The Swiss Life Group’s 2014 financial year at a glance: Course of business — Swiss Life can look back on a successful 2014: The Group steadily expanded its market position due to the resilience of its business model. In 2014, Swiss Life posted adjusted profit from operations of CHF 1182 million, a rise of 4% compared to the previous year. Net profit came to CHF 818 million (2013: CHF 784 million). The Group generated 7% growth in premium income in local currency to CHF 19.1 billion. At the same time fee and commission income rose by 15% in local currency to CHF 1.3 billion. Swiss Life is also well on track with the implementation of its Group-wide programme “Swiss Life 2015”: The majority of its targets had already been achieved by the end of 2014.
Markets — The Swiss Life Group operates in Switzerland, Germany and France and has competency centres in Luxembourg, Liechtenstein and Singapore. The Swiss Life Select, tecis, HORBACH, Proventus and Chase de Vere advisors use the Best Select approach in various European markets to choose suitable products for customers. Swiss Life Asset Managers gives institutional and private investors in Switzerland, France and Germany access to institutional and asset management solutions. Swiss Life provides multinational corporations with employee benefits solutions and high net worth individuals with structured life and pensions products. The two subsidiaries Livit and CORPUS SIREO are also part of the Group.
Workforce — 7500 employees and approximately 4500 certified financial advisors were working for the Swiss Life Group worldwide at the end of 2014.
Dear Shareholders 2014 proved to be a very successful year for Swiss Life. Once again this year our results clearly demonstrate that, thanks to the resilience of our business model, we have achieved steady and profitable growth. Swiss Life is in good shape, has a strong capital base and is close to its customers. Recent developments have again testified to the importance of our robust business model: The abolition of the minimum exchange rate by the Swiss National Bank will not stop us from achieving the goals under our Group-wide programme “Swiss Life 2015” during the current financial year.
Yet, despite all these positive trends, challenges remain. We will continue to advocate fair and sustainable framework conditions for our business in the interests of our shareholders, our customers and our employees. The debate surrounding employee pension fund reform, which is also ongoing outside Switzerland in one form or another, has grown more urgent against a background of low interest rates and volatile markets. Furthermore, the impact of an ageing society cannot and should not be ignored. As a company we share in the responsibility of ensuring that we do not bequeath an impossibly heavy burden to future generations.
Where will our journey take us as we look beyond 2015? Of course, the main emphasis this year remains on achieving the goals we set ourselves under “Swiss Life 2015”. At the same time we would like to present our goals for the period up to 2018 to you and the broader public in late autumn. The following elements are crucial in this regard: – We are placing the sustainability of our earnings at the heart of our ambitions. – We will continue to prioritise profitable growth. – We want to further develop existing business and to be very selective about any new initiatives.
We will take advantage of our solid position to steadily evolve Swiss Life – always in the best interests of our customers, employees and, of course, you our shareholders. On behalf of the Board of Directors and the Corporate Executive Board, we would like to thank you for your trust.
Swiss Life grew profitably and above the market average in 2014. The company increased premium income by 7% in local currency to CHF 19.1 billion (2013: CHF 18.0 billion). The Group also made good progress in fee and commission income, posting 15% growth to CHF 1.3 billion in local currency, to which all business units contributed.
In CHF million 1 Switzerland 2 France 3 Germany 4 International 5 Asset Managers 6 Other
Swiss Life reports adjusted profit from operations of CHF 1182 million, up 4% on the previous year. Net profit rose from CHF 784 million to CHF 818 million (+4%). The profit increase was achieved despite further strengthening of the insurance reserves by CHF 1.2 billion. Swiss Life Asset Managers generated direct investment income of CHF 4.5 billion in 2014 – a rise of 4% on the previous year. The net investment result improved by almost CHF 200 million to CHF 5.1 billion, producing a net investment return of 3.8% (2013: 3.9%).
The Group again made operational progress in the second year of implementing its Group-wide programme “Swiss Life 2015”. Efficiency ratios improved again in all insurance units. Swiss Life made overall cost savings of CHF 160 million, thereby achieving its 2015 cost savings target of CHF 130–160 million one year ahead of schedule. As a result of the interest rate situation, the new business margin fell from 2.2% to 1.8% – although it still stands above our target of 1.5%. The value of new business in 2014 amounted to CHF 255 million (2013: CHF 289 million), The Group generated adjusted return on equity of 9.6% in the year under review (2013: 10.0%). Shareholders ’ equity climbed from CHF 8.9 billion to CHF 12.8 billion (+43%). In the same period, the Group’s solvency ratio rose from 210% to 269%.
For events of particular significance after the end of the reporting period, please refer to note 35 “Events after the Reporting Period” in the Consolidated Financial Statements.
Gross written premiums, poliCy Fees And deposits reCeived 19 102 17 969 6.3%
In the year under review Swiss Life Switzerland posted a segment result of CHF 657 million (2013: CHF 716 million). Adjusted for one-off effects during the previous year (IFRS 13), Swiss Life Switzerland maintained a stable result driven by excellent premium development and a further reduction in operating expense, despite the ongoing low interest rate environment.
Insurance benefits, including changes in insurance reserves, rose by 10% to CHF 11.3 billion. This increase was mainly due to higher savings premiums.
In the course of 2015, Swiss Life Switzerland will continue to pursue its long-term initiatives of broadening its service, product and advisory offering, enhancing its distribution capacity, expanding digital customer access and achieving further efficiency gains.
Gross written premiums, poliCy Fees And deposits reCeived 10 038 9 020 11.3%
In 2015, Swiss Life in France will continue to pursue the expansion of its product and service offering in life insurance for high net worth individuals and the development of its group business offering.
Gross written premiums, poliCy Fees And deposits reCeived 5 069 4 685 8.2%
During the year under review, Swiss Life Germany maintained its segment result more or less on a par with last year at CHF 92 million – in spite of a challenging operating environment due mainly to a sustained low interest rate environment and new operating conditions resulting from the Life Insurance Reform Act. The result is attributable to much higher fee and commission income, a good financial result and further cost savings.
Swiss Life Germany generated premium volume of CHF 1.6 billion in 2014, equivalent to a fall of 6% (5% in local currency). The core product areas of Swiss Life Germany are occupational disability insurance, occupational pensions, long-term care insurance and modern guarantee concepts. Premium volume was affected by declining single-premium contributions in individual insurance due to the consistent focus on profitability before growth. Insurance benefits and bonus distributions remained almost unchanged from the previous year.
Administrative costs adjusted for one-offs fell by 2% in local currency to CHF 255 million. Swiss Life Germany thus continued its strict cost management and achieved additional cost savings.
The challenging market conditions look set to persist in 2015. Nevertheless, Swiss Life expects a rise in new business due to the introduction of several new products and a new distribution structure phased in over the course of 2014. In financial advisory services, Swiss Life expects the number of advisors to increase, which will have a positive impact on business performance.
Gross written premiums, poliCy Fees And deposits reCeived 1 618 1 724 –6.2%
In the year under review, the segment achieved a result of CHF 34 million, which was more than twice as much as during the previous year (CHF 16 million). This encouraging development is due to operational progress, particularly the ongoing cost discipline and the growth in fee and commission income. Fee and commission income increased in all business areas to a total of CHF 240 million (2013: CHF 231 million). Gross written premiums, policy fees and deposits received came to CHF 2.5 billion in 2014 (2013: CHF 2.6 billion).
The PPLI area with carriers based in Luxembourg, Liechtenstein and Singapore specialises in life insurance solutions for high net worth individuals. The identification and development of new markets in Europe and Asia further underpinned the sustained growth: The strong market position of the business in Europe led to an increase in the portfolio resulting in higher fee income.
In 2015, the main focus in all business areas will lie on continued business development and increasing fee and commission income.
The Asset Managers segment comprises Group-wide institutional asset management activities. The German real estate asset management service provider CORPUS SIREO, acquired in the summer of 2014, is accounted for from 1 October 2014.
interest expense –0 –0 n/a number of employees (full-time equivalents) 1 261 706 78.5%
Corporate Governance The Swiss Life Group is committed to risk-based and transparent corporate governance in line with nationally and internationally recognised standards of corporate governance.
The companies falling within the Group’s scope of consolidation are presented in the Consolidated Financial Statements (note 36). Information on the listing on the SIX Swiss Exchange and market capitalisation can be found in the section “Share Performance and Historical Comparison” on pages 271 and 272. The organisational structure of the Group shows the key business markets and areas. The resulting operational responsibilities are reflected in the allocation of responsibilities among the Corporate Executive Board. With regard to insurance operations, one person with responsibility for the market and results is assigned to each specific area.
The operational management structure as at 31 December 2014 is shown on page 42.
Shareholdings in companies that are domiciled in Switzerland and have their shares listed in Switzerland must be reported to the company in question and the SIX Swiss Exchange if the shareholdings exceed, fall below or reach certain thresholds. The relevant thresholds are 3, 5, 10, 15, 20, 25, 33⅓, 50 and 66⅔% of the voting rights. Details are set out in the Federal Act on Stock Exchanges and Securities Trading (SESTA) and Stock Exchange Ordinance-FINMA (SESTO-FINMA).
The disclosures of shareholdings that exceed the disclosure threshold on the balance sheet date of 31 December 2014 are shown below. In accordance with the disclosure requirements, the percentage figures given relate to the share capital and number of outstanding shares pursuant to the Articles of Association applicable at the time of the relevant disclosure.
AQR Capital Management LLC, 2 Greenwich Plaza, 4th Floor, Greenwich CT 06830, USA, reported in a publication of 30 September 2014, that it controlled through various managed funds a total of 3.01% of the voting rights of Swiss Life Holding (950 453 shares of Swiss Life Holding and 14 963 equity swaps).
On the balance sheet date a total of 166 153 shareholders and nominees were listed in the Swiss Life Holding share register, of which about 3900 were institutional shareholders. Taken together, the shareholders entered in the share register held around 50% of the shares issued. Over half of these shares were owned by shareholders domiciled in Switzerland. Around a quarter of the registered shares were in private hands.
A table showing the shareholder structure is provided in the section “Share Performance and Historical Comparison” on page 272.
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 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.
One convertible bond issue of Swiss Life Holding was outstanding on the balance sheet date: the 0% convertible bond (2013–2020) issued by Swiss Life Holding Ltd in the amount of CHF 500 000 000. The specific conditions attached to this convertible bond and further details on it can be found in the Consolidated Financial Statements, note 20, on page 206 and in the issue prospectus of 13 November 2013.
