Gross written premiums, policy fees and deposits received In CHF million
The Swiss Life Group’s 2018 financial year at a glance: Business overview — The Swiss Life again posted pleasing growth in the 2018 financial year: adjusted profit from operations increased by 4% over the previous year to CHF 1553 million and net profit rose by 7% to CHF 1080 million. Swiss Life was able to increase its fee income by 6% to CHF 1615 million in local currency. At the same time, the Group posted premium growth of 2% in local currency to CHF 19.2 billion; insurance reserves to the benefit of the company’s policyholders rose by 2% in local currency. In its insurance business Swiss Life generated direct investment income of CHF 4.4 billion, which corresponds to a direct investment yield of 2.9%. The net investment yield was 3.0%. As of 31 December 2018, Swiss Life Asset Managers had a total of CHF 233 billion assets under management. In investment business for third-party customers, assets under management rose to CHF 71.2 billion at the end of 2018 – a plus of 16% over the previous year. In the year under review, Swiss Life very successfully completed its three-year Group-wide programme “Swiss Life 2018”. All the targets were achieved – in most cases exceeded.
Employees — At the end of 2018 the Swiss Life Group employed approximately 8600 people worldwide and had a network of some 14 000 advisors.
A wide range of issues moved people in 2018 – especially in Europe, our main area of activity at Swiss Life. The EU’s quest for identity, sustainability matters in conjunction with climate change, the migration issue, discussions of political direction in the French and German markets, so critical for us, as well as the rapid pace of change in the working world due to digitalisation: all of these topics shaped the public debate.
Economic success ensures us our role in society. What we achieved as a group in 2018 makes us proud. Two key figures provide resounding proof of that: for one there is net profit, which we were able to increase year on year by 7% to CHF 1080 million. Then there is the development of our fee business: the 2014 fee result of CHF 269 million had grown to CHF 488 million by the end of 2018 – an increase of over 80%.
Strategy & Brand Swiss Life makes its customers a long-term value proposition – so that they can lead their lives in an assured and self-determined way.
Swiss Life enables people to lead a self-determined life. In doing so, the company is helping to meet a fundamental human need: for independence and self-determination. Against the backdrop of demographic change and the individual’s increasing personal responsibility for his or her own future provisions, Swiss Life’s work will continue to grow in relevance.
Swiss Life must address changing customer behaviour and consistently implement any findings from such study to actively and profitably exploit market opportunities. Customers are ever better informed; they are able to compare services immediately and demand new products and services. New modes of access as well as the ability to receive all relevant information any time, any place are also de rigueur. Accordingly, innovation, process security and competence are the ingredients of a good customer relationship.
Increased earnings quality • Marked increase in the fee result, to between CHF 600 and 650 million by the end of 2021, around 50% more than in the previous Group-wide programme • Increase in the risk result, to between CHF 400 and 450 million by the end of 2021, 10% more than in “Swiss Life 2018” • Increase in cumulative value of new business (2019–2021) to over CHF 1.2 billion, 60% more than in the prior programme
We work with passion to contribute to our customers’ peace of mind. The positive attitude towards life characterises the lifelong relationship we strive for.
The brand identity is a key instrument in making the Swiss Life brand tangible for internal and external target groups, and in distinguishing it from the competition. All marketing campaigns – in Switzerland, France, Germany and Austria – address the purpose, “We enable people to lead a self-determined life” with a variety of creative approaches.
In the home market of Switzerland, Swiss Life focuses on sports and cultural sponsorship in addition to classical advertising. For example, the company has sponsored the Swiss national football teams for over ten years, and has been the main sponsor of the ZSC Lions ice hockey team for more than three years. In the cultural arena, film is the cornerstone of its engagement: Swiss Life is the main sponsor of the Solothurn Film Festival for example.
Sponsorship is also undertaken in other markets: for example, Swiss Life Germany supports over 2500 amateur sports teams, sponsors the NP sport gala that takes place every year in Hanover and has been name sponsor of the Swiss Life Hall in that same city since 2004. Swiss Life Select Austria has been the main sponsor of the “Junge Philharmonie Wien” for four years, while Swiss Life Asset Managers awards an annual student prize for the best Bachelor’s and Master’s theses completed at Swiss universities of applied sciences.
In September 2018, Swiss Life launched its first cross-divisional brand campaign in Switzerland. At the heart of the campaign is a connection between the Swiss Life logo and the private and corporate clients of Swiss Life Switzerland, the institutional clients of Swiss Life Asset Managers and the Swiss Life Group’s stakeholders. This will establish an unmistakeable association of the company’s purpose, the self-determined life, with its brand. An expansion of the campaign to other national Swiss Life companies is being considered.
While the umbrella and sub-brands are managed centrally, brand management for the level 3 brands “Endorsement” and 4 “Individual brands” is performed directly in the relevant divisions (see figure below).
In the Swiss domestic market, Swiss Life achieved a segment result of CHF 865 million, a rise of 4% over the previous year. In France, Swiss Life grew its segment result by 6% to CHF 277 million. Germany made a contribution of CHF 142 million. The decline of 7% is due to a one-off effect in the previous year. Swiss Life International increased its segment result by 32% to CHF 67 million and Swiss Life Asset Managers achieved a segment result of CHF 272 million, which was 5% higher than the previous year.
Swiss Life increased direct investment income from insurance business to CHF 4.4 billion (previous year: CHF 4.3 billion). That corresponds to a direct investment yield of 2.9% (previous year: 2.8%). The net investment yield at the end of 2018 was 3.0% (previous year: 2.5%).
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 19 218 18 565 4%
According to the Swiss Insurance Association (SIA), life insurance premiums in Switzerland increased to CHF 29.6 billion, up 0.7% on the previous year. In group life business, the market posted an overall premium increase of 0.7% and a 0.5% rise in premiums for individual life business compared to the previous year. Swiss Life›s market share of group life business increased to 34.5% (previous year: 34.0%). In individual life business, market share fell slightly to 19.6% (previous year: 20.2%). Swiss Life thus clearly remains the leader in its home market.
Following the successful completion of the “Swiss Life 2018” strategy programme, Swiss Life launched its new programme, “Swiss Life 2021”, in November 2018. The strategic thrust of Swiss Life Switzerland in the new strategy programme is the digitally supported advisory process, which will improve the customer journey and the effectiveness of consulting as well as leading to more business with existing and new customers. Swiss Life aims to further increase its market share through its full-range provider offering while attending to margin management and capital efficiency.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 9 525 9 290 3%
During the reporting year, in a still challenging market environment characterised by continuing low interest rates, Swiss Life Germany posted a segment result of CHF 142 million (previous year: CHF 153 million). The decline is due to a lower savings result, since the previous year’s result comprised positive one-off effects to finance the statutory additional interest rate reserve. The improved risk and cost results were able to partially compensate for this decline.
Fee income was increased in 2018 to CHF 456 million, equivalent to an increase of 10% in local currency. The main driver was the strong growth of the distribution base in the owned IFAs as well as the brokered new business across all product areas. At the end of 2018 the proprietary financial advisory companies in Germany had 3808 trained and registered financial advisors under contract (+8% over the previous year).
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 1 395 1 313 6%
The Global Private Wealth Solutions business area, with carriers based in Luxembourg, Liechtenstein and Singapore, specialises in life insurance solutions for high net worth individuals. With CHF 19.6 billion assets under control and thanks to a comprehensive international product range, fee income increased.
Fee income from the financial advisory companies rose by CHF 30 million to CHF 159 million, due mainly to improved revenues achieved by Chase de Vere and the first-time consolidation of Fincentrum in the fourth quarter.
In 2018, Swiss Life Asset Managers posted a segment result of CHF 272 million (previous year: CHF 258 million). This equates to a 5% increase. Fee income in the year under review was in creased by 8% overall. Adjusted operating expenses rose 5%, driven by continuing growth in third-party business, mainly in the real estate area.
Third-party business grew vigorously: Swiss Life Asset Managers had assets of CHF 71.2 billion under management at the end of 2018, an increase of 16% over the previous year. This growth is primarily due to net new assets of CHF 8.4 billion. Mixed mandates and real estate products in particular posted significant growth. This was offset by outflows in the money market funds.
The measures and mechanisms implemented by Swiss Life to ensure good corporate governance work well in practice. Specific adjustments are examined on an ongoing basis, however, in order to adapt the management and control tools and disclosure to current circumstances and to implement further improvements.
There are no cross participations between Swiss Life Holding or its subsidiaries with other listed companies, which exceed the participation threshold of 3%.
The capital structure of Swiss Life Holding was as follows on the balance sheet date: – Ordinary share capital: CHF 174 537 840.60, divided into 34 223 106 fully paid registered shares with a par value of CHF 5.10 each; – Conditional share capital: CHF 19 675 534.80, divided into 3 857 948 registered shares with a par value of CHF 5.10 each; – Authorised share capital: none.
The conditional share capital is at the disposal of the holders of conversion or option rights granted by Swiss Life Holding or by companies belonging to the Group in connection with the issuing of new or existing convertible bonds, bonds with option rights, loans or other financing instruments (“equity-linked financing instruments”). The shareholders are excluded from subscription rights. The respective owners of the equity-linked financing instruments are entitled to subscribe to the new shares. The Board of Directors is entitled to limit or exclude the preemptive subscription rights of the existing shareholders in connection with the issuing of equity-linked financing instruments up to a value of 3 000 000 registered shares or up to a maximum amount of CHF 15 300 000, if the equity-linked financing instruments are placed on national or international capital markets or with selected strategic investors or are used in connection with the financing or refinancing of the acquisition of companies, parts of companies, participations or new investment projects. If the preemptive subscription rights are not granted either directly or indirectly when issuing equity-linked financing instruments, the equity-linked financing instruments must be issued according to the prevailing market conditions and the exercise period may not exceed 7 years for option rights and 15 years for conversion rights from the time of issuance of the relevant equity-linked financing instruments.
In 2018 there were no changes to the share capital. The distributions of CHF 13.50 per share approved by the General Meeting on 30 April 2019 were made from the capital contribution reserves.
Additional information on the Swiss Life share is available in the section “Share Performance and Historical Comparison” on pages 320 and 321.
As at 31 December 2018, Swiss Life Holding and its Group companies had not granted any options on rights to participate in Swiss Life Holding.
The number of external mandates for members of the Board of Directors and the Corporate Executive Board is limited in the Articles of Association as revised on 23 April 2014 as follows: Members of the Board of Directors may hold no more than 15 additional mandates, a maximum of four of which in other listed companies; members of the Corporate Executive Board may hold no more than 5 additional mandates, a maximum of one of which in another listed company. Mandates in different legal entities that are under joint control or same beneficial ownership are deemed one mandate. This restriction does not apply to mandates that a member of the Board of Directors or the Corporate Executive Board assumes at the request of the company or to mandates in associations, charitable foundations, family foundations and occupational benefit institutions.
Klaus Tschütscher Member Compensation Committee 2013 1 Change since AGM of 23 April 2014 due to the Minder Initiative: in accordance with Articles 3, 4 and 29 of the Ordinance against Excessive Compensation in Listed Stock Companies (VegüV), the General Meeting of Shareholders shall elect the members and the Chairman of the Board of Directors individually every year for a term of office of one year each. Furthermore, in accordance with Articles 7 and 29 of the VegüV, the members of the Compensation Committee are also to be elected individually for a term of office of one year each.
Rolf Dörig will be put forward for re-election as Member and Chairman of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 30 April 2019.
Other appointments: – Adecco S.A., Chairman of the Board of Directors – dormakaba Holding Ltd, Member of the Board of Directors – Danzer Holding AG, Member of the Supervisory Board – Emil Frey Holding AG, Member of the Board of Directors – Swiss Insurance Association (SIA), Chairman – economiesuisse, Member of the Board Committee
Frank Schnewlin — Born 1951, Swiss national Vice Chairman of the Board of Directors bild Frank Schnewlin studied at the University of St. Gallen (lic. oec. HSG), at the London School of Economics (Master of Science) and Harvard Business School (MBA) before earning his doctorate in economics in 1983 at the University of Lausanne (Dr. ès sc. écon.). From 1983 to 2001 he held various positions at the Zurich Financial Services Group in Switzerland and the USA, including Head of Corporate
Ueli Dietiker will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 30 April 2019.
Other appointments: – Sanitas Krankenversicherung and Sanitas Beteiligungen AG, Vice Chairman of the Board of Trustees and Chairman of the Board of Directors – Zuckermühle Rupperswil AG, Member of the Board of Directors – BLS Ltd. and BLS Netz AG, Member of the Board of Directors and President of the Audit
Swiss Life – Annual Report 2018 a Member of the Management Board from 1994 until 2000. He later assumed responsibility as a Member of the Management Board at AXA Versicherung AG for the Private and Corporate Clients division as well as Damages. From 2004 until 2007 he managed DBV Winterthur Holding AG as Chairman of the Management Board and was simultaneously a Member of the Management Board of the Winterthur Group. From 2007 until 2012 Frank W. Keuper was CEO of AXA Konzern AG and a Member of the Executive Committee of AXA Group in Paris.
Stefan Loacker — Born 1969, Austrian national Member of the Board of Directors bild Stefan Loacker studied economics at Vienna University of Economics and Business and at the University of St. Gallen (Mag. rer. soc. oec., lic. oec. HSG). He began his professional career with stints at the Institute of Insurance Economics (I.VW) at the University of St. Gallen and at the then-Rentenanstalt (now Swiss Life) before joining Helvetia Patria Versicherungen in 1997 as assistant to the Executive
Lugano SA. He has also served since 1997 as professor of business law, and since 2017 President of the Geneva Center for Philanthropy, at the University of Geneva. Between 2004 and 2015 he was a Member of the Swiss Takeover Board. Since 2007 he has been a Member of the Sanctions Commission of the SIX Swiss Exchange.
Henry Peter will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 30 April 2019.
