance for loan losses is sufficient. However, management cannot predict with assurance the impact of future economic circumstances or how the mortgage and real estate portfolios would be affected by various economic circumstances.
In CHF million Allowance for impairment Cost/amortised cost Gross amount losses (carrying amount) Fair value
TOTAL FINANCIAL ASSETS HELD TO MATURITY 32 6 432 7 159 – – 6 432 7 159 5 904 6 926 14 Investment Property
Rental income from investment property from continuing operations was CHF 735 million for the period ended 31 December 2009 (2008: CHF 701 million). Operating expenses arising from investment property from continuing operations that generated rental income stood at CHF 158 million for the period ended 31 December 2009 (2008: CHF 162 million). Operating expenses arising from investment property from continuing operations that did not generate rental income during the period stood at CHF 0.1 million for the period ended 31 December 2009 (2008: CHF 0.1 million).
Crédit et services financiers (CRESERFI), Paris 313 169 144 48 65 13 4 33.4%
LGT Swiss Life Non Traditional Advisers, Vaduz 9 3 6 3 7 5 2 43.7%
Crédit et services financiers (CRESERFI), Paris 315 180 135 45 72 14 5 33.4%
On 20 November 2008, the Swiss Life Group completed the acquisition of the 24.3% stake in MLP, Wiesloch. The published price quotation for the investment in MLP as at 31 December 2008 was CHF 383 million. The impairment losses in 2008 of CHF 159 million were related to MLP, Wiesloch.
Classification as assets held for sale and other disposals 0 –35 –51 –6 –92
Effect of amendment to IAS 40 4 – – – 4
Transfers from/to investment property 14 –95 –182 – – – –277
BALANCE AS AT END OF PERIOD 800 96 113 95 15 1 119
Transfers to investment property 14 21 – – – – 21
BALANCE AS AT END OF PERIOD –175 –4 –68 –61 –9 –317
No borrowing costs were capitalised in property and equipment in 2009 and 2008.
Effect of shadow accounting 0 0 –59 –151 – – –59 –151
BALANCE AS AT END OF PERIOD 20 21 2 299 2 417 19 8 2 338 2 446
DEFERRED ACQUISITION COSTS (DAC) — Certain acquisition costs relating to new and renewed insurance contracts and investment contracts with discretionary participation are deferred.
DEFERRED ORIGINATION COSTS (DOC) — These costs are recoverable and are directly attributable to securing the right for investment management services within investment contract policies. They relate to contracts in Luxembourg.
BALANCE AS AT END OF PERIOD 1 947 1 890 370 368 261 253 2 578 2 511
TOTAL OTHER INTANGIBLE ASSETS AS AT END OF PERIOD 1 790 1 727 307 339 141 139 2 238 2 205
Also in 2009, the remaining 49.4% of the non-controlling interests of Cegema, France, were acquired, which led to additional goodwill of CHF 5 million.
Goodwill totalling CHF 1303 million on the acquisition of AWD Holding AG, Hanover, was recognised in 2008.
Net carrying amount of goodwill 287 287 149 149 15 –
In 2008, the following acquisitions led to the recognition of customer relationship assets: On the acquisition of Deutsche Proventus AG, a customer relationship asset of CHF 8 million was recognised. On the acquisition of Fonds de Commerce Arpège, a customer relationship asset of CHF 9 million was recognised. The acquisition of AWD Holding AG, led to the recognition of a customer relationship asset of CHF 312 million. The acquisition of Placement Direct, France, led to a customer relationship asset amounting to CHF 5 million.
BRANDS AND OTHER — Consists of brands, trademarks, computer software and other intangible assets.
In 2008, the following acquisitions led to the recognition of brands and other intangible assets: On the acquisition of Deutsche Proventus AG, the brand name “Proventus” was recognised at CHF 6 million. The acquisition of AWD Holding AG led to the recognition of the brand
name “AWD” at CHF 120 million, which has an indefinite useful life, as well as of computer software of CHF 13 million. The brand names of “Proventus” and “AWD” are expected to generate cash inflows without legal or similar limits on an indefinite basis.
Investment contracts without discretionary participation at amortised cost 32 433 355
Investment contracts without discretionary participation at fair value through profit or loss 270 292 of which for the account and risk of the Swiss Life Group’s customers 5 2 788 1 725
Swiss Life — Financial Statements 2009 notes granted to Swiss Life AG, which are guaranteed by Swiss Life Holding. Swiss Life AG may repay the loan notes in full on 12 April 2017 or on any interest payment date thereafter, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The notes bear interest from 12 April 2007 to 12 April 2017 at a rate of 5.849% p.a. If the notes are not redeemed on 17 April 2017, the interest will be the aggregate of 2.5% and Euribor 3-month deposits.
On 16 November 2005, J.P. Morgan Bank Luxembourg S.A. issued on a fiduciary basis EUR 350 million fixed/ floating rate subordinated perpetual notes at a price of 99.423% to fund a loan made by it to Swiss Life AG. Swiss Life AG may repay the loan in full on 16 November 2015 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 16 November 2005 to 16 November 2015 at a rate of 5% p.a. If the notes are not redeemed on 16 November 2015, the interest rate will be the aggregate of 2.43% and Euribor for 3-month deposits.
