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Last year, Swiss Life brought its Group-wide programme MILESTONE, launched in 2009, to a successful conclusion and strengthened the profitability and financial solidity of the company in a sustainable way. In so doing, Swiss Life has created the business conditions for the next stage of its journey. In 2012 profit from operations far exceeded expectations: adjusted for one-off effects earnings were 26% up on the previous year at CHF 993 million. Net profit at CHF 93 million was significantly lower than in the previous year (2011: CHF 606 million), mainly due to the one-off impairment in the value of AWD’s intangible assets of CHF 578 million, additional provisions for litigation and restructuring costs arising from the new Group-wide programme “Swiss Life 2015”.
The fact that our operational progress in recent years has been achieved in extremely challenging markets, not to mention the less than favourable operating conditions, testifies to the resilience of our business model. Our upgrade in 2012 by the rating agency Standard & Poor’s to A– was equally encouraging. This confirms the progress we have made in recent years and is all the more pleasing as the upgrade runs counter to the general negative trend for financial services companies. Our employees played a key part in this success and we owe them our gratitude for the commitment they give our company on a daily basis.
Through our new corporate programme “Swiss Life 2015”, which we presented at our Investors’ Day in November 2012, we are continuing along our path of profitable growth and adapting our business areas to reflect changing market conditions. We will do this by pursuing different business strategies in our various markets: Swiss Life in Switzerland will develop from a pure life insurer to a comprehensive life and pensions and financial solutions provider, and in Germany to a financial advisory and insurance company under one roof. In France, the Group will continue to build on its strong position as a “private and personal insurer”. In our international business we will offer protection, financial solutions and advice in selected markets. In asset management we will grow our business with external customers through our new brand “Swiss Life Asset Managers”.
The progress we have made in recent years gives us confidence that we can achieve these aims. Our operational effectiveness allows us to exploit the opportunities offered even in today’s difficult market environment. All the conditions are in place for Swiss Life to strengthen its position in the market for comprehensive life and pensions and financial solutions – loyal customers, professional expertise, engaged employees, financial solidity and a strong brand. We would like to thank you, our shareholders, most sincerely for your loyalty and commitment in giving your support to the further development of our Group.
In the 2012 financial year, Swiss Life increased its profit from operations adjusted for one-off effects by 26% from CHF 788 million to CHF 993 million, thanks to further operational improvements and an excellent investment result. One-off effects, in particular as a result of the impairment in the value of AWD’s intangible assets of CHF 578 million, led to reported net profit of CHF 93 million (2011: CHF 606 million). Important contributors to this positive development in the results were the market units in Switzerland, Germany, France and Investment Management. Results in AWD and Swiss Life International were lower than expected.
With CHF 17.0 billion, Swiss Life maintained premium income at its prior-year level and improved its new business margin from 1.2% to 1.4% despite the challenging market conditions. In 2012 the Group generated a return on equity of 0.9%. Adjusted for one-off effects and unrealised gains and losses on fixed-interest investments in equity, return on equity stood at 8.6%. With investment performance of 8.5% (2011: 7.5%), an investment result of CHF 5.7 billion and net investment return of 4.8% (2011: 3.8%) were achieved, which enabled substantial strengthening of the technical reserves.
Gross written premiums, policy fees and deposits received by segment 1 Insurance Switzerland 2 Insurance France 3 Insurance Germany 4 Insurance International
–5 agement for Investment Management stood at CHF 148 billion (2011: CHF 134 billion). This includes third-party assets in which Swiss Life can report growth of 24% to over CHF 20 billion thanks to additional mandates and positive market developments. Technical provisions to cover obligations to our customers increased by CHF 10 billion to CHF 138 billion, an increase of 8% on the previous year.
IMPROVED EARNINGS POWER DUE TO OPERATIONAL IMPROVEMENTS In the 2012 financial year Swiss Life increased its profit from operations, adjusted for one-off effects, by 26% from CHF 788 million to CHF 993 million; adjusted net profit stood at CHF 681 million, a 22% rise on the previous year (CHF 557 million). Primarily as a result of the CHF 578 million impairment in AWD’s intangible assets and additional provisions for litigation, together with restructuring costs under the new Group-wide programme “Swiss Life 2015”, this produces reported net profit of CHF 93 million. In Switzerland, Swiss Life posted a segment result of CHF 634 million, up CHF 158 million on the previous year, following efficiency gains and a very good investment result. In France, Swiss Life recorded an increase in profits of CHF 33 million to CHF 157 million due to the good performance of financial products and an improved technical margin. In Germany, Swiss Life improved profits by CHF 11 million to CHF 69 million thanks to a successful investment policy. The Insurance International segment’s result made a loss of CHF 34 million, primarily attributable to restructuring costs and impairment of the customer relationship asset. Investment Management contributed a segment result of CHF 138 million, which was up CHF 8 million on the previous year. The AWD segment adversely impacted the result by CHF –591 million due, as mentioned above, mainly to the CHF 578 million impairment of intangible assets and provisions for litigation.
KEY FIGURES FOR THE SWISS LIFE GROUP Amounts in CHF million
GroSS WrItteN preMIuMS, polICy FeeS AND DepoSItS reCeIveD 17 046 17 143 –0.6%
The Group maintained its focus on profitability in the 2012 financial year and grew in strategically important business areas. With an overall figure of CHF 17.0 billion, gross written premiums, policy fees and deposits received across all segments were maintained at the prior-year level.
Swiss Life – Annual Report 2012 insurance switzerland In the year under review Swiss Life in Switzerland posted a segment result of CHF 634 million (2011: CHF 476 million). This major increase of 33% resulted to a large extent from the excellent investment result and strong premium growth. This improved result is an extremely good achievement, particularly in view of the enduring low interest rate environment and the high pressure on margins in life business.
According to the Swiss Insurance Association (SIA), life insurance premiums in Switzerland rose by 1.7% over the previous year to CHF 30.3 billion. Premiums in group insurance climbed by 2.3% and in individual insurance fell by 0.3%. Swiss Life grew overall premium volume by 2% to CHF 8.3 billion. Group insurance contributed 81% of income, as per the previous year. Swiss Life’s market share of group insurance came to 28.8%, and in individual insurance it increased to 20.1%.
Operating expenses rose by 11% to CHF 971 million. This mainly results from higher amortisation of deferred acquisition costs, additional expenses for the employee benefits plan (under IAS 19) and higher asset management fees – due to the higher asset volume. The renewed reduction in operational administrative costs results from a sustained efficiency-enhancing programme, which particularly impacted personnel costs.
Insurance benefits, including changes in technical reserves, rose by 12% to CHF 10.0 billion. This increase is mainly due to strengthening of reserves due to the ongoing low interest rate environment and higher savings deposits.
Swiss Life in Switzerland aims to continue to develop from a pure life insurer to a comprehensive life and pensions and financial solutions provider. The focus will be on closer and more regular customer interaction and the expansion of our services business. A corresponding growth and transformation programme launched in 2011 showed initial successes in 2012 in the form of new customer approach concepts. In addition, Swiss Life devised a whole new broker services offering for private housing. The company intends to further enhance its efficiency in 2013 and make more improvements to increase its distribution capacity and profitability. A major step towards improving distribution capabilities is the teaming up between Swiss Life in Switzerland and AWD Switzerland, now known as Swiss Life Select Switzerland. The teaming up will be realised during 2013.
GroSS wrItten PremIumS, PolICy FeeS And dePoSItS reCeIved 8 292 8 123 2.1%
net earned premiums and policy fees 7 868 7 757 1.4%
GroSS wrItten PremIumS, PolICy FeeS And dePoSItS reCeIved 4 260 4 379 –2.7%
net earned premiums and policy fees 1 543 1 618 –4.6%
Corporate Clients specialises in global life and pensions solutions for multinationals. During the year under review the segment cemented its market leadership as a provider of global employee benefits solutions and premium volume on its own balance sheet in Luxembourg increased slightly.
SeGment reSult –34 –10 n/a number of employees (full-time equivalents) 262 286 –8.4%
Key figures for investment management Amounts in CHF million number of employees (full-time equivalents) 655 610 7.4%
The year under review was characterised by challenging market conditions. The AWD Group generated overall sales revenues of EUR 488.5 million, a drop of 12.9% from the prior-year level. This is partly attributable to a decline in commission income in the areas of life insurance and pensions products, investment funds and private health insurance.
With the new Group-wide programme “Swiss Life 2015” the AWD segment is being repositioned within the Swiss Life Group. All production and distribution organisations in each market will be managed under one roof going forward in order to optimise market development and leverage synergies. From spring 2013, AWD will operate in the markets of Germany, Switzerland, Austria, Poland and the Czech Republic under the brand name “Swiss Life Select”. In addition, the tecis, HORBACH and Proventus brands will continue to operate in Germany, while customers in the UK will be advised under the Chase de Vere brand. Reporting will be transferred to the existing segments Switzerland, Germany and International. AWD’s former operations in Slovakia and Hungary were discontinued as of the end of 2012.
Swiss Life complies with internationally accepted standards of corporate governance and, in the interests of its shareholders, policyholders and staff, attaches great importance to the requirements entailed in terms of the management and organisation of the Swiss Life Group. The corporate gov­ ernance of Swiss Life Holding Ltd (Swiss Life Holding) is based on the Directive on Information Relat­ ing to Corporate Governance issued by the SIX Swiss Exchange and the circulars 2008/32 on corpo­ rate governance, risk management and internal control systems for insurance companies and 2010/1 on minimum standards for remuneration schemes of financial institutions published by the Swiss Financial Market Supervisory Authority FINMA. It is also modelled on leading national and interna­ tional corporate governance standards, in particular the Swiss Code of Best Practice for Corporate Governance issued by the Swiss Business Federation, economiesuisse, as well as the Organization for Economic Cooperation and Development’s (OECD) principles on corporate governance.
The companies falling within the Group’s scope of consolidation are presented in the Consolidated Financial Statements (Note 37). Information on the listing on the SIX Swiss Exchange and market capitalisation can be found in the section “Share Performance and Historical Comparison” on page 250. The organisational structure of the Group shows the key business markets and areas. The resulting operational responsibilities are reflected in the allocation of responsibilities among the Corporate Exec­ utive Board. With regard to insurance operations, one person with responsibility for the market and results is assigned to each specific area.
The operational management structure as at 31 December 2012 is shown on page 42.
SHAREHOLDERS Shareholdings in companies that are domiciled in Switzerland and have their shares listed in Switzer­ land must be reported to the company in question and the SIX Swiss Exchange if the shareholdings exceed, fall below or reach certain thresholds. The relevant thresholds are 3, 5, 10, 15, 20, 25, 33⅓, 50 and 66⅔% of the voting rights. Details are set out in the Federal Act on Stock Exchanges and Securi­ ties Trading (SESTA) and Stock Exchange Ordinance­FINMA (SESTO­FINMA).
The relevant disclosures of significant shareholdings can be found on the publication platform of the SIX Swiss Exchange’s disclosure office at www.six­exchange­regulation.com/index_en.html, “Obligations” area, “Disclosure of Shareholdings” section and “Significant Shareholders” subsection (www.six­exchange­regulation.com/obligations/disclosure/major_shareholders_en.html).
The latest disclosures of shareholdings on the balance sheet date, which exceed the disclosure threshold, are shown below. In accordance with the disclosure requirements, the percentage figures given relate to the share capital/number of outstanding shares pursuant to the Articles of Association applicable at the time of the relevant disclosure.
Dodge & Cox, 555 California Street, 40th Floor, San Francisco, CA 94101, USA, reported in the publi­ cation of 6 March 2008 that it held through the Dodge & Cox International Stock Fund 1 645 000 reg­ istered shares, correspond ing at the time to 4.71% of the voting rights of Swiss Life Holding. No new disclosure reports have been received from Dodge & Cox.
BlackRock Inc., 40 East 52nd Street, New York 10022, USA, reported various instances when share­ holdings exceeded or fell below the three per cent threshold during the year under review. These were published on 28 March, 22 May, 27 September, 3 October, 2 November and lastly on 13 Decem­ ber 2012. In its final disclosure for the year under review of 13 December 2012, BlackRock reported that a group consisting of BlackRock Asset Management Australia Limited, Level 43, 225 George Street, Sydney, Australia, BlackRock Investment Management (Australia) Limited, Level 18, 120 Col­ lins Street, Melbourne VIC 3000, Australia, BlackRock Japan Co., Ltd., 24F, Sapia Tower, 1­7­12, Marunouchi, Chiyoda­ku, Tokyo 100­0005, Japan, BlackRock Institutional Trust Company, National Association, 400 Howard Street, San Francisco CA 94105, USA, BlackRock Fund Advisors, 400 Howard Street, San Francisco CA 94105, USA, BlackRock Asset Management Canada Limited, 161 Bay Street, Suite 2500, Toronto, Ontario M5J 2S1, Canada, BlackRock Financial Management, Inc., 40 East 52nd Street, New York NY 10055, USA, BlackRock Investment Management, LLC, 1 University Square Drive, Princeton NJ 08540, USA, BlackRock Asset Management Deutschland AG, Max­Joseph­Strasse 6, 80333 Munich, Germany, BlackRock Fund Managers Limited, 12 Throgmorton Avenue, London EC2N 2DL, United Kingdom, BlackRock Investment Management (UK) Limited, 12 Throgmorton Avenue, London EC2N 2DL, United Kingdom, BlackRock Advisors, LLC, 100 Bellevue Parkway, Wilmington DE 19808, USA, BlackRock (Netherlands) B.V., Rembrandt Tower, 17th Floor, Amstel­ plein, Amsterdam, Netherlands, BlackRock Asset Management Ireland Limited, International Financial Services Centre, Dublin 1, Ireland, Blackrock Advisors (UK) Limited, 12 Throgmorton Avenue, London EC2N 2DL, United Kingdom, BlackRock Life Limited, 12 Throgmorton Avenue, London EC2N 2DL, United Kingdom, BlackRock Investments Canada Inc., 2500, 450 1st Street SW, Calgary, AB T2P 5H1 Canada, BlackRock International Limited, 12 Throgmorton Avenue, London EC2N 2DL, United Kingdom, and BlackRock (Luxembourg) S.A., 6D, Route de Trèves, Senningerberg, L­2633 Luxembourg, held a total of 991 959 shares of Swiss Life Holding, corresponding to 3.09% of the voting rights.
No cross participations exceeding the three per cent threshold exist between Swiss Life Holding or its subsidiaries and other listed companies.
A table showing the shareholder structure is provided in the section “Share Performance and Historical Comparison” on page 251.
CAPITAL AND CHANGES IN CAPITAL The capital structure of Swiss Life Holding was as follows on the balance sheet date: – Ordinary share capital: CHF 163 613 375.40, divided into 32 081 054 fully paid registered shares with a par value of CHF 5.10 each
– Conditional share capital: CHF 12 032 868.60 divided into 2 359 386 registered shares with a par value of CHF 5.10 each
Since the establishment of Swiss Life Holding on 17 September 2002, a number of capital market transactions have been conducted. A detailed description of the transactions carried out up to and including the end of 2009 can be found in the Corporate Governance section of the annual reports for the relevant years. The annual reports can be accessed at www.swisslife.com, “Investors” area, “Results & Reports” section, “Archive Reports” and “Annual Reports” subsections (www.swisslife.com/ annualreports).
On 5 May 2011 the General Meeting of Shareholders of Swiss Life Holding passed a resolution approving a par value reduction of CHF 4.50 per share from CHF 9.60 to CHF 5.10. The share capital thus
There were no changes in capital in 2012. The distribution of CHF 4.50 per share, which was approved by the General Meeting of Shareholders on 19 April 2012, was made out of the capital contribution reserve.
SHARES 32 081 054 fully paid Swiss Life Holding registered shares with a par value of CHF 5.10 each were outstanding on the balance sheet date. Subject to the ten per cent limit on voting rights set out in the Articles of Association (cf. the section on “Shareholders’ participation rights” on page 60), each share grants the right to one vote at the General Meeting of Shareholders.
There are no other equity securities besides the registered shares mentioned above, nor do any participa­ tion certificates or dividend right certificates exist.
Regulations are in place to govern transactions in Swiss Life Holding shares carried out by Swiss Life Group employees. Pursuant to the Code of Conduct and the Swiss Life Group’s Directive on Insider Information, all purchases and sales of Swiss Life Holding securities made by members of senior management or employees who are privy to confidential information are subject to a reporting requirement. Transactions by persons who, by virtue of their position, have regular access to insider information are also subject to a prior approval requirement. A general blackout period is imposed annually from 1 January until 24 hours after the year­end results have been presented and from 1 July until 24 hours after the half­year results have been presented, as well as from ten days before until 24 hours after publication of the interim statements for the first and third quarters.
Additional information on the Swiss Life share is available in the section “Share Performance and Historical Comparison” on pages 250 and 251.
LIMITATIONS ON TRANSFERABILITY AND NOMINEE REGISTRATIONS Swiss Life Holding shares are not subject to any limitations on transferability. According to the Articles of Association, resolutions for the introduction, amendment or repeal of limitations on transferability must be put before the General Meeting of Shareholders and must be approved by two thirds of the voting shares represented and by an absolute majority of the share par value represented.
Swiss Life – Annual Report 2012 subject to banking or financial market supervision. A request must be filed to register as a nominee. The voting right representation is restricted to 10% of the share capital overall, whereby nominees who are connected with regard to capital or voting rights under uniform management or contractual agreement will be counted as a single shareholder. The Board of Directors may approve exceptions to these restrictions on registration, observing the principle of responsible judgement. No such exceptions were granted during the period under review.
As at 31 December 2012, Swiss Life Holding and its Group companies had not granted any options on rights to participate in Swiss Life Holding.
ELECTIONS AND TERMS OF OFFICE Pursuant to the Articles of Association, the Board of Directors shall consist of no fewer than five and no more than fourteen members. The members of the Board are elected by the General Meeting of Shareholders for a maximum term of three years, and on an individual basis. The Organisational Regulations stipulate that a member of the Board of Directors shall automatically resign from the Board at the General Meeting of Shareholders in the year in which the member reaches the age of 70.