Other appointments: – Siegfried Holding Ltd, Member of the Board of Directors – Repower AG, Member of the Board of Directors – Engadiner Kraftwerke AG, Chairman of the Board of Directors – Elettricità Industriale SA, Chairman of the Board of Directors – Calanda Kies und Beton Gruppe, Chairman of the Board of Directors – Fontavis AG, Member of the Board of Directors – Dogger Ltd, Member of the Board of Directors – The Association of the Swiss Natural Gas Industry (Verband der Schweizerischen Gasindustrie [VSG ASIG]), Chairman of the Board of Directors – Swissgas, Member of the Board of Directors – Kantonsspital Graubünden Foundation, Chairman of the Board of Trustees – economiesuisse, Member of the Executive Board – Entwicklung Schweiz, President of the association – Institute for Financial Economics and Financial Law (IFF) at the University of St. Gallen,
Klaus Tschütscher — Born 1967, Liechtenstein national Member of the Board of Directors bild Klaus Tschütscher studied law at the University of St. Gallen and obtained a doctorate (Dr. iur.) in 1996. In 2004 he also completed a postgraduate LL.M. degree in International Business Law at the University of Zurich. He started his career in 1993 as a research assistant at the University of St. Gallen. Two years later he became Head of Legal Services and Deputy Director of Liechtenstein Tax
Klaus Tschütscher will be put forward for re-election as Member of the Board of Directors and as Member of the Compensation Committee at the General Meeting of Shareholders of Swiss Life Holding on 30 April 2019.
Other appointments: – Büchel Holding AG, Member of the Board of Directors – Grand Resort Bad Ragaz Ltd., Member of the Board of Directors – Montfort Werbung AG, Member of the Board of Directors – responsAbility Investments AG, Member of the Board of Directors – Mobilejobs AG, Member of the Board of Directors – Raiffeisen Privatbank Liechtenstein AG, Vice Chairman of the Board of Directors – University of Liechtenstein, Member of the University Council – UNICEF Switzerland and Liechtenstein, Member of the Board
On 24 April 2018, Gerold Bührer (born 1948) left the Board of Directors due to having reached the statutory age limit. Martin Schmid (born 1969), a Member of the Council of States, was newly elected to the Board of Directors.
The Board of Directors met ten times during the year under review. The meetings lasted around three hours on average. All members of the Board of Directors attended all the meetings, with the exception of one meeting, where one member was excused. The Group CEO and Group CFO attended all the meetings. The other members of the Corporate Executive Board, with one exception, attended all the meetings. The Board of Directors conducted parts of the meetings among themselves.
The members of the Board of Directors or a committee of the Board of Directors are obliged to leave meetings when issues are discussed that affect their own interests or the interests of natural or legal persons close to them.
The Chairman’s Committee held nine meetings during the year under review. Each session lasted for around two hours on average. The meetings were attended by all members. The Group CEO and Group CFO attended all the meetings.
Generally, the Group CFO and the Head of Corporate Internal Audit attend the Audit Committee meetings or parts of the meetings in an advisory capacity. The Group CEO may attend the meetings of the Audit Committee (without voting rights). Representatives from the external audit services are also regularly invited (cf. also “Supervisory and control instruments vis-à-vis the auditors”, page 74). In addition, further members of the Corporate Executive Board or in-house
Swiss Life – Annual Report 2018 specialists may also be invited to attend. The Audit Committee meets at least four times a year. The frequency of meetings depends on the financial budgeting and reporting process.
In the year under review, the Audit Committee convened seven times, with a meeting lasting about two hours on average. There was full attendance at all meetings, with the exception of two meetings, where one member was unable to attend. The Chairman of the Board of Directors was present at three meetings of the Audit Committee. The Group CEO and Group CFO attended all the meetings. The Head of Corporate Internal Audit, as well as representatives from the external audit services, attended all meetings.
It is planned that the Audit Committee will be constituted as follows once voting has been completed at the General Meeting of 30 April 2019: Stefan Loacker as Chairman, Adrienne Corboud Fumagalli, Henry Peter, Martin Schmid and Klaus Tschütscher as Members.
Management structure of the Swiss Life Group as at 31 December 2018
On 31 December 2018 the Corporate Executive Board of Swiss Life Holding was composed of the following members: Member of the Corporate Executive Name Function Board since
Other appointments: – American Chamber of Commerce, Member of the Financial Services Chapter Board – Zurich Chamber of Commerce, Member of the Board of Directors – Zürcher Volkswirtschaftliche Gesellschaft, (Zurich Economic Society), 1st Vice Chairman of the Board
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 Division. From 1988 to 1994 he worked for ELVIA Life as Director of Sales in the key accounts business. In 1994 he moved to «La Suisse» and, in 1998, was appointed CEO of the non-life business and Chief Actuary. In 2000 he became the CEO of «La Suisse», a position he held until 2005 when the company was integrated into the Swiss Life Group. Following the integration, Charles Relecom returned to Swiss Life in Belgium, initially as the CEO of Zelia S.A. and, from February 2006, as CEO for the entire Belgian business.
Other appointment: – French Insurance Association (FFA), Member of the Board of Directors
Other appointments: – German-Swiss Chamber of Commerce, Member of the Board – British Swiss Chamber of Commerce, Member of the Board
No members of the Corporate Executive Board departed during the reporting period, nor did any new members join the Board.
Thomas Buess, Group Chief Financial Officer, will hand over his executive function in the Corporate Executive Board to Matthias Aellig, currently Group Chief Risk Officer, on 1 March 2019. Thomas Buess will be proposed for election to the Board of Directors at the Annual General Meeting on 30 April 2019.
Matthias Aellig — Born 1971, Swiss national Group Chief Financial Officer (as of 1 March 2019)
bild Matthias Aellig studied Physics at the University of Bern. After receiving his doctorate in the field of solar wind and completing a research visit at the Massachusetts Institute of Technology (MIT) in Cambridge, USA, he joined McKinsey & Company in Zurich as an advisor in 2000, mainly charged with projects in the banking and insurance area. At the end of 2003, Matthias Aellig joined the then-Winterthur Group (now AXA), initially as Head of Value Management and then, as of 2004, as Chief actuary Life, running the Winterthur Group’s actuarial office. In 2007 he was named Chief actuary Life at Zurich Switzerland, in which role he was notably responsible for reserving, the group life operating account and market-consistent valuation. Since 2010 Matthias Aellig has been Chief Risk Officer of the Swiss Life Group. In this function he is charged with the Group-wide enterprise risk management framework, which includes, in addition to quantitative and qualitative risk management, the Group’s actuarial office and product and margin management.
– For the Corporate Executive Board: The short-term variable compensation component for the 2016 financial year in the amount of CHF 4 437 500 in total (bonus and deferred compensation in cash), determined by the Board of Directors at the beginning of 2017 in view of the 2016 annual results, and the maximum total amount of the fixed compensation and the long-term variable compensation (equity compensation plan) for the 2018 financial year in the amount of CHF 13 800 000 in total.
At the General Meeting of Shareholders of 24 April 2018, the following compensation was approved for the Board of Directors and Corporate Executive Board: – For the Board of Directors: The maximum total amount of fixed compensation until the next ordinary General Meeting in 2019 in the amount of CHF 3 200 000 in total.
In the same way, the General Meeting on 30 April 2019 will be asked to approve the exclusively fixed compensation to be paid to the Board of Directors until the 2020 ordinary General Meeting, the short-term variable compensation component for the Corporate Executive Board for the 2018 financial year and the maximum total amount of fixed compensation (basic salary incl. ancillary benefits and occupational provisions) and of the long-term variable compensation component (equity compensation plan) for the 2020 financial year.
The proposed budget/maximum amount for the fixed and long-term variable compensation for the Corporate Executive Board for the 2020 financial year represents an upper limit, which would only be exhausted in the case of exceptional business performance. The Board of Directors will determine the fixed compensation and the long-term variable compensation component for the Corporate Executive Board at the beginning of 2020 and will detail the key underlying factors in the respective compensation report, on which the shareholders can in turn hold an advisory vote.
The compensation policy underpins the performance culture required by the corporate strategy and forms part of the HR policy. The aim is to retain well-qualified employees and gain new, highly skilled staff. The compensation system is in line with the market environment and must be competitive. The individual overall compensation takes into account the employee’s professional skills, engagement and personal performance. It comprises the basic salary, a variable short-term component related to achieving annual targets, which is normally paid out in cash and sometimes equities and, if applicable, as deferred compensation in cash, and a long-term variable compensation component in the form of an equity compensation plan, as well as contributions to occupational provisions and risk insurance.
Since 2011 participants in the equity compensation plan have been allocated Restricted Share Units (RSUs) on 1 April (2011–2013 equity compensation plans) or on 1 March (equity compensation plans from 2014). The RSUs grant the holder future subscription rights, entitling them to receive Swiss Life Holding shares free of charge after a three-year period has elapsed. The attribution of shares after the expiry of the three-year deferral period is effected on a 1:1 basis (1 RSU = 1 share): the plan is therefore very simple, transparent throughout the whole term and directly linked to the performance of the Swiss Life share price. The value of RSUs during the three-year term develops linearly with the Swiss Life Holding share price and thus symmetrically corresponds with shareholder interests. Altogether 51 members participated in the 2016 equity compensation plan, in which a total of 51 270 RSUs were allocated: 14 586 in total to the Corporate Executive Board, of which 3478 to Patrick Frost in his capacity as Group CEO since 1 July 2014. As at 1 March 2017, 58 members of Swiss Life Group senior management participated in the 2017 equity compensation plan, in which a total of 43 768 RSUs were allocated: 12 177 in total to the Corporate Executive Board, of which 3017 to Patrick Frost, in his capacity as Group CEO. A total of 57 members of Swiss Life Group senior management participated in the 2018 equity compensation plan. A total of 42 950 RSUs were allocated: 11 454 in total to the members of the Corporate Executive Board, of which 2828 RSUs to Patrick Frost as Group CEO. 65 members of Swiss Life Group senior management participated in the 2019 equity compensation plan, in which a total of 40 840 RSUs were allocated: 10 237 in total for the Corporate Executive Board, of which 2496 to Patrick Frost as Group CEO.
The attribution of the long-term variable compensation component (equity compensation plan, 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). These apply in the event of a negative impact of the key figures applying to the allocation of deferred compensation due to a retroactive correction to a restatement of the annual accounts and in the case of damage to Swiss Life as a result of a violation of statutory, regulatory or compliance standards. If the employment relationship is terminated by a participant during the three-year term of the RSU plan, the future entitlements expire worthless.
The compensation paid to members of the Board of Directors in the 2018 financial year is shown on an individual basis in the 2018 compensation table below. For comparison purposes, the compensation for the 2017 financial year is shown again after the 2018 compensation table.
At the General Meeting of 30 April 2019, the Board of Directors will submit for approval to the shareholders the maximum amount of fixed compensation for the Board of Directors for the new term from the 2019 ordinary General Meeting until the 2020 ordinary General Meeting.
Aggregate total Amount (at in cash closing price and shares Amount Number on allocation) (amount) 4
The amount of the variable compensation (short-term variable compensation in cash and equity compensation plan as a long-term variable compensation component) is limited in the Articles of Association of Swiss Life Holding to a maximum of 181% of the fixed basic salary (statutory “bonus cap”, upper limit for the variable compensation). On the basis of the current compensation policy the Board of Directors has, with a view to harmonising fixed and variable compensation in the case of maximum target achievement and departing from a benchmark of 100%, set a range of 100–130% of the fixed basic salary for the variable compensation components; under extraordinarily positive circumstances the Board of Directors may augment this range at its own discretion to a maximum of 150% (Group CEO 165%). Starting from the principle of equal apportionment, the ratio of shortterm to long-term variable compensation components is determined by the Board of Directors in consideration of the results achieved in the respective business year (discretionary decision). In the case of an “on target” achievement, the range for variable compensation of members of the Corporate Executive Board is 80–100% of the fixed basic salary (“on-target bonus”).
Swiss Life – Annual Report 2018 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 aspects, namely project targets, risk management and compliance goals, as well as requirements relating to leadership and to supporting and further developing corporate culture.
The compensation for members of the Corporate Executive Board for the 2018 financial year is reported in detail in the 2018 compensation table below. Patrick Frost, Chairman of the Corporate Executive Board (Group CEO) since 1 July 2014, received the highest compensation of the members of the Corporate Executive Board in the 2018 financial year; accordingly his compensation is disclosed individually.
The short-term variable compensation component for the Corporate Executive Board of a total CHF 4 675 000 (cash bonus of CHF 3 975 000 and deferred compensation in cash of CHF 700 000), which was determined by the Board of Directors at the beginning of 2019 for the 2018 financial year and will be proposed to the General Meeting of Shareholders on 30 April 2019 for approval, is disclosed in the following compensation table on an accrual basis as compensation for the 2018 financial year (accrual method). The members of the Corporate Executive Board did not receive any compensation in shares for the 2018 financial year; they are participating in the current equity compensation plan that provides for the allocation of so-called Restricted Share Units (RSUs).
Following the 2018 compensation table, the details of the compensation for 2017 are stated in a separate table for comparison.
4 Child allowances (CHF 10 950), company cars (CHF 12 061), premium contributions to 3rd pillar pension plans (CHF 172 401), other (CHF 42 045) in total amounts.
2 The salary amounts also include tax-equalisation payments and international travel expenses totalling CHF 621 800.
3 The short-term variable compensation component for the 2017 financial year (bonus and deferred compensation in cash) was determined by the Board of Directors at the beginning of 2018 for the 2017 financial year.
As at the balance sheet date of 31 December 2018, acting members of the Board of Directors and the Corporate Executive Board (including closely linked parties) held the following number of registered Swiss Life Holding shares and future subscription rights to Swiss Life Holding shares in the form of Restricted Share Units (RSU): Board of Directors
SLH shares 1 Total number of RSUs allocated in the years 2016, 2017 and 2018 in connection with the relevant equity compensation plan. The RSUs represent future subscription rights that entitle the individuals concerned to receive SLH shares after a period of three years, provided that the relevant conditions are met at that point.
Shareholdings as well as future subscription rights to Swiss Life Holding shares as at 31 December 2017 are shown in the Notes to the Swiss Life Holding Financial Statements on page 314.
of which total variable compensation (total pool) 2 158 478 943
Board of Directors’ responsibility The Board of Directors is responsible for the preparation and overall fair presentation of the compensation report in accordance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordinance). The Board of Directors is also responsible for designing the compensation system and defining individual compensation packages.
Opinion In our opinion, the compensation report of Swiss Life Holding Ltd for the year ended 31 December 2018 complies with Swiss law and articles 14–16 of the Ordinance.