Amounts in CHF million (if not noted otherwise) Nominal value Nominal value Optional Carrying Carrying in year of issue at 31.12.2009 Interest rate Year of issue redemption amount amount
Swiss Life AG 2 EUR 350 EUR 343 5.000% 2005 2015 499 517
Swiss Life AG EUR 443 EUR 443 +2.050% 1999 2014 657 660
Swiss Life AG EUR 215 EUR 15 +2.050% 1999 2014 22 22 1 Hybrid loan notes granted by ELM B.V. 2 Hybrid bank loan originally granted by J.P. Morgan Bank Luxembourg S.A.
On 10 June 2004, Swiss Life Holding issued CHF 317 million in 0.625% convertible bonds due in 2010. The bonds may be converted into registered shares of Swiss Life Holding at any time at the option of the holder. Bondholders exercising their conversion right are entitled to receive the number of shares equal to the principal amount of CHF 1000 divided by the original conversion price of CHF 209.625 (subject to adjustments, with effect from 29 July 2008 conversion price of CHF 200.20).
Claims under life insurance contracts 6 505 6 632 81 74 6 424 6 558
Effect of changes in actuarial assumptions and other movements –23 –291 0 –31 –23 –260
BALANCE AS AT END OF PERIOD 6 505 6 632 81 74 6 424 6 558
Claims incurred, benefits paid and surrenders –8 929 –11 665 –132 –27 –8 797 –11 638
Foreign currency translation differences –127 –2 460 1 –32 –128 –2 428
Present value of wholly and partly funded obligations –2 313 –2 218
CHF 75 million relating to holiday and bonus accruals has been reclassified from insurance and other payables to employee benefit liabilities as at 31 December 2008.
Present value of defined benefit obligation –2 385 –2 292 –2 320 –3 065 –2 937
The termination benefit liability totalling CHF 0.1 million for the year ended 31 December 2009 (2008: CHF 0.8 million) arose as a result of early retirements.
A share-based payment programme was established which gives the members of the Corporate Executive Board and senior employees the right to receive a certain number of Swiss Life Holding shares (performance share units, PSUs) after three years of service if certain conditions are fulfilled. The number of the shares allocated depends on two criteria. One criterion is the performance of the share price of the Swiss Life Holding share during the vesting period of three years. The other criterion is the performance of the share price of the Swiss Life Holding share during the vesting period of three years compared to the performance of the Dow Jones STOXX 600 Insurance Index. For the PSUs issued in 2006, the number of PSUs can increase no more than by a factor of 1.5 or drop by 0.5, within three years, depending on how the criteria develop. For the PSUs issued in 2007, 2008 and 2009, the maximum possible factor of 1.5 was maintained whereas the factor of 0.5 was rescinded so that the number of PSUs could drop to zero after three years.
In 2007, 2008 and 2009, no adjustment to the number of PSUs was made due to the reduction in par value of the Swiss Life Holding share because of changed Eurex rules.
Number of performance share units Balance after Balance as at Reduction reduction in Employee Balance as at 1 January Issued in par value par value departures Vested end of period
Related expenses in 2009 were CHF 11 million (2008: CHF 11 million).
The expected weighted-average tax rate for the continuing operations of the Group was 30.7% in 2009 (2008: 27.0%). This rate was derived by obtaining a weighted average of the expected income tax rates in the various jurisdictions in which the Group operates. The increase of the weighted-average tax rate is due to the geographical allocation of the profits and the different tax rates in these jurisdictions. The actual income tax expense differs from the expected amount as follows:
The movements in net deferred income tax assets/liabilities during the period were as follows: In CHF million Foreign Business currency
Deferred tax liabilities have not been recognised on the aggregate amount of temporary differences with consolidated investments in subsidiaries to the extent the Group considers such undistributed earnings as being indefinitely reinvested and does not expect to repatriate these earnings in the foreseeable future. The amount of such temporary differences was approximately CHF 1.7 billion as at 31 December 2009 (2008: CHF 1.7 billion). If such earnings are ever repatriated, no material tax liabilities would be incurred due to participation exemption rules, unrecognised tax loss carryforwards and applicable double taxation treaties.
Deferred tax assets are recognised for tax-loss carryforwards and unused tax credits only to the extent that realisation of the related tax benefit is probable. Swiss tax assets are calculated in accordance with cantonal and communal tax legislation. The uncertainty of the recoverability of tax losses is taken into account in establishing the valuation allowance. For the following tax-loss carryforwards, which will expire as follows, no deferred tax asset has been recognised:
Unused amounts reversed during the reporting period –2 –15 –17 –7
Under the MILESTONE initiative, provisions for restructuring were set up in Switzerland, Germany and AWD in 2009. The outflow of the amounts is expected within the following two to three years.
In 2008, provisions for restructuring programmes were primarily set up in Switzerland. Amounts used in 2008 relate to Switzerland and Germany.
