Gross written premiums, policy fees and deposits under policyholder investment contracts of which Life of which Non-Life of which Core of which Non-Core
Net investment income including net trading income Net realised and unrealised gains / losses
parameters to be set in this area that correspond to economic and demographic realities. In doing so we attracted criticism from many quarters. However, the latest developments, such as providers abandoning this line of business altogether and autonomous pension funds facing a shortfall, illustrate the importance of not overburdening the system and of only making promises to the workforce that can be kept. The measures required to guarantee a secure system of occupational benefits may not be popular, but they are urgently needed.
The two accounting errors and the LTS investment company for members of the former Corporate Executive Board damaged the Group’s reputation in a manner that far exceeded their material importance. The Board of Directors and the Corporate Executive Board have drawn the necessary conclusions. The changes made to the management team, the division of responsibilities between Chief Financial Officer and Chief Investment Officer, the improvements to quality management and reinforcement of staff on the financial side of the business, as well as more detailed reporting, all serve to underscore the efforts being made with regard to corporate governance and transparency.
Crisis as an opportunity: this is something of a cliché these days, but we have lived through just such an episode in a dramatic fashion in 2002. It is an experience that has left its mark.We forthrightly acknowledged the errors that occurred and worked hard to help rectify them.
The Swiss Life Group reported a loss of CHF 1.7 billion for 2002, mainly due to a disappointing financial result and extraordinary write-downs. Through its strategic realignment, conversion to a holding structure, changes in senior management and a capital increase the enterprise has created a good framework for the future.
We are concentrating on life insurance and pensions and aim to be one of the leading companies in Europe in this sector. We are therefore focusing on those regional markets which promise attractive growth and where we have a strong market position that can be built upon. We have simplified our management structure and reduced organisational complexity. The management model is closely aligned with the value chain. The resulting functional organisation is reflected in the division of responsibilities both at Corporate Executive Board level and in the core markets.
With the capital increase at the end of 2002 the Swiss Life Group raised additional equity of CHF 1.1 billion (gross), giving the Group greater leeway to pursue its new strategic direction and allowing it to carry out the planned divestments without being pressed for time.
You may well have asked yourselves why I accepted the position of Swiss Life Group CEO at the start of November 2002. My motives were essentially a combination of a realistic assessment and evaluation of the opportunities and risks, a belief in both the company’s soundness and its potential, and professional ambition and confidence in my own abilities, as well as my confidence in a new Corporate Executive Board and the many existing teams throughout the enterprise which were already functioning well. The Swiss Life Group is situated at the focal point of politics and the economy, which I view as both a challenge and an obligation. We operate in a very special kind of business by virtue of our services, making a significant contribution towards enabling a large number of people to safeguard their own future. However, the terms of reference have changed dramatically within a very short space of time. In the 1990s policyholders and shareholders benefited from the high returns on investments. The slump in equity markets and the historically low interest rates led to a marked reduction in capital adequacy levels throughout the industry. We have adapted our strategy in line with this changed environment. It is based on five cornerstones: concentration on core business streamlined structure operational excellence financial strength performance culture services for customers, offer added value to our shareholders and open up interesting prospects for our employees.
11Staff reductions underway The number of employees as of 31 December 2002 corresponded to 11541 fulltime equivalents. This represents a reduction of 6% compared with the preceding year, distributed as follows: Switzerland (Swiss Life/ Rentenanstalt) 149 France 68 Germany 70 Netherlands 72 Belgium / Luxembourg 45 Private Banking 314 Investment Management 67 Other (non-core): Increase of 61 FTEs
Distinct decline in assets under management for third parties Assets under management totalled CHF 183.2 billion on 31 December 2002. This corresponds to a decline of 5.7% compared with the previous year, and is mainly attributable to the lower level of assets managed on behalf of third parties. The concept of assets under management has been redefined. They are now taken to comprise: on-balance-sheet investments and cash and cash equivalents on-balance-sheet separate account (unit-linked) assets assets managed for third parties by the Group minus insurance assets managed by third parties and alternative investments managed by third parties
Concentrating on traditional strengths The Swiss Life Group will concentrate on its life insurance and pensions business. In view of demographic developments and the increasing importance of private retirement provisions, this is an area which offers attractive prospects for growth and a promising earnings outlook. This will enable the Group to build on its traditional strengths. These strengths include product knowledge and risk expertise, quality of advice and services, established sales networks, advantages of size and a powerful brand.
The Group will concentrate on the core markets of Switzerland, France, Germany, the Netherlands and Belgium/ Luxembourg. These are markets which combine the prospect of sustainable, profit-driven growth with a strong existing or potential market position for the Swiss Life Group. The enterprise is the market leader in its domestic market of Switzerland, where it has its own efficient sales and distribution system. This particular market is enjoying stable growth in demand. The Swiss Life Group is also actively campaigning within Switzerland to have the conditions governing occupational provisions adjusted in line with economic and demographic realities. A reliable distribution network is also the foundation for success in France.Where the prospects for growth
In the Netherlands the Swiss Life Group ranks number six in the market. In this expanding market, the company represents an attractive alternative to the local market leaders and has been very successful in establishing brand awareness. In Belgium and Luxembourg, whose markets have been placed under joint management, a sound distribution network of brokers and banks provides the foundation for Swiss Life’s position as one of subsidiary, active in both life and non-life insurance, is currently under review. Those activities which have not been classified as core business still represent a significant value to the company, in spite of partly negative results in 2002. A carefully implemented process of divestment over the next two to three years should guarantee that appropriate proceeds are realised from the various sales. In the meantime, these units will continue to be managed with a view to increasing their value.