In 2018 the auditing fees credited to Pricewaterhouse Coopers came to around CHF 8.6 million (prior year: CHF 8.1 million). This includes the fees for reviewing the 2018 half-year accounts.
Key facts and figures about the Swiss Life Group and info kits on previous years’ reports are available on the internet at www.swisslife.com, “Investors & Shareholders” area, “Results & Reports” section (www.swisslife.com/results). Details on events relevant to shareholders, analysts and the media (General Meetings of Shareholders, media conferences etc.) can be found at www.swisslife.com, “Investors & Shareholders” area, “Financial Calendar” section (www.swisslife.com/financialcalendar).
Risk Management A further pillar of Swiss Life’s responsible, sustainable business is its integrated, value-oriented risk management 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 regulatory requirements and taking into account the persistently challenging capital market environment.
Operational risk management at Swiss Life includes the methods and processes used for the identification, assessment, and steering or avoidance of operational risks. Operational risk management defines operational risk as the danger that losses may result from shortcomings or failures stemming from internal processes, people, systems or external events. Swiss Life’s internal control system consists of the entirety of procedures, methods and measures prescribed by the Board of Directors and the Corporate Executive Board to ensure the orderly conduct of business. The focus is on the reliability of financial reporting, the effectiveness of business processes and compliance with laws and regulations issued to protect the company’s assets. Risk management prepares and maintains appropriate internal directives and minimal requirements for qualitative risk management and ICS based on the “Internal Control — Integrated Framework (2013)” standard of the internationally recognised Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Risk management prepares and maintains directives and minimal requirements for information security based on various internationally recognised standards, such as the British standards ISO/IEC 27001 and 27002, the Control Objectives for Information and Related Technology (COBIT) Framework v5/2019 and the Cyber Security Framework v1.1 of the National Institute of Standards and Technology (NIST). The line implements these requirements and assesses their observance in collaboration with the relevant information security experts at Group and division level. This comprises subject areas such as vulnerability management, effective IT risk management and business continuity management. Corporate Internal Audit period ically reviews information security as part of its auditing activities and addresses any weak spots with the appropriate measures.
All Swiss Life employees are provided with regular information security training in their divisions. There were no significant information or system security incidents within the Swiss Life Group during the reporting year.
Swiss Solvency Test The Swiss Solvency Test (SST) sets out the capital requirements valid for insurance companies and groups in Switzerland. The SST is a principle-based framework where the main objective is to align the required capital with the underlying risks. The SST requirements are based on the understanding that insurers will meet their obligations towards policyholders even under difficult conditions. Swiss Life uses an internal model to calculate the available and required capital for the SST. Based on this internal model, approved with conditions by FINMA, Swiss Life meets the capital requirements. As of 1 January 2019, Swiss Life will apply the new SST standard model with company-specific adjustments to determine regulatory solvency.
Standard & Poor’s rating capital In the Standard & Poor’s risk-based model, the total adjusted capital is the measure used for available capital, set against the capital required given the target rating category (target capital). The calculation of target capital takes into account, in particular, insurance risks, asset value volatility and credit risks.
Our goal for 2018 was to accord greater importance to the issue of sustainability in our investing. We also wanted to further develop operational ecology, and continue on the path we embarked upon three years ago as an employer with our “Actively shaping your career” initiative. In all of these areas we have taken crucial first steps: – In our investing activities we have systematically integrated environmental, social and governance (ESG) topics into our risk and investment management. This allows us to strengthen the sustainability aspects of our risk management approach, including in our investment decisions. We also signed on to the Principles for Responsible Investment (PRI) supported by the United Nations, and are now evaluating our real estate management using the Global Real Estate Sustainability Benchmark (GRESB).
– According environmental and social standards greater importance requires more than simply undertaking to observe them oneself, but also taking a public stand in favour of such values. For this reason we have adopted the world’s largest agreement on responsible corporate management and support the Ten Principles of the UN Global Compact.
– Furthermore, we have addressed the matter of reducing greenhouse gas emissions in our business premises and using a higher proportion of renewable energy. This has led to the setting of Group-wide goals for operational ecology, as published in this report.
Our fourth Corporate Responsibility Report shows that we are staying true to our course and assuming responsibility – in our everyday activities and within the company as well as with regard to both our employees and the environment.
Since 2018, Swiss Life systematically integrates environmental, social and governance (ESG) factors into its investment decisions. Group-wide goals for operational ecology were defined during the year under review and, with its “Actively shaping your career” initiative, Swiss Life has set new standards for the world of work.
All relevant corporate responsibility activities are discussed and resolved in the Corporate Responsibility Steering Committee (STC CR). This body includes representatives of Human Resources and Communications in addition to all the Group Executive Board members in Switzerland and the General Counsel. The STC meets twice a year as a rule; the Group CEO chairs the committee. Corporate responsibility representatives from Group Communications, Asset Managers, Public Affairs and Human Resources, and one person from the Swiss Life “Perspectives” Foundation, form a core operational team to ensure the exchange of information in the line, prepare measures and proposals for the STC and implement STC mandates within the organisation. There were no changes to the core team or the STC in 2018. The composition of both bodies is subject to yearly review.
Responsibilities The core team works on the themes of social commitments and “Actively shaping your career” as well as ecology and sustainability, and develops process proposals and updates for annual presentation to the STC.
In addition to the STC CR and the core team in the home market of Switzerland, Swiss Life France and Swiss Life Germany have also created Corporate Responsibility committees that meet regularly for discussion, to define focus topics and to drive further development.
City of Hanover): klimaallianz-hannover.de www.unpri.org www.unglobalcompact.org www.gresb.com www.cdp.net www.eurosif.org www.icgn.org www.klimastiftung.ch www.planbatimentdurable.fr
The materiality matrix displays and organises the central issues from the “Corporate Responsibility ” area along two axes. The Corporate Responsibility report covers all the subjects included in the matrix.2 The upper right quadrant of the matrix contains the issues that have proven most important to both internal and external stakeholders. These are action points, which are classified as being particularly important to business success, and they feature prominently in the reporting.
2 The report comprises Swiss Life’s main locations in Switzerland, France and Germany and refers to all company entities within the scope of consolidation (2018 Annual Report, pages 292–297; GRI 102-45).
Investment strategy Swiss Life’s investment strategy is designed on a sustainable and long-term basis and harmonised with insurance liabilities. The company’s investment policy is oriented towards long-term and stable returns. Swiss Life bases all of its investment decisions on the stipulations of the supervis ory authorities and is committed to holistic and value-oriented risk management. In addition to its legal obligations, Swiss Life observes ethical principles and environmental, social and governance (ESG) topics.
Products and services Swiss Life has over 160 years of experience in developing products and services, in consulting and in the life insurance, investment and pensions business. Swiss Life aims to create optimal customer value and ensure profitability for the company. Its offering is subject to continuous review and refinement.
Sustainable procurement For this reason, Swiss Life ensures that its procurement is in full compliance with the law. When selecting suppliers and partners, Swiss Life bases its decisions on ethical, social and ecological principles and works with local suppliers whenever possible.
Responsibility in society Political commitment Swiss Life’s operational environment is heavily influenced by political and regulatory decisions. Swiss Life cultivates contact with representatives from the political and business communities as well as supervisory authorities and coordinates its own activities closely with trade and umbrella associations. Swiss Life company executives and members of the Board of Directors work in various national business associations.
Economic responsibility As a corporation, Swiss Life takes social and economic responsibility by enabling its customers to lead a self-determined life. As a long-term investor, Swiss Life contributes to the stability of the financial centre. As a leading institutional property investor in Europe and owner of the biggest private property portfolio in Switzerland, Swiss Life is also a key principal on the Swiss construction scene. The company also assumes social responsibility as an employer.
Equal treatment and non-discrimination Equality of treatment and non-discriminatory behaviour are part of Swiss Life’s corporate culture. As a co-signatory of the UN Global Compact Swiss Life pledges, among other things, to respect the global principles governing labour standards.
Diversity and equal opportunities Diversity and equal opportunities are essential for Swiss Life. Accordingly, potential, abilities and skills are promoted equally among all employees of all ages.
See also “Strategy & Brand” (pages 8–13) as well as “Responsibility for Employees”, the “Well-Being” and “Health and Security” sections (pages 122–125).
Swiss Life supports its employees in the maintenance of their employability and promotes their ongoing development. This includes continuous internal and external education for employees of all ages, training for apprentices and trainees and entrylevel opportunities for university graduates.
Respect, equality of treatment and non-discrimination are all parts of Swiss Life’s corporate culture.
In addition, with its “Perspectives” Foundation and “Stiftung für Chancengleichheit” (Foundation for Equal Opportunity), Swiss Life supports institutions that help people from a wide range of backgrounds educate and better themselves.
Swiss Life is one of Europe’s leading real estate investors and has the biggest private real estate portfolio in Switzerland. Around 80% of its properties are in urban areas. As a builder and property owner, Swiss Life aims to use ecological and economic resources with maximum efficiency and to make an active contribution to sustainable urban development.
When selecting suppliers and service providers, Swiss Life works with local contractors whenever possible and prefers products and services from companies that have implemented a certified environmental protection system.
See also “Sustainable Construction and Renovation” (pages 101–104), “Sustainable Procurement” (pages 105–107) and “Environmental Responsibility” (pages 130–133).
At Swiss Life, customer orientation is of central importance for corporate success. Swiss Life continuously assesses customer satisfaction at the key contact points. Customer centricity managers in all divisions analyse customer feedback with their teams locally.
Swiss Life aims to use customer feedback to detect systemic problems and drive appropriate process optimisation measures. Findings and lessons learned are shared at Group level.
Total contact points recorded (left-hand axis) Total feedback recorded (right-hand axis)
Over the past four years, the NPS at Swiss Life has trended favourably at the key contact points Consulting and Service Center, thanks to regular customer feedback analysis and the appropriate improvements derived from it.
Switzerland Germany Austria Switzerland Swiss Life Swiss Life Swiss Life UK Chase Individual life Select France Select Select de Vere
The referral rate at the Service Center contact point has also enjoyed a positive trend. Thus for example, while at the outset of assessment in 2014 in Switzerland every third person surveyed was willing to actively recommend Swiss Life, today’s rate is already one out of two.
Switzerland Germany Germany Individual life France Individual life Swiss Life Select
The reporting year saw a revision of the Group Competency Model, which sets out the behaviour principles for all employees and additional responsibilities for members of management. A consistent customer perspective is an integral component of objectives-setting between management and employees.
Swiss Life’s consulting and product strategy combines optimal customer value with profitability for the company. Regulators’ demands, regarding such things as solvency, as well as external factors like the economic and interest rate environment or demographic trends, must also be considered. Optimising and constantly developing the existing range of offerings so as to take into account all target groups, such as customers, investors, shareholders and supervisory authorities, are crucial in this endeavour.
The company offers private and corporate clients comprehensive and individual advice plus a broad range of proprietary and partner products through its own agents, financial advisors and distribution partners. Swiss Life Select, the subsidiary specialising in financial planning for private households and brokering financial products, as well as the advisers of Tecis, Horbach, Proventus, Chase de Vere and Fincentrum, use the Best Select approach to let their customers choose the product from the market that suits them best. This provides customers with access to the pro duct range of the best providers in the market. In Germany, Swiss Life has developed a product for people who cannot afford conventional occupational disability insurance that allows them to insure their labour at favourable rates. Swiss Life thus does its part to help those living on lower incomes optimise their provisions and close gaps in coverage.
The practical design of products and services is guided by Group-wide standards and is in strict accordance with the local regulatory environment and legislation. The ability of the local Compliance teams to make adjustments, even to existing products and services, is guaranteed. Group-wide standards for the development of products and services are also adapted to framework conditions as required.
Customer identification and monitoring of business relationships for money-laundering, the financing of terrorism, sanctions and embargos
Swiss Life sets great store by compliance with all applicable legal provisions and regulatory stipulations in all its activities. The Code of Conduct is an important tool. It contains Swiss Life’s values and principles, valid throughout the Group, as well as the rules of conduct, which are binding for all employees.
Swiss Life has a comprehensive directives system as well as a Code of Conduct. The directives contain binding Group-wide minimum standards implemented in all business units and included in the regulations for the local offices. Regular training ensures that the employees are kept informed about the relevant compliance themes and directives. All new employees are given Group-wide Code of Conduct training within six months of beginning their position, and are instructed in the essential rules of conduct as well as data protection and data security provisions. All new employees are also trained within the same period in money-laundering prevention, combating terrorism financing, and sanctions and embargos, where relevant for their particular activities. Furthermore, all employees undergo a refresher course in these topics every two years. Participation in such training courses is mandatory and subject to monitoring, and the aim is a 100% attendance and success rate. Divisions for which the regulator has prescribed more frequent training must undergo refreshers more often.
Swiss Life takes data protection very seriously and implements all legal, regulatory and internal requirements. Group-wide standards for data protection have been defined, which are specified and implemented by way of divisional guidelines. These last govern the processing, storage, deletion, archiving and transfer of data and documents, uniform data classification, the handling of personal data and highly sensitive information and trade secrets. Data protection infringements must be reported to Compliance, while information security incidents are dealt with consistently on a Group-wide basis as part of operational risk management. There were no significant data protection infringements within the Swiss Life Group during the reporting year.
The individual divisions have their own data protection officers and ensure that their employees are all provided with regular mandatory training in the material. The line implements these requirements and assesses their observance in collaboration with the relevant divisional Compliance teams, as well as at Group level. Compliance regularly assesses the implementation and observance of applicable provisions. Corporate Internal Audit regularly reviews data protection as part of its auditing activities and addresses any weak spots with the appropriate measures.
Swiss Life incurred no monetary penalties or significant fines during the year under review, nor did the company make any settlements in connection with corruption charges.
Swiss Life reports regularly on its strategic priorities. At its Investor Day in November 2018, Swiss Life presented the plans for its Group-wide programme into 2021. With “Swiss Life 2021” the company is aiming at a continuous and yet ambitious further development of its profit sources, efficiency and distribution to shareholders, based on four strategic thrusts and comprising practical financial objectives for the period from 2019 until 2021.
Further information on the Group-wide programme and the Swiss Life Group strategy may be found in the Annual Report in the “Strategy & Brand” chapter.