The General Meeting of Shareholders of 7 May 2009 also authorised the Board of Directors to cancel the 3 003 500 SLH shares bought back through a second trading line as part of the share buyback programme. The reduction in share capital due to the share cancellation amounted to CHF 51 million.
In 2009, no convertible bonds were converted into SLH shares (2008: 124 115 SLH shares with a corresponding increase in share capital totalling CHF 3 million).
As at 31 December 2009, the share capital of SLH consisted of 32 081 054 fully-paid shares with a par value of CHF 12 each . In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of own shares or shares they represent. As at 31 December 2008, SLH had 35 084 554 registered shares with a par value of CHF 17 per share. Conditional share capital was CHF 28 312 632
Share premium comprises additional paid-in capital in excess of the par value (net of transaction costs), gains/losses on own equity instruments, equity compensation benefits and equity elements of convertible debt.
Due to the reduction in the par value of CHF 5 per registered SLH share in 2009 (2008: CHF 17 per registered SLH share), an amount of CHF 1 million was credited to share premium in respect of treasury shares (2008: CHF 49 million).
The reduction in share premium due to the cancellation of the SLH shares bought back through a second trading line amounted to CHF 635 million
Gains/losses transferred to the income statement 8 – –321 – 241 –80
foreign currency translation differences – –1 – – –1 non-controlling interests –3 0 – 0 0
Net balance as at 1 January 123 –747 – –62 –809
Share of gains/losses of associates 15 – – – 0 0
Effects of policyholder participation – –133 – 449 316 shadow accounting – –245 – 110 –135 income tax – –204 – 125 –79 disposals of subsidiaries –7 – – 131 131 foreign currency translation differences – 7 – – 7
The requirement that insurers establish – over and above the technical provisions – a buffer against unforeseen events such as higher than expected claims or unfavourable investment results is a key element for the protection of the policyholders. The Swiss Life Group’s Solvency I ratio amounted to 164% as at 31 December 2009 (2008: 158%). Following regulatory requirements, the available solvency margin consists of the IFRS equity and other equity-type instruments such as hybrid capital or unattributed policyholder reserves, minus foreseen dividend payments and intangible assets such as goodwill. The basic formula for the required solvency margin of a life insurance company is 4% of mathematical reserves plus 0.3% of the capital sum-at-risk.
The Swiss Solvency Test (SST) is the new Swiss legislation which governs the future capital requirements of insurance companies. It was enacted in 2006 with the revised Insurance Supervision Law and corresponding Insurance Supervision Ordinance and solely constitutes a reporting requirement during a five-year transition period before the capital requirements ultimately will become binding from 2011 onwards. The SST is a principles-based framework where the main objective is the alignment of the required capital with the underlying risks of an insurance company. The SST capital requirement underpins a high level of confidence that insurers will meet their obligations towards policyholders even in adverse circumstances.
The value of a life insurance company for its shareholders comprises the economic net worth and the present value of future profits. The optimal amount of economic capital an insurance company needs to hold to maximise the company value is a trade-off between benefits and costs. For risk and capital management decisions, the Swiss Life Group uses an integrated approach. The economic risk capital is determined bottom up for each business unit and takes into account market risk, credit risk, insurance risk, operational risk and strategic risk. Market, insurance and credit risk are calculated using a loss distribution approach from which risk measures can be derived. Operational risks on the other hand are accounted for in line with the Basel II basic indicator approach. The overall capital requirement is obtained by taking into account appropriate diversification benefits among the above mentioned risk categories.
Elements of the bottom-up risk capital per business unit allow for a monthly estimate of the SST solvency situation. The calibration is done based on the full SST calculations as at the beginning of each calendar year.
Swiss Life has defined a target capitalisation in line with its rating ambition. In the Standard & Poor’s risk-based capital adequacy model the total adjusted capital (TAC) is the measure used for capital available to meet a company ’s capital requirements. TAC is set against the capital required given the company’s targeted rating category (target capital). The factor-based model takes into
In line with its active capital management, the Swiss Life Group uses hybrid instruments to optimise its capital structure.
In CHF million Carrying amount Carrying amount in accordance in accordance with IFRS before with IFRS before Fair value combination Fair value combination
Financial assets at fair value through profit or loss – – 3 3
In November 2008, the Swiss Life Group acquired Deutsche Proventus AG, Bremen. The purchase price amounted to CHF 82 million.
On 19 March 2008, 96.7% of the AWD Holding shares (including 10.46% shares under option) were acquired by the Swiss Life Group. The acquisition cost amounted to CHF 1713 million.
Direct costs relating to the disposals – –58 –49 –2 –109
Net assets disposed of –18 –1 265 –1 115 –21 –2 401
In September 2009, the sale of CEAT, Paris, was completed. The gain realised on the sale amounted to CHF 19 million.
On 12 December 2008, AWD Home Finance Ltd, London, was sold. The loss realised on the sale amounted to CHF 4 million.
In November 2008, Swissville Centers Ltd, Zurich, was sold. The gain realised on the sale was CHF 1 million.
Swiss Life — Financial Statements 2009 29 Assets Held for Sale and Discontinued Operations
In 2009, a settlement payment of CHF 33 million and a provision of CHF 14 million were made with regard to the sale of Banca del Gottardo.