Streamlined management structure – creating clear responsibilities and reducing complexity The Swiss Life Group is now organised and run as an integrated enterprise. The management structure has been simplified. The new management model is aligned with the value chain and structured around the five main business functions. The resulting functional organisation is reflected in the division of responsibilities both at Corporate Executive Board level and in the core markets. This management structure, with responsibilities allocated along functional lines and across borders, improves transparency and makes it easier to share knowledge and resources. Functional organisation also enables the company to reduce dupli-
15Switzerland by an average 13% to counteract the sharp rise in disability benefits and the fact that cost premiums failed to cover expenses. Despite the Federal Council lowering the minimum rate of interest required from 4% to 3.25% with effect from 1 January 2003, given the current interest environment the legal parameters still do not conform to economic and demographic realities. As of 31 March 2003 the minimum interest rate was still around 75 basis points higher than the risk-free rate (10-year Swiss government bonds) and the currently applicable 7.2% conversion rate for pensions is also based on interest rates that are too high and a life expectancy that is too low, making it all the more difficult for this area of business to re-enter the profit zone. Swiss Life is therefore planning further measures, in consultation with the appropriate supervisory authorities, that will allow it to achieve a balance between risk and return in this area of business and continue to make a contribution to a secure system of future provisions in Switzerland.
Financial strength – safeguarding the capital base With the successful capital increase at the end of 2002 the Swiss Life Group raised CHF 1.1 billion in additional equity, Standard & Poor’s subsequently confirmed Swiss Life/Rentenanstalt’s single “A” rating, thus sending an important signal at this crucial stage to both policyholders and shareholders. The additional equity gives the Group greater financial leeway in pursuing its new strategic direction, allowing it to carry out the planned divestments without being pressed for time and to exploit growth opportunities in core markets. In order to maintain its financial strength and restrict the impact of international stock market volatility to a manageable degree, the Group noticeably reduced the equity exposure in its investment portfolio.
Operational excellence – reducing costs, achieving a balance between risk and return The business model of the future must be economically viable even without the high capital gains of the 1990s. Product features, for example interest rate promises, must be brought in line with economic and demographic realities.
The Swiss Life Group has also addressed the need to adjust product terms. From the start of 2003 Swiss Life increased premiums for occupational provisions in
Performance culture – setting clear targets Clear medium-term goals for returns and value creation are the foundation upon which a performance-oriented corporate culture can be built. In the medium term the Swiss Life Group intends to generate a return on equity (under IAS/IFRS) of 10%. Together with the price adjustments which have already been implemented or are planned, the expense ratio for technical reserves is to be reduced from 2.2% in 2002 to 1.6% in 2004 as part of the Swiss Life Group’s efforts to improve product margins to 30–45 basis points in 2004. Achieving these targets should allow it to maintain a good rating and achieve a dividend payout ratio of 25–30%. A newly introduced system of performance indicators, more closely attuned to the new strategy, will support the process of managing and monitoring the achievement of these goals.
The Articles of Association of the new company are largely identical to those of the former Swiss Life/Rentenanstalt, although the article stating its purpose has been adapted to accommodate the functions of a holding company. In October 2002 Swiss Life Holding submitted a public offer for the exchange of all Swiss Life/Rentenanstalt shares.This offer allowed shareholders to exchange each Swiss Life/Rentenanstalt share they held for a newly created share in Swiss Life Holding.
With the successful conclusion of its capital increase in December 2002, Swiss Life Holding raised CHF 1.1 billion in additional equity, thus achieving an important milestone in the implementation of its new corporate strategy. The additional resources will give the Group greater financial leeway during its strategic realignment and allow it to complete its planned divestments without being pressed for time.
Swiss Life Holding used two financial instruments to raise new capital, granting subscription rights for new shares and issuing mandatory convertible securities.
Convertible bond issue The issuance of mandatory convertible securities brought in a further CHF 250 million in equity resources. Mandatory convertible securities are a special kind of convertible bond. Units will automatically be converted into Swiss Life Holding shares, on 19 December 2005 at the latest, provided they have not been redeemed by the holder at an earlier date. The mandatory convertible securities thus effectively represent an advance sale of equity. The convertible bonds were initially offered to existing shareholders in the form of non-negotiable advance subscription rights. The consortium of banks responsible for the issue was able to place on the market all those shares not subscribed by shareholders. For the issuer this instrument, which was being used for the first time in Switzerland, has the advantage of carrying an equity feature and enabling the company to participate in future positive trends in the share price.
Investment risks A life insurer’s largest quantifiable risks are found on the asset side of its balance sheet. Investment risks are subdivided into market risks, credit risks and liquidity risks. Market risk refers to the risk of changes in the value of securities such as stocks and bonds or of real estate holdings, as well as to fluctuations in foreign exchange rates. Credit risk involves the possibility that a debtor may no longer be able to meet his obligations.
Market risks The losses resulting from high stock market volatility over the past two years provide a perfect example of market risk. Diversification, quality and the ability to cash in on an investment play a central role in keeping market risk in check. The Swiss Life Group places great importance on a high degree of diversification both in the structure of its investment portfolio (asset allocation) and with regard to individual investments. A major part of the currency risk was hedged during the course of the year.