In keeping with this investment philosophy, Swiss Life systematically integrates environmental, social and governance (ESG) factors into its investment process and the risk management of all asset classes. This will in turn address and enhance the sustainability aspects of its risk management approach and investment decisions and assess potential consequences for climate change, among other things.
Swiss Life also orients its investment objectives to the individual requirements of its customers, who would increasingly like to consider more than simply financial matters when making investment decisions. This also means a better quality of investment portfolio. Such specific customer solutions include for example Swiss Life in Germany’s investment in 2018, via a special fund in Germany, of EUR 100 million in a bond launched by the World Bank for the financing of sustainable water projects.
With its integration of ESG information, Swiss Life aims to establish a broader information basis for its investment decisions, and thus to achieve more balanced risk coverage in its investment portfolios. Swiss Life has set out its principles for responsible investing in a position paper, available at www.swisslife-am.com/responsible-investment.
Since 2018, Swiss Life has evaluated the sustainability of its property management using the Global Real Estate Sustainability Benchmark (GRESB), which allows it to consistently measure the sustainability aspects of parts of its real estate portfolio and to integrate them into its management.
The Buckhauserstrasse 41 project in Zurich, where offices are also being converted into residential space, is a further example of increased density. In place of the existing office building with its 5943 m2 of office space, a new building is to go up comprising 8790 m2 of residential space, divided among 109 apartments, and 1142 m2 of commercial space.
In France in 2018, Swiss Life refined its ESG evaluation grid as part of its sustainable real estate strategy and applied it to all properties in the office, retail, apartment, hotel, healthcare facility and student housing use classes. At the same time a system for the measurement of energy efficiency was introduced. The climate risk of all properties was also analysed, with both the current risk and risks associated with the energy transition taken into account.
At Mayfair Capital in the United Kingdom, ecological and economic sustainability aspects are also a regular element of the investment process and risk management. This involves the deliberate selection of properties that are already sustainable and enjoy good public transport connections, or those whose potential can be better exploited by means of improvements. In addition, energy consumption, waste recycling and water use are all monitored and measured. As a rule, operational optimisation measures are implemented once a property has been purchased. Such measures include the optimisation of building management systems (heating and cooling), the installation of LED lighting and motion detectors, the use of water-saving devices and the improvement of recycling facilities.
All risks in the real estate area are continuously monitored at the property level and subject to detailed oversight using cutting-edge analytical and benchmarking methods. The focus of this scrutiny is on property and market risks as well as the early detection of structural and socioeconomic changes.
Most of the suppliers and service providers in Switzerland are domestically based. About 20% are from the EU.
When working with major international companies in the IT area, Swiss Life works with its national companies wherever possible in all locations.
• Support through sourcing and legal services on the conclusion, extension, adjustment and termination of contracts
When concluding contracts with suppliers and service providers in France and Switzerland, Swiss Life stipulates that they must guarantee the following standards as a rule: – Compliance with legal guidelines on working hours and ensuring working conditions that do not endanger employee health or security.
– Fulfilment of legal regulations relating to salaries, compensating overtime and payouts. – Ensuring that their employees can work in an environment free of discrimination on the basis of race, gender, religion, origin, disability, age, sexual orientation, handicap or other attributes. – Respect for employees’ rights of association and collective bargaining. – Renunciation of child and forced labour.
✔ Compliance with legal regulations must be assured at all times
Swiss Life demands corrective action against any violations of agreed standards. The cooperation is terminated in the event of serious or repeated violations.
Insurance companies are a crucial pillar of the economy, whether as employers, tax payers or investors. Furthermore, the insurance sector offers young people an attractive starting point for a career. With gross added value of CHF 30 billion in Switzerland, the insurance sector as a whole accounts for almost 5% of Switzerland’s economic performance, a significant contribution.
Swiss Life’s activity is of social relevance as well, since the consequences of the demographic trend are largely underestimated and pose new challenges. If people are living ever longer and state pension systems reach their limits, every single individual will have to take on greater personal responsibility for their own future provisions. At the same time, self-determination is a basic human need, and the source of the Swiss Life purpose: we enable people to lead a selfdetermined life.
Political work and communication in Switzerland, France and Germany are closely coordinated with trade associations. Moreover, a number of company executives are members of various national trade associations. Swiss Life Chairman of the Board Rolf Dörig serves as chairman of the Swiss Insurance Association (SIA). In addition, members of the Corporate Executive Board and Swiss Life employees work on various SIA committees.
Swiss Life France is a member of the French Insurance Federation (Fédération française de l’assurance, FFA), France’s largest trade association in the insurance sector. The company is re presented through a number of employees who actively participate in the committees for different insurance-related themes.
Swiss Life Germany is represented on the major committees of the German Insurance Association (GDV) and is a member of various associations of intermediaries. It is in regular professional dialogue with the AFW Bundesverband Finanzdienstleistung e.V. (German federal association of financial service providers) as well as with the Verband unabhängiger FinanzdienstleistungsUnternehmen in Europa e.V. (Votum, an association representing the interests of financial service providers operating throughout Europe).
In 2018, Swiss Life further consolidated the position of Public Affairs within the Asset Managers division. One focus of this department is Swiss real estate policy.
Swiss Life is committed to the militia principle in Switzerland and supports its employees in the performance of public and political mandates. Swiss Life holds regular events for employees in Switzerland with public or political mandates. During the reporting year, Swiss Life organised for the third time an event known as “Transfer” in conjunction with Avenir Suisse, Swiss Re, Zurich Insurance Group, Helvetia and Axa. Over 60 mandate holders from different companies discussed current political issues at this event.
The “Perspectives” Foundation supported among other things in 2018 an institution that distributes foodstuffs to the needy. © Silvia Bretscher
A second foundation Swiss Life runs in its home market of Switzerland is the Anniversary Foundation for Public Health and Medical Research, founded in 1957 on the occasion of the company’s centenary. It supports medical research projects and specific charitable organisations for people with physical and mental disabilities. Swiss Life has made annual donations to this foundation in the amount of some CHF 400 000 in recent years.
In addition to its foundation work, Swiss Life promotes Swiss film-making and helps artists follow their own path. For example, Swiss Life is committed to the Solothurn Film Festival, the Locarno Festival and the Zurich Film Festival. Moreover, Swiss Life in Switzerland supports classical music through its financial commitment to Tonhalle-Orchester Zurich, Zurich Opera House, the Lucerne Festival and the Davos Festival.
The Swiss Life Select distribution company operates the Foundation Confidence for Children in Switzerland, which aims to improve the life and development opportunities of disadvantaged children and give them a better chance at leading a self-determined and independent life. Among its key undertakings are two projects in Kyrgyzstan providing medical care to children with cleft lips and palates. The foundation is essentially supported by Swiss Life Select financial advisors and employees, who donated CHF 123 100 to the foundation in 2018. Swiss Life Select Switzerland pays all administrative costs.
For more self-determination: one of the Foundation’s projects provides counselling to people in Germany with basic subsistence problems, and offers them new hope.
Corpus Sireo, a German Company of Swiss Life Asset Managers, supports the charitable Cornelius Stiftung für Kinder suchtkranker Eltern (Foundation for children of parents suffering from addiction). The Foundation focuses on the advancement of children from underprivileged homes afflicted by addiction, and thus offers them better perspectives for the future. Its average yearly donation volume is EUR 100 000.
Swiss Life Select in Austria also runs a foundation under the name Stiftung Zuversicht für Kinder, which supported 16 local and international aid projects as well as medical aid in specific cases during the reporting year. Donations in the amount of EUR 58 800 were collected in the previous year, mainly from Swiss Life Select financial advisors. With their help and the support of partner companies, customers and private individuals, numerous children were given a new outlook on life. In addition, Swiss Life Select in Austria has for the past four years been the main sponsor of the “Junge Philharmonie Wien” (Vienna young people’s philharmonic orchestra).
The Swiss Life purpose, enabling people to lead a self-determined life, also provides the framework for performance-driven collaboration within the company. Building on this, Swiss Life offers its employees and management a work environment in which they can act with selfdetermination and personal responsibility and shape their professional career and further development in every phase of life.
– I encourage appreciative collaboration. – I promote the development of my employees.
“Valuing and exploiting diversity” – Flexible working hours and sites offered – Promoting cooperation among generations – Childcare offerings and support for those caring for relatives
“Maintaining long-term work ability” – Offering time-out models – Diverse range of offerings for the promotion and maintenance of health – Social counselling offers 1 Ipsos (Switzerland) SA, 2017
Swiss Life International launched its “Self-Career Management” programme at all locations in 2018, intended to sensitise employees to the continuous evolution of professional demands. To this end, regular assessments and coaching sessions are held featuring constructive consulting to allow employees to keep up to date with the times in a strategic and responsible manner.
The talent pools in the individual divisions help to prepare future first and second-level managers (team leaders and department heads) as well as project managers and specialists for their future roles through training modules and project work.
The Key Persons Programme (KPP) is intended for Swiss Life Group management, specialists and project managers who are already in a key function or show potential for such a function. The aim of the Group-wide programme is to prepare people who show the desire and ability to help shape the company’s future in their own areas for a key position so they can live up to their role as decision maker. The programme also plays a role in employee and succession planning. Within a 12-month period, the participants acquire a detailed insight into the most important business areas within the Swiss Life Group, give and receive new impulses and apply what they have learnt to their daily work. The KPP’s four focus themes are as follows: – Personnel management and communication – Finance – Innovation – Corporate strategy
Alumni of the Key Persons Programme meet the participants every year at the “Shaping the Future Day”, at which the strategy and implementation status of the current Group-wide programme are discussed in detail with the Corporate Executive Board.
Employees without management functions by gender Total 7 730 as at 31.12.2018
Employees with rank by gender (management and senior management) Total 4 370 as at 31.12.2018
Equal opportunities and non-discrimination are also observed on a daily basis at Swiss Life, with 89% of employees saying they feel very respected in their team (+3 percentage points over 2015). This value is 12 percentage points over the “Financial industry in Europe” external benchmark.
The principles by which we work together at the Swiss Life Group are set down in the Code of Conduct, valid Group-wide. Swiss Life offers its employees a work environment characterised by respect and esteem. Among these is our zero-tolerance policy regarding mobbing and discrimination on the basis of race, sex, religion, confession, national origin, disability, age, sexual orientation, physical or mental handicap, marital status, political views or other attributes.
The Swiss Life competency model valid for all employees is applied to the Group-wide management processes. It was comprehensively revised and updated in 2018. The competency model sets out among other things responsible behaviour, particularly as regards compliance standards, laws and risks. Employees are regularly informed about the legal framework in which they operate, backed up by training courses to ensure they behave with integrity and in conformity with the law. Swiss Life has established management processes and informal channels (e.g. an Ombudsman managed by a third party) for reporting and dealing with cases of discrimination or complaints.
In accordance with valid national and international law, the Swiss Life Group follows fair employment procedures free of discrimination. Recruitment or promotion is based exclusively on ability, competence and potential in view of the requirements of the position in question. Fair and equal compensation for all employees is ensured by the Group-wide Group Compensation Policy. Swiss Life has used processes and instruments for a number of years in all its national companies to review and ensure equal pay for men and women. In Switzerland, for example, Logib software from the Federal Office for Gender Equality is used to review equal treatment. This year’s review, with the involvement of the staff committee, indicates no significant deviations among the functional groups under analysis.
Good working conditions influence employee health. Swiss Life supports this strategically by promoting uniform work structuring, providing a variety of tasks, fostering social interaction, enabling autonomy, room to manoeuvre and learning and development opportunities, ensuring meaningfulness and showing appreciation for its employees and their performance and contributions.
In addition, the divisions – in collaboration with their social partners – provide supplementary services in movement and sport, massages and therapy, relaxation rooms and all types of consulting, such as nutritional and social counselling and prevention.
The employee representatives and Corporate Executive Board maintain close contact with each other. Since 1996, Swiss Life has had a European Works Council (pursuant to EU Directives 94/45/EC and 2009/38/EC).
The nine-person “Europa Forum”, a committee comprising delegates from four countries, meets regularly with representatives of the Corporate Executive Board at ordinary and extraordinary meetings. It deals with transnational information and consultation on topics which affect all Swiss Life employees. The focuses in 2018 were: Strategy 2021, personnel management, digitalisation and employee qualification, the new competency model, performance testing, employee surveys, compensation, maintenance of employee marketability, diversity and inclusion, promotion of health and well-being.
– As part of the 2019 salary review, the staff committee made a formal application to the Executive Board for a salary increase.
France Swiss Life France A total of 13 agreements were reached in 2018: – Three annual wage negotiations 2018 (NAO): salary agreements – Agreement on electronic voting – Third addendum to the hotline agreement to ensure attention to the special requirements of
Asset Managers France Swiss Life Asset Management Ltd – Mobile Office agreement
Council made a strong commitment to health management and, via its health team in cooperation with HR, is further expanding its comprehensive portfolio of health campaigns.
Asset Managers Germany The following works agreements were reached in 2018 for Swiss Life Asset Management GmbH and Swiss Life Invest: – Mobile Office – Team portfolio – Calculation of variable compensation (bonus payment) for 2017 – Basic salary adjustment process for non-management, non-pay-scale employees
Asset Managers Luxembourg The staff committee of Swiss Life Fund Management (LUX) S.A. met a total of six times in 2018. Three of these meetings featured a conversation with the Executive Board. The staff committee also organised several employee events. No formal agreements were reached between the staff committee and the Executive Board in 2018.
Switzerland Swiss Life Switzerland Nine members; the chairwoman enjoys up to 20% work dispensation for work on the staff committee, the vice chairwoman up to 15% and the members up to 10%.
Swiss Life Asset Managers France Swiss Life Asset Management Ltd A total of six members since 10 March 2016, of whom none has dispensation.
Germany Swiss Life Germany The Works Council Internal Services (responsible for the German branch in Garching as well as Swiss Life Partner GmbH and Schweizer Leben PensionsManagement GmbH) is composed as follows: – Eleven members, of whom the Works Council chair with 100% work dispensation for Works
The Works Council Sales Force is responsible for intermediary distribution at the branch office and is composed as follows: – Seven persons, of whom none has dispensation.
The Central Works Council as the overarching body of all operations consists of five persons (2 representatives of Works Council Internal Services, 2 representatives of Works Council Sales Force, 1 representative of the severely handicapped). The Central Works Council chair is also chair of the Works Council Internal Services, member of the business committee and national representative to the Europa Forum.