STAGGERED TERMS OF OFFICE Terms of office are staggered with the intention that, in so far as possible, an equal number of members will come up for re­election every year. If a member resigns during his term of office, a successor is elected to serve in principle only for the rest of that term. Thus, with respect to the annual re­elections, 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 three financial years preceding the reporting period.
MEMBERS OF THE BOARD OF DIRECTORS On the balance sheet date of 31 December 2012, the Board of Directors was composed of the following members: Name Main function Additional functions re-elected Elected until
Rolf Dörig Chairman Chairman’s and Corporate Governance Committee, Chairman 2008/2011 2014
Frank Schnewlin 2nd Vice Chairman Nomination and Compensation Committee, Chairman 2009/2012 2015
Franziska Tschudi Member Nomination and Compensation Committee 2003/2005/2008/2011 2014 1 Member of the Board of Directors of Swiss Life Ltd since 2000
ROLF DÖRIG — Born 1957, Swiss national Chairman of the Board of Directors bild Rolf Dörig laid the groundwork for his professional career by obtaining a doctorate in law (Dr. iur.) from the University of Zurich before being called to the bar in Zurich. Joining Credit Suisse in 1986, he assumed a number of executive responsibilities in various areas of banking and in different geographical markets. As a Member of the Executive Board, he was assigned responsibility for Swiss Corporate and Retail Banking from 2000 onwards. In 2002 he assumed the role of Chairman Switzerland of Credit Suisse. Following his move to Swiss Life, Rolf Dörig held the positions of Chairman of the Corporate Executive Board from November 2002 to May 2008 and Delegate of the Board of Directors from May 2008 to May 2009.
Other appointments: – Adecco S.A., Chairman of the Board of Directors – Kaba Holding Ltd, Vice Chairman of the Board of Directors – Danzer AG, Chairman of the Board of Directors – Walter Frey Holding AG, Member of the Board of Directors – economiesuisse, Member of the Executive Committee
Other appointments: – Bank Sal. Oppenheim jr. & Cie. (Schweiz) Ltd, Member of the Board of Directors – Cellere AG, Member of the Board of Directors – Georg Fischer Ltd, Vice Chairman of the Board of Directors – Swiss National Bank, Member of the Bank Council – Züblin Real Estate Holding Ltd, Member of the Board of Directors
Following his election to the Board of Directors of Swiss Life Holding in May 2009, Frank Schnewlin assumed the role of Chairman of the Nomination and Compensation Committee.
Chairman of the Risk and Audit Committee – Twelve Capital AG, Member of the Board of Directors – Drosos Foundation, Member of the Board of Trustees/Chairman of the Finance Committee
Other appointments: – Hannover Life RE America, Orlando, Vice Chairman of the Board of Directors – Hannover Life RE Bermuda, Hamilton, Member of the Board of Directors – Hannover Life RE Ireland, Dublin, Member of the Board of Directors – Hannover Life RE Australasia, Sydney, Member of the Board of Directors
Volker Bremkamp will be resigning from the Board of Directors after ten years of office with effect from the General Meeting of Shareholders of Swiss Life Holding on 23 April 2013.
Other appointments: – fischerAppelt AG, Hamburg, Chairman of the Supervisory Board – HanseMerkur Krankenversicherungsgruppe, Hamburg, Vice Chairman of the Supervisory Board
PETER QUADRI — Born 1945, Swiss national Member of the Board of Directors bild Peter Quadri received his master’s degree in econo mics and business ad­ ministration (lic. oec. publ.) in 1969 from the University of Zurich. In 1970 he joined IBM as a systems engineer and software/operating sys­ tems specialist. Following various periods in the USA, Denmark and Switzerland, he held the position of CEO of IBM Switzerland from 1998 to April 2006. He now works as a management and technology consultant.
Other appointments: – Vontobel Holding Ltd, Member of the Board of Directors – Bühler AG, Member of the Board of Directors – Zurich Chamber of Commerce, Chairman – Unitectra Ltd, Chairman of the Board of Directors – economiesuisse, Member of the Executive Board
tant for Media Law at the Institute for Constitutional and Administrative Law at the University of Berne, and practising business and media law in Zurich, Washington DC and Geneva, she served as Secretary General at SIG Holding AG from 1992 to 1995. She then became a Member of the Executive Board of WICOR HOLDING AG (“WEIDMANN Group”), Rapperswil in 1995, where she was Head of Corporate Development and, from 1998, Head of the Business Area Electrical Technology Asia/ Pacific. She has held the positions of Chief Executive Officer and Delegate of the Board of Directors of WICOR HOLDING AG since 2001.
Other appointments: – BIOMED AG, Member of the Board of Directors – St. Gallen­Appenzell Chamber of Commerce and Industry, Vice Chairperson (until June 2012) – economiesuisse, Member of the Executive Board – Swissmem, Member of the Executive Board
RESIGNATIONS There were no resignations from the Board of Directors during the period under review.
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 commit­ tees to be entrusted with special tasks.
The Nomination and Compensation Committee (NCC) supports the Board of Directors with regard to setting the compensation policy and in key personnel decisions regarding appointments to the highest levels of management and related performance­based and market consistent compensation.
The NCC consists of at least three members, all of whom are independent members of the Board of Directors. A Board of Directors member is regarded as being independent if he has not exercised any
Swiss Life – Annual Report 2012 operational management role within the Swiss Life Group for at least three years and has no or only a minor business relationship with the Group.
During the year under review the NCC convened a total of seven times. Each session lasted for around one and a half hours on average. There was full attendance at all meetings.
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 Invest­ ment and Risk Committee include drafting proposals on the principal features of asset and liability management (ALM) and submitting them to the Board of Directors, determining the investment policy, assessing capital adequacy, verifying compliance with guidelines on investments, and estab­ lishing the risk tolerance in insurance and investment operations. The Investment and Risk Commit­ tee is vested with the authority to define various regulations and directives pertaining to the invest­ ment activities of the Swiss Life Group and must inform the Board of Directors accordingly. In addition, the Investment and Risk Committee is responsible for making decisions on investments above a certain amount and specifies the terms of significant intra­Group financing.
Seven meetings of the Investment and Risk Committee were held in the year under review. Each session lasted for around two hours on average. All members attended all the meetings, with the exception of one member who was excused from a meeting. The Chairman of the Board of Directors attended five meetings of the Investment and Risk Committee. The Group CFO was present at all meetings, and the Group CEO at six meetings of the Investment and Risk Committee. The Group CIO and the Group CRO also attended all meetings.
In the year under review, the Audit Committee convened six times, with a meeting lasting around two hours on average. There was full attendance at all meetings, with the exception of one meeting, which one member was unable to attend. The Group CEO was present at all meetings, with the exception of two. The Group CFO, the Head of Corporate Internal Audit and representatives from the external audit services attended all meetings. To prepare for the meetings relating to the annual and half­year reports, the Audit Committee regularly calls on the services of an independent financial and business expert.
The Corporate Executive Board bears responsibility in particular for the implementation of the cor­ porate strategy, for the conditions governing business operations and for financial guidance. It is further responsible for preparing the resolutions for the Board of Directors and its committees, and for monitoring the implementation of these decisions in the Group. It is vested with the authority to rule on business referred to it by the Board of Directors, the Board of Directors’ committees and the Chairman of the Board of Directors, insofar as approval or a decision is not reserved exclusively to the delegating body.
If required, the Board of Directors and its individual committees regularly invite all or some members of the Corporate Executive Board and in­house specialists to their meetings. Outside the meetings,
New management structure of the Swiss Life Group as at 1 January 2013
The Group CEO directs the business operations of the Group. The Group CEO, together with the Corporate Executive Board, works out the long­term objectives and strategic orientation of the Group for submission to the Board of Directors and, based on the resolutions of the Board of Directors, ensures the goal­oriented leadership and development of the Group. The Corporate Executive Board can form committees to address specific areas and can delegate competencies to such Corporate Executive Board committees.
The organisation and division of tasks within the Corporate Executive Board generally reflects the key business areas and functions. The members of the Corporate Executive Board have a direct man­ agement role with functional management responsibility for cross­divisional competencies. The members of the Corporate Executive Board are responsible for setting objectives, financial planning, HR management and achievement of objectives within their area. They issue directives for their area within the context of legal and regulatory requirements, the relevant regulations and the Group directives valid for the Group as a whole.
MEMBERS OF THE CORPORATE EXECUTIVE BOARD On 31 December 2012 the Corporate Executive Board of Swiss Life Holding was composed of the fol­ lowing members: Member of the
bild Bruno Pfister graduated from the University of Geneva with a master’s degree in law before being called to the bar in Geneva. Following com­ pletion of his business management studies (MBA from the UCLA Graduate School of Management in Los Angeles), the initial stages of his career saw him working for Chase Manhattan Bank in London and Geneva. From 1988 onwards he was a management consultant for Mc­
Kinsey & Co in Zurich. In 1996 Bruno Pfister became Chief of Staff of the Private Banking division at Liechtenstein Global Trust (LGT) where he managed a global strategic project before being appointed Chief Financial Officer of LGT Group and LGT Bank in Liechtenstein in 1998. In 1999, as a Member of the Credit Suisse Group Executive Board, he took over as Head of Customer Segment Management and Product Management at Credit Suisse.
Bruno Pfister has been with the Swiss Life Group since August 2002, initially as Group Chief Financial Officer (Group CFO) and, as of 1 January 2006, Chief Executive Officer International (CEO Interna­ tional). He assumed the position of Group Chief Executive Officer (Group CEO) of the Swiss Life Group in May 2008.
Other appointments: – Gottex Fund Management Holdings Limited, St. Peter Port, Guernsey, Member of the Board of
Directors – Swiss Insurance Association (SIA), Vice Chairman, Member of the Board Committee – Avenir Suisse, Member of the Board of Trustees and Member of the Finance Committee – Swiss­American Chamber of Commerce, Member of the Board of Directors
Other appointments: – Sanitas Krankenversicherung and Sanitas Beteiligungen AG, Member of the Board of Trustees and the Board of Directors – Swiss Insurance Association (SIA), Chairman of the Life Insurance Committee – German­Swiss Chamber of Commerce, Member of the Board – Member of the Board of Directors of the Financial Market Authority (FMA) Liechtenstein
Klaus G. Leyh has been a member of Swiss Life’s Corporate Executive Board since October 2008.
bild Charles Relecom graduated from the University of Namur (Belgium) with a degree in mathematics and went on to gain a master’s degree in Actuarial Science at the University of Louvain (Belgium). He began his career in 1978 as Chief Actuary and Chief Technology Officer at Swiss Life in Belgium. In 1984 he moved to the head office in Zurich, where he played a significant role in setting up the International Divi sion.
Other appointments: – Stiftung Technopark Zürich, Member of the Board of Trustees – TECHNOPARK Management Ltd, Vice Chairman of the Board of Directors – PostFinance, Member of the Board of Directors
MANFRED BEHRENS — Born 1955, German national Chief Executive Officer AWD (CEO AWD) Chief Executive Officer Germany (CEO Germany) from 1 January 2013 bild After graduating in law, Manfred Behrens initially worked as an attorney in a Hamburg­based law firm. In 1984 he moved to Hamburg Mann­ heimer AG, where he assumed various leading positions in the areas of legal protection and sales and went on to become regional manager. He joined Volksfürsorge Deutsche Lebensversicherungs­AG in May 1996 and, in 1998, was appointed Member of the Board of Management with responsibility for sales and marketing. Manfred Behrens moved to Swiss Life in January 2004, where he held the position of Chief Executive Officer of Swiss Life in Germany (CEO Germany) until August 2008. He was appointed Co­Chief Executive Officer of AWD in September 2008. From April 2009 until December 2012 he was responsible for all activities of the AWD Group as Chairman of the Executive Board of AWD (CEO AWD). As part of the joining together of Swiss Life and AWD, Manfred Behrens was appointed Chief Executive Officer of Swiss Life in Germany (CEO Germany) from 1 January 2013.
Other appointments: – Aareal Bank, Wiesbaden, Member of the Supervisory Board – Commerzbank, Frankfurt am Main, Member of the Regional Advisory Committee North
RESIGNATIONS There were no resignations from the Corporate Executive Board during the period under review.
The information in this report is presented in the same way as in previous years. The information on compensation granted to Corporate Executive Board members also includes the variable cash com­ pensation (cash bonus and deferred compensation in cash), which was determined by the Board of Directors at the beginning of 2013 and is published on an accrual basis as compensation for the 2012 financial year. The members of the Board of Directors are granted exclusively fixed compensation, payable 70% in cash and 30% in Swiss Life Holding shares; the allocated shares are subject to a three­ year blocking period.
COMPENSATION POLICY PRINCIPLES The Board of Directors as a whole is responsible for establishing the guidelines on the Group’s com­ pensation policy (incl. variable compensation and equity compensation plans) and on employee benefit institutions. The compensation policy underpins the performance culture required by the corporate strategy and is part of the HR policy. The aim is to retain well­qualified employees and gain new, highly skilled staff. The compensation system is in line with the market environment and must be competitive. The individual overall compensation takes into account the employee’s professional skills, engagement and personal performance. It is made up of the basic salary, a variable bonus based on achievement of the annual objectives, which is generally paid in cash and possibly in shares, if applicable deferred compensation in cash and a mid­ to long­term equity compensation plan, as well as contributions to occupational provisions and risk insurance.
Swiss Life – Annual Report 2012 term planning and determined on the basis of the actual performance of individuals or teams (perfor­ mance­linked payment) in relation to the objectives set and on the degree of achievement of the Swiss Life Group targets as reflected in its annual result (share in the company’s success). Quantitative and qualitative performance is assessed also on the basis of the competencies required for the function held, such as professional expertise, entrepreneurship, task fulfilment, cooperation and leadership. The percentage weighting between the individual and/or team performance and the share in the company’s success depends on the position and responsibilities of the function holder.
PRACTICE AND PROCEDURE Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for determining the level and make­up of compensation for its members, whereas the Nomination and Compensation Committee is responsible for putting forward appropriate proposals (for the internal organisation of the Board of Directors see “Internal Organisational Structure”, pages 37 to 40). The Board of Directors as a whole also establishes the guidelines for the company’s compensation policy. In doing so, it takes into consideration the compensation policies of other companies in the financial services industry, drawing its findings from publicly available information and studies by independent external experts. Comparable companies in the insurance sector in Switzerland used for the purposes of providing relevant information for the current compensation policy included Allianz, AXA, Baloise Insurance, Swiss Re and Zurich Insurance Group.
The Board of Directors as a whole sets the level and distribution of the variable compensation pool for all employees on the basis of its compensation policy guidelines upon a proposal by the Nomina­ tion and Compensation Committee. When determining the level of the allocation to the compensa­ tion pool, it takes into consideration the annual result, as well as the medium­term planning and the degree of target achievement. The Board of Directors as a whole is also responsible for determining the individual compensation of members of the Corporate Executive Board. It carries out an annual performance assessment of all members of the Corporate Executive Board, based on preparatory work by the Nomination and Compensation Committee. In addition, current aspects of HR policy and, in particular, succession planning are regularly discussed at meetings of the Nomination and Compensation Committee and the Board of Directors as a whole.
Pursuant to the regulations of the 2010 equity compensation plan, future subscription rights were allocated in the form of so­called Performance Share Units (PSUs), whereby share allocation after expiry of the three­year period was based on two performance criteria, each weighted at 50%. The allocation mechanism is set out in detail in the 2010 Annual Report in the Notes to the Swiss Life Holding Financial Statements on pages 166 to 167. In 2010, 69 members of Swiss Life Group senior management, including the members of the Corporate Executive Board, took part in the plan, in which a total of 68 510 PSUs were allocated; 24 700 to the Corporate Executive Board, of which 6500 to Bruno Pfister in his capacity as Group CEO.
Swiss Life – Annual Report 2012 throughout the whole term and directly linked to the performance of the Swiss Life Holding share price. The value of RSUs during the three­year term develops linear with the Swiss Life Holding share price and thus symmetrically corresponds with shareholder interests. 62 members of Swiss Life Group senior management participated in the 2011 equity compensation plan, in which a total of 68 730 RSUs were allocated; 23 630 in total to the Corporate Executive Board, of which 6350 to Bruno Pfister in his capacity as Group CEO. During the period under review, 55 members of Swiss Life Group senior management participated in the 2012 equity compensation plan. A total of 94 040 RSUs were allocated; 28 460 in total to the members of the Corporate Executive Board, of which 7100 RSUs to Bruno Pfister as Group CEO.
The new equity compensation plan, relating to the effective date of 1 April 2013, is based on the Group­wide programme “Swiss Life 2015”, which was announced at the Swiss Life Group’s Investors’ Day on 28 November 2012 (see www.swisslife.com/investorsday2012). On the basis of the medium­term planning 2013­2015, performance criteria relating to cost efficiency (50% weighting), the risk and fee result (25% weighting) and IFRS profit (25% weighting) have been determined by the Board of Directors. After expiry of the thee­year period of the RSU plan, the target value for each performance criterion according to the medium­term planning 2013­2015 is compared with the actual result achieved. The share allocation corresponds to the number of allocated RSUs (1 RSU = 1 SLHN) if all three perfor­ mance criteria have been achieved or exceeded after the three­year period has elapsed; overper­ formance does not lead to a higher share allocation. If the targets are only partly achieved, the share allocation is correspondingly reduced based on the weighting of the performance target concerned or the RSUs expire worthless.
The attribution of mid­ to long­term compensation components (RSU plan) is deferred for a period of three years from the date of allocation as is the case with the deferred compensation in cash. Likewise, the RSU plans provide for adjustment and reclaiming mechanisms (clawback). If the employment relationship is terminated by a participant during the three­year term of the RSU plan, the future entitlements expire worthless.
There were no resignations from the Board of Directors in the period under review. On 19 April 2012 Wolf Becke was elected to the Board of Directors of Swiss Life Holding.