Credit risks The Swiss Life Group applies very strict guidelines to the risk structure of its bond portfolio, which must be widely diversified and of a very high quality. As of 31 December 2002, 86% of all bond investments had a double “A” rating or higher. A clear majority of bond investments had either a triple “A” rating or consisted of government/treasury bonds. 2
Disability Alongside endowment insurance, life insurers also offer risk cover for the consequences of disability (a lump-sum amount or income payments in the event of disability). The frequency of disability claims is subject to greater fluctuation over a period of time than the frequency of deaths, because the former is linked to economic conditions. When the economy is booming there is work for almost everyone, but when the economy is weak it becomes more difficult for persons with a diminished capacity for work to find a job. The Swiss Life Group thus noted a strong rise in the number of disability cases during the year under review and consequently had to adjust premiums accordingly.
20 must regularly review and analyse the mortality structure of their portfolios of customers. The Swiss Life Group normally does this on an annual basis. If it is established that a portfolio of pensioners does not have sufficient reserves due to a greater drop in mortality, the necessary additional reserves are calculated and set aside.
Life Group lowered the technical interest rates, wherever necessary, over the last few years. However, an insurance company is not free to determine interest rates in every segment of its business because statutory provisions apply in some areas. The stipulated minimum rate of interest for occupational provisions in Switzerland stood at 4%. This rate was lowered to 3.25% with effect from 1 January 2003. However, this minimum interest rate is still inappropriate given the current interest environment and poses a structural threat to the entire spectrum of occupational provisions, thus destabilising the system. In order to minimise the attendant risk for the Swiss Life Group, its shareholders and customers, binding conditions are only being offered in this product category for very limited terms. In addition, the corresponding premium scales are constantly being adjusted to meet the latest requirements.
Basket of 10-year bonds from EU states 5.3 4.8 4.8 4.4 4.1 1 As of 31 March 2003
Assets under management edged down by 0.2% to stand at CHF 64.5 billion. The cost-reduction programmes launched last year have already achieved savings of 18% in administrative costs – which include the Group’s head office expenses – bringing the figure down to CHF 800 million.
Gross premiums in the core life segment fell by 1% to CHF 16.4 billion. While individual insurance premium income recorded a small increase, premium income from group business dropped. Insurance benefits increased by 4% to CHF13.8 billion. Assets under management totalled CHF 121.8 billion on 31 December 2002 (down 7.7%). Thanks to strict cost management, costs were reduced by 15%. 1
Reserves for policyholder bonuses remain high. Improvements to communication such as the new internet portal for agents have also contributed further momentum for growth. Health insurance premiums recorded an expansion of 4% to stand at EUR 0.9 billion. The upward movement in insurance benefits ran parallel to the acquisition of new business. Despite poor conditions on the financial markets, assets under management – driven by premium growth – went up 8.9% to EUR16 billion. The risk exposure in the investment portfolio was cut back substantially, to limit the impact on the portfolio of volatility on the financial markets. Cost-reduction programmes and the simplification of management structures made it possible to trim expenditure by 3%, notwithstanding the strong expansion in premiums.
The parameters governing the provision of occupational pensions have deteriorated again. The guaranteed minimum interest rate on these funds was indeed lowered from 4% to 3.25% at the beginning of 2003, but the risk-free interest rate fell to the vicinity of 2% in the first quarter of the year. The pension conversion rate remained unchanged at a high 7.2%. Meanwhile, there was a steep rise in disability insurance claims. Swiss Life/Rentenanstalt adjusted its premium rates accordingly at the beginning of 2003. Key priorities for the year now underway include systematic implementation of the new Group strategy and continued strict attention to the management of costs.
France In France, the second biggest European insurance market, Swiss Life ranks thirteenth with a market share of 2.3% and holds fourth place in health insurance with a share of 9%. Close relations with brokers, a large network of agents, a salaried external sales force and good access to Erisa’s banking channel through the joint venture with Crédit Commercial de France (part of the HSBC Group) have laid the groundwork for successful
As a result of the new orientation of the Swiss Life Group, the strategy has been reviewed in France with future emphasis on “Protection de la Personne”, an area which encompasses life, pension, accident and health insurance. A partner is being sought for the property & casualty sector. Swiss Life plans to exploit the full potential of its multidistribution capabilities even further, and especially to improve the utilisation of its health insurance client base (numbering 1.5 million customers ) for cross-selling purposes. Another key strategic objective for 2003 is boosting customer retention and expanding market share among the self-employed and SMEs (small and mediumsized enterprises).
Germany With a market share of around 1.6%, Swiss Life (Schweizerische Rentenanstalt) is one of the twenty largest life insurers in Germany. At the beginning of 2002 the company was voted the best life insurer in Germany by insurance brokers. As one of the leading providers of occupational pensions and also as a result of its excellent reputation amongst brokers, the company ’s position in the attractive German market is very strong. The importance of occupational and private retirement provisions in Germany will continue to
Key figures for Germany1 in EUR million 2002 2001 +/– %
Number of employees 880 950 – 7.4 1 IAS figures, before consolidation 2 incl. loss adjustment expenses 3 2001 cost base incl. loss adjustment expenses and with high intercompany double-counting 4 excl. loss adjustment expenses
26 Pressure on premium rates caused premium income to contract by 3% to EUR 955 million in 2002, leading the organisation to focus even more intensely on the specific criteria essential for its profitability. The drop in premium income was largely attributable to the 8% decline in premium volume for individual insurance. This in turn can be traced to the tax reforms (reduction in tax benefits for life insurance) that came into force in 2001, and in the effects of additional bonuses in the form of lower premiums that were awarded in celebration of ZwitserLeven’s hundredth anniversary. Premium income in group insurance increased by 1% to EUR 511 million, with growth held back by the lack of pay rises.This was especially the case for contracts with large corporations. There was a pronounced decline in demand for unit-linked solutions, as customers became increasingly averse to taking greater investment risks. All in all, insurance benefits contracted by 3% to EUR 891million, while assets under management grew by 9.6% to EUR 9.1billion.