Also in November 2007, the Swiss Life Group announced the sale of its Dutch and Belgian businesses. The transaction was completed on 29 April 2008. For the purposes of segment reporting the Dutch and Belgian businesses are presented as a separate segment “Insurance (Discontinued )”.
Gain/loss on disposal of operations – 1 034 –47 591 –47 1 625
Sales to and purchases from related parties are made at normal market prices. Outstanding balances at year-end are unsecured and settlement is made in cash. There have been no guarantees provided or received for any related party receivables. For the year ended 31 December 2009, no impairment allowance has been made for doubtful debts in respect of the amounts owed by related parties.
This assessment is undertaken each financial year by examining the financial position of the related party and the market in which the related party operates.
Financial assets at fair value through profit or loss 21 997 16 916
Total gains/losses recognised in the income statement 2 19 –24 – –64
Gains/losses for assets held at end of period recognised in the income statement are presented in net gains/losses on financial assets – – –20 – –150 net gains/losses on financial instruments at fair value through profit or loss 2 13 – – –
The Group has entered into various operating leases as a lessee. Rental expenses relating to continuing operations recognised in income for these items totalled CHF 48 million for the year ended 31 December 2009 (2008: CHF 44 million). Minimum lease payments totalled CHF 48 million in 2009 (2008: CHF 44 million).
Contractual obligations for repairs and maintenance of investment property amounted to CHF 70 million as at 31 December 2009, which are included in this line item (2008: CHF 38 million).
FAIR VALUE OF COLLATERAL HELD WHICH CAN BE SOLD OR REPLEDGED
Further details with regard to the financial assets reclassified are as follows: In CHF million
RECLASSIFICATIONS IN THE CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2008
RECLASSIFICATIONS IN THE CONSOLIDATED BALANCE SHEET AS AT 1 JANUARY 2008
Insurance and other receivables and loans are now included within loans and receivables.
Liabilities relating to holiday and bonus accruals have been reclassified from insurance and other payables to employee benefit liabilities.
S.I. Eaux-Vives 2000 AG, Zürich Ins. CH 100.0% 100.0% CHF 1 000
S.I. Eaux-Vives Office AG, Zürich Ins. CH 100.0% 100.0% CHF 100
Swiss Life AG (formerly Swiss Life/Rentenanstalt), Zürich Ins. CH 100.0% 100.0% CHF 587 350
Swiss Life Holding AG, Zürich Other – – CHF 384 973
Swiss Life Products (Luxembourg) S.A., Strassen, Branch Zürich, Zürich Ins. Other from 19.12.2008 100.0% 100.0% – –
Swiss Life (Liechtenstein) Services AG, Schaan Ins. Other 100.0% 100.0% CHF 100
Financière du Capitole SAS, Balma Ins. FR from 12.11.2008 80.0% 80.0% EUR 1 700
Financière du Patrimoine SARL, Balma Ins. FR from 12.11.2008 80.0% 100.0% EUR 8
Placement Direct SAS, Pau Ins. FR from 08.01.2008 100.0% 100.0% EUR 40
Société suisse vie, Paris (Branch Swiss Life/Rentenanstalt) Ins. FR until 31.10.2008 – –
Swiss Life Assurances de Biens, Paris Ins. FR 100.0% 100.0% EUR 80 000
Allgemeiner Wirtschaftsdienst Gesellschaft für Wirtschaftsberatung und Finanzbetreuung mbH, Hannover AWD from 19.03.2008 100.0% 100.0% EUR 2 700
AWD Gastronomie GmbH, Hannover AWD from 19.03.2008 100.0% 100.0% EUR 25
AWD Vermögensverwaltungsgesellschaft mbH, Hannover AWD from 19.03.2008 100.0% 100.0% EUR 100
Horbach Wirtschaftsberatung GmbH, Köln AWD from 19.03.2008 100.0% 100.0% EUR 260
PROFIDUS Assekuranzmakler GmbH, Bremen AWD from 06.05.2008 100.0% 100.0% EUR 25
PROFIDUS Vertriebsgesellschaft mbh, Bremen AWD from 06.05.2008 100.0% 100.0% EUR 25
SL Beteiligungs-GmbH & Co. Grundstücksverwaltung KG, München Ins. DE 100.0% 100.0% EUR 50
SL Beteiligungs-GmbH & Co. Immobilien II KG, München Ins. DE from 27.11.2008 100.0% 100.0% EUR 10
SL Beteiligungs-GmbH & Co. Immobilien III KG, München Ins. DE from 04.12.2008 100.0% 100.0% EUR 10
SLPM Schweizer Leben PensionsManagement, München Ins. DE 100.0% 100.0% EUR 150
Swiss Life Cooperations GmbH in liquidation, Hamburg Ins. DE 100.0% 100.0% EUR 100
Swiss Life Partner AG, München Ins. DE 100.0% 100.0% EUR 7 000