As at 31 December 2014, Swiss Life Holding and its Group companies had not granted any options on rights to participate in Swiss Life Holding.
The Board of Directors consists of no fewer than 5 and no more than 14 members in accordance with the Articles of Association. The Chairman, other members of the Board of Directors and members of the Compensation Committee of the Board of Directors are elected by the General Meeting of Shareholders on an individual basis for a one-year period. The term of one year is deemed to signify the period from one Annual General Meeting up to and including the next. Members whose terms of office are expiring are eligible to stand for immediate re-election.
2 Member of the Board of Directors of Swiss Life Ltd since 2000
Rolf Dörig will be put forward for re-election as member and Chairman at the General Meeting of Shareholders of Swiss Life Holding on 27 April 2015.
Other appointments: – Adecco S.A., Chairman of the Board of Directors – Kaba Holding Ltd, Vice Chairman of the Board of Directors – Danzer Holding AG, Member of the Supervisory Board – Walter Frey Holding AG, Member of the Board of Directors
Gerold Bührer will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding on 27 April 2015.
Other appointments: – Cellere AG, Member of the Board of Directors – Georg Fischer Ltd, Vice Chairman of the Board of Directors – J.P. Morgan, Member of the European Advisory Council – FehrAdvice & Partners AG, Chairman of the Board of Directors
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), the London School of Economics (Master of Science) and the 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
Frank Schnewlin will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding on 27 April 2015.
Chairman of the Risk and Audit Committee – Twelve Capital AG, Member of the Board of Directors – Drosos Foundation, Vice Chairman of the Board of Trustees/Chairman of the Finance
Wolf Becke will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding on 27 April 2015.
Adrienne Corboud Fumagalli — Born 1958, Swiss and Italian national Member of the Board of Directors bild Adrienne Corboud Fumagalli is a Doctor of Economics and Social Sciences and a graduate of the University of Fribourg. In 1996 she joined the PTT in the management team of Radiocom (radio, TV, mobile) in charge of New Business Development and the international market. The PTT then became Swisscom and Adrienne Corboud Fumagalli held various positions from 1997 to 2000, ultimately becoming Director of Product Marketing in Radio Broadcasting Services. In November 2000, Adrienne Corboud Fumagalli joined the Kudelski Group as Corporate Secretary and Member of the Corporate Executive Board. In January 2004, she was appointed Executive Vice President in charge of Business Development. In July 2008 the ETH Board appointed Adrienne Corboud Fumagalli as Vice-President for Innovation and Technology Transfer at EPF Lausanne (EPFL) with a special focus on the development of the EPFL Innovation Park Foundation and industrial partnerships.
CFO and deputy CEO of the Swisscom Group. In 2006 and the first half of 2007 he was CEO of Swisscom Fixnet Ltd and afterwards became CFO and deputy CEO of the Swisscom Group until the end of 2012 and, from 1 January 2013, the Head of Group Related Businesses.
The following mandates in the Swisscom Group: – Fastweb AG, Member of the Board of Directors – Swisscom Energy Solutions Ltd, Chairman of the Board of Directors – Belgacom International Carrier Services Ltd, Member of the Board of Directors – Cinetrade Group, Chairman of the Board of Directors – PubliGroupe Ltd, Chairman of the Board of Directors
Damir Filipovic will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding on 27 April 2015.
Henry Peter — Born 1957, Swiss and French national Member of the Board of Directors bild Henry Peter completed his studies in law at the University of Geneva in 1979, and in 1981 he was called to the Geneva bar. Following a pupillage in Geneva, a period of study as a visiting scholar at the University of California in Berkeley and legal work in Lugano, he obtained his PhD at the University of Geneva in 1988. Since 1988 he has been a partner in a law firm in Lugano, currently PSM Law SA.
Committee – Consitex SA, Member of the Board of Directors – Ermenegildo Zegna Holditalia SpA, Member of the Board of Directors and Chairman of the
– Banque Morval SA, Member of the Board of Directors – PKB Privatbank AG, Chairman of the Board of Directors and the Executive Committee – Sowind Group Ltd, Member of the Board of Directors – Global Petroprojects Services Ltd, Member of the Board of Directors – Bank Lombard Odier & Co Ltd, Member of the Board of Directors and Chairman of the
Franziska Tschudi will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding on 27 April 2015.
Changes in the Board of Directors with effect from the 2015 General Meeting of Shareholders
The Board of Directors met eight times during the year under review. The meetings lasted over three hours on average. All members of the Board of Directors attended all the meetings, with the exception of one meeting, where individual members were excused. The Group CEO and the other members of the Corporate Executive Board were present at all the meetings, with the exception of three meetings, at each one of which one Corporate Executive Board member was excused. The Board of Directors conducted parts of the meetings among themselves.
Four standing committees support the work of the Board of Directors as a whole: the Chairman’s and Corporate Governance Committee, the Compensation Committee, the Investment and Risk Committee, and the Audit Committee. The Board of Directors may establish other committees to be entrusted with special tasks.
The Chairman of the Board of Directors presides over meetings. As a rule, the Group CEO attends the Chairman’s Committee meetings or parts of the meetings in an advisory capacity. Further members of the Corporate Executive Board and in-house or external specialists may also be invited to attend. The Chairman’s Committee meets at least six times a year.
Compensation Committee The Compensation Committee supports the Board of Directors with regard to setting the compensation policy and in key personnel decisions regarding appointments to the highest levels of
Eight meetings of the Investment and Risk Committee were held in the year under review. Each session lasted for around two hours on average. All members attended all the meetings. The Chairman of the Board of Directors attended six meetings of the Investment and Risk Committee. The Group CEO was present at seven, the Group CIO at six, and the Group CFO and Group CRO at all meetings of the Investment and Risk Committee.
Audit Committee The Audit Committee assists the Board of Directors in its supervision of the accounting function and financial reporting activities, as well as compliance with the legal framework. It reviews the appropriateness of the internal control structures and processes used to comply with the legal requirements. It monitors the activities of Corporate Internal Audit and the external audit services, takes due note of their reports and recommendations, and oversees any further measures that may prove necessary. The Committee is empowered to make decisions with respect to defining the terms and conditions for mandates to external auditors and keeps the Board of Directors appropriately informed. More over, the Audit Committee issues the regulations for Corporate Internal Audit and sets its annual programme of activities.
The Articles of Association of Swiss Life Holding can be found at www.swisslife.com, “About us” area, “Organisation” section, “Corporate Governance” and “Articles” subsections (www.swisslife.com/ association). The Organisational Regulations are also published on Swiss Life’s internet site in the “About us” area, “Organisation” section, “Corporate Governance” and “Organisational Regulations” subsections (www.swisslife.com/en/organisation).
The organisation and division of tasks within the Corporate Executive Board generally reflects the key business areas and functions. The members of the Corporate Executive Board have a direct management role with functional management responsibility for cross-divisional competencies. The members of the Corporate Executive Board are responsible for setting objectives, financial planning, HR management and achievement of objectives within their area. They issue directives for their area within the context of legal and regulatory requirements, the relevant regulations and the Group directives valid for the Group as a whole.
bild Patrick Frost studied at the ETH in Zurich and the universities of Cologne, Basel and Zurich, obtaining degrees in natural science (dipl. Natw. ETH), economics (Dr. rer. pol.) and law (lic. iur.). He began his career in the mid-nineties as an analyst and subsequently as a Portfolio Manager in asset management for Winterthur Group. After two years in the US as a Corporate Bond Manager, he was appointed Head of Fixed Income at Winterthur Group in 2001.
In 2006 Patrick Frost was appointed Member of the Corporate Executive Board and Group Chief Investment Officer of Swiss Life and in this capacity was responsible for the investment management of the Swiss Life Group. On 1 July 2014 he was appointed Group Chief Executive Officer (Group CEO) of the Swiss Life Group.
bild After completing his business administration and economics studies at the University of St. Gallen and a two-year research activity at the Institute of International Economics, Thomas Buess launched his career in insurance in 1985. From 1985 to 1993 he assumed various positions in the area of finance at the ELVIA Group. In 1994 he joined Zurich Financial Services Group as Chief Financial Officer and Member of the Executive Committee of the Swiss P&C business unit. From 1997 to 1999 he was Chief Financial Officer of all Swiss operations. In 1999 Thomas Buess moved to the USA as Chief Financial Officer of Zurich Financial Services Group’s North American business area. In 2002 he was appointed Group Chief Financial Officer and Member of the Group Management Board. Thomas Buess went on to head the reorganisation of the life insurance business before assuming the role of Chief Operating Officer of Zurich Financial Services Global Life in 2004. In January 2009 he moved to Allianz Group as Head of Operational Transformation.
bild Markus Leibundgut studied Physics and Mathematics at the University of Bern and gained his doctorate in quantum field theory. Having joined McKinsey & Company in 1999 he worked in various positions as a strategic advisor for companies in a number of sectors including technology, telecommunications and management. During his career at McKinsey & Company, Markus Leibundgut focused on consulting in the insurance sector in Europe and Switzerland. He was elected a partner in 2005. From 2009 to 2011 Markus Leibundgut also managed the McKinsey European Life Insurance Center of Competence. He joined Swiss Life in 2012, initially heading the Finance & Actuarial Services business area as CFO and Member of the Executive Board at Swiss Life Switzerland. In 2013 Markus Leibundgut was appointed Chief Operating Officer and Member of the Executive Board of Swiss Life Germany.
Other appointments: – Corporate Private Care AG, Member of the Board of Directors – Rüegg-Naegeli AG, Member of the Board of Directors – Stiftung Technopark Zürich, Member of the Board of Trustees
Bruno Pfister, Group CEO until 30 June 2014, decided to take a new career path after 12 years at Swiss Life and handed over to Patrick Frost, Group CIO until 30 June 2014, on 1 July 2014. Stefan Mächler succeeded Patrick Frost as Group CIO on 1 September 2014. Manfred Behrens, CEO Germany until 31 March 2014, retired. His responsibilities on the Corporate Executive Board were assumed by Markus Leibundgut, previously Chief Operating Officer of Swiss Life Germany, on 1 April 2014. Nils Frowein, CEO International since January 2013, was appointed Member of the Corporate Executive Board of the Swiss Life Group on 1 January 2015.