Salary is determined annually by the Board of Directors, on the basis of a proposal by the Nomination and Compensation Committee, taking into account the individual member’s function­related responsibility and the current market conditions.
The number of future subscription rights to Swiss Life Holding shares allocated in the context of the above­mentioned equity compensation plan to members of the Corporate Executive Board is shown in table form in the Notes to the Swiss Life Holding Financial Statements.
OPTIONS No share options have been granted in the Swiss Life Group since 2003 and no options are outstanding.
For Group CEO Bruno Pfister, the regular annual employer contribution in the period under review totalled CHF 225 504.
Expenditure for occupational provisions on behalf of the remaining members of the Corporate Execu­ tive Board totalled CHF 1 208 271 during the period under review.
Compensation in blocked shares 362 767 4443 SLH shares with three-year blocking period 1
including regular contribution to occupational provisions of CHF 283 968 1 654 735
including regular contribution to occupational provisions of CHF 225 504 2 493 249
On the allocation date of 1 April 2011 the fair value of an RSU was CHF 140.05.
of which total variable compensation (total pool) 2 113 733 933
Charges and credits in the financial year from compensation for previous financial years 3 –261 070
3 In particular reduction in expenses affecting net income due to the expiration of entitlements under equity compensation plans. 4 Compensation which is agreed on the conclusion of an employment agreement to be paid or be due once. Also deemed to constitute a sign-on payment shall be compensation for benefits foregone vis-à-vis a previous employer.
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 (corresponding to at least two thirds of the voting shares represented and an absolute majority of the share par value represented) is required to: – change provisions concerning restrictions on voting rights – dissolve the company (liquidation) – dismiss more than one third of the members of the Board of Directors – change these provisions of the Articles of Association
CONVOCATION OF THE GENERAL MEETING OF SHAREHOLDERS AND AGENDA The rules set out in the Articles of Association for convening a General Meeting of Shareholders and drawing up the agenda comply with the stipulations of the law. Shareholders who represent at least 0.25% of the share capital can submit a written request within a time limit published in advance by Swiss Life Holding for the inclusion on the agenda of an item for discussion, together with the rele­ vant motions. The written application must be accompanied by a blocking certificate issued by a bank to confirm that the shares are deposited with it until after the General Meeting of Shareholders is held.
ENTRY IN THE SHARE REGISTER Entries can be made in the share register up to the day before the General Meeting of Shareholders. In all cases, however, the company reserves the right to adhere to the legal maximum period of 20 days for recognition of entries in the share register in accordance with Art. 685g of the Swiss Code of Obliga­ tions. For administrative reasons (postal delivery times), the deadline for registering to participate in the General Meeting of Shareholders is usually seven calendar days before the event takes place.
VOTING SYSTEM AND PROCEDURES Based on a corresponding authorisation in the Articles of Association, the presiding officer at Swiss Life Holding’s General Meeting of Shareholders generally requests that votes be taken electron­ ically. Swiss Life Holding uses a certified electronic voting system which permits balloting with remote­controlled handsets and records the exact number of voting shares represented.
DUTY TO MAKE AN OFFER Swiss Life Holding’s Articles of Association provide for neither an “opting up” nor an “opting out” clause within the meaning of Art. 32 and 22 of the Federal Act on Stock Exchanges and Securities Trading (SESTA).
CLAUSES ON CHANGES OF CONTROL No contractual provisions exist in favour of the Board of Directors or the Corporate Executive Board with regard to changes of control of the company.
AUDITING FEES In 2012 the auditing fees credited to PwC came to CHF 7.7 million (2011: CHF 8.0 million). This includes the fees for reviewing the 2012 half­year accounts.
ADDITIONAL FEES In 2012 PwC received additional fees totalling around CHF 1.5 million for advisory services (2011: CHF 1.5 million), approximately CHF 0.7 million of which was for actuarial advisory services and CHF 0.4 million for fiscal and financial advisory services. The remainder resulted from strategic, legal and other advisory services. The advisory services were performed in compliance with the relevant independency regulations set forth in the Swiss Code of Obligations and the Audit Supervision Act.
SUPERVISORY AND CONTROL INSTRUMENTS VIS-À-VIS THE AUDITORS The Audit Committee maintains regular contact with the external auditors. It evaluates the inde­ pendence of the external auditors and identifies possible conflicts of interest. It also examines the terms and conditions of the external audit mandates and assesses the audit plan and strategy for the year in question.
Swiss Life communicates actively and openly both within and outside the company. The Investor Relations and Communications areas provide up­to­date reports to private and institutional investors, financial analysts, journalists and the public.
In addition to its comprehensive Annual Report and Financial Statements, Swiss Life Holding also publishes its half­year results. Furthermore, in May and November of each year, it publishes specific details on the previous quarter. All Swiss Life’s annual and half­year reports since 1997 can be accessed on the internet at www.swisslife.com/en/home/investors/results/archive.html, “Investors” area, “Results & Reports” section, “Archive Reports” and “Annual Reports” subsections (www.swisslife.com/ annualreports). A report detailing the key facts and figures on business operations is sent out on an annual basis to all the shareholders listed in the share register.
In addition, “Investors’ Day 2012” was held on 28 November 2012. The relevant documents and pre sentations can be found at www.swisslife.com, “Investors” area, “Investors’ Day 2012” section (www.swisslife.com/investorsday2012).
Swiss Life pursues an integrated, value-oriented risk management approach, involving both quantitative and qualitative elements. The goal is to protect customers’ funds and ensure the best possible investment of risk capital, while complying with the regulatory requirements and taking into account the challenging economic conditions.
Strategic riSiK MaNageMeNt Swiss Life uses analytical methods to ensure that strategic risks are dealt with adequately in today’s very demanding economic environment. In its strategic risk management process, Swiss Life incorporates all the information on risks and the risk/return characteristics in its strategic decisions. An understanding of the interplay of individual risks is essential in order to take due account of the factors influencing risks during strategy development so that these factors can be steered appropri ately.
OPeratiONal riSiK MaNageMeNt aNd iNterNal cONtrOl SySteM Operational risk management (ORM) at Swiss Life includes the methods and processes used for the identification, assessment and steering or avoidance of operational risks. ORM defines operational risk as the danger that losses may result from shortcomings or failures in internal processes, people or systems, or from external events. Swiss Life’s internal control system (ICS) consists of the totality of procedures, methods and measures prescribed by the Board of Directors and the Corporate Executive Board to ensure the orderly conduct of business. The focus is on the reliability of financial reporting, the effectiveness of business processes and compliance with laws and regulations issued to protect the company’s assets.
caPital MaNageMeNt SwiSS SOlveNcy teSt The Swiss Solvency Test (SST) is the new legislation which governs the capital requirements of insurance companies and groups and their reporting to the regulator. It was enacted in 2006 with the revised Insurance Supervision Law and corresponding Insurance Supervision Ordinance and solely constituted a reporting requirement during a five-year transition period before the capital require-
Economic and statutory capital constraints and the profit target are the main elements determining the risk budgets. Based on these risk budgets, the Group Risk Committee of the Corporate Executive Board defines the risk limits for each country and business unit. Compliance with these limits is checked each month.
The Group MCEV is a measure of the consolidated value of shareholders’ interest in the in-force business of the Swiss Life Group. It includes the insurance business covered by the MCEV methodology and all other business valued by its IFRS net asset value.
Contents 68 1.1 Basis of Preparation 68 1.2 Covered Business and Non-Covered Business 70 2 Summary of MCEV Results 70 2.1 Key Results 71 2.2 MCEV of Covered Business 72 2.3 Value of New Business 73 2.4 Group MCEV – Analysis of Earnings 74 2.5 Covered Business – Analysis of Earnings 77 2.7 Reconciliation of IFRS Net Asset Value to Group MCEV 79 3 Information by Market Unit 79 3.1 Market Units 80 3.2 Results by Market Unit 86 4.1 MCEV Components for Covered Business 89 4.2 New Business 89 4.3 Asset and Liability Data 90 4.4 Economic Scenario Generator 91 4.5 Dynamic Management Actions and Policyholder Behaviour 91 4.6 Look-Through Principle 92 4.8 Employee Pension Schemes and Share-Based Payment Programmes 93 5.1 Economic Assumptions 97 5.2 Taxation and Legislation 97 5.3 Operating Assumptions 98 6 Auditor’s Report on Embedded Value 100 7 Glossary and List of Abbreviations
IFRS Equity 1 Introduction 1.1 Basis of PreParation Market consistent embedded value (MCEV) is a measure of the consolidated value of shareholders’ interests in the in-force covered business of the Swiss Life Group. Covered business includes life, health and pension business of the company. The Group MCEV is a measure of the consolidated value of shareholders’ interest in the covered and non-covered business in force of the company. Business in force includes business written as at 31 December 2012; future new business is not included. The notion of market consistent embedded value (MCEV) will alternatively refer within the course of this report to the MCEV of Swiss Life’s covered business, of one of its market units, or to Swiss Life’s Group MCEV.
1.2 Covered Business and non-Covered Business Covered business includes all of Swiss Life’s life, health and pension business as well as assumed external reinsurance, with the exception of Swiss Life Insurance Solutions AG, which is not material for MCEV purposes. MCEV (and Group MCEV) are net of ceded external reinsurance. Included are namely operations in Switzerland, France, Germany, Luxembourg, Liechtenstein and Singapore. All other businesses such as investment management and AWD are generally included in the non-covered business at their IFRS net asset values, with the exception of France, where they are included in the covered business.
The IFRS net asset value (IFRS NAV) is defined as the unadjusted IFRS net asset value allocated to the non-covered business.
Swiss Life – Annual Report 2012 2 Summary of MCEV Results 2.1 Key results During 2012, the capital markets were characterised by a continued decline of the relevant interest rates, a tightening of corporate credit spreads from their extraordinary high levels at year-end 2011 and generally lower volatilities of interest rates and equities.
The following tables show key results as at 31 December 2012 compared to the results as at 31 December 2011: In CHF million
Present value of new business premium (PVNBP) 11 276 12 914
The value of covered business increased by 47%. Operating MCEV earnings contributed to this increase by profitable new business and a strong operating return on the in-force business enhanced by positive persistency experience and expense reductions. The improved capital market environment also contributed significantly to the earnings. Due to adjustments relating to AWD intangibles and the distributions to shareholders, the value of the non-covered business decreased.
CEV Certainty equivalent value TVOG Time value of options and guarantees CNHR Cost of non-hedgeable risks FC Frictional costs VIF Value of in-force business RC Required capital FS Free surplus NAV Net asset value MCEV Market consistent embedded value scaling only indicative 2.2 MCev of Covered Business The following graph and table show the MCEV by components, together with the previous year’s figures: In CHF million
PrESENT ValuE OF NEw BuSINESS PrEMIuMS (PVNBP) 11 276 12 914 average annual premium multiplier 10.5 10.3
The new business volume in Switzerland remains stable, the French and German units experienced lower volumes in challenging insurance markets. Overall, the new business volume measured in
2.4 grouP MCev — analysis of earnings The table below shows the development of Group MCEV split by components from 31 December 2011 to 31 December 2012.
Other movements in IFrS net equity n/a 1 –2 –2 –6 1 n/a: not applicable
The opening adjustment of the Group MCEV represents the distribution to shareholders out of the capital contribution reserve of CHF 4.50 per share or a total of CHF 144 million as described in the Consolidated Financial Statements (Note 27).
The closing adjustments result mainly from transfer of funds between covered and non-covered business and currency exchange rate developments.
–47 2.5 Covered Business — analysis of earnings The graph and table below show the analysis of earnings for the covered business in 2012:
Expected existing business contribution (reference rate) 25 –15 19 30 14
Expected existing business contribution (in excess of reference rate) 14 0 615 629 802
Other non-operating variances –10 3 –41 –47 102 oPening adJustMents Opening adjustments represent dividend payments from non-covered to covered business.
eXPeCted eXisting Business ContriBution (referenCe rate) Expected existing business contribution (reference rate) shows the unwinding of discount on all value of in-force components with reference rates as at start of year. Additionally the notional interest on the net asset value is included.
transfers froM value in forCe and reQuired CaPital to free surPlus Transfers from value in force and required capital to free surplus include the transfer of the results of the preceding step from value in force to free surplus. Also, the required capital is normally reduced after this step, resulting in an equal increase of free surplus. The total effect in this line is zero. In the context of a life insurer’s business model, this should be seen in combination with effects from new business which partly reverses this effect by an increase of required capital and a reduction of net asset value.
Swiss Life – Annual Report 2012 eXPerienCe varianCes Experience variances aggregate the impact of actual development versus expectations regarding noneconomic assumptions such as mortality, expenses, lapses, as well as the deviations in handling of additional reserves. In total the effect is small with CHF 5 million. A variety of effects including reserve strengthening had overall almost opposite impacts on the net asset value and the value of inforce business. The largest contributions originate from the Swiss business.
assuMPtion CHanges Assumption changes refer to the impact of the change on assumptions such as future expense, surrender, mortality, morbidity, longevity rates. The positive contribution is driven by an overall very favourable persistency experience and a further reduced expense base while a minor negative contribution stems from updated demographic assumptions.
otHer oPerating varianCe Other operating variance includes the effects from the issuance of new and restructuring of existing hybrid debt and PPLI’s revised outlook on future new business.
otHer non-oPerating varianCes Other non-operating variances encompass effects relating to government-set parameters, such as taxes.
Closing adJustMents Closing adjustments represent the transfer of funds into the covered business and currency exchange rate translation effects resulting from the consolidation in Swiss francs.
Swiss Life – Annual Report 2012 2.6 sensitivities Sensitivities for MCEV with regard to reference rate levels are further reduced while operational and demographic sensitivities as well as economic sensitivities with regard to implied volatilities of equity/ property and their market values remained overall stable compared to the ones for 2011.
The table below shows sensitivities of the MCEV and the value of new business to important financial market parameters and to operational and demographic assumptions.
100 bp decrease of interest rates (reference rates) –567 –7% –40 –25%
10% increase in equity / property market values 653 8% 1 1
10% decrease in equity / property market values –732 –9% 1 1
25% decrease in equity / property implied volatilities 211 3% 6 4%
5% proportionate increase in mortality rates (death cover) –22 –0% –5 –3%
5% proportionate decrease in mortality rates (annuities) –128 –2% –3 –2%
reConCiliation of ifrs net assets to grouP MCev as at 31 deCeMBer 2012
Starting with the total IFRS net assets, there are valuation differences between IFRS and MCEV regarding the net asset value for the covered business. In the reconciliation these valuation differences are shown under “adjustments”. The main elements that have been adjusted are deferred acquisition costs (DAC), goodwill and other intangible assets, differences between statutory and IFRS balance sheet items reflecting different reserving bases, and different treatment of the investments and unrealised gains (that form part of the IFRS net assets but are projected on MCEV as part of the value of in-force business in the MCEV calculations).
Swiss Life – Annual Report 2012 3 Information by Market Unit 3.1 MarKet units Swiss Life’s covered business is subdivided according to market units as follows: – Life, pension and assumed external reinsurance business in Switzerland – All businesses in France, mainly life, health and pension business – Life and pension business in Germany – Life and pension business in Luxembourg, Liechtenstein, and Singapore (together referred to as
switZerland Swiss Life’s main business in the Swiss market is group life business with a full range of offerings. The individual business includes traditional savings, risk and annuity products, as well as modern savings and retirement products with flexible and lower guarantees. Swiss Life’s own sales force plays the major role in distribution, followed by brokers and AWD. The business for assumed external reinsurance is included here.
franCe Insurance products include savings, annuity, and risk products as well as health insurance products. New business for life insurance focuses on multi-support products, combining traditional savings and unit-linked components. The main distribution channels are brokers, tied agents and own sales force. Additionally, Swiss Life in France has developed strong relations with independent financial advisors and private banks.
gerMany Swiss Life sells traditional and modern products within individual and group life business. Disability insurance plays an important role. The main distribution channel is independent brokers, followed by financial advisors such as AWD.
international Swiss Life offers private placement life insurance (PPLI) through its carriers in Liechtenstein, Singapore and Luxembourg. In Luxembourg, Swiss Life also provides group insurance solutions for international and local corporate clients through Corporate Clients.
ValuE OF IN-FOrCE BuSINESS 1 593 815 173 255 2 836
Time value of financial options and guarantees –1 991 –367 –235 –8 –2 601
franCe The MCEV of Swiss Life in France increased due to operating earnings and was supported by an overall favourable capital market environment with both the net asset value and the value of in-force business contributing positively.
international Private Placement Life Insurance (PPLI) and Corporate Clients account each for about 50% of the closing MCEV. The decrease of 6% is driven by a revised outlook on future new business volumes for the PPLI business, which is partly offset by an improved MCEV of Corporate Clients.
The negative free surplus is explained by not taking into account the goodwill relating to a past acquisition in Liechtenstein.
value of new Business By MarKet unit – PreMiuMs and Margins for tHe year 2011 amounts in CHF million
PrESENT ValuE OF NEw BuSINESS PrEMIuMS (PVNBP) 3 875 4 478 1 739 2 822 12 914
New business annual premium equivalent (aPE) 307 530 150 283 1 269 1 New business strain represents the effect on the net asset value from writing new business.
Swiss Life – Annual Report 2012 switZerland New business consists of new contracts and new coverages on existing contracts. Within group life business, replacements and newly insured persons entering existing group life contracts are not accounted for as new business.
New business volume was overall stable. The very positive development in the value of new business and the new business margin is supported by comprehensive re-pricings and the launch of new guarantee concepts for individual life products. Allowing for some newly modelled products the value of new business for second pillar business remained stable.
For health operations, lower volumes and higher future lapse rates assumed led to a lower value of new business. This was partly compensated by efficiency gains, lower commissions paid to the brokers, and higher tariffs, which preserved the profitability.
gerMany The value of new business dropped considerably due to a multitude of developments. Substantially lower reference rates negatively affected the profitability of the long-term traditional part of the business which experienced higher volumes due to regulatory changes, while the risk and supplementary disability insurance business incurred lower volumes. Re-pricing measures and the introduction of long-term care products did partly offset the aforementioned effect.