For 2003 Swiss Life in Germany is promising policyholders a 5% bonus distribution. At the end of 2002 it was granted authorisation to set up both a company pension fund (Pensionskasse) and an employee pension fund (Pensionsfonds) and is now able to offer a comprehensive range of solutions for private and occupational retirement provisions, benefitting from increased momentum for growth in this area. In January 2003 a new efficiency programme was launched, which will result in further cost savings. The transfer of data from individual and group insurance to a new IT system will continue during 2003, to be completed in 2004.
The Netherlands Ranked seventh in the highly concentrated Netherlands life insurance market, the Swiss Life Group is among the country ’s most important providers. Its position as an attractive alternative to local insurers is based on the brand’s high recognition value (ZwitserLeven) and the Group’s close links to brokers, the only sales channel. The Netherlands is a highly developed market and its growth only ranged from 3% to 4% in the year under review, well below the average for the previous year.
Based on initial estimates by insurance associations, in 2002 the 8% growth in premiums experienced by Belgian life insurers, and the 7% posted by those in Luxembourg, were considerably higher than the growth rate for the economy as a whole.
Key figures for Belgium/Luxembourg1 in EUR million 2002 2001 +/– %
Swiss Life Network is made up of companies in the Swiss Life Group and leading local life insurers in the countries in which the Group is not directly active. It consists of 51 partners in a total of 44 countries. The year under review saw the addition of three new partners: in Chile Cruz del Sur, which belongs to the Grupo Angelini; in Poland Compensa Życie, which is part of the Wiener Städtische Gruppe; and in Sweden Danica Fondförsäkring, which was founded in 1999 and is a wholly owned subsidiary of Swiss Life Network’s long-time partner Danica Pension. A second Swiss Life Asia Pacific office was opened in Singapore to supplement the Regional Sales Office in Sydney. This new office will be responsible for servicing customers in Korea, Japan, Malaysia, Singapore and Taiwan. Wide-ranging expertise and experience in combination with a high-quality, stable partner network with global reach are the success factors in this important segment. The broad spectrum of modular products in the Swiss Life Network portfolio allows customers to combine individually tailored employee benefits plans with the desired degree of risk assumption, thereby optimally controlling the cost factors. This unique, flexible system secured the Swiss Life Group’s position as market leader in the period under review. Around 40% of the top “Fortune 100” companies from outside the insurance sector number among its customers.
Swiss Life Network is a pioneer in the field of international pooling solutions and in the year under review reaffirmed its role as a leading provider. The Network was further expanded with the addition of a number of new partners. Despite the unfavourable state of the economy, the volume of business increased once again. In the multinationals segment Swiss Life Network continues to hold a commanding market position with about 40% of the “Fortune 100” companies numbering amongst its customers.
(Swiss Life) Greece Aspis Pronia Hungary Union Biztosító Ireland Irish Life Italy Swiss Life (Italia) Luxembourg Swiss Life (Luxembourg) Norway Vital Forsikring ASA Poland Compensa Życie Portugal Império Russia Rosgosstrakh Slovakia Kooperativa South Africa Momentum Employee Benefits Spain Swiss Life (España) Sweden Danica Fondförsäkring Switzerland Swiss Life (Head office)
«La Suisse» (Non-Life) The Netherlands ZwitserLeven (Swiss Life) United Kingdom Swiss Life (UK) * Health insurer for Swiss Life Network’s international clients
Australia Swiss Life International Services Asia Pacific Hannover Life Re of Australasia
«La Suisse» Vie In the Swiss insurance market «La Suisse» Vie ranks as the seventh largest provider of life insurance. Premium volume for the 2002 financial year totalled CHF 700 million, which represents a decline of 5% compared to the previous year. Last year’s figures were not duplicated in either individual or group insurance lines. Group insurance premium income fell by 5% due to the large number of policy surrenders.
Gross premium income in the non-core life business fell by 16% to CHF 2.0 billion in the year under review. There was a drop in premium income in both individual and group insurance. Insurance benefits paid decreased by 5%. Assets under management amounted to CHF 11.2 billion (down by 0.5%). 1
Key figures for life, non-core in CHF million 2002 2001 +/– %
Gross premiums, incl. deposits under policyholder investment contracts 2 045 2 434 – 16.0 of which individual insurance 511 681 – 25.0 1 incl. loss adjustment expenses 2 excl. loss adjustment expenses
Gross written premiums and deposits under policyholder investment contracts decreased by 12% in 2002. However, compared to the premium income for 2000 this still left an increase of 76%. Especially positive was the strong 67% growth in periodic premiums in 2002. The rapidly growing business also led to a remarkable increase of 24% in assets under management in the year under review.
The insurance branch acknowledged the company’s achievements with several industry awards, including Group Risk Provider of the Year, Best Group Critical Illness Provider and Best Individual Income Protection Provider as well as with other second and third place mentions. Furthermore, Swiss Life was singled out for its commitment to employees by being named Employer of the Year in the UK.