Asset Managers Germany In March 2018, the workforces of Swiss Life Asset Management GmbH and Swiss Life Invest elected their own Works Council, consisting of three Works Council members. All members work without dispensation.
Corpus Sireo The Works Council of Corpus Sireo Real Estate GmbH consists of eleven members, one member with 100% work dispensation (Works Council chair), all other members without dispensation.
Luxembourg Swiss Life Luxembourg The number of employee representatives and the time required for their work are directly proportional to the number of employees. In the Global Solutions area in Luxembourg the future employee representation consists of five ordinary representatives and five deputies. The employee representatives have at their disposal 16 hours a week to exercise their mandate.
The Swiss Life Products team in Luxembourg has reached the threshold of 15 employees and will thus elect its own employee representation in 2019.
Asset Managers Luxembourg The staff committee of Swiss Life Fund Management (LUX) S.A. consists of two active delegates, two deputy delegates and one security delegate. All delegates work without dispensation.
The Swiss Life Group cares for the environment and aims to continuously reduce its carbon footprint. To this end, Swiss Life now depends on Group-wide goals for operational ecology.
Overarching operational ecology objective In its operational ecology, Swiss Life focuses on climate protection and aims to continuously reduce its carbon footprint.
Electricity Swiss Life wants to increase the share of electricity it uses in its buildings from renewable energy sources with an eye to reaching 100% by 2021.
Environmental data on operational ecology are gathered annually in accordance with the globally recognised standard of the Association for Environmental Management and Sustainability at Financial Institutions (VfU). Its annual data collection allows Swiss Life to determine where progress has been made, where risks lie and where steps must be taken. The VfU key figures conform to the international Greenhouse Gas Protocol (Scope 1, 2 and 3) standards, and thus to the CDP (formerly Carbon Disclosure Project) as well. The data are gathered, evaluated and analysed across the Group. All the major Swiss Life locations have environmental officers and the individual divisions work closely together.
TOTAL ENERGY CONSUMPTION (IN MWH) 49 500 47 819 49 075
TOTAL GREENHOUSE GAS EMISSIONS (IN T) 24 436 22 788 26 647
TOTAL GREENHOUSE GAS EMISSIONS (IN KG/FTE) 2 771 2 775 3 311
With the acquisition of new companies, the Swiss Life Group’s greenhouse gas emissions increased by 7% in 2018, although emissions per employee remained stable. And, while the absolute consumption of energy and water, as well as the absolute volume of business travel, also increased due to business development, relative consumption per employee basically remained stable. Paper consumption, on the other hand, is also being affected by digitalisation at Swiss Life, having declined continuously in recent years, in 2018 absolutely by 10% and per employee by 16% compared to the previous year.
Switzerland In Switzerland, Swiss Life is a member of the Zurich Energy Model and has been drawing all its electricity from renewable energy sources for over ten years. This has enabled the company to reduce its annual greenhouse gas emissions by over 1300 tonnes. With its energy model, Swiss Life has pledged to improve energy efficiency at its Zurich location by 1.76% every year until 2020. Swiss Life’s head office is practically CO2 neutral. Since the early 1990s, the building has been cooled with water from Lake Zurich. Around three years ago, the system was further developed to make use of lake water for heating as well, by means of a heat pump. Over 95% of the building’s heating needs are now supplied in this fashion. All the sanitary facilities at both Zurich locations are equipped with water-saving installations, which allows Swiss Life Switzerland to save some three million litres of water each year. Rainwater has also been one of the water sources used for the sanitary facilities since 1999. All printers and copiers use paper with FSC label from environmentally and socially friendly forestry. Employees are instructed to keep their paper consumption to a minimum.
Swiss Life wants to make an active contribution to climate protection through operational ecology, for which reason it set up the Swiss Climate Foundation in 2008 in cooperation with other Swiss companies. The foundation supports SMEs in becoming more energy efficient and reducing their CO2 emissions.
Since 2011, the Swiss Life Group has taken part in the CDP (formerly Carbon Disclosure Project) survey. The CDP is an independent charitable organisation which holds the world’s most comprehensive collection of corporate information on climate change. In its first submission, Swiss Life scored 70 out of 100 index points for transparency (climate disclosure score). In 2018, Swiss Life was rated B–, a slight improvement over the previous year (2017: C).
Swiss Life Germany has also been represented in the Klima-Allianz der Stadt Hannover (Climate Alliance of the City of Hanover) network for over ten years and undertakes, in cooperation with other companies, to reduce CO2 emissions and increase energy efficiency in urban areas.
Corpus Sireo, a German company of Swiss Life Asset Managers, is gradually switching its business premises to 100% electricity from renewable energy. The company is also implementing measures in its motor pool to help improve its carbon footprint.
GRI 102-2 Activities, brands, products and services p. 5, S. 8–13, S. 95–96
GRI 102-51 Date of most recent report CR Report 2017, published in May 2018
GRI 102-53 Contact point for questions regarding the report Media Relations, p. 323
GRI 102-54 Claims of reporting in accordance with the GRI standards p. 85
The GRI is reviewing for the Materiality Disclosures Service whether the GRI Content Index is clearly displayed and whether the references of items 102-40 to 102-49 correspond with the relevant contents of the Report.
GRI 202-2 Financial implications and other risks and opportunities due p. 101 to climate change
GRI 302-3 Energy intensity p. 131 GRI 302-4 Reduction of energy consumption p. 131–133
GRI 401-1 New employee hires and employee turnover p. 118, p. 125
GRI 404-2 Programs for upgrading employee skills and transition assistance programs p. 120–121
GRI 405-1 Diversity of governance bodies and employees p. 117, p. 122
GRI 405-2 Ratio of basic salary and remuneration of women to men p. 123
GRI 417-1 Requirements for product and service information and labeling p. 95–96
GRI 417-2 Incidents of non-compliance concerning product and p. 99 service information and labeling
Total GHG emissions (in 1000 t) 24.44 22.79 26.65 1 26.23 AR, p. 131
Electricity used (in 1000 MWh) 32.01 31.56 33.50 1 35.16 AR, p. 131
Targets to reduce energy consumption yes yes yes yes AR, p. 131
Emissions reduction initiatives yes yes yes yes AR, p. 86, p. 90–91, p. 101–104, p. 130–133
Guidelines for environmental assessment of suppliers yes yes yes yes AR, p. 105–107
Green building policy yes yes yes yes AR, p. 86, p. 101–104, p. 130–133
Climate change opportunities discussed yes yes yes yes AR, p. 86, p. 100–104, p. 130–133
Risks of climate change discussed yes yes yes yes AR, p. 86, p. 100–104, p. 130–133
Health and safety policy yes yes yes yes AR, p. 124–125
Total number of part-time employees 1528 1380 1285 n/a AR, p. 123
Leadership training and skills development yes yes yes yes AR, p. 120–121
Guidelines for social assessment of suppliers yes yes yes yes AR, p. 105–107
1 A more detailed survey now includes the expenses for a total of seven foundations. As a result, the 2017 value had to be corrected upwards.
Data privacy policy yes yes yes yes AR, p. 76–78, p. 97–99 Code of Conduct
Company has customer privacy policy yes yes yes yes AR, p. 76–78, p. 97–99 Code of Conduct and further directives
Company has a risk management framework yes yes yes yes AR, p. 76–78
Financial assets at fair value through profit or loss 10 39 155 40 228
Financial assets pledged as collateral 12, 33 4 767 3 601
Premiums, policy fees and deposits received, net of reinsurance 16 613 15 522
Acquisitions of subsidiaries, net of cash and cash equivalents 28 –243 –16
Cash and cash equivalents as at 1 January 6 611 7 333
Consolidated statement of changes in equity for the year ended 31 December 2018
Equity-settled share-based payments – 10 – – – 10 – – 10
Purchases of treasury shares – – –39 – – –39 – – –39
Transfer of revaluation surplus – – – –25 25 – – – –
BALANCE AS AT END OF PERIOD 175 341 –140 1 885 12 261 14 522 425 86 15 034
Distribution out of capital contribution reserve – –356 – – – –356 – – –356
Equity-settled share-based payments – 9 – – – 9 – – 9
Swiss Life – Annual Report 2018 2 Summary of Significant Accounting Policies
The Swiss Life Group made an assessment of whether it is eligible for the temporary exemption and decided to adopt the option of deferring the application of IFRS 9.
The Swiss Life Group adopted IFRS 15 Revenue from Contracts with Customers effective from 1 January 2018. The core principle of the standard is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration of which the entity expects to be entitled in exchange for those goods or services. The adoption of IFRS 15 did not have a material impact on the Swiss Life Group’s financial statements.
Swiss Life – Annual Report 2018 2.4 Foreign currency translation and transactions
Hedges of net investments in foreign operations (net investment hedges) are accounted for similarly to cash flow hedges, i.e. the effective portion of the gain or loss on the hedging instrument is recognised in other comprehensive income and any ineffective portion is recognised immediately in profit or loss. On the disposal of the foreign operation, the gains or losses included in other comprehensive income are reclassified to profit or loss.
– Certain financial assets with embedded derivatives which otherwise would have to be separated. – Certain financial assets and financial liabilities where a measurement or recognition inconsistency can be avoided (“accounting mismatch”) that would otherwise arise from measuring those assets or liabilities or recognising the gains and losses on them on different bases.
Financial assets available for sale (AFS) Financial assets classified as available for sale are carried at fair value. Financial assets are classified as available for sale if they do not qualify as held to maturity, loans and receivables or if they are not designated as at fair value through profit or loss. Gains and losses arising from fair value changes, being the difference between fair value and cost/amortised cost, are reported in other comprehensive income. On disposal of an AFS investment, the cumulative gain or loss is
Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments. Loans include loans originated by the Group and investments in debt instruments which are not quoted in an active market and for which no intention of sale in the near term exists. Loans are initially recognised at fair value, net of transaction costs, or direct origination costs. Subsequent measurement is at amortised cost using the effective interest method.
Measurement rules are consistent with the ones for corresponding unrestricted financial assets.
A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Held-to-maturity securities and loans and receivables are assessed for impairment when a significant decrease in market value related to credit risk arises, namely after a downgrade of a debtor’s rating below single B– after initial recognition (i.e. CCC or lower according to Standard and Poor’s or equivalent) or when payments of principal and/or interest are overdue by more than 90 days. If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been
The Group has assessed the significance of insurance risk on a contract-by-contract basis. Contracts that do not transfer insurance risk at inception but at a later date are classified as insurance from inception unless the Group remains free to price the insurance premium at a later date. In this case, the contract is classified as insurance when the insurance premiums are specified. A contract that qualifies as an insurance contract remains an insurance contract until all rights and obligations are extinguished or expire.
IFRS 4 Insurance Contracts is silent on the measurement of the amounts identified as DPF. This topic will be addressed in IFRS 17 Insurance Contracts, effective from 1 January 2021. In November 2018, the IASB tentatively decided to defer the effective date of IFRS 17 by one year to reporting periods beginning on or after 1 January 2022. Cash flows to policyholders that vary depending on returns on underlying items are included in the measurement of insurance liabilities. If these cash flows are substantial, a modification of the general measurement model in IFRS 17 Insurance Contracts applies (“variable fee approach” for direct participating contracts).
The accounting for the amounts identified as DPF has been done as follows: In jurisdictions where no statutory minimum distribution ratio (“legal quote”) exists, the contrac tual right to receive, as a supplement to guaranteed benefits, additional benefits which are likely to be a significant portion of the total contractual benefits arise when management ratifies the allocation of policyholder bonuses. When ratified by management, a corresponding liability is set up. To the extent discretion with regard to amount and/or timing is involved, these amounts are included within policyholder participation liabilities. In that respect the policyholder bonus reserve set up in the statutory accounts for these contracts is regarded as discretionary. For these contracts the entire DPF is classified as a liability.
The statutory minimum distribution ratios (“legal quote”) relating to the Swiss Life Group’s operations are as follows: Switzerland Group business subject to “legal quote”: At least 90% of the calculated income on the savings, risk and cost components minus the expenses thereof must be allocated to the policyholders. All other business: no “legal quote”.
France In life insurance business, 85% of the net investment returns less 100% of the minimum guaranteed interest on the policyholder account and 90% of any other results are allocated to the policyholders as a minimum.
Liabilities for claims and claim settlement costs Liabilities for unpaid claims and claim settlement costs are for future payment obligations under insurance claims for which normally either the amount of benefits to be paid or the date when payments must be made is not yet fixed. They include claims reported at the balance sheet date, claims incurred but not yet reported, and claim settlement expenses. Liabilities for unpaid claims and claim settlement costs are calculated at the estimated amount considered necessary to settle future claims in full, using actuarial methods. These methods are continually reviewed and updated. Claim reserves are not discounted except for claims with determinable and fixed payment terms.
Assets associated with separate account/unit-linked contracts and private placement life insurance are included in financial assets designated as at fair value through profit or loss, derivatives and cash and cash equivalents. The related income and gains or losses are included in the income statement under the respective line items. The Group has allocated on a rational basis the proportion of acquisition costs related to the insurance and deposit components. The accounting policy for deferred acquisition costs applies to the portion of acquisition costs associated with the
Operating lease The Group primarily enters into operating leases for the rental of equipment and property. The total payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.
When DAC are amortised in proportion to gross profits or gross margins on the acquired contracts, realised gains /losses are taken into account as well as gains /losses recognised in other comprehensive income (unrealised gains /losses). If these gains /losses were to be realised, the gross pro fits or gross margins used to amortise DAC would be affected. Therefore, an adjustment relating to these unrealised gains /losses is recognised in other comprehensive income and is also reflected in the amount of DAC in the balance sheet (“shadow accounting”).
For non-financial assets the recoverable amount is mea sured as the higher of the fair value less costs of disposal and its value in use. Fair value less costs of disposal is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date, 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.
Borrowings Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost using the effective interest method. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings.
Borrowing costs presented in the consolidated statement of income relate to the interest expense on the financial liabilities classified as borrowings, whilst interest expense presented in the consolidated statement of income relates to interest expense on insurance and investment contract deposits and other financial liabilities.
Financial liabilities relating to non-controlling interests in investment funds are measured at fair value and changes in fair value are recognised in profit or loss.