Expected existing business contribution (in excess of reference rate) 370 187 64 9 629
Strong operating earnings of CHF 799 million correspond to a return of 30% on MCEV.
The positive experience variances include effects from balance sheet strengthening measures such as a reduction of technical interest rates, and effects from persistency and demographic experience.
Better persistency experience, both in group and individual life, and a further reduced expense base drive the positive assumption changes while a slightly negative effect results from updated demographic assumptions.
The negative other operating variances are mainly attributable to the issuance of new and restructuring of existing hybrid debt leading to an increase of hybrid debt with extended maturity profile. Additional effects stem from refinements and updates of management rules.
franCe The operating MCEV earnings of CHF 89 million result mainly from the strong contribution of existing business and profitable new business in life and health, whereas changed policyholder behaviour in the French health market led to negative variances.
Experience variances include improvements in claims ratios, especially in health and disability business, which were offset by higher lapse rates, both in life and health business.
The higher lapse rates in health business mentioned are assumed to remain higher than previously anticipated and therefore result in negative assumptions changes, which were partially mitigated by achieved efficiency gains projected.
The value of new business contributed strongly to the MCEV earnings with CHF 28 million or 12% of the total closing MCEV of International.
By reason of the type and composition of International’s business, changes in economic conditions have a limited impact compared to other market units.
Swiss Life – Annual Report 2012 4 Methodology 4.1 MCev CoMPonents for Covered Business net asset value (nav) The net asset value is the market value of assets allocated to the covered business, which are not backing liabilities from the covered business.
Certainty eQuivalent value (Cev) The certainty equivalent value is defined as the present value of the future shareholders’ statutory profits (net of tax) under the certainty equivalent scenario.
tiMe value of finanCial oPtions and guarantees (tvog) The certainty equivalent value does not allow for the risk that the financial outcome for shareholders could differ from the one implied by the certainty equivalent scenario. This is of particular relevance when products or funds include guarantees or options for the policyholder such as: – guaranteed interest rates – discretionary profit sharing and regulatory constraints, e.g. “legal quotes” – maturity guarantees – guaranteed minimum death benefits – guaranteed annuity options – surrender options
Cost of residual non-HedgeaBle risKs (CnHr) 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 risks.
friCtional Costs of reQuired CaPital (fC) The frictional costs of required capital for the covered business are defined as the present value of the costs incurred by shareholders due to investment via the structure of an insurance company (compared to direct investment as individuals), such as tax on profits generated by the insurance company or the costs of asset management. Other potential frictional costs such as agency costs or financial distress costs have not been taken into account in the frictional costs of required capital.
Swiss Life – Annual Report 2012 4.2 new Business New business is defined as covered business arising from the sale of new contracts and from new covers to existing contracts during the reporting year, including cash flows arising from the projected renewal of those new contracts. Higher premiums in Swiss group life contracts from wage increases are not considered new business. The value of new business (VNB) reflects the additional value to shareholders created through the activity of writing new business during the reporting period.
4.3 asset and liaBility data All assets and liabilities reflect the actual positions as at valuation date.
assets The asset model used for the calculation of the MCEV differentiates three main asset classes: – cash and fixed income instruments – equity-type investments (including real estate) – derivatives
The stochastic economic scenarios are generated by the economic scenario generator developed and provided by Barrie & Hibbert, a UK based financial consulting company. For variable annuity products a dedicated economic scenario generator is used.
Swiss Life – Annual Report 2012 4.5 dynaMiC ManageMent aCtions and PoliCyHolder BeHaviour Anticipated dynamic management actions and policyholder behaviour mainly concern the following areas: profit sharing for participating life businesses, asset allocation and realisation of gains and losses, and assumed policyholder behaviour with regards to their contractual options. They are dependent on the economic scenario considered and reflect local regulations and type of business.
4.8 eMPloyee Pension sCHeMes and sHare-Based PayMent PrograMMes Allowance is made for gains or losses arising from the defined benefit pension plans for Swiss Life’s own employees. In Switzerland there is a semi-autonomous pension fund with biometric risks covered by an insurance contract. In other units the major part is covered by insurance contracts. The remaining part is modelled as commensurate expenses in the projections.
5.1.1 referenCe rates Following market practice, the reference rates used for the calculation of the MCEV 2012 are based on the swap rates as at 31 December 2012 and include, where appropriate, a liquidity premium. Extrapolation of the interest curves and determination of liquidity premiums closely follow the QIS 5 framework.
In line with QIS 5 guidance and market practice, we apply no liquidity premium to PPLI, unit-linked, and variable annuities business, 50% of the underlying liquidity premium to health insurance and assumed external reinsurance, and 75% to all participating and other businesses, including traditional annuities. Also according to QIS 5 guidance, liquidity premiums are applied over a term of 10 years for Swiss franc, 15 years for euro and 30 years for US dollar, and phased out over the following five years.
The spread (over swap rates) applied for valuation of the hybrid debt as at 31 December 2012 is 185 bp. For the opening MCEV the spread amounted to 363 bp.
Swiss Life – Annual Report 2012 5.1.1.1 SwaP raTES aS aT 31 dECEMBEr 2012
Euro Zone 48bp 107bp united States 68bp 108bp 1 liquidity Premium for British pound: 85bp, for Canadian dollar: 37bp 5.1.2 volatility assuMPtions Volatility assumptions for the year-end 2012 and 2011 calculations are derived from market data as at 31 December 2012 and 2011.
5.1.2.4 PrOPErTY VOlaTIlITIES uSEd FOr THE CalCulaTION aS aT 31 dECEMBEr 2012 aNd 31 dECEMBEr 2011
5.1.5 real world assuMPtions These assump tions are used for the step “expected business contribution in excess of reference rates”.
Swiss Life – Annual Report 2012 5.2 taXation and legislation Tax assumptions for the projection of annual results have been set in line with the local tax regime. Tax losses carried forward are considered. Taxation rules are based on individual companies’ total results. Tax impact of future new business has not been allowed for. The following table 5.2.1 shows the corporate tax rates applied.
5.2.1 taX assuMPtions 1 Following French legislation the tax rate assumption applied for 2013 and 2014 is 36.1%.
We have audited the Market Consistent Embedded Value Report (“MCEV Report”) of Swiss Life Holding Ltd for the year ended 31 December 2012. The embedded value information included in the MCEV Report has been prepared in accordance with the Market Consistent Embedded Value (“MCEV”) Principles issued by the European Insurance CFO Forum, as described in sections 1 and 4 of the MCEV Report.
Swiss Life – Annual Report 2012 oPinion In our opinion, the MCEV Report of Swiss Life Holding Ltd for the year ended 31 December 2012 is prepared, in all material respects, in accordance with the MCEV Principles.
Basis of PreParation Without modifying our opinion, we draw attention to sections 4 and 5 of the MCEV Report, which describe the basis of MCEV methodology and assumptions.
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.
Best estiMate assuMPtions A best estimate assumption should equal the mean estimate (probability weighted average) of outcomes of that risk variable.
Certainty eQuivalent sCenario Economic scenario under which asset returns are equal to the reference rates.
Certainty eQuivalent value (Cev) Certainty equivalent value is defined as the present value of the future shareholders’ statutory profits (net of tax) under the certainty equivalent scenario.
Cfo foruM The CFO Forum is a high-level discussion group formed and attended by the Chief Financial Officers of major European listed, and some non-listed, insurance companies. Its aim is to discuss issues relating to proposed new accounting regulations for their businesses and how they can create greater transparency for investors. It published the MCEV Principles together with a detailed Basis for Conclusions on 4 June 2008 and an amendment in October 2009.
friCtional Costs of reQuired CaPital (fC) The additional investment and taxation cost incurred by shareholders through investing required capital in the company compared to direct investment as individuals.
“legal Quote” Statutory minimum policyholder participation ratio liQuidity PreMiuM As stipulated in the MCEV Principles, liquidity premiums are included in swap yield curves in cases where liabilities are not liquid.
new Business Margin The value of new business divided by the present value of new business premiums (PVNBP) or divided by the annual premium equivalent (APE), respectively.
non-Covered Business All businesses of the Swiss Life Group which are not accounted for under covered business, such as investment management and AWD, are included in the non-covered business of the Group MCEV by means of their IFRS net asset values.
non-traditional Business Unit-linked-type contracts, with or without additional financial guarantees and policyholder options.
oPerating MCev earnings Change in MCEV and in Group MCEV in the reporting period after initial and closing adjustments, economic variances and other non-operating variances, as well as other movements in IFRS net equity.
referenCe rate The reference rates used for the calculation of the MCEV are based on the swap rates at the valuation date.
Swiss Life – Annual Report 2012 reQuired CaPital (rC) The required capital is the market value of assets, attributed to the covered business over and above that required to back liabilities for covered business, whose distribution to shareholders is restricted based on statutory solvency.
Consolidated Financial Statements 106 Consolidated Statement of Income 107 Consolidated Statement of Comprehensive Income 108 Consolidated Balance Sheet 110 Consolidated Statement of Cash Flows 112 Consolidated Statement of Changes in Equity 113 Notes to the Consolidated Financial Statements 113 1 General Information 113 2 Summary of Significant Accounting Policies 113 2.1 Basis of preparation 113 2.2 Changes in accounting policies 114 2.3 Consolidation principles 114 2.4 Foreign currency translation and transactions 115 2.5 Cash and cash equivalents 116 2.7 Financial assets 118 2.8 Impairment of financial assets 119 2.9 Investment property 120 2.10 Insurance operations 125 2.11 Property and equipment 125 2.13 Investment management 126 2.14 Commission income and expense 126 2.15 Intangible assets 128 2.16 Impairment of non-financial assets 128 2.17 Income taxes 129 2.18 Assets held for sale and associated liabilities 129 2.19 Financial liabilities 130 2.20 Employee benefits 131 2.21 Provisions and contingent liabilities 131 2.22 Treasury shares 131 2.23 Earnings per share 132 2.25 Forthcoming changes in accounting policies 133 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies 138 4 Segment Information 145 5 Risk Management Policies and Procedures 145 5.1 Contracts for the account and risk of the Swiss Life Group’s customers 146 5.2 Risk budgeting and limit setting 147 5.3 Asset and liability management (ALM) 148 5.4 Financial risk management objectives and policies 162 5.5 Insurance risk management objectives and policies 169 6 Earnings per Share
Swiss Life – Annual Report 2012 170 7 Premiums, Policy Fees and Deposits Received 171 8 Details of Certain Items in the Consolidated Statement of Income 177 10 Financial Assets and Liabilities at Fair Value through Profit or Loss 178 11 Financial Assets Available for Sale 178 12 Financial Assets Pledged as Collateral 179 13 Loans and Receivables 180 14 Financial Assets Held to Maturity 181 15 Investment Property 181 16 Investments in Associates 182 17 Property and Equipment 184 18 Intangible Assets including Intangible Insurance Assets 188 19 Other Assets and Liabilities 188 20 Investment Contracts 193 22 Other Financial Liabilities 193 23 Insurance Liabilities and Reinsurance Assets 196 24 Employee Benefits 201 25 Income Taxes 206 28 Capital Management 207 29 Acquisitions and Disposals of Subsidiaries 209 30 Assets Held for Sale and Associated Liabilities 210 31 Acquisition of Insurance Portfolio 211 32 Related Party Transactions 212 33 Fair Value of Financial Instruments 215 34 Guarantees and Commitments 217 36 Future Minimum Lease Payments under Non-Cancellable Operating Leases – Lessor 218 37 Scope of Consolidation
Net gains/losses on financial instruments at fair value through profit or loss 5, 8 580 –820
Commission expense 8 –871 –983 employee benefits expense 8 –871 –835
Impairment of property and equipment and intangible assets 17, 18 –604 –11 other expenses 8 –521 –530
Borrowing costs –125 –120 share of profit or loss of associates 5, 16 8 6
equity holders of swiss life Holding 92 605 earnings per share attributable to equity holders of swiss life Holding
Consolidated statement of Comprehensive inCome for the years ended 31 deCember
equity holders of swiss life Holding 1 262 1 869 total net Comprehensive inCome 1 264 1 870
Intangible assets including intangible insurance assets 18 2 893 3 722
Financial liabilities at fair value through profit or loss 10 21 162 18 782
Consolidated statement of Cash flows for the years ended 31 deCember
financial instruments at fair value through profit or loss 359 397
ToTal NeT CasH Flows From oPeraTING aCTIvITIes 1 542 –2 089
Purchases of computer software and other intangible assets –22 –20 acquisition of insurance portfolio, net of cash and cash equivalents 31 – 100 acquisitions of subsidiaries, net of cash and cash equivalents 29 –1 –9
Disposals of subsidiaries, net of cash and cash equivalents 29 0 –
Cash and cash equivalents as at 1 January 5 084 6 940
Total change in cash and cash equivalents 1 386 –2 020
ToTal CasH aND CasH equIvaleNTs as aT eND oF PerIoD 6 480 5 084
Distribution out of the capital contribution reserve 27 – –144 – – – – –144 – –144 equity-settled share-based payments – 7 – – – – 7 0 7
Purchases of treasury shares – – –1 – – – –1 – –1 allocation of treasury shares under equity compensation plans – –8 8 – – – – – –
BalaNCe as aT eND oF PerIoD 164 1 507 –17 –855 2 736 6 718 10 253 33 10 286
BalaNCe as aT eND oF PerIoD 164 1 651 –25 –833 1 544 6 626 9 127 35 9 162
distribution out of Capital Contribution reserve For the 2011 financial year, a distribution was made to the shareholders of Swiss Life Holding Ltd (hereinafter referred to as “Swiss Life Holding”), instead of a dividend payment from profit, from the capital contribution reserve. This amounted to CHF 144 million (CHF 4.50 per registered share) and was paid in the first half of 2012.
approval of finanCial statements On 13 March 2013, the Board of Directors approved the annual financial statements and the financial report and authorised them for issue. The financial report, therefore, only reflects events up to that date.
2.1 basis of preparation The consolidated financial statements of Swiss Life have been prepared in accordance with and comply with International Financial Reporting Standards (IFRS). The consolidated financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which are stated at their fair value: derivatives, financial assets and liabilities at fair value through profit or loss, financial assets classified as available for sale and investment property.
2.2 Changes in aCCounting poliCies standards and interpretations effeCtive in the Current period In December 2010, an amendment to IAS 12 Income Taxes was issued by the International Accounting Standards Board. The amendment is set out in Deferred Tax: Recovery of Underlying Assets. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset
Swiss Life – Annual Report 2012 is measured using the fair value model in IAS 40 Investment Property. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will normally be through sale. The amendment applies to annual periods beginning on or after 1 January 2012. These amendments currently have no impact on the Group’s consolidated financial statements.
In October 2010, amendments to IFRS 7 Financial Instruments: Disclosures were issued. The amendments will allow users of financial statements to improve their understanding of transfer transactions of financial assets (for example securitisations), including understanding the possible effects of any risks that may remain with the entity that transferred the assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period. The amendments apply to annual periods beginning on or after 1 July 2011. The Swiss Life Group is currently not impacted by these amendments.
The following amended Standards and Interpretations are not relevant to the Swiss Life Group: – Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards 2.3 Consolidation prinCiples The Group’s consolidated financial statements include the assets, liabilities, income and expenses of Swiss Life Holding and its subsidiaries. A subsidiary is an entity in which Swiss Life Holding owns directly or indirectly more than 50% of the voting rights, or in which it otherwise has the power to exercise control over operations. Subsidiaries are consolidated from the date on which effective control is obtained. All intercompany balances, transactions and unrealised gains and losses on such transactions have been eliminated. A listing of the Group’s subsidiaries is set out in note 37. The financial effect of acquisitions and disposals of subsidiaries is shown in note 29. Associates for which the Group has between 20% and 50% of the voting rights and/or exercises significant influence are accounted for using the equity method. The Group’s share of net income for the year is recognised as a share of profit or loss of associates and the ownership interest in the investment is recorded in the balance sheet at an amount that reflects its share of the net assets. The Group’s share of net income is included from the date on which significant influence begins until the date on which significant influence ceases. Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. The carrying amount includes goodwill on the acquisition. A listing of the Group’s principal associates is shown in note 16.
Swiss Life – Annual Report 2012 solidated financial statements are presented in millions of Swiss francs (CHF), which is the Group’s presentation currency. Figures may not add up exactly due to rounding.
2.6 derivatives The Group enters into forward contracts, futures, forward rate agreements, currency and interest rate swaps, options and other derivative financial instruments for hedging risk exposures or for trading purposes. The notional amounts or contract volumes of derivatives, which are used to express the volume of instruments outstanding and to provide a basis for comparison with other financial instruments, do not, except for certain foreign exchange contracts, represent the amounts that are effecti vely exchanged by the parties and, therefore, do not measure the Group’s exposure to credit risk. The amounts exchanged are calculated on the basis of the notional amounts or contract volumes and other terms of the derivatives that relate to interest or exchange rates, securities prices and the volatility of these rates and prices.
2.7 finanCial assets “Regular way” purchases and sales of financial assets are recorded on the trade date. The amortisation of premiums and discounts on investments is computed using the effective interest method and
Swiss Life – Annual Report 2012 is recognised in income as an adjustment of yield. Dividends are recorded as revenue on the ex-dividend date. Interest income is recognised on an accrual basis.
finanCial assets available for sale (afs) Financial assets classified as available for sale are carried at fair value. Financial assets are classified as available for sale if they do not qualify as held to maturity, held for trading, loans and receivables or if they are not designated as at fair value through profit or loss. Gains and losses arising from fair value changes, being the difference between fair value and cost/amortised cost, are reported in equity. On disposal of an AFS investment, the cumulative gain or loss is transferred from equity to income for the period. Gains and losses on disposal are determined using the average cost method.