Premium income rose by 12% during the year under review. Restructuring of the portfolios and conservative underwriting practices were continued. The claims ratio deteriorated from 81.3% to 86.5% as reserves in Belgium needed to be bolstered (October’s storms) and because of higher claims in «La Suisse»’s health and accident portfolio.
Gross premiums for «La Suisse»’s non-life business swelled by 50% to CHF 393 million. This increase is mostly due to the integration of Swiss Life/Rentenanstalt’s short-term disability benefit portfolio, which took effect on 1 January 2002. This put «La Suisse» in fourth place in the Swiss market for group health insurance. Its expense ratio was brought down to 24%. As a result of the unfavourable performance in liability insurance, the claims ratio is higher than for the previous year.
The non-life segment comprises property insurance business in Belgium and France, and the non-life segment of «La Suisse». Gross premium volume in the year under review increased by 12% to CHF 1.1 billion. Thanks to the transfer of the short-term disability benefit portfolio within the Group to «La Suisse», the latter was able to expand its non-life business by 50%. 1
The private banking segment covers investment consultancy services and asset management for wealthy clients. Services include all personalised banking products and wealth management services, such as fiduciary solutions, financial advice, estate planning, investment services, portfolio management and brokerage. The Swiss Life Group largely conducts its private banking business via two channels: the Ticino-based Banca del Gottardo and the Schweizerische Treuhandgesellschaft (STG), registered in Basel. Banca del Gottardo offers services in private banking and asset management internationally to private customers and institutions. In its home market in Ticino it operates as a full-service bank, offering a broad range of products and services to local companies and individuals.
STG offers tax advice, fiduciary and asset management services, and is oriented toward wealthy private clients.
38 On 31 December 2002 the Swiss Life Group’s private banking segment had assets under management totalling CHF 41.5 billion. This meant a reduction of CHF 8.2 billion compared to the previous year.The chief causes were in the stock market slump and unfavourable exchange rate developments.
Banca del Gottardo will continue to systematically pursue its business strategy in 2003. The main emphasis will be on expanding business activities in Switzerland and through its subsidiary in Italy. The measures to increase efficiency will have a positive effect on results in the current year.The bank aims to achieve a return on equity (ROE) in excess of 10% in 2003, which would correspond to a profit of CHF 80 million.
The investment management segment comprises asset management and investment consultancy for institutional clients. Services are rendered to both the Group’s insurance business and thirdparty clients. The range of services includes the following: Cash and short-term investments Fixed maturity securities Mortgages Loans Property Investment funds Shares Private equity Hedge funds Derivative instruments
These services are provided by specialised companies that cover the most important European markets.
During 2002 Swiss Life Asset Management continued to improve its relationships with both customers and intermediaries. Customer relationship management software (CRM) was implemented successfully.
In spring 2002 the Swiss Life Group sold its subsidiary company Swiss Life Hedge Fund Partners Ltd to the RMF Group, which in turn was sold a few weeks later to the MAN Group of the UK. The two transactions resulted in a net profit for the Swiss Life Group of approximately CHF 330 million.
During the year under review the investment management segment generated profit of CHF 105 million. Income was 19% down from the previous year at CHF 278 million. Operating expenses decreased by 16% to CHF 172 million. Assets under management on the balance sheet date totalled CHF 81.9 billion. During the course of the year the number of staff declined by 11% to 558. 1
of which for third parties 14 997 15 577 – 3.7
Information on options granted by issuers or by Group companies on rights to participate in equity under equity compensation plans for employees can be found on page 50 of the Financial Statements.
There are no preference shares or specially issued “voting-right” shares. No participation certificates or dividend right certificates are outstanding. Likewise, there are no provisions restricting transferability.
Limitations on transferability and nominee registrations According to the Articles of Association, resolutions for the introduction, amendment or repeal of restrictions on transferability must be put before the General Meeting of Shareholders and require approval by both two thirds of the votes per share represented and an absolute majority of the share par value represented. Swiss and foreign banks, securities brokers and companies acting on their behalf, with shares of Swiss Life Holding held in their custody for the account of the beneficial owners, may be registered as nomi-
43Mr Leuenberger has announced his intention to resign from the Board of Directors as of the Swiss Life Holding Annual General Meeting of Shareholders on 27 May 2003.
Rino Rossi Born 1933 Swiss national First Vice Chairman of the Board Rino Rossi studied mechanical engineering at the Federal Institute of Technology (ETH) Zurich, prior to pursuing further studies in production engineering and systems technology at the Technical University of Berlin. In 1965, after six years as a researcher at the ETH’s Department of Business Economics, he joined V-ZUG AG, where he was a Senior Vice President from 1970 to 1980. From 1980 to 1996 he was a managing director of V-ZUG AG. He has been a Member of the Board of Directors since 1988 and was appointed Chairman in 1996.
Mr Rossi will be leaving the Board of Directors with effect from the Swiss Life Holding Annual General Meeting of Shareholders on 27 May 2003 for reasons of age.