On the basis of the new powers of the General Meeting of Shareholders in relation to compensation under the Articles of Association, which came into effect on 1 January 2015, the compensation for the Board of Directors and the Corporate Executive Board will be submitted for approval to the General Meeting of Shareholders on 27 April 2015 for the first time.
– For the Corporate Executive Board: The short-term variable compensation component for the 2014 financial year and the maximum total amount of the fixed compensation and the longterm variable compensation (equity compensation plan) for the 2016 financial year.
The proposed budget/maximum amount for the fixed and long-term variable compensation for the Corporate Executive Board for the 2016 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 2016 and will detail the key underlying factors in the respective compensation report, on which the shareholders can in turn hold an advisory vote.
The revised Articles of Association of Swiss Life Holding can be viewed online and printed out at www.swisslife.com, “About us” area, “Organisation” section, “Corporate Governance” and “Articles” subsections (www.swisslife.com/association). For stipulations on compensation and on the approval of compensation for the Board of Directors and the Corporate Executive Board, particular reference is made to Articles 14, 15 and 16 of the Articles of Association.
The information on compensation granted to Corporate Executive Board members also includes the variable compensation, which was determined by the Board of Directors at the beginning of 2015 and is published on an accrual basis as compensation for the 2014 financial year. The members of the Board of Directors are granted exclusively fixed compensation, payable 70% in cash and 30% in Swiss Life Holding shares; the allocated shares are subject to a three-year blocking period.
Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for determining the level and make-up of compensation for its members, whereas the Compensation Committee is responsible for putting forward appropriate proposals (for the internal organisation of the Board of Directors see “Internal organisational structure”, pages 37 to 40). The Board of Directors as a whole also establishes the guidelines for the company’s compensation policy. In doing so, it takes into consideration the compensation policies of other companies in the financial services industry, drawing its findings from publicly available information and studies by independent external experts. Comparable companies in the insurance sector in Switzerland used for the purposes of providing relevant information for the current compensation policy included Allianz, AXA, Baloise Insurance, Swiss Re and Zurich Insurance Group.
As part of the implementation of the Compensation Ordinance and based on the amended Articles of Association as in force on 1 January 2015, the General Meeting of Shareholders approves, on the basis of a proposal by the Board of Directors, the maximum total amount of fixed compensation and long-term variable compensation for the Corporate Executive Board for the following financial year. This prospective approval excludes the short-term variable compensation component for the Corporate Executive Board, which is approved by the General Meeting of Shareholders retrospectively for the previous financial year. In addition, the General Meeting of Shareholders can, under Article 16 of the Articles of Association, pass a resolution at any time to retrospectively increase an approved total amount. If new members of the Corporate Executive Board are appointed after a resolution approving the compensation has been passed, the Articles of Association stipulate that a supplementary amount of a maximum 40% of the total amount for the year in question is
Within the framework of the compensation arrangements for members of the Corporate Executive Board, “deferred compensation in cash” was introduced as a new compensation component on 1 January 2012. On the basis of the corresponding regulations, a portion of the short-term variable cash compensation determined by the Board of Directors is not paid immediately but after a period of three years has elapsed and provided that the regulatory requirements are satisfied at that point. The allocated deferred compensation in cash represents an entitlement during the three-year deferral period. The underlying “deferred cash plan” also provides for adjustment and reclaiming mechanisms (clawback). A full or partial reduction of the deferred compensation is provided for in the following cases: negative impact of the key figures applying to the allocation of deferred compensation due to a restatement of the annual accounts or damage to Swiss Life as a result of a violation of statutory, regulatory or compliance standards by participants in the plan. If the employment relationship is terminated by a participant during the three-year deferral period for deferred compensation in cash, the entitlements expire worthless (retention component). For the 2014 financial year, the Board of Directors has determined that, as in the previous year, as from a variable compensation amount in cash of CHF 500 000, 23% of the total variable compensation in cash is to be allocated as deferred compensation in cash.
Since 2011 participants in the equity compensation plan have been allocated Restricted Share Units (RSUs) on 1 April (2011–2013 equity compensation plans) or on 1 March (equity compensation plans from 2014). The RSUs grant the holder future subscription rights, entitling them to receive Swiss Life Holding shares free of charge after a three-year period has elapsed. The attribution of shares after the expiry of the three-year deferral period is effected on a 1:1 basis (1 RSU = 1 share): the plan is therefore very simple, transparent throughout the whole term and directly linked to the performance of the Swiss Life Holding share price. The value of RSUs during the three-year term develops linear with the Swiss Life Holding share price and thus symmetrically corresponds with shareholder interests. 55 members of Swiss Life Group senior management participated in
Swiss Life – Annual Report 2014 the 2012 equity compensation plan, in which a total of 94 040 RSUs were allocated; 28 460 in total to the Corporate Executive Board, of which 7100 to Bruno Pfister, in his capacity as Group CEO at the time. 56 members of Swiss Life Group senior management participated in the 2013 equity compensation plan. A total of 74 630 RSUs were allocated; 18 590 in total to the members of the Corporate Executive Board, of which 3360 to Bruno Pfister as Group CEO at the time. Altogether 57 members participated in the 2014 equity compensation plan, in which a total of 57 223 RSUs were allocated; 14 432 in total to the Corporate Executive Board, of which 4226 to Bruno Pfister as Group CEO at the time. A total of 51 members of Swiss Life Group senior management participated in the 2015 equity compensation plan. A total of 51 660 RSUs were allocated; 13 288 in total to the members of the Corporate Executive Board, of which 3644 to Patrick Frost in his capacity as Group CEO since 1 July 2014.
The compensation paid to members of the Board of Directors in the 2014 financial year is shown on an individual basis in the 2014 compensation table below. For comparison purposes, the compensation for the 2013 financial year is shown again after the 2014 compensation table.
Compensation in blocked shares is reported in both tables on the basis of the respective stock exchange closing prices on the day of allocation. The economic value at allocation, which is equal to the tax value, is indicated in footnote 3.
As part of the implementation of the Compensation Ordinance and based on the Articles of Association of Swiss Life Holding as amended at the 2014 General Meeting, the maximum amount of the fixed compensation for the Board of Directors from the 2015 ordinary General Meeting until the 2016 General Meeting will be presented to the General Meeting of Shareholders on 27 April 2015 for approval. The proposed level of compensation remains unchanged from the compensation paid during the previous period 2014–2015.
The variable compensation components are determined by the Board of Directors in accordance with the compensation policy and based on the company result and the achievement of personal goals assessed in the employee appraisal procedure implemented throughout the Group (Group Performance System, GPS).
For the short-term variable compensation in cash (cash bonus and, if applicable, deferred compensation in cash), the amended compensation policy at Corporate Executive Board level (in relation to the ratio between fixed and variable compensation) provides for variable compensation in cash of 50% of the fixed basic salary in the case of 100% target achievement (“on-target bonus”), which can be reduced by the Board of Directors in consideration of all the circumstances.
Poss. variable compensation – cash bonus – deferred compensation in cash – equity compensation plan, RSU plan
Bruno Pfister, Group CEO until 30 June 2014, received the contractually agreed salary in the 2014 financial year until formal termination of the employment relationship on 30 November 2014; short-term variable compensation (bonus and deferred compensation in cash) of a total of CHF 540 000 was determined for his service as Group CEO until 30 June 2014; in addition he was allocated 1415 RSUs with a fair value of CHF 203.54 under the equity compensation plan for this first half of 2014.
In the 2014 financial year, the compensation is reported, in addition to the compensation of Group CEO Patrick Frost, for seven persons who were members of the Corporate Executive Board for all or part of the year under review. For Bruno Pfister, Group CEO until 30 June 2014, and Manfred Behrens, CEO Germany until 31 March 2014, compensation is considered for both the period of their membership of the Corporate Executive Board and the period until termination of their employment relationship on 30 November 2014 and 31 December 2014 respectively. For Markus Leibundgut, who joined on 1 April 2014 and Stefan Mächler, who joined on 1 September 2014, the compensation is stated pro rata for the period of their membership of the Corporate Executive Board in 2014.
The stated amounts do not include social security contributions (AHV/IV/ALV/FAK) payable by the employer under the law. The respective expenditure is shown in footnote 6 of the 2014 compensation table.
Following the 2014 compensation table the details of the compensation for 2013 are stated in a separate table for comparison.
Total Bonus for 2014 Total compensation determined Other compensation in cash and Salary in 2015 3 compensation 4 in cash Number Amount shares (amount)
Patrick Frost, Group CEO from 01.07.2014 1 125 000 575 000 24 742 1 724 742 0 0 1 724 742
Patrick Frost, Group CEO from 01.07.2014 175 000 3 644 750 190 2 855 156
Other members of Corporate Executive Board 1 4 447 814 3 365 677 137 279 7 950 770 0 0 7 950 770 1 Six individuals were taken into account in the period under review.
2 The bonus paid in 2014 relates to the 2013 financial year result.
7 The RSUs represent future subscription rights that entitle the individuals concerned to receive Swiss Life Holding shares after a period of three years, provided the requirements are satisfied at that point.
8 For the 2014 RSU plan beginning 01.03.2014 the 2013 financial year forms the basis for the amount of the allocation and the corresponding number of allocated RSUs. The allocation of RSUs on 01.03.2014 was effected at a fair value of CHF 203.54, as calculated by an independent consultancy firm.
In accordance with the Articles of Association as amended on 23 April 2014, the Company may grant members of the Board of Directors and the Corporate Executive Board secured loans and credits at usual market terms for up to CHF 10 million each and unsecured loans and credit of up to CHF 0.5 million each.
In the form of an overview, the following additional information is provided on the Swiss Life Group compensation systems for the 2014 financial year: In CHF (unless otherwise indicated)
of which total variable compensation (total pool) 2 125 809 020
Charges and credits in the financial year from compensation for previous financial years 3 –278 578
An audit involves performing procedures to obtain audit evidence on the disclosures made in the compensation report with regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the compensation report, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value components of remuneration, as well as assessing the overall presentation of the compensation report.
The General Meeting of Shareholders elects an independent voting representative. His term of office ends after completion of the next ordinary General Meeting of Shareholders. Re-election is possible. The independent voting representative is obliged to exercise the represented voting rights pursuant to the instructions given. He can be represented at the General Meeting of Shareholders by an assistant. He remains fully responsible for compliance with his obligations. If the company does not have an independent voting representative, the Board of Directors appoints one for the next General Meeting of Shareholders.