Swiss Life – Annual Report 2012 finanCial assets held to maturity (htm) Financial assets which the Group has the ability and positive intent to hold to maturity are carried at amortised cost using the effective interest method.
2.8 impairment of finanCial assets The Group reviews the carrying value of financial assets regularly for indications of impairment.
Investment property is carried at fair value and changes in fair values are recognised in income. Fair values are determined either on the basis of periodic independent valuations or by using discounted cash flow projections. The valuation of each investment property is reviewed by an independent recognised valuer at least every three years. Rental income is recognised on a straight-line basis over the lease term.
2.10 insuranCe operations definition of insuranCe ContraCts Insurance contracts are contracts under which one party accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. Significant insurance risk exists if an insured event could cause an insurer to pay significant additional benefits in any scenario, excluding scenarios that lack commercial substance (i.e. have no discernible effect on the economics of the transaction). The classification of contracts identifies both the insurance contracts that the Group issues and reinsurance contracts that the Group holds. As a Group policy, Swiss Life considers those contracts to be insurance contracts that require the payment of additional benefits in excess of 10% of the benefits that would be payable if the insured event had not occurred, excluding scenarios that lack commercial substance.
investment ContraCts with and without disCretionary 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.
Swiss Life – Annual Report 2012 reCognition and measurement prinCiples Subject to certain limitations, the Group uses its existing accounting policies for the recognition and measurement of insurance contracts and investment contracts with discretionary participation features that it issues (including related deferred acquisition costs and related intangible assets) and reinsurance contracts that it holds. The existing accounting policies for recognition and measurement have primarily been based on the requirements of the Generally Accepted Accounting Principles in the United States (US GAAP).
The bonuses which are allocated to the policyholders in the participating insurance business (insurance and investment contracts) in Switzerland, France, Germany, Luxembourg and Liechtenstein generally follow the definition of DPF as set out in IFRS 4 Insurance Contracts.
IFRS 4 Insurance Contracts is silent on the measurement of the amounts identified as DPF. This topic will be solved in phase II of the project of the International Accounting Standards Board on insurance contracts.
In other jurisdictions, a statutory minimum distribution ratio (“legal quote”) exists for certain types of business. Geographical areas in which the Swiss Life Group is present and in which such a statutory minimum distribution ratio (“legal quote”) exists are as follows: Switzerland (only group business subject to “legal quote”), France (life insurance business) and Germany. For these contracts the Swiss Life Group defines DPF as the policyholder bonus reserve set up in the statutory accounts and the amount of temporary valuation differences between the IFRS basis and statutory basis on the
Group business subject to “legal quote”: At least 90% of the calculated income on the savings, risk and cost components minus the expenses thereof must be allocated to the policyholders. All other business: No “legal quote”.
In life insurance business, 85% of the investment result and 90% of any other results are allocated to the policyholders as a minimum.
A minimum of 90% of the total investment result less 100% of the minimum guaranteed interest on the policyholder account, a minimum of 75% of the risk result and a minimum of 50% of the positive expense result is allocated to the policyholder.
Swiss Life – Annual Report 2012 inCome and related expenses from insuranCe ContraCts and investment ContraCts with disCretionary partiCipation features Premiums from traditional life insurance contracts are recognised when due from the policyholder. Insurance liabilities are established in order to recognise future benefits and expenses. Benefits are recognised as an expense when due.
For investment contracts with discretionary participation, savings premiums collected are reported as deposits (deposit accounting). The liabilities relating to these contracts are not calculated actuarially; they move in line with premiums paid by the policyholders plus interest credited less expenses and mortality charges and withdrawals.
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.
reinsuranCe The Group assumes and/or cedes insurance in the normal course of business. Reinsurance assets principally include receivables due from both insurance and reinsurance companies for ceded insurance liabilities. Amounts recoverable or due under reinsurance contracts are recognised in a manner consistent with the reinsured risks and in accordance with the terms of the reinsurance contract. Reinsurance is presented in the consolidated balance sheet and income statement on a gross basis unless a right and the intention to offset exist.
separate aCCount/unit-linked ContraCts/private plaCement life insuranCe Separate account contracts represent life insurance contracts with a separated part that is invested in assets managed for the account and risk of the Swiss Life Group’s customers according to their specific investment objectives. Separate account liabilities are included in insurance liabilities. Separate account liabilities include the right of the policyholder to participate in the performance of the underlying assets.
Swiss Life – Annual Report 2012 with the insurance component and the policy for deferred origination costs applies to the other portion (see 2.15 Intangible Assets).
2.11 property and equipment Property and equipment are carried at cost less accumulated depreciation. Land is carried at cost and not depreciated. Depreciation is principally calculated using the straight-line method to allocate their cost to their residual values over the assets’ estimated useful life as follows: buildings 25 to 50 years; furniture and fixtures five to ten years; computer hardware three to five years.
2.12 leases operating lease The Group primarily enters into operating leases for the rental of equipment. The total payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.
finanCe lease If the lease agreement transfers the risks and rewards of the assets, the lease is recorded as a finance lease and the related asset is capitalised. At inception, the asset is recognised at the lower of the present value of the minimum lease payments or fair value and is depreciated over its estimated useful life. The correspond ing finance lease obligations are recorded as liabilities.
2.14 Commission inCome and expense Revenue consists principally of brokerage fees, recurring fees for existing business and other fees. Such revenue is recognised when earned, i.e. when the services are rendered. Cancellations are recorded as a deduction of fee income.
PVP is amortised in proportion to gross profits or gross margins over the effective life of the acquired contracts, which generally ranges from 20 to 30 years. Realised gains/losses are thereby taken into account as well as gains/losses recognised directly in equity (unrealised gains/losses). If these unrealised gains/losses were to be realised, the gross profits or gross margins used to amortise PVP would be affected. Therefore, an adjustment relating to these unrealised gains/losses is recognised in equity and is also reflected in the amount of PVP in the balance sheet (“shadow accounting”).
PVP is subject to recoverability tests. The effect of changes in estimated gross profits or margins on unamortised PVP is reflected as an expense in the period in which such estimates of expected future profits or margins are revised.
deferred origination Costs (doC) Incremental costs directly attributable to securing rights to receive fees for asset management services sold with investment contracts without DPF are recognised as an asset if they can be identified separately and measured reliably and if it is probable that they will be recovered. These incremental costs are costs that would not have been incurred if the Group had not secured the investment contracts. All other origination costs are recognised as an expense when incurred.
Goodwill represents the excess of the fair value of the consideration transferred and the amount of any non-controlling interest recognised, if applicable, over the fair value of the assets and liabilities recognised at the date of acquisition. The Group has the option for each business combination, in which control is achieved without buying all of the equity of the acquiree, to recognise 100% of the goodwill in business combinations, not just the acquirer’s portion of the goodwill (“full goodwill method”). Goodwill on acquisitions of subsidiaries is included in intangible assets. Acquisitionrelated costs are expensed. Goodwill on associates is included in the carrying amount of the investment.
Brands and trademarks with a definite useful life of generally 5 to 20 years are amortised using the straight-line method over their useful lives. Brands with an indefinite useful life are tested for impairment on an annual basis as part of the cash-generating unit to which they belong. They are carried at cost less accumulated impairment.
2.16 impairment of non-finanCial assets For non-financial assets the recoverable amount is mea sured as the higher of the fair value less costs to sell and its value in use. Fair value less costs to sell is the amount obtainable from the sale of an asset or cash-generating unit in an arm’s-length transaction between knowledgeable, willing parties, less the costs of disposal. “Value in use” is the present value of the future cash flows expected to be derived from an asset or cash-generating unit from its continuing use.
2.17 inCome taxes Current and deferred income taxes are recognised in income except when they relate to items recognised directly in equity. Income taxes are calculated using the tax rates enacted or substantively enacted as of the balance sheet date.
– Financial liabilities related to assets measured at fair value in order to reduce or eliminate a measurement or recognition inconsistency.
The assets of these plans are generally held separately from the Group’s general assets in trusteeadministered funds. Defined benefit plan contributions are based upon regulatory requirements and/or plan terms. The Group’s defined benefit obligations and the related service costs are determined at each balance sheet date by a qualified actuary, using the Projected Unit Credit Method.
Unrecognised actuarial gains and losses which exceed 10% of the greater of the present value of the defined benefit obligations and the fair value of plan assets at the end of the previous reporting period are recognised in profit or loss over the expected average remaining working lives of the employees participating in the plans.
healthCare benefits Some Group companies provide healthcare benefits to their retirees. The entitlement to these benefits is usually based on the employee remaining in service up to the retirement age and the completion of a minimum service period. The expected costs of these benefits are accounted for in the same manner as for defined benefit plans.
2.21 provisions and Contingent liabilities Provisions are liabilities with uncertainties as to the amount or timing of payments. Provisions are recognised if there is a present obligation that probably requires an outflow of resources and a reliable estimate can be made at the balance sheet date and be measured on a best estimate basis. Contingent liabilities are disclosed in the Notes if there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources or the amount of the obligation cannot be measured with sufficient reliability.
2.23 earnings per share Basic earnings per share are calculated by dividing net income available to shareholders by the weighted average number of shares in issue during the reporting period, excluding the average number of shares purchased by the Group and held as treasury shares.
For diluted earnings per share the profit and the weighted average number of shares in issue are adjusted to assume conversion of all dilutive potential shares, such as convertible debt and share options issued. Potential or contingent share issuance is treated as dilutive when conversion to shares would decrease earnings per share.
2.24 offsetting Financial assets and liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.
In June 2011, the International Accounting Standards Board issued an amended version of IAS 19 Employee Benefits. Important improvements were made by eliminating an option to defer the recognition of gains and losses, known as the ‘corridor method’, and by streamlining the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring remeasurements to be presented in other comprehensive income. Furthermore, the disclosure requirements for defined benefit plans were enhanced, providing better information about the characteristics and risks of defined benefit plans. The amended version of IAS 19 Employee Benefits comes into effect for annual periods beginning on or after 1 January 2013. The Swiss Life Group expects an impact of these new requirements on the reported amounts relating to defined benefit plans. The estimated net impact of these changes on shareholders’ equity as at 1 January 2012 is a decrease of approx. CHF 180 million.
Swiss Life – Annual Report 2012 addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. IFRS 12 Disclosure of Interests in Other Entities comprises all the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. IAS 27 has been renamed ‘Separate Financial Statements’ and carries forward the existing accounting requirements for separate financial statements. IAS 28 Investments in Associates and Joint Ventures has been amended in line with the changes to the accounting for joint arrangements. The new and amended standards will be effective for annual periods beginning on or after 1 January 2013. Due to the consolidation of additional investment funds, total assets and liabilities increase by approx. CHF 1.3 billion as at 1 January 2012.
In November 2009, IFRS 9 Financial Instruments was issued by the International Accounting Standards Board. The Standard represents the first part of a three-part project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 Financial Instruments covers classification and measurement of financial assets. The classification and measurement approach in IFRS 9 Financial Instruments is based on how an entity manages its financial instruments (business model) and the contractual cash flow characteristics of the financial assets. A financial asset is measured at amortised cost or fair value. The Standard will be effective for annual periods beginning on or after 1 January 2015. The Swiss Life Group is currently analysing the impact of these changes on its financial statements.
The following amended Standards and Interpretations are not relevant to the Swiss Life Group: – Investment Entities (Amendments to IFRS 10, 12 and IAS 27) – IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine – Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards – Annual Improvements 2009-2011 Cycle 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies
With regard to debt securities carried at fair value inputs to the fair value measurement categorised as level 2 within the fair value hierarchy are primarily determined using present value techniques on the basis of yield curves and appropriate spreads or discounted cash flow models with deposit and swap rates as the main input parameters. With regard to equity instruments carried at fair value, inputs to the fair value measurement categorised as level 2 within the fair value hierarchy are determined using quotes from the custodian bank for the determination of fair values of fund units. Quoted prices of the underlying equity and debt securities are taken into account. Some fair value measurements of fund units categorised as level 2 are determined based on quoted prices/redemption prices with an adequate adjustment for illiquidity. Fair value measurements of equity securities categorised as level 3 within the fair value hierarchy are determined based on net asset value techniques with an adequate adjustment for illiquidity.
– Fair value measurements for derivative financial instruments are obtained from quoted market prices (level 1) and/or valuation models (level 2) as appropriate. Quoted market prices are sourced from well-known price providers such as Bloomberg. Fair values for over-the-counter derivatives are established based on well established valuation models (Black Scholes, discounted cash flows). Market quotes of the input variables are generally used as the parameters for the models. Main inputs to the models are deposit/swap rates (for interest rate swaps), yield curves, inflation and retail price index (for inflation-linked swaps), realised and implied volatilities (for equity variance swaps), interest rates and price volatility of underlying (for total return swaps), foreign exchange spot rates and foreign exchange ticks (for foreign currency forwards). In certain cases these market quotes may be slightly adjusted to better reflect specific market behaviour, e.g. volatility smiles.
– Private equity investments are primarily classified as available for sale and are measured at fair value. The fair values are based on generally accepted valuation techniques. Valuation techniques use a maximum of market inputs and include the use of comparable recent arm’s length transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants.
– The fair value of financial reinsurance assets and liabilities, which are carried at amortised cost, is estimated using discounted cash flow calculations.
fair value of non-finanCial instruments The fair value of investment property is based on current prices in an active market for properties of a similar nature, condition or location – suitably adjusted. Recent prices for similar properties on less active markets, with suitable adjustments for differences, are also used for the estimation of the fair values. Furthermore, investment property is valued using discounted cash flow projections if reliable estimates and reasonable assumptions (such as rental income and operating expenses) can be made, based on external evidence. Future expenditure that will improve the property is not included in the fair value. The risk-adjusted discount rates used in the cash flow projections reflect the specific nature and location of the individual properties. The cash flows used in the projections are based on actual rental income on a sustainable basis. Cost is reflected in the cash flows based on experience and budgets
impairment of held-to-maturity and available-for-sale debt instruments and loans and reCeivables As a Group policy, held-to-maturity and available-for-sale debt 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.
impairment of available-for-sale equity instruments At each balance sheet date, an assessment is made whether there is objective evidence that an availablefor -sale equity instrument is impaired. A significant or prolonged decline in the fair value of the security below its cost is considered objective evidence of impairment. In this respect, a decline of 30% or more is regarded as significant, and a period of 12 months or longer is considered to be prolonged.
insuranCe liabilities Past experience, adjusted for the effect of current developments and probable trends, is assumed to be an appropriate basis for predicting future events. Actuarial estimates for incurred but not reported losses are continually reviewed and updated and adjustments resulting from this review are reflected in income.
Swiss Life – Annual Report 2012 mortality and longevity Pricing and valuation assumptions for mortality and longevity are generally based on the statistics provided by national insurance associations and complemented with internal claims experience reflecting own company records.
poliCyholder options Policyholders are typically offered products which include options such as the right to terminate the contract early or to convert the accumulated funds into a life annuity at maturity. In case of early termination the policyholder receives a specified surrender value or a value which varies in response to the change in financial variables such as an equity price or an index. In the case of the conversion option, the policyholder has the right to convert an assured sum into a fixed life annuity. The option values typically depend on both biometric assumptions and market variables such as interest rates or the value of the assets backing the liabilities. In certain countries and markets policyholder behavioural assumptions are based on own company records. The assumptions vary by product type and policy duration.
impairment of goodwill 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 18.
defined benefit liabilities The Swiss Life Group uses certain assumptions relating to the calculation of the defined benefit liabilities. These assumptions comprise the expected return on plan assets as well as future salary increases and future pension increases which have been derived from estimates based on past experience. The expected return on the plan assets takes into consideration the investment policy relating to the assets and their projected returns.
inCome taxes 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.
provisions The recognition of provisions involves assumptions about the probability, amount and timing of an outflow of resources embodying economic benefits. A provision is recognised to the extent that an outflow of resources embodying economic benefits is probable and a reliable estimate can be made.
The reportable segments have been identified based on information about the components of the entity that management uses to make decisions about operating matters. The reportable segments in these financial statements reflect the management structure that was in place until the end of 2012. With the implementation of the new strategic group-wide programme in 2013, the management structure and the reportable segments were adjusted accordingly. The corresponding information for the statement of income for the year ended 31 December 2012 and the balance sheet as at 31 December 2012 will be restated for the 2013 consolidated financial statements.
The information provided to management focuses on product lines and services. The organisational and management structure within the insurance business is geographical. The reportable segments have therefore been identified as follows: – Insurance Switzerland – Insurance France – Insurance Germany – Insurance International – Investment Management – AWD – Other
The insurance segments primarily consist of life insurance operations. These operations offer a broad range of life, pension, annuity and investment-type policies to both groups and individuals, including disability coverage. The Group’s strategy focuses primarily on life and pensions in Switzerland, France and Germany and on cross-border business from Liechtenstein, Luxembourg, Singapore and Dubai. The insurance segments also include a number of companies which hold investments primarily pertaining to life insurance.