On the balance sheet date the Board of Directors comprised the following members: Andres F. Leuenberger Born 1938 Swiss national Chairman of the Board Following studies in Economics at the University of Basel and in Economics and Social Sciences at the University of St. Gallen, Andres F. Leuenberger graduated in 1963 with a Master’s Degree, before going on to complete his Doctorate in Economics at the University of Neuchâtel. He joined F. Hoffmann-La Roche & Co. Ltd in 1968 and served as President and CEO of their Tokyo branch, NipponRoche K.K., from 1973 to 1980. He was appointed to the Executive Committee of F. Hoffmann-La Roche & Co. Ltd in Basel in 1980, and became a Member of the Board in 1983. From 1994 to 2000 he was Chairman of the Vorort (Swiss Federation of Commerce and Industry) and in 2000 and 2001 served as Chairman of economiesuisse (Swiss Business Federation). He was a member of both the Bank Council and Bank Committee of the Swiss National Bank from 1994 to 2002. Mr Leuenberger joined the Swiss Life/Rentenanstalt Board of Directors in June 1998, becoming its Chairman in 2000. He has also served as Chairman of the Board of Swiss Life Holding since that organisation was established in 2002. In 2000 he took over as head of the Finance Committee of Swiss Life/Rentenanstalt, and in November 2002 assumed the same responsibilities at Swiss Life Holding.
Members of the Board of Directors. 31.12.2002 Name Board member Term since expires
Maria Luisa Garzoni, Josef Kühne and Henri B. Meier have announced that they will be resigning their seats with effect from the Swiss Life Holding General Meeting of Shareholders on 27 May 2003.
2 Rino Rossi will be stepping down from the Board of Directors at the same time for reasons of age.
Chairman of the Board – F. Gehrig AG, Chairman of the Board – Sauter AG, Chairman of the Board – Sibir Haushaltstechnik AG,
Ulrich Oppikofer Born 1934 Swiss national Second Vice Chairman of the Board of Directors Ulrich Oppikofer took a Doctorate in Law at the University of Zurich before joining Sandoz Ltd. in 1959 as a legal specialist. He was appointed CEO of Sandoz United States Inc. in 1981 and joined the Executive Board of both Sandoz Ltd. and Sandoz Pharma Ltd. five years later. He became part of the executive management team of Novartis International Inc. in 1997. In 1986 Mr Oppikofer joined the Supervisory Board of Swiss Life/Rentenanstalt. After being appointed to the Supervisory Committee in 1991, he was designated Second Vice Chairman of that body as well as the Supervisory Board in 1996. In 1997 Mr Oppikofer was named Second Vice Chairman of the Board of Directors and Board of Directors’ Committee of Swiss Life/Rentenanstalt, becoming Chairman of the Audit Committee in 2001.
From 1990 on, Mr Oppikofer has served alternately as Chairman and Member of the Board of Trustees of Swiss Life/Rentenanstalt ’s employee benefits foundations. In November 2002 he was elected as Second Vice Chairman of the Board of Directors of the newly established Swiss Life Holding.
Mr Oppikofer will be resigning his position on the Board of Directors of Swiss Life Holding with effect from the Annual General Meeting of Shareholders on 27 May 2003.
– Wohlfahrtsstiftung der Novartis AG, Chairman of the Board of Trustees
Gerold Bührer Born 1948 Swiss national Member of the Board Gerold Bührer was awarded a Master’s Degree in Political Economy (lic. oec. publ.) from the University of Zurich in 1972. After 17 years as a member of management in the Financial Sector of Union Bank of Switzerland and as a Member of the Executive Board of the bank’s investment company, he joined Georg Fischer Ltd, where, as Head of Finance, he was a member of the Corporate Executive Board from 1991 to 2000. He is currently an independent economic consultant. In June 2000, he was made a member of both Swiss Life/Rentenanstalt’s Board of Directors and its Finance Committee. In addition, in 2000 he became a member of the Board of Trustees for the company’s own employee benefits foundations. In November 2002 he was subsequently elected to the Board of Directors of the newly established Swiss Life Holding. Mr Bührer will be put forward for reelection at the Swiss Life Holding Annual General Meeting of Shareholders on 27 May 2003.
– Meier & Cie AG, Vice President – Bank Sal. Oppenheim jr. & Cie.
(Schweiz) AG, Member BoD – Cellere AG, Member BoD – Georg Fischer Ltd, Member BoD – Hablützel AG, Member BoD – Strabus AG, Member BoD Political activities – 1982 until 1991 Member of the Grand
Gilbert Coutau Born 1936 Swiss national Member of the Board Gilbert Coutau received a Master’s Degree in Law (lic. iur) from the University of Geneva in 1959. In 1961 he joined the Geneva office of the Society for the Promotion of Swiss Trade and Industry, and was appointed Secretary in 1970, staying on until 1991, since when he has been an independent consultant for economic affairs and communication. From 1996 to 2002 he headed the Chamber of Commerce and Industry of Geneva. Until June 2002 he was Chairman of the Standing Committee for Finance and Taxes at economiesuisse (Swiss Business Federation ). Mr Coutau was elected to Swiss Life/Rentenanstalt’s Supervisory Board in 1985, and in 1997 he became a member of the Board of Directors. He has been a member of the Audit Committee since 2001. In November 2002 he was subsequently elected to the Board of
Chairman of the Board – Gammert & Partner AG, Member BoD – Gianca AG, Member BoD – Fondazione Olivio Ferrari,
Josef Kühne Born 1938 Swiss national Member of the Board Josef Kühne received a Master’s Diploma in Agriculture in 1969. He managed his own farm from1966 to1999. From 1990 to 1999 he was a Member of the SBB Board of Directors (Swiss Federal Railways). In 1991 he was elected to the Supervisory Board of Swiss Life/Rentenanstalt. He has been on that company’s Board of Directors since 1997. Since 2000 he has served as an alternate member of the Board of Trustees for employee benefits foundations, and since 2001 he has been on the Audit Committee. In November 2002 Mr Kühne was subsequently elected to the Board of Directors of the newly established Swiss Life Holding. Mr Kühne will step down from the Board of Directors of Swiss Life Holding with effect from the date of the Annual General Meeting of Shareholders on 27 May 2003. Other appointments: – Swiss Milk Producers SMP,
Other appointments: – Nalage SA, Chairman of the Board – SA du Journal de Genève et de la
– Emmental Co. Ltd. Exportation Company for Swiss Cheese, Vice Chairman of the Board
Henri B. Meier Born 1936 Swiss national Member of the Board Henri B. Meier gained his Doctorate in Economics from the University of St. Gallen, prior to attending postgraduate studies at Columbia University, New York from 1964 to 1965. He was awarded an honorary doctorate from Basel University in 1999. From 1965 to 1973 Mr Meier held several positions, including Division Chief at both the World Bank and International Finance Corporation in Washington, DC, before joining Motor Columbus Ing.AG in Baden, Switzerland, where he was a member of the Management Board and Head of Marketing and Finance. From 1978 to 1985 Mr Meier was a member of the Executive Board of the Handelsbank/National Westminster in Zurich where he was in charge of Investment Banking.