No contractual provisions exist in favour of the Board of Directors or the Corporate Executive Board with regard to changes of control of the company.
In 2014 the auditing fees credited to PwC came to CHF 8.2 million (2013: CHF 8.0 million). This includes the fees for reviewing the 2014 half-year accounts.
The external auditors submit regular written reports on the status of the auditing work. They also submit detailed reports on the half-year and annual financial statements to the Audit Committee. At the end of the year, the external auditors draw up a comprehensive report for the attention of the General Meeting of Shareholders and a detailed report on the financial year just completed for the attention of the Audit Committee, the Board of Directors and the Swiss Financial Market Supervisory Authority FINMA.
In the year under review, representatives of the external auditors attended all Audit Committee meetings, either in their entirety or for specific items on the agenda.
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” 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” area, “Financial Calendar” section (www.swisslife.com/financialcalendar).
In addition to its comprehensive Annual Report and Financial Statements, Swiss Life Holding also publishes its half-year results. Furthermore, in May and November of each year, it publishes specific details on the previous quarter. All Swiss Life’s annual reports since 1998 and all halfyear reports since 2001 can be accessed on the internet at www.swisslife.com/en/home/investors/ results/archive.html, “Investors” area, “Results & Reports” section, “Archive Reports” and “Annual Reports” subsections (www.swisslife.com/annualreports). A report detailing the key facts and figures on business operations is sent out on an annual basis to all the shareholders listed in the share register.
Risk Management Swiss Life pursues an integrated, value-oriented risk management approach, involving both quantitative and qualitative elements. The goal is to protect customers’ funds and ensure the optimal use of risk capital, while complying with the regulatory requirements and taking into account continued challenging economic conditions.
Standard & Poor’s rating capital In Standard & Poor’s risk-based capital model, the total adjusted capital (TAC) is the measure used for available capital. TAC is set against the capital required given the company’s target rating category (target capital). The calculation of target capital takes into account, in particular, insurance risks, asset value volatility and credit risks.
The following tables show key results as at 31 December 2014 compared to the results as at 31 December 2013.
CEV Certainty equivalent value TVOG Time value of options and guarantees CNHR Cost of non-hedgeable risks FC Frictional costs VIF Value of in-force business RC Required capital FS Free surplus NAV Net asset value MCEV Market consistent embedded value scaling indicative 2.2 MCEV of covered business
Driven by the operating profit of the year, the net asset value went up by 13%, despite dividends paid and negative foreign currency translation effects. Free surplus – after new business financing and the aforementioned dividends – increased by CHF 384 million, to which all units contributed. Goodwill and other intangibles are not included in the net asset value, with the exception of France (see section 4.7).
The cost of credit risk amounts to CHF –665 million for 2014 compared to CHF –638 million for the previous year.
–55289 2.3 Value of new business 2.3.1 Value of new business, premiums and margins amounts in CHF million
PrESENT ValuE OF NEw BuSINESS PrEMIuMS (PVNBP) 14 414 12 929 average annual premium multiplier 12.3 11.9
2.3.2 Value of new business — analysis of change The following graph and table detail the drivers for the change in new business value and margin of the business sold in 2014 compared to the business sold in 2013.
Swiss Life – Annual Report 2014 gains mitigated the adverse impacts of the challenging capital market environment on both the new business value and margin.
Other movements in IFrS net equity n/a 1 17 17 –12 1 n/a: not applicable
The operating MCEV earnings for non-covered business correspond mainly to the results from Swiss Life Asset Managers, Swiss Life Holding, and distribution and insurance units outside the scope of covered business.
The non-operating MCEV earnings relate to borrowing costs and tax effects for the non-covered business. For Group MCEV, the change in non-operating MCEV earnings compared to 2013 originates almost entirely from the covered business.
The other movements in IFRS net equity (non-covered business only) include effects from changes in unrealised gains and losses, the sale and purchase of treasury shares, effects from equity-settled share-based payments and currency exchange rate effects on goodwill.
Transfers from VIF and required capital to free surplus 691 –187 –505 – –
Expected existing business contribution (in excess of reference rate) Expected existing business contribution (in excess of reference rate) represents the additional contribution to MCEV by taking into account investment returns for the reporting period expected at the beginning of the period over and above the initial reference rates for the period. Also, releases from the period’s contribution to the time value of financial options and guarantees and cost of residual non-hedgeable risks are included. The expected existing business contribution is explained to a large extent by spreads expected to be earned on the corporate bond and real estate portfolio.
Transfers from value in force and required capital to free surplus Transfers from value in force and required capital to free surplus include the transfer of the results of the preceding step from value in force to free surplus. Also, the required capital is normally reduced after this step, resulting in an equal increase of free surplus. The total effect in this line is zero. In the context of a life insurer’s business model, this should be seen in combination with effects from new business which partly reverses this effect by an increase of required capital and a reduction of net asset value.
Experience variances Experience variances aggregate the impact of actual development versus expectations regarding non-economic assumptions such as mortality, expenses, lapses, as well as the deviations in handling of additional reserves. A variety of effects relating to persistency and other demographic experience as well as reserve strengthening resulted in a MCEV increase. The latter had a negative impact on free surplus and a positive effect on value of in-force business; the largest contribution originates from the Swiss business.
Assumption changes Assumption changes refer to the impact of the change on assumptions such as future expense, surrender, mortality, morbidity, longevity rates. The positive contribution is driven by a favourable demographic experience in Germany and in the French health business, while the regular update in the Swiss business had a negative impact, also on the free surplus. Further cost efficiency gains contributed positively.
Other operating variance Other operating variance include effects from a refined basis for determining the spread for the valuation of hybrid debt and measures to improve current and future margins in the insurance businesses.
Closing adjustments Closing adjustments represent the transfer of funds into the covered business and currency exchange rate translation effects resulting from the consolidation in Swiss francs.
Sensitivities for MCEV with regard to reference rates increased, while operational and demographic sensitivities remained stable overall. Sensitivities with regard to swaption implied volatilities are influenced by the Swiss group life business, where operating improvements have contained the cost of policyholder options and guarantees, such that business-inherent shareholder options drive the time value of options and guarantees. In the current capital market environment with high interest rate volatilities, we consider corresponding sensitivities of ±10% more appropriate (±25% in previous year). The relative sensitivities with regard to equity/property market values and their volatilities remained stable compared to 2013.
100 bp decrease of interest rates (reference rates) –1 068 –10% –118 –46%
10% increase in equity / property market values 722 7% 1 1
10% decrease in equity / property market values –818 –7% 1 1
25% decrease in equity / property implied volatilities 263 2% 20 8%
5% proportionate decrease in mortality rates (annuities) –118 –1% –2 –1%
Reconciliation of IFRS net assets to Group MCEV as at 31 December 2014
This breakdown by market unit essentially coincides with the IFRS insurance segments in the annual report. There are some differences since the MCEV classification generally follows the legal structure in order to ensure a correct modelling of the profit-sharing. A divergence from the IFRS insurance segment reporting is the treatment of distribution units such as Swiss Life Select, which are reported for MCEV purposes under non-covered business, and Swiss Life Asset Management in France, which is reported for MCEV purposes under France.
France Swiss Life offers savings, annuity, and risk products as well as health insurance. New business for life insurance focuses on multi-support products, combining traditional savings and unit-linked components. The main distribution channels are brokers, tied agents and own sales force. Additionally, Swiss Life in France has developed strong relations with independent financial advisors and private banks.
Germany Swiss Life sells traditional and modern products in individual and group life business. Disability insurance plays an important role. The main distribution channels are independent brokers, followed by financial advisors such as Swiss Life Select.
International Swiss Life International is specialised in private placement life insurance (PPLI), booked in its carriers in Liechtenstein, Singapore and Luxembourg, and group insurance solutions for international and local corporate clients, booked in Luxembourg.
ValuE OF IN-FOrCE BuSINESS 4 653 1 174 312 218 6 356
Frictional costs of required capital –211 –98 –21 –18 –348 1 The value for France includes CHF 95 million in goodwill and intangible assets originating from the non-life and non-health insurance operations.
The sustained business growth and further lowering of the guarantees increased the value of the in-force business. In group life, characterised by variable guarantees, the business-inherent shareholder options drive the time value of options and guarantees, which increased due to higher interest rate volatilities; the continued balance sheet strengthening was particularly beneficial.
France The MCEV increased by CHF 435 million notably due to the annual profit, the revised profitsharing approach for life business and the new business value.
Swiss Life in France is subject to a tax of 3% applied to dividends paid to Switzerland. As no clear market practice concerning the treatment of such taxes has emerged yet and as the effect would not be material for Swiss Life, it is not taken into account.
International The MCEV increased by CHF 123 million driven by a strong operating performance of the in-force business, an increased value of new business and reduced costs in both the PPLI and the corporate client businesses. In addition to the strong annual profit, a capital transfer of CHF 28 million contributed to the increase of the net asset value.
PrESENT ValuE OF NEw BuSINESS PrEMIuMS (PVNBP) 6 939 4 326 938 2 211 14 414
France Ongoing margin management counteracted adverse external effects such as lower interest rates and the French health reform.
International The PPLI business is the main contributor to International’s value of new business. The effect of lower new business volume was more than compensated by higher fee levels and cost management across all of International’s businesses leading to an increased margin.
Expected existing business contribution (in excess of reference rate) 149 124 14 19 306
Operating earnings of CHF 467 million correspond to a return of 8% on MCEV.
Assumption changes are influenced by the regular inclusion of the demographic experience which was slightly negative overall, with minor opposite effects in group and individual life.
The positive effect of assumption changes relates to an updated biometric experience, mostly in disability, while various true-up effects in the model parametrisation are included in other operating variances.
Other non-operating variances show the effect of the new Life Insurance Reform Act, mainly originating from the increased minimum policyholder participation in risk results.
International The value of new business contributed strongly to the MCEV earnings with CHF 26 million or 9% of the opening MCEV. Combined with the operating profit and positive true-up effects on the inforce business, operating MCEV earnings of CHF 91 million resulted, while other non-operating variances reflect the reduction of technical rates by the local regulator in Luxembourg.