Swiss Life Vermittlungs GmbH, München Ins. DE 100.0% 100.0% EUR 50 tecis Asset Management AG, Hamburg AWD 19.03.08 – 05.12.08 – –
tecis Finanzdienstleistungen AG, Hamburg AWD from 19.03.2008 100.0% 100.0% EUR 500
Thomas Beteiligungsgesellschaft mbH, Bremen AWD from 06.05.2008 100.0% 100.0% EUR 52 1 Segment (Ins. CH = Insurance Switzerland, Bank. Dis. = Banking (Discontinued), IM = Investment Management, Ins. Other = Insurance Other, Ins. FR = Insurance France, Ins. DE = Insurance Germany, Ins. Dis. = Insurance (Discontinued))
Swiss Life Asset Management (Nederland), Amstelveen Ins. Dis. until 29.04.2008 – –
Zwitserleven, Amstelveen (Branch Swiss Life/Rentenanstalt) Ins. Dis. until 29.04.2008 – –
Swiss Life Asset Management (Belgium), Bruxelles IM until 30.06.2008 – –
Swiss Life Belgium SA, Bruxelles Ins. Dis. until 29.04.2008 – –
Swiss Life Immo-Cross Roads, Bruxelles Ins. Dis. until 29.04.2008 – –
Swiss Life Immo-Midi (Belgium), Bruxelles Ins. Dis. until 29.04.2008 – –
Swiss Life Invest (Belgium), Bruxelles Ins. Dis. until 29.04.2008 – –
Gottardo Strategy Fund Management, Luxembourg Bank. Dis. until 07.03.2008 – –
Swiss Life Asset Management Holding, Strassen IM until 18.12.2008 – –
Swiss Life Assurance Solutions S.A., Luxembourg Ins. Other from 27.11.2008 100.0% 100.0% EUR 6 000
Swiss Life Funds (Lux) Management Company S.A., Luxembourg IM 100.0% 100.0% CHF 400
Swiss Life Participations Luxembourg S.A., Strassen Other 100.0% 100.0% EUR 70 000
Active Net Solutions Limited, Manchester AWD 19.03.08 – 12.05.09 – –
AWD Chase de Vere Limited, London AWD from 19.03.2008 100.0% 100.0% GBP 10
AWD Chase de Vere Wealth Management Limited, London AWD from 19.03.2008 100.0% 100.0% GBP 23 088
AWD Consultancy Limited, Manchester AWD from 19.03.2008 100.0% 100.0% GBP 0
AWD Direct Limited, Manchester AWD from 19.03.2008 100.0% 100.0% GBP 9
AWD Group Plc, London AWD from 19.03.2008 100.0% 100.0% GBP 65 800
AWD Group Services Limited, London AWD from 19.03.2008 100.0% 100.0% GBP 0
AWD Loans Limited, Manchester AWD from 19.03.2008 100.0% 100.0% GBP 1 000
AWD Trustees Limited, Leicestershire AWD from 19.03.2008 100.0% 100.0% GBP 0
AWD Wealth Management Limited, Manchester AWD from 19.03.2008 100.0% 100.0% GBP 0
Chase de Vere Financial Solutions Limited, Manchester AWD from 19.03.2008 100.0% 100.0% GBP 10
Gottardo Asset Management SGR, Milano Bank. Dis. until 07.03.2008 – –
AWD CEE Holding GmbH, Wien AWD from 19.03.2008 100.0% 100.0% EUR 35
Swiss Life Financial Services (Cayman) Ltd., Grand Cayman Other 100.0% 100.0% CHF 50
AWD zastupanje u osiguranju d.o.o., Zagreb AWD from 19.03.2008 100.0% 100.0% HRK 100
AWD Magyarország Pénzügyi Szolgáltató Korlátolt Felelősségű Társaság, Budapest AWD from 19.03.2008 100.0% 100.0% HUF 5 000
AWD Consultanta Financiara SRL, Târgu Mureş AWD from 19.03.2008 100.0% 100.0% RON 1
Swiss Life Private Placement (Singapore) Pte.Ltd., Singapore Ins. Other from 28.07.2009 100.0% 100.0% SGD 11 000
Swiss Life Private Placement (Middle East) Limited, Dubai Ins. Other from 16.09.2008 100.0% 100.0% USD 2 000 1 Segment (Ins. CH = Insurance Switzerland, Bank. Dis. = Banking (Discontinued), IM = Investment Management, Ins. Other = Insurance Other, Ins. FR = Insurance France, Ins. DE = Insurance Germany, Ins. Dis. = Insurance (Discontinued))
As statutory auditor, we have audited the accompanying consolidated financial statements of Swiss Life Holding Ltd, which comprise the consolidated statement of income, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of cash flows, consolidated statement of changes in equity and notes to the consolidated financial statements (pages 62 to 173), for the year ended 31 December 2009.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards as well as the International Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatement.
Swiss Life Holding Financial Statements 177 Review of Operations 178 Statement of Income 179 Balance Sheet 180 Notes to the Financial Statements 195 Appropriation of Profit 196 Report of the Statutory Auditor
Review of Operations — Swiss Life Holding generated a profit of CHF 40 million in the 2009 financial year vis-à-vis the previous year’s figure of CHF 1921 million. This significant decline can be attributed to the extraordinary dividends included in the prior-year profit distributed as a result of gains realised on disposals.