Swiss Life – Annual Report 2012 statement of inCome for the year ended 31 deCember 2012
Premiums earned on insurance contracts 7 166 2 719 1 541 45 – – 1 11 473 –87 11 385
Premiums ceded to reinsurers –25 –194 –35 –8 – – –1 –263 87 –175
Net gains/losses on investment property 366 15 9 – – – 0 390 – 390 exPeNses
Benefits and claims under investment contracts with discretionary participation –685 – – – – – – –685 – –685
Net insurance benefits and claims –10 048 –2 035 –1 709 –18 – – –9 –13 819 –1 –13 819 employee benefits expense –286 –192 –80 –54 –112 –102 –6 –833 1 –831
Impairment of property and equipment and intangible assets –7 – –2 –17 – –578 – –604 – –604 other expenses –101 –154 –48 –45 –46 –91 –13 –498 –1 –499 unallocated corporate costs –61 resulT From oPeraTIoNs 346 share of profit or loss of associates 3 3 0 – 1 – 1 8 – 8
additions to non-current assets 818 177 62 3 3 7 1 1 073 – 1 073
Swiss Life – Annual Report 2012 statement of inCome for the year ended 31 deCember 2011
Premiums earned on insurance contracts 7 056 2 514 1 620 44 – – 35 11 269 –164 11 105
Net gains/losses on financial assets 361 45 142 34 0 –2 –30 550 – 550
at fair value through profit or loss –615 –81 –75 –34 – 1 –16 –820 – –820
Net gains/losses on investment property 399 105 9 – – – 0 513 – 513 exPeNses
with discretionary participation –696 –13 – – – – – –709 – –709
Net insurance benefits and claims –8 964 –1 847 –1 776 –19 – – –1 –12 607 –7 –12 614 employee benefits expense –268 –187 –81 –55 –101 –105 –7 –804 0 –804
Impairment of property and equipment and intangible assets –6 – –2 – – –3 – –11 – –11 unallocated corporate costs –54 resulT From oPeraTIoNs 699 share of profit or loss of associates 1 3 0 – 0 – 2 6 – 6
Income tax expense 21 net result 606 additions to non-current assets 1 232 144 126 4 14 3 4 1 527 – 1 527
Swiss Life – Annual Report 2012 balanCe sheet as at 31 deCember 2012
land France Germany national ment awD other nations nations Total assets
assets held for sale – – – – – – – – – –
Intangible assets including intangible insurance assets 589 458 1 248 157 12 422 7 2 893 – 2 893
liabilities associated with assets held for sale – – – – – – – – – –
Income tax liabilities 1 532 total liabilities and equity 163 400
Swiss Life – Annual Report 2012 balanCe sheet as at 31 deCember 2011
liabilities associated with assets held for sale – 15 – – – – – 15 – 15
Financial liabilities at fair value through profit or loss 1 469 566 453 16 294 – – – 18 782 – 18 782
Income tax liabilities 1 264 total liabilities and equity 151 875
The Swiss Life Group operates in selected countries. The Group’s income and non-current assets by geographical location are detailed below: In CHF million
information about major Customers No revenue from transactions with a single external customer amounted to 10% or more of the Group’s revenue.
The risk appetite for the largest operations in the insurance business is defined with the help of local risk bud gets which are used as a basis for the determination of the individual risk limits. These limits are used as a framework for the asset and liability management process, the objective of which is to define a strategic asset allocation. From this strategic asset allocation a scenario-based expected return is calculated which forms the basis for the mid-term planning of the Group.
Swiss Life – Annual Report 2012 assets for the aCCount and risk of the swiss life group’s Customers
at fair value through profit or loss (FvPl) 8 629 –803 –49 –17 580 –820
Net gains/losses on investment property 390 513 – – 390 513 share of profit or loss of associates 8 6 – – 8 6 5.2 risk budgeting and limit setting 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 or by direct observation of market values. The available risk capital 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.
ComplianCe with external Constraints Aspects other than the purely economic view must also be considered in the ALM process, such as regulatory requirements including statutory minimum distribution ratios (“legal quote”), funding ratios, solvency, local accounting rules and International Financial Reporting Standards, liquidity requirements and rating targets. Some of these views may lead to results that are not aligned with the economic approach, but nevertheless need to be taken into account.
strategiC asset alloCation Defining the strategic asset allocation is the first major task of the ALM process and aims at achieving an efficient risk capital allocation, i.e. optimising the returns on the asset portfolio for the available risk capital defined within the risk budgeting process, taking into account all known constraints.
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 consistent with their products. 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.
External constraints must be considered in the definition of the distribution policy. Important elements which influence such policy are minimum guaranteed interest rates and the statutory minimum distribution ratio (“legal quote”), which strongly depend on the regulatory environments of the Swiss Life Group’s insurance operations.
ToTal INTeresT-seNsITIve INsuraNCe lIaBIlITIes 60 089 24 285 98 84 472
Insurance liabilities linked to assets for the account and risk of the swiss life Group’s customers 1 108
In certain businesses, a large part of the impact of interest rate changes is for the account and risk of the policyholders based on the specific profit-sharing systems.
equity priCe risk A decline in the equity market may lead to a reduction of the Swiss Life Group’s realised and unrealised gains/losses, which also negatively affects the Swiss Life Group’s results of operations and financial condition.
To reduce the credit exposure relating to derivatives a collateral management process 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 exchange-traded, have to be approved by both the Group Chief Risk Officer and the Group Chief Investment Officer. The minimum rating for a counterparty is A– (Standard & Poor’s or equivalent) for the Swiss Life Group’s insurance operations. During periods of market turmoil reliance on ratings is of limited value; therefore an additional qualitative and quantitative counterparty monitoring process has been established to allow for immediate proactive measures.
In certain countries, specific additional guidelines and rules have been defined locally to monitor credit risk. Such guidelines cover investments in fixed-income securities which are mostly based on the average rating of the issuers (calculated by weighting default probabilities). Minimum and maxi-
Swiss Life – Annual Report 2012 mum thresholds apply with regard to permitted investments in non-government bonds. For investments in government bonds with a rating lower than AA- (according to Standard & Poor’s or equivalent) and non-government bonds additional exposure limits are in place. For certain businesses, credit risk is monitored and controlled with a risk limit framework whereby maximum limits are reviewed and approved at least annually. The majority of the bond portfolio is invested in government bonds (including supranational and sovereigns) and bonds issued by the financial sector covered by collateral or government guarantees.
Debt securities held to maturity – 5 046 – – – 5 046
Policy and other originated loans 1 247 1 708 – – 1 247 1 708 oTHer asseTs
total exposure to Credit risk 111 737 104 591 8 293 8 529 120 030 113 120
Swiss Life – Annual Report 2012 exPosure To CreDIT rIsK oF DeBT INsTrumeNTs – CreDIT raTING By Class as aT 31 DeCemBer 2012
ToTal oTHer loaNs aND reCeIvaBles 4 149 2 920 1 294 544 100 4 026 60 13 092 exPosure To CreDIT rIsK oF DeBT INsTrumeNTs – CreDIT raTING By Class as aT 31 DeCemBer 2011
Policy and other originated loans 149 69 858 14 – 618 0 1 708
ToTal oTHer loaNs aND reCeIvaBles 5 088 2 011 1 883 573 18 3 840 58 13 471
FINaNCIal asseTs INDIvIDually DeTermINeD as ImPaIreD – ImPaIrmeNT loss allowaNCe For THe year 2012
Swiss Life – Annual Report 2012 exPosure To CreDIT rIsK oF oTHer asseTs
Swiss Life – Annual Report 2012 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.
entities with functional currency CHF – 13 820 13 919 3 872 100 2 838 entities with functional currency eur 6 – 1 335 301 7 373
entities with functional currency CHF – –12 595 –13 490 –3 169 –100 –2 211 entities with functional currency eur – – –906 –111 – –207
At operational level, rolling forecasts are in place to address situational liquidity risk, which primarily arises on unexpected calls on cash resources from claims, amounts payable at maturity and surrenders arising from insurance and investment contracts. To overcome unexpected liquidity shortfalls at times asset disposals are not desired, repurchase agreements are used to ensure short-term refinancing at minimal cost.
Swiss Life – Annual Report 2012 exPosure To lIquIDITy rIsK as aT 31 DeCemBer 2012
Investment contracts with discretionary participation 8 469 23 41 221 1 936 1 805 4 444
up to 1 month 1–3 months 3–12 months 1–5 years 5–10 years 10 years
Current and non-Current assets and liabilities The table below shows the expected recovery or settlement of assets and liabilities. Assets are classified as current if they are expected to be realised within twelve months after the balance sheet date. Liabilities are classified as current if they are due to be settled within twelve months after the balance sheet date. All other assets and liabilities are classified as non-current.
Financial assets at fair value through profit or loss 3 743 2 235 811 1 985 22 629 19 900 27 183 24 120
Financial assets available for sale 3 568 2 483 77 608 64 781 – – 81 176 67 264
Financial assets held to maturity – 174 – 4 872 – – – 5 046
liabilities associated with assets held for sale – 15 – – – – – 15
Financial liabilities at fair value through profit or loss 592 566 – – 20 570 18 216 21 162 18 782 5.5 insuranCe risk management objeCtives and poliCies Insurance contracts are contracts under which one party (the insurer) agrees to compensate the other party (the policyholder) if a specified uncertain future event affects the policyholder. The Group’s insurance entities neither generally accept nor generally deny insurance coverage to applicants, but ensure that all the insurance risks are identified and thoroughly assessed, and that the insurance premiums accurately reflect the risk taken. The amount of risk taken must be in line with the Group’s strategy and risk policy, and must also meet the profitability targets.
Swiss Life – Annual Report 2012 with a reliable pricing basis with sufficient statistical data available. Insurance risk arises when biometric parameters deviate adversely from expectations. The uncertainty in the estimation of future benefit payments and premium receipts for long-term insurance contracts is due to the unpredictability of long-term changes in overall levels of mortality and disability, for instance. Furthermore, deviations from the expected outcome of a portfolio can also arise because of random fluctuations. The impact of random fluctuations depends on the extent of diversification within a portfolio of contracts, that is, on the size of the portfolio.
Disability income and other annuities – deferred 7 598 7 661
Swiss Life – Annual Report 2012 aNNuITIes PayaBle Per aNNum By TyPe oF aNNuITy – GrouP lIFe
Disability income and other annuities – deferred 14 528 14 311 lIFe BeNeFITs INsureD By TyPe oF INsuraNCe – INDIvIDual lIFe
CurreNT esTImaTe oF CumulaTIve ClaIms 309 247 255 256 261 259 293 314 362 303 2 859
Cumulative payments to date –278 –223 –225 –221 –213 –207 –228 –227 –204 –109 –2 134 effect of discounting – – – – – – – – – – –
lIaBIlITIes For THe CurreNT aND 9 PrevIous years 31 25 30 35 48 52 66 86 158 194 725 liabilities for prior years 229
The development of claims under non-life insurance contracts comprises the non-life business in France. A minor part of the non-life business is very short-tailed. The claims incurred are almost completely settled within one year. The amount of unpaid claims as at the balance sheet date is therefore not material and does not underlie any significant variation in its temporal development. The claims data regarding this type of business is not included in the figures above.
The monitoring of the risks taken is made on a monthly basis with regard to related premiums and claims. An automated claims supervision system is used for the adjustment of tariffs for risks with loss ratios above a certain level.
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
Approximately 1.5% in terms of earned insurance premiums was ceded as at 31 December 2012 (2011: 1.6%).
Swiss Life – Annual Report 2012 at the same level (going concern) and the current cost ratios – adjusted for inflation – are thus assumed to hold good for the future as well. Future costs for maintaining classic solvency capital funded by the shareholders and which underpins the insurance business are charged to the MCEV. The Swiss Life Group calculates the embedded value for all its life and health insurance companies. All other companies are taken into account at their IFRS net asset value. As a consequence, embedded value sensitivities do not affect the value of these companies.
At 31 December 2012, if the longevity improvement parameter had increased by 5%, the embedded value would have been CHF 60 million lower (2011: CHF 37 million lower).
At 31 December 2012, if morbidity had been 5% higher, the embedded value would have been CHF 61 million lower (2011: CHF 87 million lower).
At 31 December 2012, if morbidity had been 5% lower, the embedded value would have been CHF 54 million higher (2011: CHF 85 million higher).
The sensitivity analysis with regard to market risk is as follows: The MCEV calculations of the Swiss Life Group are based on economic scenarios which are calibrated to market conditions at valuation date.
At 31 December 2012, if the interest rates had been 100 basis points higher, the embedded value would have been CHF 166 million higher (2011: CHF 283 million higher).
At 31 December 2012, if the swaption implied volatilities (interest rates) had been 25% lower, the embedded value would have been CHF 15 million lower (2011: CHF 544 million higher).
At 31 December 2012, if the market value of equity securities and property had been 10% higher, the embedded value would have been CHF 653 million higher (2011: CHF 746 million higher).
At 31 December 2012, if the market value of equity securities and property had been 10% lower, the embedded value would have been CHF 732 million lower (2011: CHF 814 million lower).
At 31 December 2012, if the equity securities and property implied volatilities had been 25% higher, the embedded value would have been CHF 261 million lower (2011: CHF 243 million lower).
At 31 December 2012, if the equity securities and property implied volatilities had been 25% lower, the embedded value would have been CHF 211 million higher (2011: CHF 200 million higher).
In CHF million asset management commissions 122 123 other commissions and fees 159 136
Swiss Life – Annual Report 2012 net gains/losses on finanCial assets
Financial liabilities designated as at fair value through profit or loss –122 30
ToTal NeT GaINs/losses oN FINaNCIal INsTrumeNTs aT FaIr value THrouGH ProFIT or loss 5 580 –820 other inCome
Change in liability for future life policyholder benefits, gross 3 495 2 028
Change in liability for future life policyholder benefits, gross 311 272
Net benefits and claims under investment contracts with discretionary participation 685 709
Derivatives embedded in insurance contracts – – – 0 – 6 of which derivatives designated and accounted for as hedging instruments
Derivatives designated as cash flow hedges 589 239 5 63 9 045 6 497
To manage the risks associated with derivative activity, the Group establishes risk levels and monitors these exposures. Exposure to price risk on both derivatives and their underlyings is managed in accordance with risk limits set by management for buying or selling instruments or closing out positions. The risks arise from open positions in interest rates, currencies and equity instruments, all of which are exposed to general and specific market movements.
assets liabilities sive income profit or loss profit or loss amount (year) (year)
Swiss Life – Annual Report 2012 derivatives designated as net investment hedges
Investment fund units – mixed 443 20 assets for the account and risk of the swiss life Group’s customers 5 22 629 19 900
ToTal FINaNCIal asseTs DesIGNaTeD as aT FaIr value THrouGH ProFIT or loss 27 183 24 120
share of net assets of investment funds attributable to minority unitholders 592 566
ToTal FINaNCIal lIaBIlITIes DesIGNaTeD as aT FaIr value THrouGH ProFIT or loss 21 162 18 782
Financial assets held to maturity of CHF 1.3 billion were reclassified to financial assets available for sale in 2012.
financial assets available for sale 964 969 total finanCial assets pledged as Collateral 964 969
BalaNCe as aT eND oF PerIoD 54 53 9 9 63 62 reCeIvaBles
Swiss Life – Annual Report 2012 tion is part of the regular review to determine whether the allowance for potential loan losses is warranted. Management believes that the allowance for loan losses is sufficient. However, management cannot predict with assurance the impact of future economic circumstances or how the mortgage and real estate portfolios would be affected by various economic circumstances.
Further details with regard to the financial assets reclassified are as follows: debt seCurities previously Classified as available for sale
Gains (+)/losses (–) recognised in profit or loss (including impairment) –46 –19 14 Financial Assets Held to Maturity
Financial assets held to maturity of CHF 4.1 billion were sold in 2012 due to the unstable situation in the euro zone. The remaining financial assets held to maturity of CHF 1.3 billion were reclassified to financial assets available for sale.
Classification as assets held for sale and other disposals –731 –594
Classification as assets held for sale and other disposals 0 0 share of profit or loss 8 6 share of other comprehensive income 0 –
Goodwill relating to investments in associates is included in the carrying amount of investments in associates.
In 2011, the Swiss Life Group acquired a 25% share of Prigest, Paris.
Crédit et services financiers (CreserFI), Paris 243 106 137 46 136 4 1 33.4%
Crédit et services financiers (CreserFI), Paris 241 107 134 45 50 7 3 33.4%
BalaNCe as aT eND oF PerIoD 700 52 50 16 818 aCCumulaTeD DePreCIaTIoN aND ImPaIrmeNT
Classification as assets held for sale and other disposals 2 9 7 1 19 reclassifications and transfers to investment property 15 5 – – –3 2
Swiss Life – Annual Report 2012 18 Intangible Assets including Intangible Insurance Assets
Total effect of shadow accounting 0 0 –4 –139 – – –4 –139
BalaNCe as aT eND oF PerIoD 1 726 1 727 309 311 258 236 2 293 2 274 aCCumulaTeD amorTIsaTIoN aND ImPaIrmeNT
BalaNCe as aT eND oF PerIoD –550 –157 –255 –112 –200 –100 –1 005 –369 total other intangible assets as at end of period 1 176 1 570 54 199 58 136 1 288 1 905 goodwill Goodwill represents the excess of the fair value of the consideration transferred and the amount of any non-controlling interest recognised, if applicable, over the fair value of the assets and liabilities recognised at the date of acquisition. Goodwill includes amounts relating to both the Swiss Life Group’s interest and the non-controlling interest in the business acquired in the case where noncontrolling interest is measured at fair value. Goodwill on acqui sitions of subsidiaries is included in intangible assets. Goodwill on associates is included in the carrying amount of the investment.
In 2011, the Swiss Life Group acquired a majority share of Viveris REIM, Marseilles. The goodwill relating to this transaction amounted to CHF 9 million.
Goodwill relating to Lloyd Continental has been allocated to the “Insurance France” segment. Goodwill relating to CapitalLeben has been allocated to the “Insurance International” segment. Of the goodwill relating to other acquisitions, CHF 12 million (2011: CHF 12 million) has been allocated to the “Insurance France” segment and CHF 9 million (2011: CHF 9 million) to the “Investment Management ” as at 31 December 2012. The goodwill on the acquisition of aXenta AG, Baden, was fully impaired in 2012.
The calculations relating to the recoverable amounts, which have been determined on a value-in-use basis, use cash flow projections based on financial budgets approved by management. The projection covers a four-year period for Lloyd Continental. Due to the duration of the insurance and investment contracts a five-year period was used for CapitalLeben. The calculations for Lloyd Continental and
CapitalLeben are based on present values that traditionally use a single set of estimated cash flows and a single discount rate.
No impairment loss would arise on the goodwill relating to Lloyd Continental if the eternal growth rate were reduced to 1% or the discount rate were increased by 1%.
No impairment loss would arise on the goodwill relating to CapitalLeben if the eternal growth rate were set to nil (instead of 1%) or operating costs were to remain flat starting from 2013 (i.e. no further cost reductions achieved).