Swiss Life – Annual Report 2014 4 Methodology 4.1 MCEV components for covered business
Certainty equivalent value and time value of financial options and guarantees are items that involve projections encompassing local statutory liabilities and assets in line with: – local legal and regulatory obligations – company practice due to commercial and competitive constraints – local market practice in the calculation of embedded value
The rules for anticipated management and policyholders’ actions applied in the certainty equiva lent scenario are the same as those for the stochastic projection used to determine the time value of financial options and guarantees.
At the end of the projection, shareholders are assumed to meet any shortfall of assets against liabilities or to receive a share of any residual assets. The same applies to the certainty equivalent value.
Swiss Life – Annual Report 2014 2 Copyright © 2009 jPMorgan Chase & Co. all rights reserved.
The drivers for projecting the economic capital for CNHR are generally based on the statutory solvency margin.
The stochastic economic scenarios are generated by the economic scenario generator developed and provided by Barrie & Hibbert, part of Moody’s Analytics, Inc. For variable annuity products a dedicated economic scenario generator is used.
Non-covered business comprises all other entities of the Swiss Life Group that are valued at the unadjusted IFRS net asset value on a consolidated level, such as the distribution units of Swiss Life Select or investment management (including the newly acquired CORPUS SIREO), financing and holding companies. Non-covered business is added to the MCEV results from the covered business to form the Group MCEV.
The costs of share-based payment programmes for employees are not included in the MCEV, other than to the extent that they are allowed for in the local statutory accounts upon which the shareholder net assets are based. Further information on the costs of share-based payment programmes is given in the Group’s Consolidated Financial Statements (note 23).
Swiss Life – Annual Report 2014 3 Copyright © 2011 Markit Group limited 5 Assumptions 5.1 Economic assumptions
5.1.1 Reference rates The reference rates used for the calculation of the MCEV 2014 are based on the swap rates as at 31 December 2014 and include, where appropriate, a liquidity premium. Extrapolation of the interest curves and determination of liquidity premiums closely follow the QIS 5 framework.
Swiss Life – Annual Report 2014 5.1.1.1 Swap rates as at 31 december 2014
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.1.1.3 100% liquidity premium, relative to swap rates, as at 31 december 2014 and 31 december 2013
Euro Zone 24bp 29bp united States 63bp 47bp 1 liquidity premium for British pound: 69bp (2013: 56bp), for Canadian dollar: 25bp (2013: 24bp)
Swiss Life – Annual Report 2014 5.1.2.2 Swaption implied volatilities as at 31 december 2013
5.1.4.1 Forward inflation rates used for the calculation as at 31 december 2014
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.1.4.2 Forward inflation rates used for the calculation as at 31 december 2013
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.1.5 Real world assumptions These assump tions are used for the step “expected existing business contribution in excess of reference rates”.
5.1.5.1 Equity and property assumptions for real world projection risk premiums by asset class 2014 2013
Swiss Life – Annual Report 2014 6 Auditor’s Report on Embedded Value
We have audited the Market Consistent Embedded Value Report (“MCEV Report”) of Swiss Life Holding Ltd for the year ended 31 December 2014. The embedded value information included in the MCEV Report has been prepared in accordance with the Market Consistent Embedded Value (“MCEV”) Principles issued by the European Insurance CFO Forum, as described in sections 1 and 4 of the MCEV Report.
Opinion In our opinion, the MCEV Report of Swiss Life Holding Ltd for the year ended 31 December 2014 is prepared, in all material respects, in accordance with the MCEV Principles.
Swiss Life – Annual Report 2014 7 Glossary and List of Abbreviations
CFO Forum The CFO Forum is a high-level discussion group formed and attended by the Chief Financial Officers of major European listed, and some non-listed, insurance companies. Its aim is to discuss issues relating to proposed new accounting regulations for their businesses and how they can create greater transparency for investors. It published the MCEV Principles together with a detailed Basis for Conclusions on 4 June 2008 and an amendment in October 2009.
Operating MCEV earnings Change in MCEV and in Group MCEV in the reporting period after initial and closing adjustments, economic variances and other non-operating variances, as well as other movements in IFRS net equity.
Time value of financial options and guarantees (TVOG) The TVOG represents the additional market price of those financial options and guarantees in excess of the intrinsic value of options and guarantees which is already allowed for in the certainty equivalent value.
Total MCEV earnings Change in MCEV and in Group MCEV in the reporting period after initial and closing adjustments and other movements in IFRS net equity.
Consolidated Financial Statements 114 Consolidated Statement of Income 115 Consolidated Statement of Comprehensive Income 116 Consolidated Balance Sheet 118 Consolidated Statement of Cash Flows 120 Consolidated Statement of Changes in Equity 121 Notes to the Consolidated Financial Statements 121 1 General Information 122 2 Summary of Significant Accounting Policies 122 2.1 Basis of preparation 122 2.2 Changes in accounting policies 123 2.3 Consolidation principles 124 2.4 Foreign currency translation and transactions 124 2.5 Cash and cash equivalents 126 2.7 Financial assets 127 2.8 Impairment of financial assets 129 2.9 Investment property 130 2.10 Insurance operations 135 2.11 Property and equipment 135 2.12 Inventory property 136 2.14 Investment management 136 2.15 Commission income and expense 136 2.16 Intangible assets 139 2.17 Impairment of non-financial assets 139 2.18 Income taxes 140 2.19 Assets held for sale and associated liabilities 140 2.20 Financial liabilities 141 2.21 Employee benefits 142 2.22 Provisions and contingent liabilities 142 2.23 Treasury shares 142 2.24 Earnings per share 143 2.26 Forthcoming changes in accounting policies 145 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies 148 4 Segment Information 155 5 Risk Management Policies and Procedures
Swiss Life – Annual Report 2014 155 5.1 Contracts for the account and risk of the Swiss Life Group’s customers 157 5.2 Risk budgeting and limit setting 157 5.3 Asset and liability management (ALM) 159 5.4 Financial risk management objectives and policies 174 5.5 Insurance risk management objectives and policies 181 6 Earnings per Share 182 7 Premiums, Policy Fees and Deposits Received 183 8 Details of Certain Items in the Consolidated Statement of Income 186 9 Derivatives and Hedge Accounting 189 10 Financial Assets and Liabilities at Fair Value through Profit or Loss 190 11 Financial Assets Available for Sale 190 12 Financial Assets Pledged as Collateral 191 13 Loans and Receivables 193 14 Investment Property 194 15 Investments in Associates 196 16 Property and Equipment 198 17 Intangible Assets including Intangible Insurance Assets 202 18 Other Assets and Liabilities 203 19 Investment Contracts 207 21 Other Financial Liabilities 208 22 Insurance Liabilities and Reinsurance Assets 210 23 Employee Benefits 220 24 Income Taxes 229 27 Capital Management 230 28 Acquisitions and Disposals of Subsidiaries 231 29 Related Party Transactions 232 30 Fair Value Measurements 243 31 Offsetting Financial Assets and Liabilities 244 32 Guarantees and Commitments 247 34 Future Minimum Lease Payments under Non-Cancellable Operating Leases – Lessor 247 35 Events after the Reporting Period 248 36 Scope of Consolidation 255 Report of the Statutory Auditor
Net gains/losses on financial instruments at fair value through profit or loss 5, 8 –1 992 844
Commission expense 8 –940 –870 employee benefits expense 8 –867 –862
Impairment of property and equipment and intangible assets 16, 17 –12 –6 other expenses 8 –532 –533
equity holders of Swiss life Holding 814 781 earnings per share attributable to equity holders of Swiss life Holding
Net other CompreheNsive iNCome 3 178 –1 856 total Net CompreheNsive iNCome 3 996 –1 072
equity holders of Swiss life Holding 3 993 –1 075 total Net CompreheNsive iNCome 3 996 –1 072
Financial assets at fair value through profit or loss 10 32 389 31 486
Financial assets pledged as collateral 12, 33 2 763 1 999
Financial liabilities at fair value through profit or loss 10 25 415 24 794
Non-controlling interests 76 74 total liabilities aND equity 192 854 170 530
Issuance of debt instruments 5 915 redemption of debt instruments –50 –19
ToTal NeT CaSH FlowS From FINaNCINg aCTIvITIeS –383 605 total ChaNge iN Cash aND Cash equivaleNts –24 –379
Cash and cash equivalents as at 1 January 6 088 6 480
CaSH aND CaSH equIvaleNTS aS aT eND oF PerIoD 6 062 6 088
Cash and cash equivalents for the account and risk of the Swiss life group’s customers 2 309 2 499
ToTal CaSH aND CaSH equIvaleNTS aS aT eND oF PerIoD 6 062 6 088
Purchases of treasury shares – – –15 – – –15 – –15 allocation of treasury shares under equity
For the 2013 financial year, a distribution was made to the shareholders of Swiss Life Holding Ltd (hereinafter referred to as “Swiss Life Holding”) from the capital contribution reserve instead of a dividend payment from profit. This amounted to CHF 176 million (CHF 5.50 per registered share) and was paid in the first half of 2014.
On 11 March 2015, the Board of Directors approved the annual financial statements and the financial report and authorised them for issue. The financial report, therefore, only reflects events up to that date.
Swiss Life – Annual Report 2014 2 Summary of Significant Accounting Policies
Associates for which the Group has significant influence are accounted for using the equity method. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those decisions. The Group’s share of net income for the year is recognised as a share of profit or loss of associates and the ownership interest in the investment is recorded in the balance sheet at an amount that reflects its share of the net assets. The Group’s share of net income is included from the date on which significant influence begins until the date on which significant influence ceases. Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. The carrying amount includes goodwill on the acquisition.
The Group has elected to measure certain associates held by venture capital entities and investmentlinked insurance funds at fair value through profit or loss, as permitted by IAS 28 Investments in Associates and Joint Ventures. Changes in the fair value of such investments are included in net gains/losses on financial instruments at fair value through profit or loss.
Non-controlling interest is the part of profit or loss and net assets of a subsidiary attributable to equity interest that is not controlled, directly or indirectly, through subsidiaries by the parent. The amount of non-controlling interest comprises the proportion of the net fair value of the identifiable assets, liabilities and contingent liabilities not attributable, directly or indirectly, to the parent at the date of the original acquisition, goodwill attributable to non-controlling interest,
Swiss Life – Annual Report 2014 if any, and the proportion of changes in equity not attributable, directly or indirectly, to the parent since the date of acquisition. Summarised financial information of subsidiaries with material non-controlling interests is set out in note 26.