In 2009 Swiss Life Holding’s investment income came to CHF 88 million. Interest received on loans to Group companies rose from CHF 28 million to CHF 42 million on the back of additional loans already granted in 2008. Dividends received were CHF 57 million, down on the 2008 figure of CHF 2307 million, which, as mentioned above, included extraordinary dividends arising from gains realised on disposals.
At CHF 8 million, operating expenses remained stable. Other expenses include extraordinary charges of CHF 47 million relating to the sale of Banca del Gottardo. Overall, Swiss Life Holding generated an annual profit of CHF 40 million.
Swiss Life Holding’s profit distribution to shareholders in the period under review came to CHF 159 million or CHF 5 per share, and took the form of a repayment of par value. The par value of the Swiss Life share was thus reduced from CHF 17 to CHF 12. In addition, the 3 003 500 proprietary shares repurchased as part of the share buyback programme were cancelled. As a result of the par value reduction and the cancellation of proprietary shares, the company’s share capital decreased from CHF 596 million to CHF 385 million.
The nominal value of the convertible bond issued in 2004 at CHF 317 million and set to expire in June 2010 amounted to CHF 43 million at the end of 2009. In the period under review Swiss Life Holding bought back convertible bonds to the amount of CHF 8 million. No outstanding convertible bonds were converted into shares during 2009. The conversion price is CHF 200.20. Apart from the convertible bond issue, Swiss Life Holding is financed entirely by equity.
Swiss Life Products (Luxembourg) S.A., Strassen EUR 60 031 100.00% EUR 35 031 100.00%
MAJOR SHAREHOLDERS — The following shareholders hold over 5% of Swiss Life Holding’s share capital: As % of total share capital
TREASURY SHARES — In the year under review the companies in the Swiss Life Group purchased a total of 1 965 033 Swiss Life Holding shares at an average price of CHF 64.87. In the same period, they sold 3 348 841 shares
Swiss Life — Financial Statements 2009 at an average price of CHF 67.76. In addition, within the context of the share buyback programme, Swiss Life Holding repurchased 3 003 500 shares. As at 31 December 2009, the Swiss Life Group held 232 158 of its treasury shares.
CONTINGENCIES — Swiss Life Holding acts as warrantor for all Swiss Life Ltd liabilities with regard to the various tranches of the subordinated perpetual step-up loan (hybrid debt), which amounted to an equivalent value of CHF 2141 million at the balance sheet date.
Reserve for own shares (incl. reduction in par value) 976 –508
The description of the compensation received by the members of the Board of Directors and the Corporate Executive Board and the tables showing the relevant amounts are based on those in the Annual Report 2008. The variable compensation granted to members of the Corporate Executive Board as a cash bonus for the 2009 financial year, which was determined at the beginning of 2010, is shown on an accrued basis in the compensation tables as compensation for 2009 (accrued method). The relevant information has already been disclosed on an accrued basis in last year’s compensation report. For the 2008 financial year, the members of the Board of Directors and the Corporate Executive Board did not receive any variable compensation, neither in the form of blocked shares nor as a cash bonus.
Below, for transparency reasons, the 2008 compensation tables are shown twice after the 2009 compensation tables. In the first 2008 table, the information is shown in accordance with the accrued method, but without any variable compensation, as there was none granted for the 2008 financial year. The second table is that published in the Annual Report 2008, which includes the variable compensation for the previous 2007 financial year which was determined and paid out in 2008.
Individual compensation is made up of a basic salary and variable short-, medium- and long-term salary components as well as contributions to retirement and risk insurance.
PRACTICE AND PROCEDURE — Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for determining the level and make-up of compensation for its members, whereas the Nomination and Compensation Committee (NCC) is responsible for putting forward corresponding proposals. The Board of Directors also establishes the guidelines for the company ’s compensation policy. In doing so, it takes into consideration the compensation policies of other organisations of comparable size and in comparable industries, drawing its findings from publicly available information and, as necessary, studies by external experts. Based on these guidelines, the Nomination and Compensation Committee determines the amount of the bonus pool for all staff and its terms of distribution, as well as the compensation for the individual members of the Corporate Executive Board.
DIRECTORS — Compensation remitted to members of the Board of Directors in the year under review comprises the basic compensation and additional compensation in cash. The basic compensation, which is made up of compensation in cash and in Swiss Life Holding shares, covers membership of the Board of Directors of Swiss Life Holding and its subsidiary Swiss Life Ltd as well as membership of the individual Board Committees. The additional compensation in cash is commensurate to the function and workload and is determined annually by the Board of Directors. If Swiss Life Group’s business operations have proved successful, a further, variable compensation component may be remitted in the form of Swiss Life Holding shares, decided upon by the Board of Directors taking into consideration the business results. The shares are allocated at economic value, which is equal to the tax value, taking a blocking period of three years into account. The respective share price on the allocation date is always disclosed too.