Net carrying amount of goodwill 287 287 149 149 21 21
Goodwill relating to the acquisitions of AWD Holding AG and Deutsche Proventus AG has been allocated to the “Insurance Switzerland”, “Insurance Germany” and “AWD” segments. The reportable segments in these financial statements reflect the management structure that was in place until the end of 2012. For the purpose of impairment testing, goodwill was allocated to the cash-generating units according to the new management structure and reportable segments in place as of 2013.
Swiss Life – Annual Report 2012 awd goodwill relating to “insuranCe switzerland” and “insuranCe germany” segments
On the carrying amount of goodwill, no other impairment losses were recognised in 2012, and no impairment losses were recognised in 2011.
Customer relationships As at 31 December 2012, customer relationships comprise customer relationships relating to the “AWD” segment CHF 35 million (2011: CHF 156 million), “Insurance France” segment CHF 18 million (2011: CHF 21 million), “Insurance International” segment nil (2011: CHF 20 million) and “Investment Management” segment CHF 1 million (2011: CHF 2 million). On the customer relationships relating to AWD, CHF 98 million was recognised as an impairment loss in 2012 due to higher than originally projected fluctuation rates of financial advisers in Austria and Switzerland. On the customer relationships relating to “Insurance International” CHF 17 million was recognised as an impairment loss in 2012. The impairment loss arose due to the pursued two-carrier strategy with the strong focus on new business in Luxembourg and Singapore.
Swiss Life – Annual Report 2012 brands and other Consists of brands, trademarks, computer software and other intangible assets relating to AWD CHF 5 million (2011: CHF 98 million) and other CHF 53 million (2011: CHF 38 million) as at 31 December 2012. Due to the rebranding strategy relating to the AWD brand CHF 94 million was recognised in 2012 as an impairment loss on the carrying amount of brands and other.
Investment contracts with discretionary participation with actuarial valuation 1 678 1 463
BalaNCe as aT eND oF PerIoD 9 694 9 605 investment ContraCts with disCretionary partiCipation with aCtuarial valuation
Deposits released –28 –136 other movements 0 –1 reclassifications and other disposals –18 –
In CHF million hybrid debt In November 2012, Swiss Life Insurance Finance Ltd. offered to existing lenders under the subordinated perpetual step-up loan placed in 1999 by Swiss Life AG to purchase their loan holdings against a consideration consisting of both a cash component and a credit component. Altogether, EUR 265 million and CHF 290 million were purchased from lenders. The cash component amounted to a total of CHF 139 million. The credit component consists of a tranche of a subordinated dated step-up loan newly issued by Swiss Life AG. The subordinated dated step-up loan placed in connection with the offer amounts to CHF 471 million, is guaranteed by Swiss Life Holding, has a tenor of thirty years and is first repayable on 30 November 2022 at the option of the issuer, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The rate of interest is 6-month Libor plus a margin of 4.20% p.a. until 30 November 2022. If the bonds are not redeemed on 30 November 2022, the margin increases by 1%.
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
bank loans Bank loans relate to mortgage loans for real estate acquired in 2011.
In CHF million amounts due to banks 586 464 23 Insurance Liabilities and Reinsurance Assets
ToTal INsuraNCe lIaBIlITIes aND reINsuraNCe asseTs 97 474 93 365 369 380 97 104 92 985 of which for the account and risk of the swiss life Group’s customers 1 603 1 108 – – 1 603 1 108 unearned premiums Unearned premiums represent the portion of the premiums written relating to the unexpired terms of coverage.
ToTal ClaIms aND ClaIm seTTlemeNT CosTs PaID –250 –273 reclassifications and other disposals – –6
Net additions from acquisition of insurance portfolio 31 – 1 459 – – – 1 459
Swiss Life – Annual Report 2012 insuranCe liabilities with and without disCretionary partiCipation
The major part of the defined benefit liability arises from plans covering employees in Switzerland. The primary benefit of those plans is an old-age pension paid out after reaching retirement age. There are options for early retirement (with reduction of the pension amount determined using actuarial methods) and for choosing to receive a lump-sum payment instead of a pension. Other benefits comprise survivors’/orphans’ pensions in case of death as well as disability pensions (if disabled before retirement
Swiss Life – Annual Report 2012 age). The plans are funded by the employer through ordinary contributions determined using actuarial methods where, under Swiss law, a part (generally less than 50% of the total contribution) is deducted from the employee’s gross salary. Further funding comprises mandatory transfers of funds made by new employees from plans of former employers, discretionary contributions by employees (within plan restrictions) and the earnings on the plan assets.
In January 2011, CHF 684 million in cash was transferred from the Swiss Life Group to two major defined benefit plans in Switzerland. This amount is included in the contribution by the employer. The investment risks are now borne by the plan participants themselves whereas mortality and disability risks are still reinsured with the Swiss Life Group.
The contributions expected to be paid for the year ending 31 December 2013 are CHF 57 million. These contributions include amounts payable under insurance contracts issued to defined benefit plans covering own employees.
Fair value of plan assets 1 213 1 059 unrecognised actuarial gains (–)/losses (+) 458 547
ToTal DeFINeD BeNeFIT exPeNse 110 84 actual return on plan assets (gains (–)/losses (+)) –106 –31
Swiss Life – Annual Report 2012 prinCipal aCtuarial assumptions (weighted averages)
equity Compensation plans For 2009 and 2010, a share-based payment programme was established which gives the members of the Corporate Executive Board and other senior management members of the Swiss Life Group 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 2010, a maximum possible factor of 2.0 applies. For the PSUs issued in 2009, the maximum possible factor is 1.5. No minimum possible factor is applied in 2009 and 2010 so that the number of PSUs could drop to zero after three years.
Balance as at employee Balance as at 1 January Issued departures vested end of period share-based payment programmes (performanCe share units)
Income tax calculated using the expected weighted-average tax rate 25 155
In 2012, non-deductible expenses include CHF 123 million relating to the impairment loss on the “AWD” goodwill.
In 2011, a change in the tax rate in Switzerland led to a positive income tax effect of CHF 41 million.
ToTal DeFerreD INCome Tax asseTs/lIaBIlITIes 85 153 1 458 1 144
1 January in profit or loss income and disposals differences end of period movemeNTs By TyPe oF TemPorary DIFFereNCe DurING THe year 2012
Deferred tax liabilities have not been recognised on the aggregate amount of temporary differences with consolidated investments in subsidiaries to the extent the Group considers such undistributed earnings as being indefinitely reinvested. The foreign entities are controlled by the Group and these earnings are not expected to be repatriated in the foreseeable future. The amount of such temporary differences was approximately CHF 5.6 billion as at 31 December 2012 (2011: CHF 4.4 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.
additional provisions made during the reporting period 19 4 61 65 81 69 amounts used during the reporting period –14 –20 –18 –14 –32 –34 unused amounts reversed during the reporting period –2 –1 –9 –10 –11 –11 reclassifications and other disposals – – 0 –1 0 –1
BalaNCe as aT eND oF PerIoD 32 28 156 122 188 150 restruCturing provisions Under the “Swiss Life 2015” programme, provisions for restructuring were set up in Switzerland, Liechtenstein and Luxembourg in 2012. The outflow of the amounts is expected within the following one to three years.
Swiss Life – Annual Report 2012 other provisions Other provisions were primarily set up for warranties and litigation. Also included in other provisions are customer claims mainly relating to AWD.
27 Equity share Capital As at 31 December 2012 and 2011, the share capital of SLH consisted of 32 081 054 fully-paid shares with a par value of CHF 5.10 each. In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of own shares or shares they represent. Conditional share capital was CHF 12 032 868.60 as at 31 December 2012 (2011: CHF 12 032 868.60).
As approved by the shareholders at the General Meeting of Swiss Life Holding (SLH) on 5 May 2011, a reduction in the par value of CHF 4.50 per registered SLH share was effected in 2011. The payout took place on 28 July 2011 and led to a reduction in the share capital of SLH of CHF 144 million.
gains/losses reCognised direCtly in equity Gains/losses recognised directly in equity comprise fair value changes of available-for-sale investments, unrealised losses on financial assets reclassified from available for sale to loans due to the disappearance of an active market, revaluation surpluses on the transfer of owner-occupied property to investment property and the effective portion of the gain or loss on hedging derivatives in qualifying cash flow hedges. These amounts are net of certain policyholder bonuses and other policyholder liabilities, deferred acquisition costs, deferred income taxes and non-controlling interests.
NeT BalaNCe as aT eND oF PerIoD –855 2 494 299 –56 2 736 1 882
Hedging gains/losses arising during the period 9 3 – 408 – 408 412 revaluation surplus on investment property 17 – – – 62 62 62 share of other comprehensive income of associates 16 – – – 0 0 0
Swiss Life – Annual Report 2012 amounts reCognised direCtly in equity for the year 2011
Net balance as at 1 January –762 369 2 –162 209 –553
Gains/losses arising during the period –80 3 360 – – 3 360 3 280
Hedging gains/losses arising during the period 9 9 – 175 – 175 184 revaluation surplus on investment property 17 – – – 16 16 16
Transfer in respect of assets classified as held for sale – 0 – 0 – –
Gains/losses transferred to the income statement 8, 9 – –200 –2 109 –93 –93 effects of
Net other comprehensive income before non-controlling interests –71 1 154 143 38 1 335 1 264
retained earnings Retained earnings comprise accumulated retained earnings of the Group entities which have not been distributed to the shareholders. The distribution of profit is subject to restrictions in the various jurisdictions where the Group entities are located.
Financial assets available for sale 15 loans and receivables 12 reinsurance assets 0
Net assets disposed of –7 amounts recognised in other comprehensive income 0
Swiss Life – Annual Report 2012 30 Assets Held for Sale and Associated Liabilities
Financial assets available for sale – 14 – – – 14
ToTal lIaBIlITIes assoCIaTeD wITH asseTs HelD For sale – 15 – – – 15 amounts recognised in other comprehensive income relating to
associates personnel other Total Total asset management and other income 1 – – 1 0 employee benefits expense – –18 – –18 –18
Debt securities at fair value through profit or loss 157 383 154 694
Financial assets for the account and risk of the swiss life Group’s customers 20 315 2 246 68 22 629
For more detailed descriptions of the determination of the fair values of financial instruments refer to note 3.
No significant transfers were made between level 1 and level 2 of the fair value hierarchy.
As at 31 December 2012, financial assets of CHF 944 million (2011: CHF 975 million) were included in level 3 of the fair value hierarchy (excluding financial assets for the account and risk of the Swiss Life Group’s customers). The exposure primarily consists of alternative investments such as hedge funds, private equity, infrastructure and real estate funds. These investments are valued based on regular reports from the issuing funds. Fair values are reviewed by a team of in-house investment professionals and may be adjusted based on their understanding.
Total gains/losses recognised in profit or loss – 5 1 1 39 53
Total gains/losses recognised in other comprehensive income – – 2 – 13 –
Transfers out of level 3 – – – – – –
BalaNCe as aT eND oF PerIoD – 154 4 27 759 68
net gains/losses on financial instruments at fair value through profit or loss – 5 – 1 – 53
BalaNCe as aT eND oF PerIoD – 187 2 28 758 246
Gains/losses recognised in profit or loss for assets held at end of period
The following table summarises the carrying amounts and fair values of those financial assets and liabilities not presented in the Group’s balance sheet at fair value: In CHF million
Financial assets held to maturity – 5 046 – 5 369 lIaBIlITIes
Private equity commitments 161 266 other capital commitments 284 611 operating lease commitments 41 18
Not later than 1 year 8 1 later than 1 year and not later than 5 years 25 17 later than 5 years 8 –
loan Commitments The Group has also entered into irrevocable commitments to extend credit in the form of loans and other instruments. They represent undrawn credit lines which are available to clients to secure their liquidity needs. With respect to credit risk, these commitments are contingent upon clients maintaining certain credit standards, and the Group monitors its exposure on a regular basis.
private equity Commitments Private equity commitments represent unfunded commitments to make investments in direct private equity or private equity funds. Such commitments do not involve credit or market risk, as the Group purchases investments at market value at the time the commitments are invoked.
other Capital Commitments Other capital commitments include commitments to make investments (capital calls) and agreements to provide liquidity to protection funds in the insurance industry.
35 Collateral assets pledged as Collateral The following table provides details of financial assets which have been sold or otherwise transferred, but which do not qualify for derecognition because substantially all risks and rewards of ownership are retained. Repurchase agreements and securities lending transactions are discussed in Notes 2.7 and 12. Securities pledged under other transactions include debt securities pledged as collateral under reinsurance contracts issued and debt securities pledged as collateral under prime broker contracts to cover margins due in respect of derivative transactions. Other financial assets pledged include cash collateral provided for OTC derivative liabilities.
Fair value securities under derivative and other transactions 1 815 1 871 1 815 2 000 1) of which can be sold or repledged by transferee 964 969 964 969
Fair value securities under reverse repurchase agreements – 93 36 Future Minimum Lease Payments under Non-Cancellable Operating Leases – Lessor
Leased assets where the Group is a lessor primarily relate to investment property leased to third parties under operating leases.
share capital segment 1 Consolidation period Group share Direct share Currency in 1000 switzerland
Neue warenhaus aG, Zürich Ins. CH 100.0% 100.0% CHF 5 000 oscar weber aG, Zürich Ins. CH 100.0% 100.0% CHF 5 000 oscar weber Holding aG, Zürich Ins. CH 100.0% 100.0% CHF 50 swiss life aG, Zürich Ins. CH 100.0% 100.0% CHF 587 350 swiss life asset management aG, Zürich Im 100.0% 100.0% CHF 250 swiss life Capital Holding aG, Zürich other 100.0% 100.0% CHF 5 514 swiss life Funds aG, lugano Im 100.0% 100.0% CHF 20 000 swiss life Holding aG, Zürich other – – CHF 163 613 swiss life Intellectual Property management aG, Zürich other 100.0% 100.0% CHF 250 swiss life International Holding aG, Zürich other 100.0% 100.0% CHF 1 000 swiss life International services aG, schaan, Branch Zürich, Zürich Ins. Int. 100.0% 100.0% – –
swiss life Property management aG, Zürich Im 100.0% 100.0% CHF 250 swiss life schweiz Holding aG, Zürich Ins. CH from 11.12.2012 100.0% 100.0% CHF 250 swissville Centers Holding aG, Zürich Ins. CH 100.0% 100.0% CHF 7 100 swissville Commerce aG, Zürich Ins. CH 100.0% 100.0% CHF 17 000 1 segment (Ins. CH = Insurance switzerland, Im = Investment management, Ins. Int. = Insurance International, Ins. Fr = Insurance France, Ins. De = Insurance Germany)
swiss life (liechtenstein) aG, schaan Ins. Int. 100.0% 100.0% CHF 5 000 swiss life International services aG, schaan Ins. Int. 100.0% 100.0% CHF 100 franCe
aGamI, Paris Ins. Fr 100.0% 100.0% eur 1 250 aTIm université sCI, levallois Perret Ins. Fr from 20.06.2012 100.0% 100.0% eur 7 933 axyalIs PaTrImoINe, montbonnet-saint-martin Ins. Fr from 28.12.2011 76.8% 96.0% eur 100
Financière du Patrimoine, Balma Ins. Fr 80.0% 100.0% eur 8 ma santé Facile, levallois Perret Ins. Fr 100.0% 100.0% eur 1 388 sas Placement Direct, Pau Ins. Fr 100.0% 100.0% eur 40 sCI swIsslIFe 148 uNIversITe, levallois Perret Ins. Fr from 07.06.2012 100.0% 100.0% eur 1 swiss life asset management (France), levallois Perret Im 100.0% 100.0% eur 3 000 swisslife assurance et Patrimoine, levallois Perret Ins. Fr 100.0% 100.0% eur 169 036 swisslife assurances de Biens, levallois Perret Ins. Fr 100.0% 100.0% eur 80 000 swisslife Banque Privée, Paris Ins. Fr 60.0% 60.0% eur 37 902 swisslife Dynapierre, levallois Perret Ins. Fr 100.0% 100.0% eur 7 317 swisslife France, levallois Perret Ins. Fr 100.0% 100.0% eur 267 767 swisslife Gestion Privée, Paris Ins. Fr 60.0% 100.0% eur 205 swisslife Immobilier, levallois Perret Ins. Fr 100.0% 100.0% eur 37 swisslife Prestigimmo, levallois Perret Ins. Fr 100.0% 100.0% eur 2 340 swisslife Prévoyance et santé, Paris Ins. Fr 99.8% 99.8% eur 150 000 viveris reIm, marseille Im from 15.03.2011 68.3% 68.3% eur 340 germany
und Finanzbetreuung mbH, Hannover awD 100.0% 100.0% eur 2 700 awD Gastronomie GmbH, Hannover awD 100.0% 100.0% eur 25 awD Gruppe Deutschland GmbH, Hannover awD 100.0% 100.0% eur 1 501 awD Holding aG, Hannover awD 100.0% 100.0% eur 38 639 awD – versicherungsmakler und -beratungs GmbH, Hannover awD until 15.02.2011 – –
Proventus akademie- und vertriebs GmbH, Bremen awD 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 I KG, münchen Ins. De 100.0% 100.0% eur 10 sl Beteiligungs-GmbH & Co. Immobilien II KG, münchen Ins. De 100.0% 100.0% eur 10 sl Beteiligungs-GmbH & Co. Immobilien III KG, münchen Ins. De 100.0% 100.0% eur 10 sl Beteiligungs-GmbH & Co. Immobilien ost KG, münchen Ins. De 100.0% 100.0% eur 50 sl-Immobilien-Beteiligungs-Gesellschaft mbH, münchen Ins. De 100.0% 100.0% eur 25 sl Private equity GmbH, Frankfurt am main Ins. De 98.9% 98.9% eur 91 slPm schweizer leben Pensionsmanagement GmbH, münchen Ins. De 100.0% 100.0% eur 150 swiss life aG, münchen (Branch swiss life aG) Ins. De 100.0% 100.0% – –
swiss life Deutschland Holding GmbH, münchen Ins. De from 11.08.2011 100.0% 100.0% eur 50 swiss life Grundstücksmanagement, münchen Ins. De until 01.11.2012 – –
swiss life Grundstücksmanagement GmbH & Co. münchner Tor KG, münchen Ins. De until 01.06.2012 – –
swiss life Insurance solutions aG, münchen other 100.0% 100.0% eur 7 500 swiss life Insurance solutions s.a. Branch Germany, münchen other 100.0% 100.0% – –
swiss life Partner service- und Finanzvermittlungs GmbH, münchen Ins. De 100.0% 100.0% eur 300 swiss life Pensionsfonds aG, münchen Ins. De 100.0% 100.0% eur 3 000 swiss life Pensionskasse aG, münchen Ins. De 100.0% 100.0% eur 3 000 swiss life Products (luxembourg) s.a. Branch Germany, münchen Ins. Int. 100.0% 100.0% – –
swiss life service GmbH, leipzig Ins. De 100.0% 100.0% eur 100 swiss life vermittlungs GmbH, münchen Ins. De 100.0% 100.0% eur 50 tecis Finanzdienstleistungen aG, Hamburg awD 100.0% 100.0% eur 500 1 segment (Ins. CH = Insurance switzerland, Im = Investment management, Ins. Int. = Insurance International, Ins. Fr = Insurance France, Ins. De = Insurance Germany)
share capital segment 1 Consolidation period Group share Direct share Currency in 1000 united kingdom
awD Chase de vere Consulting limited, london awD 100.0% 100.0% GBP 1 935 awD Chase de vere Corporate services limited, manchester awD until 29.03.2011 – –
awD Chase de vere limited, london awD 100.0% 100.0% GBP 5 000 awD Group Plc, london awD 100.0% 100.0% GBP 14 000 awD Group services limited, london awD 100.0% 100.0% GBP 0 awD loans limited, manchester awD 100.0% 100.0% GBP 1 000 awD Private Client Trustees limited, london awD 100.0% 100.0% GBP 0 awD Trustees limited, leicestershire awD 100.0% 100.0% GBP 0
swiss life Österreich GmbH (formerly swiss life Österreich aG), wien Ins. CH 100.0% 100.0% eur 70 swiss life Products (luxembourg) s.a., Branch austria, wien Ins. Int. 100.0% 100.0% – –
adroit Investment (offshore) ltd., Grand Cayman Ins. CH 100.0% 100.0% CHF 0 adroit Partnerships (offshore) l.P., Grand Cayman Ins. CH 100.0% 100.0% CHF 6 580 swiss life Financial services (Cayman) ltd., Grand Cayman other 100.0% 100.0% CHF 50 swiss life Insurance Finance ltd., Grand Cayman other 100.0% 100.0% eur 5 1 segment (Ins. CH = Insurance switzerland, Im = Investment management, Ins. Int. = Insurance International, Ins. Fr = Insurance France, Ins. De = Insurance Germany)
awD Česká republika s.r.o., Brno awD 100.0% 100.0% CZK 1 000 hungary
swiss life Private Placement (Ireland) limited, Dublin other until 13.01.2011 – –
swiss life Insurance solutions aG, Branch Italy, milano other 100.0% 100.0% – –
awD spólka z ograniczona odpowiedzialnoscia, warszawa awD 100.0% 100.0% PlN 250 european Consulting Group sp.z o.o., warszawa awD until 21.10.2011 – –
awD romania Broker de asigurare srl, Târgu mureş awD until 24.11.2011 – –
Swiss Life Holding Financial Statements 227 Review of Operations 228 Statement of Income 229 Balance Sheet 230 Notes to the Financial Statements 233 Disclosure of compensation to the Board of Directors and the Corporate Executive Board in accordance with the Swiss Code of Obligations (CO) Art. 663bbis and Art. 663c 247 Appropriation of Profit 248 Report of the Statutory Auditor
The annual profit largely resulted from interest and fee income. Interest earned on loans to Group companies increased from CHF 38 million to CHF 50 million. Fees on guarantees rose from CHF 21 million to CHF 35 million. Most of the new loans and guarantees were granted to subsidiaries in the previous year. Dividend payouts by subsidiaries declined from CHF 191 million to CHF 24 million. Improved management of liquid funds produced an increase in interest income on fixed-interest securities from CHF 2 million in the previous year to CHF 8 million in 2012. Total expenditure remained unchanged at CHF 11 million.