He joined the Roche Group in1986 where he served as Group Chief Financial Officer and Member of the Executive Committee until 2000. Mr Meier became a member of the Swiss Life/Rentenanstalt Board of Directors in 2001. In November 2002 he was subsequently elected to the Board of Directors of the newly established Swiss Life Holding.
Mr Meier will be resigning his position on the Board of Directors of Swiss Life Holding with effect from the date of the Annual General Meeting of Shareholders on 27 May 2003.
Holdings Ltd, Chairman of the Board – S.I. Château de Bonmont SA,
Chairman of the Board – Bertarelli & Cie., Board Vice Chairman – Animan Publications SA,
Member BoD – Privatbank IHAG AG, Member BoD – Roche Holding Ltd., Member BoD – Züblin Real Estate Holding Ltd.,
Georges Muller Born 1940 Swiss national Member of the Board Georges Muller graduated from the University of Lausanne in 1963 with a Degree in Law and Economics and was awarded an LL.M. from Harvard University in 1969. In 1973 he received a Doctorate in Law.
Mr Muller will be put forward for reelection at the Swiss Life Holding Annual General Meeting of Shareholders on 27 May 2003.
Other appointments: Internal organisational structure The following standing committees support the work of the entire Board of Directors, and further special committees may be established to assist with specific tasks and responsibilities: Coordination, Nomination and Compensation Committee (Chairmens’ Committee) The Coordination,Nomination and Compensation Committee currently consists of Andres F. Leuenberger (Chairman), Rino Rossi and Ulrich Oppikofer. Its remit includes the following: to coordinate and prepare business matters to be brought to the attention of the Board of Directors, to consider possible candidates for election to the Board of Directors and for the role of Chairman of the Corporate Executive Board, to consider recommendations put forward by the Chairman of the Corporate Executive Board regarding potential candidates for the Corporate Executive Board, to determine the remuneration of the members of the Board of Directors and of the Corporate Executive Board (including incentive schemes) and to approve the compensation (including incentive schemes) for top management within the Group.
Finance Committee This committee consists of Andres F. Leuenberger (Chairman), Rino Rossi and Gerold Bührer. The remit of the Finance Committee is as follows: to exercise a system of direct financial controls, to approve Group investment directives and verify that these are being adhered to, to make financial decisions within the scope of the allocation of financial competencies, to determine guidelines for longterm investment policies and approve those proposed by the Risk Management Board, and to monitor risk management.
47Areas of responsibility and control instruments The Organisational Regulations of Swiss Life Holding provide for the comprehensive delegation of the executive management of the company to the Corporate Executive Board, with the exception of those duties reserved for other bodies in accordance with the law, the Articles of Association or the Organisational Regulations themselves. The Corporate Executive Board is entrusted with the preparation and implementation of the resolutions passed by the Board of Directors, the Chairmen’s Committee and the special committees.
The Corporate Executive Board keeps the Chairmen’s Committee and the Board of Directors regularly informed about the conduct of business, new business activities and significant projects. Internal auditing procedures represent an efficient means of monitoring and information gathering for the Board of Directors, to which the Corporate Internal Audit department reports directly.
Meetings may be called more often if the situation requires. Depending on the business to be discussed, the Corporate Executive Board or individual members of the Corporate Executive Board may be invited to attend these meetings in their professional capacity.
Kongresshaus AG, Zurich – Member of the Board of Directors of
– Member of the Board of Directors of Banca del Gottardo (from March 2003)
Other appointments: – Member of the Board of Directors of Maerki Baumann & Co. AG, Zurich (since 2002)
Paul Müller Born 1950 Swiss national CMO (Chief Markets Officer) and CEO Switzerland since 15 January 2003 Paul Müller studied Economics at the University of St. Gallen. After graduating with a Master’s degree (lic. oec. HSG) in 1975 he launched his career by joining Winterthur Versicherungen. In 1982 he moved to Bâloise Insurance where he held a number of leading positions. As a member of the Corporate Executive Board he was ultimately responsible for the German, Austrian, French, Belgium and Luxembourg markets. From 1995 Paul Müller served as CEO of Helvetia Patria Assurances’ Swiss Division in Basel. Paul Müller took up his new position as Chief Markets Officer (CMO) and CEO Switzerland at the Swiss Life Group in mid-January 2003. He is married with two children.