Swiss Life – Annual Report 2018 2.22 Provisions and contingent liabilities
In October 2017, the International Accounting Standards Board issued Prepayment Features with Negative Compensation (amendments to IFRS 9 Financial Instruments) to address the concerns about how IFRS 9 Financial Instruments classifies particular prepayable financial assets. Prepayment Features with Negative Compensation amends the existing requirements in IFRS 9 Financial Instruments regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments. Under the amendments, the sign of the prepayment amount is not relevant, i.e. depending on the interest rate prevailing at the time of termination, a payment may also be made in favour of the contracting party effecting the early repayment. In addition, an aspect of the accounting for financial liabilities following
In January 2016, IFRS 16 Leasing was issued by the International Accounting Standards Board. The new standard eliminates the classification of leases as either operating leases or finance leases for lessees. Instead all leases are treated in a way similar to finance leases, applying the current standard IAS 17 Leases. The new standard brings leases on-balance sheet for lessees, the effect being that reported assets and liabilities increase. IFRS 16 Leases replaces the straight-line operating lease expense with a depreciation charge for the lease asset and an interest expense on the lease liability. This change aligns the lease expense treatment for all leases. As a practical expedient, short-term and low-value leases are exempt from this treatment. The exemption permits a lessee to account for qualifying leases in the same manner as existing operating leases (IAS 17 Leases). For lessors, the accounting treatment from IAS 17 Leases is substantially carried forward. The new standard is effective for annual periods beginning on or after 1 January 2019. The Swiss Life Group will have the standard implemented by this date applying the modified retrospective approach with several practical expedients such as the exclusion of short-term and low-value leases and leases with a short remaining term, the treatment of non-lease components as lease components, the measurement of the right-of-use asset being equal to the lease liability at transition date, the use of discount rates as per transition date and the use of hindsight. The lease liability per 1 January 2019 is expected to be in the range of CHF 100 to 200 million.
Swiss Life – Annual Report 2018 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies
Swiss Life – Annual Report 2018 values of the liabilities so established are adequate in the light of these latest estimates (liability adequacy test). If the valuation of the liabilities is deemed adequate, the assumptions are not altered. However, if the valuation of the liabilities is deemed inadequate, the assumptions underlying the valuation of the liabilities are altered (“unlocked”) to reflect the latest estimates; no margin is added to the assumptions in this event.
In France, expense allocation is based on an activity-based cost methodology. Recurrent costs are subdivided into the following main cost categories: acquisition costs, administration costs and asset management costs.
Investment returns Assumptions relating to investment returns are based on the strategic asset allocation. From this gross investment return, projected asset management fees are deducted to obtain a net investment return.
The carrying amount of provisions is set out in note 25.
Net gains/losses on financial instruments at fair value through profit or loss 580 –15 –138 –2 1 –11 415 0 415
Net insurance benefits and claims –10 531 –2 155 –1 263 –12 – 0 –13 961 0 –13 961
Policy fees earned on investment and unit-linked contracts 39 169 6 82 – – 296 0 296
Net gains/losses on financial assets 780 –39 –86 –19 –1 16 651 – 651
Net gains/losses on investment property 450 164 37 – – – 651 – 651
Financial assets available for sale 72 716 19 411 9 573 1 528 28 1 664 104 922 – 104 922
Risk management functions are performed at several levels by corresponding bodies within the Swiss Life Group, such as the Investment and Risk Committee at the level of the Board of Directors of the Swiss Life Group and the Group Risk Committee at the level of the Corporate Executive Board of the Swiss Life Group. The risk management functions at the level of the individual operations of the Swiss Life Group are organised accordingly.
Since the Group’s core business is insurance, its risk management is in line with the two main regulatory solvency frameworks in Switzerland (SST) and throughout Europe (Solvency II), as well as economic considerations. In addition to general governance aspects and extensive reporting requirements, this includes an annual Own Risk and Solvency Assessment (ORSA) at Group level covering a comprehensive risk assessment as well as the integration of risk and solvency aspects in the overall management of the Swiss Life Group.
The information below focuses first on the risk budgeting and asset and liability management process and then on the principal risk categories faced by the Swiss Life Group.
Consideration of constraints Aspects other than the economic view, such as regulatory requirements including solvency, statutory minimum distribution ratios (“legal quote”), funding ratios, local accounting rules and International Financial Reporting Standards, liquidity requirements and rating targets, are also to be considered in the ALM process.
TOTAL LIABILITIES LINKED TO ASSETS FOR THE ACCOUNT AND RISK OF THE SWISS LIFE GROUP’S CUSTOMERS 34 222 35 466
Net gains/losses on financial assets 8 –511 659 2 –8 –509 651
Net gains/losses on financial instruments at fair value through profit or loss 8 420 –1 192 –5 11 415 –1 181
Net gains/losses on investment property 725 651 – – 725 651
Share of profit or loss of associates 0 3 – – 0 3 5.4 Financial risk management objectives and policies
The risk budgeting and limit setting described above ensure that the corresponding risks remain under control. The market risk capital, interest rate risk capital, credit spread risk capital and credit risk capital limits, as well as exposure limits for currencies and net equity for each large insurance operation, are defined based on the risk appetite per operation.
Interest rate risk relating to financial in stru ments and insurance contracts The Group’s primary interest rate exposure is to contracts with guaranteed benefits and the risk that the interest rates of the financial assets purchased with the consideration received from the contract holders are insufficient to fund the guaranteed benefits and expected discretionary participation payable to them.
TOTAL INTEREST-SENSITIVE INSURANCE LIABILITIES 72 060 25 352 74 97 486
Spread risk Spread risk arises from bond investments when the counterparties are not considered risk free. The market value of these bonds corresponds to the discounting of the agreed payment flows with an interest rate curve composed of the base interest rate curve and a spread curve. The spread curve is defined by the counterparty’s credit quality and the risk aversion of the capital market actors. Spreads increase markedly during capital market crises, leading to a significant decrease in the bond portfolio’s market value.
The Group is also exposed to credit risk associated with reinsurance recoverables. As a consequence, the financial strength of reinsurers is monitored. The creditworthiness of reinsurers is considered on an annual basis by reviewing their financial strength and also prior to any contract being signed. The general policy of the Swiss Life Group is to reinsure its insurance risks only with counterparties rated A– or above (Standard & Poor’s or equivalent). In exceptional cases, reinsurers with a lower rating may be considered. Additionally, the Group holds substantial collateral under related reinsurance agreements in the form of deposited funds and securities.
Debt securities at fair value through profit or loss 340 545 6 378 6 647 6 718 7 192
Debt securities available for sale 81 242 87 446 – – 81 242 87 446
Senior loans available for sale 3 010 2 649 – – 3 010 2 649
TOTAL EXPOSURE TO CREDIT RISK 119 398 123 484 9 195 9 476 128 593 132 960
To mitigate specific credit risk, the Group purchases credit risk protection in the form of credit default swaps and credit default swap indices. As at 31 December 2018, these derivative contracts provided a notional principal protection of CHF 5271 million (2017: CHF 3894 million).
TOTAL OTHER LOANS AND RECEIVABLES 3 088 2 578 1 910 5 744 1 996 –28 15 287
Debt instruments that on a specific date give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding meet the SPPI criterion. The exposure to credit risk of such debt instruments is disclosed in the following table.
Financial assets individually determined as impaired – impairment loss allowance for the year 2017
Liquidity risk Liquidity risk is the risk that not enough cash resources may be available to pay obligations when due (primarily obligations arising from the insurance business and debt) at a reasonable cost. The Swiss Life Group is exposed to liquidity risk which primarily arises on calls on its cash resources from claims, amounts payable at maturity and surrenders arising from insurance and
Swiss Life – Annual Report 2018 investment contracts. The Swiss Life Group faces the risk of not being able to refinance its debt obligations due to unexpected long-term market disruptions.
Financial assets available for sale 9 447 7 734 90 990 97 188 – – 100 437 104 922
The Swiss occupational pensions (BVG) segment of the group life insurance business in Switzerland is a significant part of the Group’s overall life insurance business. The BVG business provides an example of a minimum return guarantee. The guarantee takes the form of the right to convert an assured sum into a life annuity at a guaranteed conversion rate: The prevalent annuity conversion rate for the mandatory part of the BVG business is set at 6.8% for men (retirement age 65) and 6.8% for women (retirement age 64).
CURRENT ESTIMATE OF CUMULATIVE CLAIMS 263 265 294 278 280 296 291 276 317 331 2 892
Cumulative payments to date –246 –244 –248 –236 –241 –237 –220 –201 –189 –131 –2 192
Effect of discounting – – – – – – – – – – –
Monitoring of the risks taken is done 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.
Approximately 1.3% in terms of earned insurance premiums was ceded as at 31 December 2018 (2017: 1.2%).
Operational risk management at Swiss Life includes the methods and processes used for the identification, assessment and steering or avoidance of operational risks. Operational risk management defines operational risk as the danger that losses may result from shortcomings or failures stemming from internal processes, people, systems or external events. Reliability of information and ensuring confidentiality, availability and integrity of data are an integral part of operational risk management. Swiss Life’s internal control system consists of the entirety of procedures, methods and measures prescribed by the Board of Directors and the Corporate Executive Board to ensure the orderly conduct of business. The focus is on the reliability of financial reporting, the effectiveness of business processes and compliance with laws and regulations issued to protect the Swiss Life Group’s assets.
In addition to asset allocation, the main exposures are at counterparty level.
Risk transfer primarily takes the form of reinsurance. Alternative forms of risk transfer (such as securitisation) require the formal approval of the Group Risk Committee. No significant alternative form of risk transfer is used by the Group at present.
Effective from 2017, the sensitivity analysis is based on how IFRS profit or loss and other comprehensive income would have been affected if changes in the relevant risk variables that were reasonably possible at the end of the reporting period had occurred.
The sensitivity analysis with regard to market risk is as follows.
At 31 December 2018, if equity prices had been higher by 10%, profit or loss would have been CHF 329 million lower (2017: CHF 379 million lower) and other comprehensive income would have been CHF 703 million higher (2017: CHF 651 million higher). If equity prices had been lower by 10%, profit or loss would have been CHF 217 million higher (2017: CHF 343 million higher) and other comprehensive income would have been CHF 680 million lower (2017: CHF 602 million lower). These impacts are gross before policyholder and tax. This sensitivity measures the impact of an increase/decrease in the market value of equities (incl. hedge funds and private equity) at the closing date. Investment funds with substantial investment in equities are included in the analysis, as are hedging effects.
At 31 December 2018, if mortality rates for life assurance had been higher by 5%, profit or loss would have been CHF 1 million lower (2017: CHF 1 million). This sensitivity measures the impact of an increase in the mortality rates in life assurance, e.g. endowments and term life insurance products where the net amount at risk is positive. If mortality rates for the annuity business had been lower by 5%, profit or loss would have been CHF 4 million lower (2017: CHF 4 million). This sensitivity concerns annuities in payment and future annuities. Whether policies are affected already during the savings accumulation period might depend on technical implementation issues, e.g. whether the accumulation and annuity phases are driven by the same mortality table. These impacts are net after policyholder and tax.
RESULT USED TO DETERMINE DILUTED EARNINGS PER SHARE 1 076 1 013
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING FOR DILUTED EARNINGS PER SHARE 34 158 467 34 169 909
DILUTED EARNINGS PER SHARE FOR THE NET RESULT ATTRIBUTABLE TO EQUITY HOLDERS OF SWISS LIFE HOLDING (IN CHF) 31.49 29.63
Swiss Life – Annual Report 2018 7 Premiums, Policy Fees and Deposits Received
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 19 218 18 565
Swiss Life – Annual Report 2018 8 Details of Certain Items in the Consolidated Statement of Income
TOTAL NET GAINS/LOSSES ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 5 415 –1 181
Net benefits and claims under investment contracts with discretionary participation 665 867
Amortisation of present value of future profits (PVP) 17 1 0
Derivatives designated as fair value hedges 149 162 26 101 11 650 14 103
Derivatives designated as cash flow hedges 72 304 21 135 1 358 5 222
Derivatives designated and accounted for as hedging instruments comprise derivatives associated with fair value hedges, cash flow hedges and net investment hedges that qualify for hedge accounting.
Derivatives designated as fair value hedges as at 31 December 2017
The Swiss Life Group used interest rate swaps to hedge available-for-sale fixed-rate bonds and bonds classified as loans in Swiss francs, euro, British pounds and US dollars against changes in the fair value attributable to interest rate risk. The nominal amount of these bonds as at 31 December 2018 was CHF 5.6 billion (2017: CHF 8.2 billion).
Derivatives designated as cash flow hedges as at 31 December 2017
In 2018, a gain of CHF 66 million was reclassified from other comprehensive income to profit or loss (2017: gain of CHF 23 million), of which CHF 45 million were included in investment income (2017: CHF 25 million), and CHF 21 million in net gains /losses on financial assets (2017: loss of CHF 2 million). The CHF-denominated forward starting swaps were terminated in 2018.
In 2018, investments in senior secured loan funds of USD 3196 million (2017: USD 2211 million) and investments in real estate funds of EUR 1012 milllion (2017: EUR 320 milllion) were hedged.
Swiss Life – Annual Report 2018 10 Financial Assets at Fair Value through Profit or Loss
Swiss Life – Annual Report 2018 12 Financial Assets Pledged as Collateral
Other debt securities classified as loans 211 270 – – 211 270
BALANCE AS AT END OF PERIOD 4 5 16 14 20 19
TOTAL ALLOWANCE FOR IMPAIRMENT LOSSES 20 13 31 33 51 45
Classification as assets held for sale and other disposals –630 –522
BALANCE AS AT END OF PERIOD 31 381 27 946 of which pledged as security for mortgage loans 1 522 506
Rental income from investment property was CHF 1154 million for the period ended 31 December 2018 (2017: CHF 1018 million). Operating expenses arising from investment property that generated rental income amounted to CHF 221 million for the period ended 31 December 2018 (2017: CHF 225 million).
Agrippa Quartier GmbH & Co. Geschlossene InvKG, Heusenstamm 38.1% 51 – n/a n/a n/a
Current liabilities –15 –14 –33 –36 –11 – –205 –61 –3 –3
Due to loss of control in 2017 and retention of a significant interest, Agrippa Quartier GmbH & Co. Geschlossene InvKG, Heusenstamm, is accounted for as an investment in associates.