As part of the compensation policy, a long-term equity compensation plan (mid- to long-term compensation components) was introduced in 2004 for members of the Corporate Executive Board and other senior management members of the Swiss Life Group. Under this programme, participants have been granted future subscription rights to Swiss Life Holding shares in the form of Performance Share Units (PSUs) since 2005. These subscription rights entitle them to receive Swiss Life Holding shares free of charge after a period of three years insofar as the relevant conditions have been satisfied.
Pursuant to the regulations of the 2007, 2008 and 2009 equity compensation plans, two objective performance criteria have been defined, each weighted at 50%. Depending on the fulfilment of the two performance criteria within the three-year period, the number of PSUs can increase by up to a factor of 1.5 or drop to zero. The first criterion is the Total Shareholder Return on the Swiss Life Holding share (TSR Swiss Life Holding), requiring a performance of over 20% for a subscription right to share allocation to arise after three years. The second criterion involves a comparison of the Swiss Life Holding share’s TSR with the TSRs of the shares of the
100%, if a performance of 30% is attained for the first performance criterion, the TSR Swiss Life Holding. Interim values are determined by linear interpolation. In the case of TSR Outperformance, the second performance criterion, the factor is 1, i.e. 100%, if the TSR Swiss Life Holding is equal to the median of the benchmark index (Dow Jones STOXX 600 Insurance Index). Here, too, interim values are determined by linear interpolation. The results (factor TSR Swiss Life Holding multiplied by one half of the PSUs and the factor TSR Outperformance multiplied by the other half) are added up. The sum is the number of PSUs, which translates into an entitlement to an equal number of Swiss Life Holding shares.
For transparency and comparison purposes, the 2008 compensation table is shown twice below the compensation table for 2009; firstly, without variable compensation in shares (according to the accrued method) and, secondly, as published in the Annual Report 2008.
Basic compen- sation and shares Regular contri- total compensation sation in cash Number Amount (amount) contributions6 butions (amount)7
Rolf Dörig, Chairman of the Board of Directors 1 1 121 132 0 1 121 132 1 093 117 558 1 238 690 195 656 – 1 434 346 1 BoD Delegate until 07.05.2009 / BoD Chairman from 07.05.2009. As BoD Delegate until 07.05.2009, Rolf Dörig received compensation of CHF 19 662 for a company car and a premium contribution of CHF 41 470 to his 3rd-pillar pension plan. This total of CHF 61 132 was added to his basic compensation of CHF 1 060 000.
4 BoD member until 07.05.2009. 5 The compensation in shares (totalling 2 940 shares) was part of the basic compensation. The allocation of shares was effected on 24.06.2009 and 18.12.2009 at economic value, which is equal to the tax value (CHF 77.6649 and CHF 107.5553 respectively), taking into account a blocking period of three years. The share prices (closing prices) on the days of allocation were CHF 92.50 and CHF 128.10 respectively. No variable compensation in shares has been granted for the 2009 financial year.
6 Pursuant to the pension fund regulations, occupational provisions were financed by the employer and the employee at a ratio of 2/3 to 1/3. 7 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV/FAK amounted to a total of
The members of the Board of Directors did not receive any variable compensation in shares for the 2008 financial year. Therefore, to enable a year-on-year comparison with the compensation for 2009, the variable compensation in shares for the 2007 financial year shown in last year’s annual report (a total of 1011 shares) is not included in the table below, in contrast to the table published in the Annual Report 2008. The shares disclosed form part of the basic compensation.
Bruno Gehrig, Chairman of the Board of Directors 555 000 100 000 655 000 – 0 655 000 104 827 759 827
Amounts in CHF Expenditure for Compensation in cash Compensation in shares1 occupational provisions
For transparency and comparison purposes, below the compensation table for 2009, the 2008 compensation table is shown twice; firstly, without cash bonuses or variable compensation in shares for the 2008 financial year (according to accrued method) and, secondly, as published in the Annual Report 2008, which included the variable compensation for the 2007 financial year.
2 The bonus paid in 2010 relates to the 2009 financial year. No bonus was paid for the 2008 financial year. 3 Child allowances (CHF 8700), company cars (CHF 121 318), premium contributions to 3rd pillar pension plans (CHF 88 730), other (CHF 52 228), each in total.
Amounts in CHF Compensation in cash Compensation in shares for 20084
Bonus for 2008 Other compensation in cash and Salary paid in 20092 compensation3 in cash Number Amount shares (amount)
Other members of Corporate Executive Board 5 3 908 057 0 260 893 4 168 950 – 0 4 168 950 1 Group CEO until 08.05.2008, BoD Delegate from 09.05.2008. Salary / compensation in cash was fixed at CHF 1 200 000 per year for the position of BoD Delegate. 2 No bonus was paid for the 2008 financial year. 3 Child allowances (CHF 12 830), allowances for years of service (CHF 31 570), company cars (CHF 110 221), premium contributions to 3rd-pillar pension plans (CHF 174 401), other (CHF 81 870), each in total.
Manfred Behrens, Charles Relecom, Paul Müller, Ivo Furrer and Klaus Leyh.