Other appointments: – Honorary General Consul of the Republic of Austria in Basel (until June 2003)
He then returned to Credit Suisse where he held the position of Chief of Staff of the Investment and Trading Division. In 1997 Mr Himmel became a member of the Executive Board at ABN AMRO (Switzerland), assuming responsibility for the bank’s logistics operations. He became Head of Operations at UBS Warburg Switzerland in August 2001. Mr Himmel took up his new position as Chief Information and Technology Officer at the Swiss Life Group in mid-January 2003. He is married.
Head of E-Business Division Roland Chlapowski (as of 5 November 2002)
Head of Swiss Division, Group CEO Hans-Rudolf Strickler (as of 7December 2002)
Transfer of management tasks No management tasks have been contractually assigned to third parties by Swiss Life Holding.
50 bers of the Board of Directors who resigned their seats prior to the period under review.
Options The following provides an overview of the options on shares of Swiss Life/Rentenanstalt or Swiss Life Holding allocated to members of the Board of Directors and the Corporate Executive Board in the
Practice and procedure The Board of Directors is responsible for determining the level and make-up of compensation for its members as well as for the members of the Corporate Executive Board. Pursuant to the Organisational Regulations, the Chairmen’s Committee, in its capacity as Coordination, Nomination and Compensation Committee, is responsible both for setting the specific levels of compensation and for stipulating the conditions to which these are subject.
In accordance with the Board of Directors ’ decision of 13 December 2002, instead of receiving their fixed remuneration in cash, members of the Board of Directors were indemnified for their services in the second half of 2002 with Swiss Life Holding shares (at the market price of 13 December 2002 of CHF 114.75 per share).
Option life: 3.5 years Vesting period: 3 years Subscription ratio: 1.39 Exercise price: CHF 960.17
These options had no intrinsic value on the balance sheet date.
Additional honorariums and remunerations During the period under review there were no additional honorariums or remunerations paid to members of the Board of Directors or the Executive Board that would have been subject to disclosure requirements.
The interest rates used for these mortgages are 3.625% and 4% or 3%.
Highest total compensation The highest total compensation for a member of the Board of Directors comprised the following: Compensation CHF 260 0001
Total compensation CHF 331 5501 1 Half of the fixed remuneration (fixed for the second half of 2002) of CHF 130 000 has been credited in the form of shares of Swiss Life Holding at CHF114.75, their market price of 13 December 2002.
2 Based on the market value as of 31 December 2002 of CHF 101.75 per share and CHF 10 per option.
Required majorities In addition to the resolutions provided for by law, a qualified majority (corresponding to at least two thirds of the voting shares represented and an absolute majority of the share par value represented), by analogy with Art. 704 of the Swiss Code of Obligations, is required to: change provisions concerning the transferability of registered shares change provisions concerning restrictions on voting rights dissolve the company (liquidation) dismiss more than one third of the Members of the Board of Directors change these provisions of the Articles of Association
Convening the General Meeting of Shareholders and drafting the agenda The rules set out in the Articles of Association for convening a General Meeting of Shareholders and drawing up the agenda encompass the stipulations of the law.
52 Auditors PricewaterhouseCoopers (PwC) serves as external statutory auditor for 84% of the Swiss Life Group companies that are directly or indirectly held by Swiss Life Holding under its scope of consolidation. PwC is also the Group Auditor for Swiss Life Holding. The remaining auditing mandates for subsidiaries are carried out by Ernst & Young (15%) and other auditing firms (1%).
Auditing fees In 2002 the auditing fees received by PwC from the Swiss Life Group came to CHF 13.503 million. These include the costs of reviewing Swiss Life/Rentenanstalt ’s 2002 half-year accounts and of comfort letters issued in connection with the capital increase.
Additional fee payments In 2002 PwC received additional payments totalling CHF 3.907 million for advisory services. A significant portion of this was for consultancy in connection with optimising the internal auditing system.
Supervisory and control instruments vis-à-vis the auditors As a matter of corporate governance, the Audit Committee of the Board of Directors is concerned with all aspects of auditing and supports the Board in the performance of its legal responsibilities as regards financial reporting, internal auditing and the coordination of audit processes.The Audit Committee does not itself carry out any auditing, but rather supervises the activities of the internal and external auditors.
The Audit Committee has the following remit: to prepare recommendations for the election or re-election of the external statutory auditors for Swiss Life/Rentenanstalt and Swiss Life Holding as well as the Group Auditor to commission audits to be performed by internal or external auditors to ascertain the independence of the External Auditors, identify possible conflicts of interest affecting them and agree on their fee to examine and comment on the External Auditors’ findings and recommendations, and receive reports from the management regarding measures taken to review and assess the quality of external reporting to examine the organisation and effectiveness of internal auditing, and take note of the findings and results of internal auditors’ reports.
Swiss Life shares declined in value by 85% in the course of the year. Alongside generally challenging economic conditions, which had a particularly negative impact on the financial services sector, there were also company-specific factors that led to a loss of confidence on the part of investors. The successful completion of the capital increase in December 2002 was an indication that shareholders are standing behind the new management as it implements the new strategy.
Languages This publication may also be obtained in French, Italian and German. The German text is definitive.