BALANCE AS AT END OF PERIOD –218 –43 –57 –19 –336
TOTAL PROPERTY AND EQUIPMENT AS AT END OF PERIOD 340 21 10 21 392 of which assets held under a finance lease – – 0 – 0 of which buildings in the course of construction 3
BALANCE AS AT END OF PERIOD 567 61 63 34 725
BALANCE AS AT END OF PERIOD –211 –41 –53 –17 –321
TOTAL PROPERTY AND EQUIPMENT AS AT END OF PERIOD 356 20 11 17 404 of which assets held under a finance lease – – 0 – 0
No borrowing costs were capitalised in property and equipment in 2018 and 2017.
BALANCE AS AT END OF PERIOD 8 9 1 454 1 453 32 20 1 494 1 482
BALANCE AS AT END OF PERIOD 1 981 229 216 36 2 462
BALANCE AS AT END OF PERIOD –524 –119 –177 –2 –822
TOTAL OTHER INTANGIBLE ASSETS AS AT END OF PERIOD 1 318 62 46 24 1 449
Goodwill relating to Lloyd Continental has been allocated to the “France” segment. Goodwill relating to CapitalLeben has been allocated to the “International” segment. Goodwill relating to Corpus Sireo and Beos has been allocated to the “Asset Managers” segment. Of the goodwill relating to other acquisitions, CHF 19 million (31.12.2017: CHF 21 million) have been allocated to the “France” segment, CHF 26 million (31.12.2017: CHF 26 million) to the “Asset Managers” segment and CHF 61 million (31.12.2017: CHF 23 million) to the “International” segment as at 31 December 2018.
Net carrying amount of goodwill 152 152 454 472 72 75 678 699
As at 31 December 2018, customer relationships comprise customer relationships relating to Swiss Life Select: CHF 3 million (31.12.2017: CHF 3 million), which were allocated to the “Switzerland ” segment. The “France” segment comprises customer relationships of CHF 12 million (31.12.2017: CHF 13 million) and the “Asset Managers” segment of CHF 87 million (31.12.2017: CHF 45 million). The “International” segment comprises customer relationships of CHF 9 million (31.12.2017: CHF 0 million). Customer relationships were included in the impairment test of the respective cash-generating unit.
Swiss Life – Annual Report 2018 18 Other Assets and Liabilities
1 of which CHF 247 million pledged as security for loans (2017: CHF 291 million)
Swiss Life – Annual Report 2018 19 Investment and Unit-Linked Contracts
Investment contracts without DPF at amortised cost 30 0 0 – – 0 0
Liabilities released for payments on death, surrender and other terminations –2 401 –2 007
Effect of changes in actuarial assumptions and other movements –1 044 522
In the case of contracts that do not have significant insurance risk but contain discretionary participation features, the Swiss Life Group primarily bases its accounting policies on the requirements of the Generally Accepted Accounting Principles in the United States (status of US GAAP as of the first application of IFRS 4).
Reconciliation of liabilities arising from financing activities for the year 2018
BALANCE AS AT END OF PERIOD 2 960 – 424 0 3 385
Reconciliation of liabilities arising from financing activities for the year 2017
On 24 March 2016, Swiss Life Ltd issued subordinated perpetual callable bonds in the amount of CHF 450 million. The bonds are guaranteed by Swiss Life Holding, have no fixed maturity date and are first callable on 24 September 2021 or at each interest payment date thereafter at the option of the issuer, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The interest has been fixed at 3.75% p.a. until 24 September 2021. If the bonds are not redeemed on 24 September 2021, the interest resets at a rate fixed for the subsequent five years, consisting of the aggregate of the then-prevailing five-year CHF swap rate and the initial margin of 4.392% p.a.
Swiss Life AG CHF 175 CHF 175 2.625% 2018 2028 174 –
Swiss Life AG CHF 471 CHF 471 +4.200% 2012 2022 469 469
Swiss Life AG CHF 300 CHF 300 5.500% 2012 2018 – 300
Swiss Life AG EUR 443 EUR 192 +2.050% 1999 2019 217 225
Claims under non-life insurance contracts 917 924 174 176 743 748
Effect of changes in actuarial assumptions and other movements 938 359
Deposits released for payments on death, surrender and other terminations during the year –314 –318
Switzerland Pension plans in Switzerland are governed by the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG). Pension plans must be managed by independent, legally autonomous entities and are under regulatory supervision. The plans covering the Group’s employees in Switzerland are set up as foundations. The foundation board as the most senior governing body must be composed of equal numbers of employee and employer representatives. Main responsibilities of the foundation board are the definition of plan benefits, funding system and the setting of actuarial parameters and investment policies for the plan assets. The BVG defines minimum levels with regard to benefits (including conversion rate for old-age pensions), employer/employee contributions and the interest rate for the accrual of the employee’s pension account. An annual actuarial report according to BVG requirements is prepared which shows the funding level of the respective plan. The measurement basis for the plan’s assets and benefit obligations for this purpose is in accordance with BVG rules.
As a result of the effects of the continuing low interest rate environment, reduced investment return expectations on the plan assets and increasing life expectancy, the board of trustees announced measures to support the long-term financial stability of the Swiss pension plan. As of 2021, the pension plan will operate with lower conversion rates. To mitigate the effects of such a plan change, the employees individual pension assets will be increased. The respective contribution of the foundation will be defined by the board of trustees in 2020. Additionally, the pension plan will increase savings contributions as of 1 January 2021.
To assess the funding situation of the defined benefit plans in total, plan assets as well as insurance contracts not eligible as plan assets under IFRS must be set off against the present value of the defined benefit obligation. The total deficit taking into consideration insurance contracts not eligible as plan assets under IFRS amounted to a deficit of CHF 338 million as at 31 December 2018 (2017: deficit of CHF 330 million).
Actuarial gains and losses on the defined benefit obligation 45 –40
Average life expectation at ordinary retirement age (men) 22.5–23.4 22.4–23.3 19.8–27.0 19.8–26.8
At 31 December 2018, if the discount rate had been 50 basis points higher (lower), the defined benefit obligation would have decreased by CHF 253 million (increase CHF 286 million). At 31 December 2017, if the discount rate had been 50 basis points higher (lower), the defined benefit obligation would have decreased by CHF 262 million (increase CHF 297 million).
At 31 December 2018, if the future expected salary growth had increased (decreased) by 50 basis points, the defined benefit obligation would have increased by CHF 19 million (decrease CHF 19 million). At 31 December 2017, if the future expected salary growth had increased (decreased) by 50 basis points, the defined benefit obligation would have increased by CHF 20 million (decrease CHF 19 million).
At 31 December 2018, if the average life expectancy had increased by one year (for both men and women), the defined benefit obligation would have increased by CHF 112 million. At 31 December 2017, if the average life expectancy had increased by one year (for both men and women), the defined benefit obligation would have increased by CHF 118 million.
Duration of the defined benefit obligation (weighted average no. of years) 15.3 15.6
The 2014 and 2015 equity compensation plans are based on the Group-wide programme “Swiss Life 2015”, which was announced at the Swiss Life Group’s Investors’ Day on 28 November 2012. On the basis of the medium-term planning 2013–2015 (2013 equity compensation plan) and 2014 – 2016 (2014 equity compensation plan), 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. With regard to the 2015 equity compensation plan, the Board of Directors has set the following performance criteria on the basis of the medium-term planning 2015–2017: IFRS profit (50% weighting), the risk and fee result (25% weighting) and cash to Swiss Life Holding for further strengthening of the financial substance and payout capacity (25% weighting). After expiry of the three-year period of the RSU plan, the target value for each performance criterion according to the medium-term planning is compared with the actual result achieved. The share allocation corresponds to the number of allocated RSUs (1 RSU = 1 share) if all three performance criteria have been achieved or exceeded after the three-year period has elapsed; overperformance does not lead to a higher share allocation. If the targets are only partly achieved, the share allocation is correspondingly reduced in accordance with the weighting of the performance target concerned, or the RSUs expire worthless.
The expected weighted-average tax rate for the Group in 2018 was 21.1% (2017: 23.4%). This rate was derived by obtaining a weighted average of the expected income tax rates in the various jurisdictions in which the Group operates. The change of the weighted-average tax rate is due to the geographical allocation of the profits and the different tax rates in these jurisdictions. The actual income tax expense differs from the expected amount as follows.
Income tax calculated using the expected weighted-average tax rate 295 309
TOTAL DEFERRED INCOME TAX ASSETS/LIABILITIES 55 40 1 991 2 216
NET DEFERRED INCOME TAX ASSETS/LIABILITIES –2 176 –82 391 – –80 11 –1 936
Deferred tax liabilities have not been recognised on the aggregate amount of temporary differences with consolidated investments in subsidiaries to the extent the Group considers such undistributed earnings as being indefinitely reinvested. The amount of such temporary differences was approximately CHF 9.6 billion as at 31 December 2018 (2017: CHF 10.1 billion). If such amounts from entities controlled by the Group are ever distributed, no material tax liabilities would be incurred due to participation exemption rules, unrecognised tax loss carryforwards and applicable double taxation treaties.
BALANCE AS AT END OF PERIOD 17 9 22 28 48 37 87 74
“Other” comprises various liabilities of uncertain timing or amount (e.g. indemnification provision relating to property development and management).
As at 31 December 2018, the share capital of Swiss Life Holding consisted of 34 223 106 fullypaid shares with a par value of CHF 5.10 each (2017: 34 223 106 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 19 675 534.80 as at 31 December 2018 (2017: CHF 19 675 534.80).
The conversion of convertible debt in 2017 into Swiss Life Holding shares and the corresponding impact on share capital and share premium is described in note 20.
BALANCE AS AT END OF PERIOD 34 223 106 34 223 106
Accumulated other comprehensive income comprises items of income and expense that are recognised directly in equity rather than in profit or loss, as required or permitted by certain IFRSs.
The following table provides information relating to amounts recognised in accumulated other comprehensive income.
Net investment hedges – gross 9 – – – 9 – – – – 9
Net other comprehensive income before non-controlling interests –125 –1 336 –62 13 –1 510 21 24 – 45 –1 465 1 Amount relates to debt securities reclassified to loans in 2008 (note 13).
Net balance as at 1 January –1 157 3 685 464 –30 2 962 64 –353 – –289 2 673
NET BALANCE AS AT END OF PERIOD –888 4 127 410 –22 3 626 72 –325 – –252 3 374
Reclassification to profit or loss – gross – –495 –23 15 1 –501 – – – – –501
NET CHANGE IN CASH AND CASH EQUIVALENTS –154 –829 –4 –3
The Swiss Solvency Test (SST) is the Swiss legislation which governs the capital requirements of insurance companies and groups. It is a principle-based framework whose main objective is the alignment of the required capital with the underlying risks. The SST capital requirement underpins a high level of confidence that insurers will meet their obligations towards policyholders even in adverse circumstances. Swiss Life uses an internal model to calculate the available and the required capital for the SST. As of 1 January 2019 Swiss Life will use the new SST standard model with some company-specific adjustments for the determination of the regulatory solvency.
Swiss Life reports to the Swiss Financial Market Supervisory Authority FINMA. The reporting covers risk management and solvency, liquidity, legal structure, management organisation and intra-group transactions. The reporting is submitted on an ad-hoc, quarterly, half-yearly or yearly basis depending on the topic and is reviewed on a yearly basis by the statutory auditor according to the legal requirements. As at 31 December 2018 and 2017, Swiss Life was compliant with the legal requirements.
In March 2018, the asset management and real estate company Artemis Acquisition Germany S.à r.l., Luxembourg, was acquired.
Fincentrum a.s., one of the leading independent financial advisors in the Czech Republic and Slovakia, domiciled in Prague and Bratislava, was acquired in October 2018.
In October 2017 Medical Money Management Ltd., domiciled in Liverpool, a company specialised in providing financial planning advice to medical, dental and other professionals was acquired.
Due to loss of control in the first half of 2018, SOBRADO Software AG, Cham, is accounted for as an investment in associates.
Due to loss of control in the second half of 2018, Artemis Acquisition Germany S.à r.l., Luxembourg, is accounted for as an investment in associates.
In 2017, the real estate companies CS Stella (LUX) S.à r.l., Luxembourg, and Agrippa Quartier GmbH & Co. Geschlossene InvKG, Heusenstamm, as well as Swiss Life Immo-Arlon, Société Anonyme, Strassen, were sold. The majority of the shares in the real estate company Vestas Germany ACB GmbH & Co. KG, Cologne, were sold. The company is now held with a participation of 5.1% and was renamed VREF Germany ACB GmbH & Co. KG in 2018.
“Guarantees issued” in 2017 relates to a bank loan granted to an associated company of the Group in relation to property under construction.
The details regarding key management compensation in accordance with Article 663bbis of the Swiss Code of Obligations or the Ordinance against Excessive Compensation in Listed Stock Companies (Compensation Ordinance, VegüV), respectively, are set out in the Compensation Report, which forms part of the Corporate Governance section of the Annual Report 2018 of the Swiss Life Group. The information according to Article 663c of the Swiss Code of Obligations is shown in the Notes to the Swiss Life Holding Financial Statements.
For reporting purposes, a fair value hierarchy is established that categorises the inputs to valuation techniques used to measure fair value into level 1, 2 or 3. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1 inputs) and the lowest priority to unobservable inputs (level 3 inputs).
If one or more significant inputs to these valuation techniques are not observable in the market, the assets or liabilities are included in level 3. Such inputs may include information that is derived through extrapolation which is not substantiated by observable market data or that reflects own assumptions about what market participants would use in pricing the asset or liability.
Financial instruments As a general rule, fair values of financial instruments are based on quoted prices sourced from well-known independent price providers such as Bloomberg. Model-based level 2 and level 3 valuations of financial instruments are applied to a minority of the assets.
Assets for the account and risk of the Swiss Life Group’s customers 26 917 28 885 1 297 1 318 3 383 2 622 31 597 32 824
Equity securities: Equity securities categorised as level 2 of the fair value hierarchy comprise unlisted equities for which the prices are not available in the exchange market. The instruments are evaluated by counterparties or third-party independent agencies based on market consistent valuation parameters.