2.4 foreign currency translation and transactions functional and presentation currency Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the Group’s entities operate (the “functional currency”). The consolidated financial statements are presented in millions of Swiss francs (CHF), which is the Group’s presentation currency.
Derivatives and other financial instruments are also used to hedge or modify exposures to interest rate, foreign currency and other risks if certain criteria are met. Such financial instruments are designated to offset changes in the fair value of an asset or liability and unrecognised firm commitments (fair value hedge), or changes in future cash flows of an asset, liability or a highly probable forecast transaction (cash flow hedge) or hedges of net investments in foreign operations. In a qualifying fair value hedge, the change in fair value of a hedging derivative is recognised in profit or loss. The change in fair value of the hedged item attributable to the hedged risk adjusts the carrying value of the hedged item and is also recognised in profit or loss.
financial assets at fair value through profit or loss (fvpl) Financial assets at fair value through profit or loss comprise financial assets held for trading and financial assets designated as at fair value through profit or loss. Financial assets which the Group buys with the intention to resell in the near term are classified as held for trading. Financial assets designated as at fair value through profit or loss are irrevocably designated as such when initially recognised. Financial assets are primarily designated as at fair value through profit or loss in the following instances: – Financial assets backing insurance liabilities and liabilities arising from investment contracts for the account and risk of the Swiss Life Group’s customers (contracts with unit-linked features, separate accounts, private placement life insurance) in order to avoid measurement inconsis tencies with the corresponding liabilities.
Interest, dividend income and realised and unrealised gains and losses are included in net gains/ losses on financial instruments at fair value through profit or loss.
Swiss Life – Annual Report 2014 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 transferred from other comprehensive income to profit or loss for the period. Gains and losses on disposal are determined using the average cost method.
financial assets pledged as collateral Transfers of securities under repurchase agreements or under lending agreements continue to be recognised if substantially all the risks and rewards of ownership are retained. They are accounted for as collateralised borrowings, i.e. the cash received is recognised with a corresponding obligation to return it, which is included in other financial liabilities.
Swiss Life – Annual Report 2014 on loans and receivables or held-to-maturity investments carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in profit or loss. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
investment contracts with and without discretionary participation features For investment contracts that contain discretionary participation features (see below), the same recognition and measurement principles as for insurance contracts apply. For investment contracts without discretionary participation features, the recognition and measurement rules for financial instruments apply.
recognition and measurement principles Subject to certain limitations, the Group uses its existing accounting policies for the recognition and measurement of insurance contracts and investment contracts with discretionary participation features that it issues (including related deferred acquisition costs and related intangible assets) and reinsurance contracts that it holds. The existing accounting policies for recognition and measurement have primarily been based on the requirements of the Generally Accepted Accounting Principles in the United States (status of US GAAP as of the first application of IFRS 4 Phase I).
germany A minimum of 90% of the net investment returns less 100% of the minimum guaranteed interest on the policyholder account (“interest result”), a minimum of 90% of the risk result and a minimum of 50% of the positive expense result is allocated to the policyholder. A negative investment result can be offset with positive other profit sources.
income and related expenses from insurance contracts and investment contracts with discretionary participation features Premiums from traditional life insurance contracts are recognised when due from the policyholder. Insurance liabilities are established in order to recognise future benefits and expenses. Benefits are recognised as an expense when due.
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.
Swiss Life – Annual Report 2014 2.13 leases 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 straightline basis over the period of the lease.
2.16 intangible assets present value of future profits (pvp) arising from acquired insurance contracts and investment contracts with discretionary participation features On acquisition of a portfolio of insurance contracts or a portfolio of investment contracts with discretionary participation features (DPF), either directly from another insurer or through the acquisition of a subsidiary undertaking, the Group recognises an intangible asset representing the present value of future profits (PVP) embedded in the contracts acquired. The PVP represents
Swiss Life – Annual Report 2014 the difference between the fair value of the contractual rights acquired and insurance obligations assumed and a liability measured in accordance with the accounting policies for insurance contracts and investment contracts with DPF. The PVP is determined by estimating the net present value of future cash flows from the contracts in force at the date of acquisition. For acquired insurance and investment contracts with DPF, future positive cash flows generally include net valuation premiums while future negative cash flows include policyholders’ benefits and certain maintenance expenses.
goodwill The Group’s acquisitions of other companies are accounted for under the acquisition method.
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.
Swiss Life – Annual Report 2014 healthcare benefits Some Group companies provide healthcare benefits to their retirees. The entitlement to these benefits is usually based on the employee remaining in service up to the retirement age and the completion of a minimum service period. The expected costs of these benefits are accounted for in the same manner as for defined benefit plans.
In December 2014, the International Accounting Standards Board issued amendments to IAS 1 Presentation of Financial Statements. The amendments are part of the initiative to improve presentation and disclosure in financial statements. They are designed to encourage companies to apply professional judgement in determining what information to disclose in their financial statements. They clarify that materiality applies to the whole of financial statements and that the inclusion of immaterial information can inhibit the usefulness of financial disclosures. The amendments become mandatory for annual periods beginning on or after 1 January 2016. The Swiss Life Group is currently analysing the effect of the amendments on its financial statements.
In September 2014, Annual Improvements to IFRSs 2012–2014 Cycle was issued. These amendments are effective for annual periods beginning on or after 1 January 2016. The Swiss Life Group is currently analysing the effect of the amendments on its financial statements.
In July 2014, the International Accounting Standards Board completed IFRS 9 Financial Instruments. The new standard replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 covers classification and measurement of financial instruments, impairment of financial assets and hedge accounting. Classification determines how financial assets and financial liabilities are accounted for in financial statements, and, how they are measured on an ongoing basis. Financial assets are classified on the basis of the business model within which they are held and their contractual cash flow characteristics. An expected-loss impairment model is introduced. Under the new model, it is no longer necessary for a credit event to have occurred before an impairment loss is recognised. The new model for hedge accounting aligns accounting treatment more closely with risk management activities. IFRS 9 is effective for annual periods beginning on or after 1 January 2018. The Swiss Life Group is currently analysing the effect of the amendments on its financial statements.
IFRS 15 Revenue from Contracts with Customers was published in May 2014. The core principle is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 also introduces disclosure requirements that provide comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. IFRS 15 is effective for annual periods beginning on or after 1 January 2017. The Swiss Life Group is currently analysing the effect of the amendments on its financial statements.
In December 2013, Annual Improvements to IFRSs 2010–2012 Cycle and Annual Improvements to IFRSs 2011–2013 Cycle were published. These amendments are effective for annual periods beginning on or after 1 July 2014. The Swiss Life Group does not expect a material impact on its financial statements.
In November 2013, an amendment to IAS 19 Employee Benefits was issued. The amendment covers the treatment of contributions from employees or third parties and should simplify the accounting for contributions that are independent of the number of years of employee service. The amendment is effective for annual periods beginning on or after 1 July 2014. The Swiss Life Group does not expect a material impact on its financial statements.
The following amended Standards and Interpretations are not relevant to the Swiss Life Group: – Amendments to IFRS 10 Consolidated Financial Statements, IFRS 12 Disclosure of Interests in Other Entities and IAS 28 Investments in Associates and Joint Ventures (Investment Entities: Applying the Consolidation Exception)
mortality and longevity Pricing and valuation assumptions for mortality and longevity are generally based on the statistics provided by national insurance associations and complemented with internal claims experience reflecting own company records.
In the group life business, tariffs can be adjusted due to loss experience with regard to disability each year. In the group life business, the tables are based on own company records reflecting loss experience. Especially in the group life business, changes in the labour market may have a signifi cant influence on disability. The tables are updated for significant changes.
The Swiss Life Group uses certain assumptions relating to the calculation of the defined benefit liabilities. These assumptions comprise future salary increases and future pension increases which have been derived from estimates based on past experience. Assumptions are also made for mortality, employee turnover and discount rates. In determining the discount rate, the Swiss Life Group takes into account published rates of well-known external providers. The discount rates reflect the expected timing of benefit payments under the plans and are based on a yield curve approach.
The statement of income and the balance sheet for the segments are provided in the following pages:
Total before Switzer- Inter- asset elimi- elimi- land France germany national managers other nations nations Total
Premiums earned on investment contracts with discretionary participation 893 – – – – – 893 – 893
Policy fees earned on investment and unit-linked contracts 40 132 23 88 – – 284 – 284
Share of profit or loss of associates 0 4 0 – –1 0 3 – 3 exPeNSeS
Net profit 818 additions to non-current assets 1 080 300 163 4 206 0 1 754 – 1 754
Swiss Life – Annual Report 2014 statement of income for the year ended 31 December 2013
Premiums earned on insurance contracts 7 955 2 865 1 571 55 – 0 12 446 –102 12 344
Premiums earned on investment contracts with discretionary participation 798 – – – – – 798 – 798
Share of profit or loss of associates 1 4 0 – 2 0 7 – 7 exPeNSeS
Financial assets at fair value through profit or loss 4 133 8 478 1 172 18 607 0 – 32 389 – 32 389
Swiss Life – Annual Report 2014 balance sheet as at 31 December 2013
Total before Switzer- Inter- asset elimi- elimi- land France germany national managers other nations nations Total assets
Swiss Life – Annual Report 2014 premiums and policy fees from external customers
Swiss Life – Annual Report 2014 5 Risk Management Policies and Procedures
The Group’s core business is life insurance and pensions. A life insurance and pensions contract re presents a long-term promise to the policyholder. To fulfil its future payment obligations to the policyholders, the insurance entities of the Group must be financially sound over an extended period of time. The ability to remain financially sound and strong depends on a number of risk factors. The Group’s risk map can be broadly divided into financial, insurance, strategic and operational risks. All of these risk categories can impact the financial stability of the Group.
Swiss Life – Annual Report 2014 assets for the account and risk of the swiss life group’s customers
ToTal aSSeTS For THe aCCouNT aND rISK oF THe SwISS lIFe grouP’S CuSTomerS 31 284 28 559 1 Comparative amounts adjusted due to reclassification of CHF 614 million from other to equity securities (CHF 462 million) and to investment funds (CHF 152 million) as at 1 January 2014.