Swiss Life Holding continued to streamline the Group structure during the reporting period. The establishment of the new subsidiary Swiss Life Schweiz Holding AG has brought the legal structure further into line with the new management structure. This new holding company comprises the Swiss unit of AWD, now known as Swiss Life Select Schweiz. In order to continue to finance the insurance business, CHF 50 million was made available to Swiss Life International Holding AG, including CHF 30 million through the conversion of debt capital into equity capital. The total value of participations grew as a result of these transactions from CHF 3545 million to CHF 3658 million, while internal loans fell by CHF 82 million.
Swiss Life Holding’s profit distribution to shareholders in the period under review came to CHF 144 million or CHF 4.50 per share. The distribution was made out of the capital contribution reserve. The par value of the Swiss Life Holding share thus remained the same at CHF 5.10. The company’s overall nominal share capital at the end of the year totalled CHF 163.6 million.
Swiss Life Holding paid CHF 0.5 million in interest on an intra-group current account debit balance in 2012. The account was closed at the end of the year; as a result, Swiss Life Holding is financed exclusively by equity.
Swiss Life Holding’s liquid assets (liquid funds, time deposits, and bonds and investments) amounted to CHF 316 million on 31 December 2012. Liquid funds and time deposits contracted from CHF 279 million to CHF 88 million, while easily tradable bonds and capital-protected investments accounted for CHF 228 million at the end of the year. These share certificates are all eligible for repos and can generate liquidity at any time.
maJor ShareholderS The following shareholders hold over 5% of Swiss Life Holding’s share capital: as % of total share capital talanx ag
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 3078 million at the balance sheet date.
In addition, Swiss Life Holding grants a credit line of CHF 18 million to Swiss Life Products.
Swiss Life – Annual Report 2012 dIScloSure of compenSatIon to the board of dIrectorS and the corporate executIVe board In accordance WIth the SWISS code of oblIGatIonS (co) art. 663bbIS and art. 663c compenSatIon In 2012 The specifications below take into consideration the transparency regulations relating to compensation set out in the Swiss Code of Obligations Art. 663bbis and Art. 663c and the directives on information relating to corporate governance issued by the SIX Swiss Exchange as well as Circular 2010/1 of the Swiss Financial Market Supervisory Authority FINMA on minimum standards for remuneration schemes of financial institutions. Further information on compensation and benefit expenditure can be found in the Corporate Governance section on pages 48 to 59 and in the Consolidated Financial Statements (Notes 24 and 32) on pages 196 to 200 and 211.
The description of the compensation received by the members of the Board of Directors and the Corporate Executive Board and the tables showing the relevant amounts are based on those of previous years. The variable cash compensation to the Corporate Executive Board members (cash bonus and deferred compensation in cash) for the 2012 financial year, which was determined by the Board of Directors at the beginning of 2013, is published in the compensation tables on an accrual basis as compensation for the 2012 financial year. The members of the Board of Directors are granted exclusively fixed compensation, payable 70% in cash and 30% in Swiss Life Holding shares; the allocated shares are subject to a three-year blocking period.
The compensation received by each member of the Board of Directors and the compensation received by the Chairman of the Corporate Executive Board (Group CEO), who received the highest compensation of the members of the Corporate Executive Board during the period under review, is disclosed individually.
The salary is determined according to the employee’s function and skill set, and is annually reassessed and adjusted if appropriate. Salary comparison studies and recognised job evaluation systems are used to check appropriateness and to ensure internal and external comparability.
Deferred mid- to long-term compensation component (Equity compensation plan and, if applicable, deferred compensation in cash)
The variable compensation components are linked to the strategic objectives of the Group and the individual divisions, and the associated financial and HR-related targets. They are based on the achievement of annual objectives defined in advance for a period of three years as part of medium-term planning and determined on the basis of the actual performance of individuals or teams (performance -linked payment) in relation to the objectives set and on the degree of achievement of the Swiss Life Group targets as reflected in its annual result (share in the company’s success). Quantitative and qualitative performance is assessed also on the basis of the competencies required for the function held, such as professional expertise, entrepreneurship, task fulfilment, cooperation and leadership. The percentage weighting between the individual and/or team performance and the share in the company’s success depends on the position and responsibilities of the function holder.
Personal performance based on the specified quantitative and qualitative objectives is assessed annually in the employee appraisal procedure implemented throughout the Group (Group Performance System, GPS). Two assessment elements/models are used for determining objectives and evaluating performance: the Group Objectives Model (GOM) relating to qualitative and quantitative objectives and the Group Competency Model (GCM) for measuring and assessing individual competencies and behaviour, incl. the compliance regulations.
For persons responsible for risk management and risk control, the quantitative objectives are set in such a way that performance is not linked to the result of the monitored business unit, specific products or transactions.
Permanent employment contracts in Switzerland contain notice periods of between three and twelve months, depen d ing on position and seniority. All current employment contracts with members of the Corporate Executive Board specify a notice period of twelve months.
Swiss Life – Annual Report 2012 practIce and procedure Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for determining the level and make-up of compensation for its members, whereas the Nomination and Compensation Committee (NCC) is responsible for putting forward appropriate proposals (for the internal organisation of the Board of Directors see Corporate Governance / Internal Organisational Structure, pages 37 to 40). The Board of Directors as a whole also establishes the guidelines for the Group’s compensation policy. In doing so, it takes into consideration the compensation policies of other companies in the financial services industry, drawing its findings from publicly available information and studies by independent external experts. Comparable companies in the insurance sector in Switzerland used for the purposes of providing relevant information for the current compensation policy included Allianz, AXA, Baloise Insurance, Swiss Re and Zurich Insurance Group.
compenSatIon to memberS of the board of dIrectorS The members of the Board of Directors are granted exclusively fixed compensation, payable 70% in cash and 30% in Swiss Life Holding shares; the shares are subject to a three-year blocking period from the date of allocation.
The compensation takes into account membership of the Board of Directors of Swiss Life Holding and its subsidiary Swiss Life Ltd, as well as membership of the individual Board Committees, and is commensurate with the individual’s function and workload. The compensation is determined annually by the Board of Directors. The amount of compensation granted to members of the Board of Directors on an annual basis takes into consideration compensation paid to board members in comparable companies within the insurance sector (Allianz, AXA, Baloise Insurance, Swiss Re and Zurich Insurance Group).
compenSatIon to memberS of the corporate executIVe board Compensation remitted to members of the Corporate Executive Board comprises the basic salary, variable compensation in cash and other compensation (child allowances, company cars, premium contributions to 3rd pillar pension plans). The variable compensation in cash is allocated as a bonus
In the same way the allocation of future subscription rights to Swiss Life Holding shares (equity compensation plan, RSU plan) is dependent on the respective target achievement. The cash bonus thereby serves as a reference value, whereby the deferred compensation components (RSU plan and, if applicable, deferred compensation in cash) are considered as a whole. The allocation of future subscription rights to Swiss Life Holding shares is also limited in value to 117% of the fixed basic salary or, if deferred compensation in cash is simultaneously allocated, to 64% of the fixed basic salary.
40% of the variable compensation is based on Corporate Executive Board members’ achievement of specified personal goals. On the one hand, these personal goals are linked back to the company’s success, in that each Corporate Executive Board member has to meet personal quantitative objectives contributing to the company’s success in relation to his division. On the other hand, the personal goals cover qualitative factors, namely project targets, risk management and compliance goals, as well as requirements relating to leadership and to supporting and further developing corporate culture.
Swiss Life achieved significant operational improvements during the year under review. Adjusted annual operating profit significantly exceeded expectations despite a very challenging economic, regulatory and political environment, increasing by 26% compared with the previous year. The reduction in reported profit is primarily due to the one-off effect caused by the writedown in AWD’s
Within the framework of the compensation arrangements for members of the Corporate Executive Board, “deferred compensation in cash” was introduced as a new compensation component on 1 January 2012. On the basis of the corresponding regulations, the Board of Directors determines every year from what amount and, if applicable, what portion of the variable cash compensation is not paid immediately but is allocated in the form of “deferred compensation in cash”. As in the previous year, the Board of Directors determined that, for the 2012 financial year, as of a variable cash compensation level of CHF 500 000, a 23% share of the total variable cash compensation will be allocated as deferred compensation.
As a mid-to long-term compensation component linked to the performance of the Swiss Life Holding share price, respectively to medium-term planning and corresponding target achievement, an equity compensation plan has been in place since 2004 for members of the Corporate Executive Board and other key performers within the Swiss Life Group, who are determined by the Corporate Executive Board with the approval of the Nomination and Compensation Committee. Based on this plan, participants are granted future subscription rights to Swiss Life Holding shares free of charge after a period of three years has elapsed and provided that the requirements under the plan are satisfied at that point.
The attribution of mid- to long-term compensation components (RSU plan) is deferred for a period of three years from the date of allocation, as is the case with the deferred compensation in cash. Likewise, the RSU plans provide for adjustment and reclaiming mechanisms (clawback) in the event of a negative impact of the key figures applying to the allocation of deferred compensation due to a
Swiss Life – Annual Report 2012 compenSatIon to the board of dIrectorS In 2012 For comparison purposes, the corresponding details of the compensation for 2011, as published in the Annual Report 2011, are shown in a separate table below the compensation table for 2012.
Compensation in cash blocked shares4 occupational provisions total compensation extrain cash ordinary aggregate and shares Regular contri- total amount Number amount (amount) 5 contributions 6 butions (amount)
CHF 179 034 in the year under review. 6 pursuant to the pension fund regulations, occupational provisions were financed by the employer and the employee at a ratio of 70% to 30%.
For comparison purposes, the corresponding details of the compensation for 2011, as published in the Annual Report 2011, are shown in a separate table below the compensation table for 2012.
4 pursuant to the pension fund regulations, occupational provisions were financed by the employer and the employee at a ratio of 70% to 30%. 5 all contributions are gross contributions, i.e. they include employee contributions to aHv/Iv/alv. employer contributions to aHv/Iv/alv/FaK amounted to a total of
6 the deferred compensation in cash is paid out after a deferral period of three years, provided the requirements are satisfied at that point. 7 the RsUs represent future subscription rights that entitle the individuals concerned to receive swiss life Holding shares after a period of three years, provided the requirements are satisfied at that point. 8 the allocation of RsUs as at 01.04.2012 was effected at a fair value of CHF 93.77, as calculated by an independent consultancy firm.
Swiss Life – Annual Report 2012 compenSatIon to the corporate executIVe board In 2011 amounts in CHF
Other members of Corporate executive board 1 tOtal CORpORate exeCUtIve bOaRD
6 the deferred compensation in cash is paid out after a deferral period of three years, provided the requirements are satisfied at that point. 7 the RsUs represent future subscription rights that entitle the individuals concerned to receive swiss life Holding shares after a period of three years, provided the requirements are satisfied at that point. 8 the allocation of RsUs as at 01.04.2011 was effected at a fair value of CHF 140.05, as calculated by an independent consultancy firm.
Share oWnerShIp/partIcIpatIon rIGhtS aS at 31.12.2012 As at the balance sheet date, acting members of the Board of Directors and the Corporate Executive Board (including closely related parties) held the following number of registered Swiss Life Holding shares and future subscription rights to Swiss Life Holding shares in the form of Restricted Share Units (RSUs) and Performance Share Units (PSUs).
Rolf Dörig, Chairman of the board of Directors 44 929 wolf becke 237
Share oWnerShIp/partIcIpatIon rIGhtS aS at 31.12.2011 As at the balance sheet date, acting members of the Board of Directors and the Corporate Executive Board (including closely related parties) held the following number of registered Swiss Life Holding shares and future subscription rights to Swiss Life Holding shares in the form of Restricted Share Units (RSUs) and Performance Share Units (PSUs).
slH shares bruno pfister, group CeO 3 068 manfred behrens 0
1 total number of psUs allocated in the years 2009 and 2010 in connection with the relevant equity compensation plan. the psUs represent future subscription rights that entitle the individuals concerned to receive slH shares after a period of three years, provided that the relevant conditions are then met.
2 total number of RsUs allocated in the year 2011 in connection with the relevant equity compensation plan. the RsUs represent future subscription rights that entitle the individuals concerned to receive slH shares after a period of three years, provided that the relevant conditions are then met.
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 228 to 246), for the year ended 31 December 2012.
board of dIrectorS’ reSponSIbIlIty The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
audItor’S reSponSIbIlIty 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.
Performance Swiss Market Index (SMI) (in %) +15 –8 –2 +18 –35
Gross written premiums, policy fees and deposits received 17 046 17 143 20 191 20 219 18 515 figureS from conSoLidated Statement of income
Net result from continuing operations 93 606 560 324 –1 143
Net result from discontinued operations – – – –47 1 488
Number of employees (full-time equivalents) 7 046 7 168 7 483 7 820 8 291 1 Up to 2008, traditional embedded value methodology used; from 2009, market consistent embedded value methodology applied.
E-mail shareholder.services@swisslife.ch annUaL RepoRt 2012 The Annual Report is published in German and English and contains additional information on risk management, market consistent embedded value (in English only), corporate governance and the annual accounts. The English text is definitive for the Consolidated Financial Statements.
The Annual Report can be found online at: www.swisslife.com/report pUbLishing DetaiLs pUbLisheR — Swiss Life Holding Ltd, Zurich eDitoRiaL ResponsibiLity — Swiss Life, Group Communications, Zurich ConCept anD Design — Eclat AG, Erlenbach, Canton of Zurich pRoDUCtion — Management Digital Data AG, Lenzburg, Canton of Aargau © Swiss Life Holding Ltd, 2013
Important Dates annual general meetIng 2013 23 April 2013, Hallenstadion Zurich