Rolf Dörig, Group CEO until 08.05.2008, BoD Delegate from 09.05.2008 195 656 1 817 462
Bruno Pfister, CEO International until 08.05.2008, Group CEO from 09.05.2008 7 755 148 1 808 341
7 Regular contribution of CHF 156 648 and a subsequent contribution of CHF 598 500 in accordance with the pension fund regulations due to the increase in the insured income. 8 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV amounted to a total of
Other members of Corporate Executive Board 17 771 3 186 341 8 168 711 9 In 2008 no PSUs were allocated to Rolf Dörig as a result of his transfer from the Corporate Executive Board to the Board of Directors. 10 The PSUs represent future subscription rights that entitle the individuals concerned to receive Swiss Life Holding shares after a period of three years, provided the relevant conditions are then met. Depending on the fulfilment during the three-year term of the two performance criteria defined, the number of PSUs can increase by a factor of 1.5 or drop to zero.
Bonus for 2007 Other compensation in cash and Salary paid in 20082 compensation3 in cash Number Amount shares (amount)
4 The allocation of shares for the 2007 financial year was effected on 31.03.2008 at economic value, which is equal to the tax value (CHF 231.7351), taking into account a blocking period of three years . The share price on the day of allocation was CHF 276.00. No variable compensation in shares was paid out for the 2008 financial year. 5 Eight individuals were taken into account in the period under review. Compensation for 2008 membership of the Corporate Executive Board was disclosed on a pro-rata basis for
Rolf Dörig, Group CEO until 08.05.2008, BoD Delegate from 09.05.2008 195 656 3 508 917
Bruno Pfister, CEO International until 08.05.2008, Group CEO from 09.05.2008 8 755 148 3 026 105
Bruno Pfister, CEO International until 08.05.2008, Group CEO from 09.05.2008 10 5 924 1 062 173 4 088 278
Other members of Corporate Executive Board 17 771 3 186 341 11 749 414 9 In 2008 no PSUs were allocated to Rolf Dörig as a result of his transfer from the Corporate Executive Board to the Board of Directors. Disregarding the cash bonus paid for the 2007 financial year and the variable compensation in shares, the total compensation paid to Rolf Dörig for 2008 amounted to CHF 1 817 462.
31.12.2009 — As at the balance sheet date, current members of the Board of Directors and Corporate Executive Board (including closely linked parties) held the following number of registered Swiss Life Holding Ltd shares and future subscription rights to Swiss Life Holding Ltd shares in the form of Performance Share Units (PSUs).
TOTAL BOARD OF DIRECTORS 1 664 873 1 Rolf Dörig owns an additional 6717 PSUs, which were allocated to him under the 2007 equity programme for his former role of Group CEO. They represent future subscription rights that entitle him to receive SLH shares after a period of three years, provided that the relevant conditions are then met. Following his election to the Board of Directors on 8 May 2008 and resultant resignation from the Corporate Executive Board, Rolf Dörig was not allocated any further PSUs in 2008 or 2009.
Performance Share Units (PSUs) as future subscription rights to SLH shares 31.12.20091
31.12.2008 — As at the balance sheet date, current members of the Board of Directors and Corporate Executive Board (including closely linked parties) held the following number of registered Swiss Life Holding Ltd shares and future subscription rights to Swiss Life Holding Ltd shares in the form of Performance Share Units (PSUs).
Rolf Dörig, Group CEO until 08.05.2008, BoD Delegate from 09.05.2008 1
Rolf Dörig, Group CEO until 08.05.2008, BoD Delegate from 09.05.2008 28 607
Bruno Pfister, CEO International until 08.05.2008, Group CEO from 09.05.2008 8 841
Performance Share Units (PSUs) as future subscription rights to SLH shares 31.12.20081
TOTAL CORPORATE EXECUTIVE BOARD 64 877 1 Total number of PSUs allocated in the years 2006, 2007 and 2008 in connection with the relevant equity compensation plan. The PSUs represent future subscription rights that entitle the individuals concerned to receive SLH shares after a period of three years, provided that the relevant conditions are then met.
The net profit for the year amounts to CHF 39 650 536. The Board of Directors proposes to the Annual General Meeting of Shareholders to appropriate the profit in accordance with the table below. If the Board of Directors’ proposal is adopted, a distribution in the form of a CHF 2.40 reduction in the par value per share will be paid.
As statutory auditor, we have audited the financial statements of Swiss Life Holding Ltd, which comprise the statement of income, balance sheet and notes to the financial statements (pages 178 to 194), for the year ended 31 December 2009.
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
In our opinion, the financial statements for the year ended 31 December 2009 comply with Swiss law and the company ’s articles of incorporation.
PUBLISHER — Swiss Life Holding Ltd, Zurich CONCEPT AND DESIGN — Eclat AG, Erlenbach, Canton of Zurich PHOTOGRAPHY — Beat Schweizer, Berne and Franz Rindlisbacher/Gerry Amstutz, Zurich (portraits in Corporate Governance section) PRODUCTION — Management Digital Data AG, Schlieren, Canton of Zurich PRINTERS — NZZ Fretz AG, Schlieren, Canton of Zurich © Swiss Life Holding Ltd, 2010
ANNUAL GENERAL MEETING OF SHAREHOLDERS 2010 6 May 2010 Hallenstadion Zurich