ToTal lIaBIlITIeS lINKeD To aSSeTS For THe aCCouNT aND rISK oF THe SwISS lIFe grouP’S CuSTomerS 31 192 28 398
Net gains/losses on financial assets 8 2 631 –259 – – 2 631 –259
Net gains/losses on investment property 288 505 – – 288 505
To control and limit exposure to risks, capital and exposure limits are defined. They include overall market risk capital, credit risk capital and, more specifically, interest rate risk capital and credit spread risk capital as well as equity exposure.
Swiss Life – Annual Report 2014 strategic asset allocation Defining the strategic asset allocation is the first major task of the ALM process and aims at achieving an efficient risk capital allocation, i.e. optimising the returns on the asset portfolio for the available risk capital defined within the risk budgeting process, taking into account all known constraints.
Distribution policy The distribution policy seeks to align the interests of the different groups of stakeholders. Holders of traditional life insurance policies favour a guaranteed minimum interest rate coupled with regular and appropriate discretionary participation whereas shareholders place greater emphasis on returns commensurate with the level of risk they are exposed to. The focus of the Swiss Life Group lies on the sustainability of the business model and should balance the policyholders’ and shareholders ’ expectations.
product design The targets of risk management are supported by product design principles. Product design defines which guarantees and benefits are built into a specific product to respond to the demand from and expectations of customers. The actuarial bases used for this purpose ensure that each individual product generates a sufficient contribution margin. To ensure that the Group’s principles are observed, guidelines on product management and underwriting are in place. As the Group’s insurance entities operate in a number of different countries, the local regulatory constraints may have an impact on the business units’ product range. These constraints must always be obeyed.
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. These limits are assessed and reported on a monthly basis.
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 is insufficient to fund the guaranteed benefits and expected discretionary participation payable to them.
ToTal INTereST-SeNSITIve INSuraNCe lIaBIlITIeS 65 995 25 602 89 91 686
Many life insurance products with a savings component and investment contracts are subject to minimum guaranteed interest rates. The guaranteed rate differs according to the type of contract. In Switzerland for instance the minimum guaranteed interest rate for the occupational pensions segment (mandatory BVG savings account) stood at 1.75% in 2014 and will remain at 1.75% for 2015 (2013: 1.5%).
To reduce the credit exposure relating to derivatives a collateral management process is in place. Contractually all outstanding positions must be fully collateralised if they reach a very low agreed minimum transfer amount. The collateral is called at least weekly, but in times of turbulent markets the frequency is increased. Counterparties for derivative transactions, over-the-counter and exchange-traded, have to be approved by both the Group Chief Risk Officer and the Group Chief Investment Officer. The minimum rating for a counterparty is A– (Standard & Poor’s or
Swiss Life – Annual Report 2014 equivalent) for the Swiss Life Group’s insurance operations. During periods of market turmoil reliance on ratings is of limited value; therefore an additional qualitative and quantitative counterparty monitoring process has been established to allow for immediate proactive measures.
In certain countries, specific additional guidelines and rules have been defined locally to monitor credit risk. Such guidelines cover investments in fixed-income securities which are mostly based on the average rating of the issuers (calculated by weighting default probabilities). Minimum and maximum thresholds apply with regard to permitted investments in non-government bonds. For investments in government bonds with a rating lower than AA– (according to Standard & Poor’s or equivalent) and non-government bonds, additional exposure limits are in place. For certain businesses, credit risk is monitored and controlled with a risk limit framework whereby maximum limits are reviewed and approved at least annually. The majority of the bond portfolio is invested in government bonds (including supranational and sovereigns) and bonds issued by the financial sector covered by collateral or government guarantees.
Debt securities at fair value through profit or loss 595 857 6 240 5 607 6 835 6 465
Debt securities available for sale 90 038 76 845 – – 90 038 76 845
Credit risk mitigation – collateral held and other credit enhancements as at 31 December 2013
Swiss Life – Annual Report 2014 exposure to credit risk of debt instruments – credit rating by class as at 31 December 2014
Swiss Life – Annual Report 2014 exposure to credit risk of other assets
At 31 December 2014 and 2013, no reinsurance assets were past due or impaired.
Swiss Life – Annual Report 2014 in foreign operations. Although the Swiss Life Group actively engages in currency management to reduce the effect of exchange rate fluctuations on its assets and liabilities, particularly by hedging against the risk of such movements in relation to part of its investments denominated in euros and in US dollars, significant movements in exchange rates could adversely affect the Swiss Life Group’s earnings and financial position, including the value of its investment portfolio. Foreign exchange exposure is hedged to a large extent in line with the strategic asset allocation. The instruments which the Swiss Life Group uses to hedge exposure may not be perfectly correlated to the related assets, so the Group will still be exposed to losses if the value of the hedge and the value of the underlying asset or liability do not correspond appropriately.
The following table shows the Group’s foreign currency exposure on monetary items against the major functional currencies Swiss franc and euro: Currency exposure as at 31 December 2014
entities with functional currency CHF – 6 593 17 617 2 697 91 3 227 entities with functional currency eur –1 457 – 2 969 443 4 25
Swiss Life – Annual Report 2014 liquidity risk Liquidity risk is the risk that not enough cash resources may be available to pay obligations when due (primarily obligations arising from the insurance business and debt) at a reasonable cost. The Swiss Life Group is exposed to liquidity risk which primarily arises on calls on its cash resources from claims, amounts payable at maturity and surrenders arising from insurance and investment contracts. The Swiss Life Group faces the risk of not being able to refinance its debt obligations due to unexpected long-term market disruptions.
At strategic level, the Swiss Life Group holds substantial liquidity and uses active debt maturity planning to ensure financial flexibility and efficient liquidity management.
Derivatives designated as cash flow hedges – – 298 931 42 – 1 271 144
Financial assets pledged as collateral 72 74 2 691 1 925 – – 2 763 1 999
Intangible assets including intangible insurance assets – – 2 972 2 937 – – 2 972 2 937 lIaBIlITIeS
Swiss Life – Annual Report 2014 5.5 insurance risk management objectives and policies
Nature of insurance risk When designing a new product or reviewing an existing one, care has to be taken that the product neither includes systemic risk nor provides incentives for adverse selection. The product should meet the market’s needs. The Swiss Life Group favours transparent and simple product design with a reliable pricing basis with sufficient statistical data available. Insurance risk arises when biometric parameters deviate adversely from expectations. The uncertainty in the estimation of future benefit payments and premium receipts for long-term insurance contracts is due to the unpredictability of long-term changes in overall levels of mortality and disability, for instance. Furthermore, deviations from the expected outcome of a portfolio can also arise because of random fluctuations. The impact of random fluctuations depends on the extent of diversification within a portfolio of contracts, that is, on the size of the portfolio.
With regard to mortality, morbidity and longevity risk the most important annuities payable (annuities in payment phase) or insured (annuities in deferral phase) as well as sums insured are as follows: annuities payable per annum by type of annuity – individual life
In CHF million life annuities – in payment 593 595 life annuities – deferred 604 637 annuities certain – in payment 8 10 annuities certain – deferred 41 43
Disability income and other annuities – deferred 7 526 7 643 annuities payable per annum by type of annuity – group life
Disability lump-sum payment 30 33 life benefits insured by type of insurance – group life
Swiss Life – Annual Report 2014 morbidity and disability Disability risk reflects the financial consequences of groups of individuals getting disabled more often and/or recovering less quickly than expected. With regard to morbidity, the most significant risk factors are epidemics, widespread changes in lifestyle, such as eating, smoking and exercise habits or economic effects.
embedded options The ability of a policyholder to pay reduced or no future premiums under a contract, to terminate the contract completely or to exercise a guaranteed annuity option means that the insurer’s liability is also subject to policyholder behaviour to a certain extent. On the assumption that a certain part of policyholders will make decisions rationally, overall insurance risk can be aggravated by such behaviour. For example, it is conceivable that policyholders whose health has deteriorated significantly will be less inclined to terminate contracts insuring disability or death benefits than those policyholders remaining in good health, thus resulting in an increasing trend in the expected mortality of policyholders, as the portfolio of insurance contracts is reduced due to surrender.
Claims arising from the accident and health business primarily cover refunds for medical treatment, daily allowances in the case of sick leave, annuities and long-term medical care. The most significant factors that could increase the overall liabilities in health insurance are the increase in the claim frequency due to an increase in the average age of the insured persons and negative economic and social factors. The insurance liabilities arising from accident and health insurance contracts must consider outstanding claims and claims incurred but not reported (IBNR). A large part of the insurance liabilities arising from these contracts relates to IBNR, and experience shows that health insurance contracts are sensitive to late reporting of claims in both number of claims and amounts.
CurreNT eSTImaTe oF CumulaTIve ClaImS 253 268 260 232 297 301 336 331 361 342 2 979
Swiss Life – Annual Report 2014 1 Copyright © Stichting CFo Forum Foundation 2008 sensitivity analysis The Swiss Life Group uses the market consistent embedded value (MCEV) following the guidelines of the European Insurance CFO Forum Market Consistent Embedded Value Principles©1, as one of the main management tools, for its sensitivity analysis with regard to insurance risk and market risk. From the shareholders’ point of view, the embedded value serves as an indicator of the value of the existing insurance portfolios. It is composed of two components: the net asset value (NAV) attributable to shareholders and the value of in-force business (VIF). Future new business is not included.
The market consistent embedded value of the Swiss Life Group amounted to CHF 12.9 billion as at 31 December 2014 (2013: CHF 11.4 billion). Due to different valuation principles, changes in the embedded value are typically not reflected to the same extent in the consolidated balance sheet and consolidated statement of income of the Swiss Life Group and vice versa.
At 31 December 2014, if morbidity had been 5% lower, the embedded value would have been CHF 54 million higher (2013: CHF 47 million higher).
At 31 December 2014, if the interest rates had been 100 basis points higher, the embedded value would have been CHF 530 million higher (2013: CHF 413 million higher).
At 31 December 2014, if the interest rates had been 100 basis points lower, the embedded value would have been CHF 1068 million lower (2013: CHF 700 million lower).
At 31 December 2014, if the swaption implied volatilities (interest rates) had been 25% lower, the embedded value would have been CHF 79 million lower (2013: CHF 157 million lower).