Currency derivatives: – Foreign currency options are valued on the basis of the Garman-Kohlhagen model with the spot foreign exchange rate, the interest rates of the underlying currencies and the foreign exchange rate volatility as main inputs.
Equity derivatives: Over-the-counter equity-index options are valued using the Black-Scholes model. Main inputs are the current spot value and the dividend yield of the underlying index. The implied volatility is taken from similar exchange-traded equity index options.
Significant increases or decreases in estimated rental value and rent growth per annum would result in a higher or lower fair value of investment property. Significant decreases or increases in the discount rate would result in a higher or lower fair value. The following sensitivity information show how the fair value of investment property would have been affected if changes in certain parameters that are used in the discounted cash flow model for the determination of fair value had occurred. At 31 December 2018, if rental income that can be earned in the long term had decreased by 5%, the fair value of investment property would have been CHF 1887 million lower (2017: CHF 1866 million). At 31 December 2018, if discount rates had been 10 basis points higher, the fair value of investment property would have been CHF 862 million lower (2017: CHF 807 million).
Debt instruments for the account and risk of the Swiss Life Group’s customers –652 6 378
The fair value and gross carrying amount of debt instruments that meet the SPPI criterion and have a credit rating below investment grade are disclosed in the following table.
Debt instruments SPPI below investment grade as at 31 December 2018
for assets held at the end of the period – 0 – 130 –28 338 711 1 151
for assets held at the end of the period – 0 – 63 –8 –105 601 551
Total gains/losses recognised in profit or loss – – 0 0 60 6 60 6
Transfers into level 3 – – – – – – – –
Transfers out of level 3 – – – – – –11 – –11
for liabilities held at the end of the period – – 0 0 59 6 59 6
The discount factors for other loans are derived from the Group’s current lending rates for similar loans. For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values equal the carrying values.
Swiss Life – Annual Report 2018 31 Offsetting Financial Assets and Liabilities
NET AMOUNTS PRESENTED IN THE BALANCE SHEET 2 140 1 675 – – 19 – 2 158 1 675
Gross amounts of recognised financial liabilities before offsetting 1 048 1 619 4 625 3 662 15 – 5 688 5 281
NET AMOUNTS PRESENTED IN THE BALANCE SHEET 1 048 1 619 4 625 3 662 14 – 5 688 5 281
Other contingent liabilities and commitments 344 559 1of which relating to investments in associates – 2
Later than 1 year and not later than 5 years 118 115
Contractual obligations for repairs and maintenance of investment property amounted to CHF 179 million as at 31 December 2018, which are included in this line item (2017: CHF 304 million ).
Securities pledged under repurchase agreements1 4 767 3 601 4 767 3 601
Securities lent in exchange for securities received 3 861 5 516 3 861 5 516 1 of which can be sold or repledged by transferee 4 767 3 601 4 767 3 601
Other securities received 49 71 34 Events after the Reporting Period
Adroit Private Equity AG, Zürich CH 100.0% 100.0% Private equity aXenta AG, Baden-Dättwil CH 100.0% 100.0% Information technology
Swiss Life International Services AG, Schaan IN 100.0% 100.0% Services 1 Segment (CH = Switzerland, AM = Asset Managers, IN = International, FR = France, DE = Germany)
SL RETAIL FRANCE 1, Paris FR/DE from 16.03.2017 71.8% 100.0% Real estate
ACB Projekt GmbH, Köln CH from 04.04.2017 50.0% 50.0% Asset management & Real estate
BCP GP GmbH, Berlin AM from 12.12.2018 100.0% 100.0% Asset management & Real estate
BEOS AG, Berlin AM from 30.08.2018 100.0% 100.0% Asset management & Real estate
BEREM Property Management GmbH, Berlin AM from 30.08.2018 100.0% 100.0% Asset management & Real estate
BVIFG I General Partner GmbH, Berlin AM from 30.08.2018 100.0% 100.0% Asset management & Real estate
BVIFG I Management GmbH, Berlin AM from 30.08.2018 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Aurum GmbH & Co. KG, Köln CH 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Immobilien Beteiligungs GmbH, Köln CH 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Projektentwicklung Beteiligungs GmbH, Köln AM 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Projektentwicklung Köln-West GmbH, Köln AM until 16.05.2018 – –
CORPUS SIREO Projektentwicklung Wohnen GmbH, Köln AM 99.9% 100.0% Asset management & Real estate
CORPUS SIREO Real Estate GmbH, Köln AM 100.0% 100.0% Holding 1 Segment (CH = Switzerland, AM = Asset Managers, IN = International, FR = France, DE = Germany)
FRECOR Projektentwicklung und Wohnbau GmbH, Köln AM 76.0% 76.0% Asset management & Real estate
SL Beteiligungs-GmbH & Co. Grundstücksverwaltung KG, Garching b. München DE 100.0% 100.0% Real estate
SL Beteiligungs-GmbH & Co. Immobilien VI KG, Garching b. München DE 100.0% 100.0% Real estate
Swiss Life Deutschland erste Vermögensverwaltungs GmbH, Garching b. München DE 100.0% 100.0% Services
Swiss Life Kapitalverwaltungsgesellschaft mbH, Heusenstamm AM 100.0% 100.0% Asset management & Real estate
Swiss Life Partner Service- und Finanzvermittlungs GmbH, Garching b. München DE 100.0% 100.0% Services
1 Segment (CH = Switzerland, AM = Asset Managers, IN = International, FR = France, DE = Germany)
CS Stella (LUX) S.à r.l., Luxembourg CH until 04.07.2017 – –
Swiss Life Assurance Solutions S.A., Luxembourg Other 100.0% 100.0% Non-life insurance
Swiss Life Hotel Properties SCS, Luxembourg DE 100.0% 100.0% Asset management & Real estate
Swiss Life Loan Fund (LUX) SA, SICAV-SIF, Luxembourg DE from 19.09.2017 100.0% 100.0% Investment funds
(formerly Swiss Life REF (LUX) European Retail SCS, SICAV-RAIF), Luxembourg FR/DE from 08.03.2017 71.8% 71.8% Real estate
sous la forme d’une SICAV, Luxembourg DE 66.4% 66.4% Real estate
Cortenbergh 107 SA, Bruxelles CH from 25.07.2018 100.0% 100.0% Asset management & Real estate
Swiss Life Network (Asia) Pte. Ltd., Singapore IN 100.0% 100.0% Services
Opinion We have audited the consolidated financial statements of Swiss Life Holding Ltd and its subsidiaries (the Group), which comprise the consolidated balance sheet as at 31 December 2018 and the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
In our opinion, the consolidated financial statements (pages 142-297) give a true and fair view of the consolidated financial position of the Group as at 31 December 2018 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.
Policyholders’ benefits represent the estimated future benefit liability for traditional life insurance
• Verification of the consistency of the assumptions made by management with assumptions made elsewhere
• Review of the methodology for determining the selected discount rate, based on the above input parameters.
The existing goodwill amounts to CHF 1’457 million as a result of various business combinations, mainly Swiss Life Select, Lloyd Continental, CapitalLeben, Corpus Sireo and Beos. Goodwill is subject to management testing, at least annually, for impairment at the cash generating unit level.
The recoverable amounts have been determined on a value-in-use basis and use cash flow projections based on financial budgets approved by management and the board of directors. The calculations are based on present values that use a single set of estimated cash flows and a single discount rate. The cash flow projections cover a three or five-year period, and consider a terminal value after such period, based on long-term growth assumptions in the various geographical markets, which is material to the overall value-in-use.
We obtained the mid-term planning documents for the individual cash generating units, as approved by management and the board of directors, including details on activities supporting the expected development. In particular, we challenged management as to the feasibility of reaching the cash flows.
We consider the valuation approach, and the assumptions and parameters used within, as a reasonable and adequate basis for the assessment of recoverability of goodwill. The audit evidence obtained through our audit procedures was sufficient and suitable to assess the recoverability of goodwill.
We focused on investment property due to the size of such property with respect to the total amount of invested assets and the fact that there is a high degree of judgement involved in determining the fair value. Further, we consider the investment property in Switzerland as key audit matter, as the value provides for 74% of the investment property on the Group’s balance sheet.
During the audit we have been supported by our real estate valuation experts. In particular, our valuation review included the following: • assessed the completeness and appropriateness of the valuation report and the competence, objectivity and independence of the valuation expert
• examined the formal aspects, in particular the compliance with investment property valuation standards
Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
Swiss Life Holding increased its profit in the 2018 financial year from CHF 314 million to CHF 460 million.
As at the end of the year, Swiss Life Holding had assets (liquid funds, receivables due from subsidiaries, debt securities, investment funds and equities) of CHF 1678 million. Liquid funds increased from CHF 65 million to CHF 118 million, and debt security, investment fund and equity holdings reduced from CHF 1647 million to CHF 1524 million. One of the reasons is the financing of the share buyback announced in 2018, for a total value of CHF 1000 million. Shares were bought back in the amount of CHF 87 million. All debt securities in the possession of Swiss Life Holding may be pledged as collateral.
Swiss Life Holding’s profit distribution to shareholders in the period under review came to CHF 460 million, or CHF 13.50 per share, and was made out of the capital contribution reserve. The par value of the share as well as Swiss Life Holding’s nominal share capital stand unchanged at CHF 5.10 and CHF 175 million, respectively.
Staff costs and operating expenses including taxes dropped from CHF 22 million to CHF 15 million. The reduction is due to the stamp duty on issues resulting from the convertible bond conversions in the previous year.
Loans to Group companies CHF 721 million of the loans to Group companies is classified as subordinated.
Statutory capital reserve The statutory capital reserve consists of the capital contribution reserve of CHF 263 million (previous year: CHF 724 million). The capital contribution reserve fell by CHF 13.50 per share or CHF 460 million due to the distribution of profit during the year under review. As at 31 December 2018, the capital contribution reserve came to CHF 263 million. Of this amount, CHF 86 million is recognised by the Federal Tax Administration, while the legal qualification of CHF 177 million is still open and is to be reassessed according to future legal developments.
As part of the share buyback programme, Swiss Life Holding purchased a total of 227 700 treasury shares at an average price of CHF 380.84. As at 31 December 2018, therefore, the Swiss Life Group held a total of 418 899 treasury shares.
Swiss Life Holding further provides capital guarantees for a maximum net asset value of CHF 1100 million to Swiss Life Ltd, CHF 146 million to Swiss Life Products, CHF 6 million to Swiss Life Liechtenstein, CHF 24 million to Corpus Sireo and CHF 100 million to cover regulatory requirements at the level of subsidiaries.
Share ownership/participation rights as at 31 December 2018 As at 31 December 2018, acting members of the Board of Directors and the Corporate Executive Board (including closely linked parties) held the following number of registered Swiss Life Holding shares and future subscription rights to Swiss Life Holding shares in the form of Restricted Share Units (RSUs).
Opinion We have audited the financial statements of Swiss Life Holding Ltd, which comprise the balance sheet as at 31 December 2018, income statement and notes for the year then ended, including a summary of significant accounting policies.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into account the structure of the entity, the accounting processes and controls, and the industry in which the entity operates.
As key audit matter the following area of focus has been identified: Valuation of participations
Materiality The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Annually, management analyse participations to assess valuation adjustments. For the analysis
How our audit addressed the key audit matter significant judgement is applied, to determine assumptions, such as new business volume, commission income, cost development applied discount rates on projected cash flows.
We consider our audit procedures in this area as particularly important, due to the size of the balance sheet position and level of significant assumptions.
In accordance with the Swiss Code of Obligations, participations are valued at cost with deductions for write-downs as necessary.
Management test the valuation of individual participations through a comparison of the book value of each participation to the respective IFRS equity value. Management utilise the equity value of each participation determined for the IFRS closings. As long as the IFRS equity value exceeds the book value of the participation, the conclusion is drawn that the valuation of the participation is sufficient. In case that the IFRS equity value is below the book value of the participation, management performs an extensive valuation analysis and the value in use is compared to the book value of the participation. For the calculation of the value in use, an extensive valuation analysis using cash flow projections, based on mid-term planning approved by management and the board of directors, is performed.
As part of our audit procedures, we compared the book value with the IFRS equity value or value in use. For material participations, we audited the IFRS equity value as part of the IFRS group audit. For immaterial participations, we performed an assessment of differences between the IFRS equity value and the statutory equity.
An element of placing trust in planned cash flow projections is the extent they were reached in the past. Where actual results varied from planned results, we inquired as to the reasons and potential impact they may have in reaching future goals and assessed the key drivers which contributed to the deviation.
Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Share Performance and Historical Comparison The Swiss Life share price developed strongly in 2018, closing the year at CHF 378.60. This is an increase of 10%, or 14% taking into account the dividend payment of CHF 13.50 in April 2018.
The international stock markets were negatively influenced by this year’s trade conflict between the US and China and continued monetary policy normalization. Additionally the political debate on the Brexit also caused uncertainty on the markets. US stock prices fell during the final quarter 2018 and closed 2018 down, like other major stock indices in developed economies. Also the Swiss Market Index (SMI) was unable to escape the global trends and closed the year minus 10%. Swiss Life’s share price in this setting developed very nicely; with a plus of 10% until end of 2018, the share outperformed the SMI and the European Down Jones Stoxx 600 insurance index (–10%) considerably. At the Annual General Meeting in April 2018, shareholders approved a withholding tax-free distribution from the capital contribution reserve of CHF 13.50 per share.
Performance of Swiss Life (in %) +10 +20 +6 +15 +28
Dow Jones STOXX 600 Insurance Index (in EUR) 31.12. 259.40 288.35 269.66 285.56 250.55
Market capitalisation (in CHF million) 28.12. 12 957 11 807 9 246 8 704 7 584
Equity holders of Swiss Life Holding 1 076 1 007 922 872 814
Annual Report 2018 The Annual Report is published in German and English and contains information on corporate governance, risk management, corporate responsibility and the annual accounts. The English text is definitive for the Consolidated Financial Statements; the original German text is binding in all other respects.
Publishing details Publisher — Swiss Life Holding Ltd, Zurich Editorial responsibility — Swiss Life, Group Communications and Strategic Marketing, Zurich Concept, design and technical realisation — EQS Group, Zurich Production — Management Digital Data AG, Lenzburg © Swiss Life Holding Ltd, 2019