At 31 December 2014, if the equity securities and property implied volatilities had been 25% higher, the embedded value would have been CHF 322 million lower (2013: CHF 245 million lower).
assumed conversion of convertible bonds 1 998 862 170 786 weIgHTeD average NumBer oF SHareS ouTSTaNDINg For DIluTeD earNINgS Per SHare 34 065 763 32 274 253
Under the accounting principles adopted, deposits received under insurance and investment contracts for which deposit accounting is used are not recognised as income: In CHF million gross written premiums and policy fees 14 271 13 451
In CHF million asset management commissions 185 154 other commissions and fees 234 167
Interest income on financial assets available for sale 2 812 2 681
Financial assets designated as at fair value through profit or loss 1 169 236
Financial liabilities designated as at fair value through profit or loss 2 –50 12 associates at fair value through profit or loss 1 28 75
Financial instruments for the account and risk of the Swiss life group’s customers 1 24 –2
ToTal NeT gaINS/loSSeS oN FINaNCIal INSTrumeNTS aT FaIr value THrougH ProFIT or loSS 5 –1 992 844 1 includes interest and dividend income of CHF 103 million (2013: CHF 111 million) 2 includes changes attributable to credit risk: nil (2013: nil)
In CHF million realised gains/losses on sales of subsidiaries and other assets 0 17 realised gains/losses on sales of inventory property 14 –
Net benefits and claims under insurance contracts 14 287 13 095
Net benefits and claims under investment contracts with discretionary participation 932 826
Derivatives designated as fair value hedges – 126 46 1 1 312 2 521
available-for-sale bond portfolios – 121 – – –96 210 101 –231 – 1 331
ToTal DerIvaTIveS DeSIgNaTeD aS CaSH Flow HeDgeS 744 – 853 0 –1 3 584 n/a n/a
Derivatives designated as cash flow hedges as at 31 December 2013
In 2014, CHF 1 million was reclassified from other comprehensive income to profit or loss and included in investment income (2013: CHF 0 million).
Swiss Life – Annual Report 2014 10 Financial Assets and Liabilities at Fair Value through Profit or Loss
ToTal FINaNCIal lIaBIlITIeS DeSIgNaTeD aS aT FaIr value THrougH ProFIT or loSS 25 415 24 794
Swiss Life – Annual Report 2014 11 Financial Assets Available for Sale
Financial assets that have been sold under a repurchase agreement or lent under an agreement to return them are not derecognised when substantially all the risks and rewards of ownership are retained by the Swiss Life Group. If the transferee has the right to sell or repledge the financial assets given as collateral, they are reclassified in the balance sheet as financial assets pledged at their respective carrying amounts.
BalaNCe aS aT eND oF PerIoD 9 8 11 10 20 18 reCeIvaBleS
BalaNCe aS aT eND oF PerIoD 6 7 16 16 22 23 total alloWaNCe for impairmeNt losses 15 15 26 26 42 41
Further details with regard to the financial assets reclassified are as follows: Debt securities previously classified as available for sale
(excluding adjustments for income tax and policyholder participation) 136 –327 gains (+)/losses (–) recognised in profit or loss (including impairment) 0 7
Rental income from investment property was CHF 850 million for the period ended 31 December 2014 (2013: CHF 811 million). Operating expenses arising from investment property that generated rental income stood at CHF 173 million for the period ended 31 December 2014 (2013: CHF 174 million). Operating expenses arising from investment property that did not generate rental income during the period stood at nil for the period ended 31 December 2014 (2013: nil).
Due to the adoption of IFRS 13 Fair Value Measurement, the Swiss Life Group adjusted the fair value measurement of certain investment properties taking into account highest and best use. The impact of these adjustments to fair value was an increase of CHF 176 million (before policyholder participation and income tax expense) which was recognised in profit or loss in 2013.
summarised financial information for the year 2014 amounts in CHF million
Share of Share of other Share of total Fair value ownership Carrying Dividends profit or comprehensive comprehensive of quoted interest amount received loss income income associates equITy meTHoD aSSoCIaTeS
DePFa Holding verwaltungsgesellschaft mbH, Düsseldorf 20.4% 212 7 n/a n/a n/a n/a summarised financial information for the year 2013 amounts in CHF million
DePFa Holding verwaltungsgesellschaft mbH, Düsseldorf 20.4% 195 1 n/a n/a n/a n/a
Transfers to investment property 14 –81 – – – –81 revaluation in respect of transfers to investment property 0 – – – 0
BalaNCe aS aT eND oF PerIoD –177 –35 –46 –14 –271 total property aND equipmeNt as at eND of perioD 394 20 16 13 442 of which assets held under a finance lease – – 1 – 1 of which buildings in the course of construction 0 1 includes elimination of fully depreciated assets
BalaNCe aS aT eND oF PerIoD 603 53 59 27 742 aCCumulaTeD DePreCIaTIoN aND ImPaIrmeNT
BalaNCe aS aT eND oF PerIoD –196 –39 –46 –12 –294 total property aND equipmeNt as at eND of perioD 407 14 13 14 448 of which assets held under a finance lease – – 3 – 3 of which buildings in the course of construction 60 1 includes elimination of fully depreciated assets
No borrowing costs were capitalised in property and equipment in 2014 and 2013.
Swiss Life – Annual Report 2014 17 Intangible Assets including Intangible Insurance Assets
BalaNCe aS aT eND oF PerIoD 14 16 1 450 1 567 33 35 1 497 1 618 present value of future profits (pvp) The present value of future profits relates to portfolios of insurance contracts and investment contracts with discretionary participation acquired in a business combination or transfer of portfolios. It relates to contracts acquired in Germany and France and is amortised in proportion to gross profits or margins over the effective life of the acquired insurance and investment contracts.
BalaNCe aS aT eND oF PerIoD –542 –99 –131 0 –772 total other iNtaNgible assets as at eND of perioD 1 301 91 59 23 1 475 1 includes elimination of fully amortised/impaired assets
Swiss Life – Annual Report 2014 other intangible assets for the year 2013
BalaNCe aS aT eND oF PerIoD 1 743 223 183 3 2 151 aCCumulaTeD amorTISaTIoN aND ImPaIrmeNT
Balance as at 1 January –550 –255 –105 –95 –1 005
BalaNCe aS aT eND oF PerIoD –550 –164 –120 0 –833 total other iNtaNgible assets as at eND of perioD 1 193 59 64 3 1 319 1 includes elimination of fully amortised/impaired assets goodwill Goodwill represents the excess of the fair value of the consideration transferred and the amount of any non-controlling interest recognised, if applicable, over the fair value of the assets and liabilities recognised at the date of acquisition. Goodwill includes amounts relating to both the Swiss Life Group’s interest and the non-controlling interest in the business acquired in the case where non-controlling interest is measured at fair value. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on associates is included in the carrying amount of the investment.
The acquisition of CORPUS SIREO Holding GmbH & Co. KG, Cologne, in October 2014 led to the recognition of goodwill of CHF 117 million. The goodwill has been allocated to the “Asset Managers” segment.
Goodwill relating to Lloyd Continental has been allocated to the “France” segment. Goodwill relating to CapitalLeben has been allocated to the “International” segment. Of the goodwill relating to other acquisitions, CHF 21 million (31.12.2013: CHF 21 million) has been allocated to the “France” segment and CHF 9 million (31.12.2013: CHF 9 million) to the “Asset Managers” segment as at 31 December 2014.
The calculations relating to the recoverable amounts, which have been determined on a value-inuse basis, use cash flow projections based on financial budgets approved by management. The
Net carrying amount of goodwill 287 287 149 149 116 – 30 30
In 2014, the method for determining the discount rates used for the value-in-use calculations was changed from cost of equity to weighted average cost of capital (WACC) derived from the Capital Asset Pricing Model. Peer group comparisons and the beta of the Swiss Life Group were used for determining the beta used in the calculation. Capital structure reflected in the WACC calculation is in line with the actual and target capital structure of the Swiss Life Group. The new calculation method better reflects the economic situation of the individual cash-generating units. The discount rates for 2013 have been represented accordingly.
The acquisition of Prigest, Paris, in November 2013 led to the recognition of additional customer relationships of CHF 17 milllion.
As at 31 December 2014, customer relationships comprise customer relationships relating to “Swiss Life Select”: CHF 5 million (31.12.2013: CHF 6 million) which were allocated to the “Switzerland ” segment and nil allocated to the “Germany” segment (31.12.2013: CHF 21 million). The “France” segment comprises customer relationships of CHF 26 million (31.12.2013: CHF 31 million) and the “Asset Managers” segment CHF 60 million (31.12.2013: CHF 1 million).
brands and other The acquisition of CORPUS SIREO Holding GmbH & Co. KG, Cologne, in October 2014 led to the recognition of the brand “CORPUS SIREO” of CHF 20 million.
Deferred charges and prepaid expenses 62 159 employee benefit assets 103 99 vaT and other tax receivables 103 104
Investment contracts with discretionary participation with deposit accounting 11 167 10 728
Investment contracts with discretionary participation with actuarial valuation 2 630 2 173
Investment contracts without discretionary participation at amortised cost 30 11 36
BalaNCe aS aT eND oF PerIoD 11 36 investment contracts without discretionary participation at fair value through profit or loss
On 22 October 2012, Swiss Life Ltd issued subordinated perpetual callable bonds in the amount of CHF 300 million. The bonds are guaranteed by Swiss Life Holding, have no fixed maturity date and are first callable on 22 August 2018 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 5.50% p.a. until 22 August 2018. If the bonds are not redeemed on 22 August 2018, 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 5.091%.
On 4 April 2011, Swiss Life Ltd issued subordinated perpetual callable bonds in the amount of CHF 325 million. CHF 75 million was additionally issued in June 2011 and CHF 100 million in October 2011. The bonds are guaranteed by Swiss Life Holding, have no fixed maturity date and are first callable on 4 October 2016 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 5.25% p.a. until 4 October 2016. If the bonds are not redeemed on 4 October 2016, 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 3.551%.
Swiss life ag CHF 300 CHF 300 5.500% 2012 2018 298 298
Swiss life ag 2 eur 350 eur 343 5.000% 2005 2015 411 417
Swiss life ag eur 443 eur 192 +2.050% 1999 2019 231 236 1 Hybrid loan notes granted by elm B.v. 2 Hybrid bank loan originally granted by J.P. morgan Bank luxembourg S.a.
In December 2013, Swiss Life Holding issued CHF 500 million senior unsecured convertible bonds due in 2020. The coupon was set at 0%. The bonds may be converted into registered shares of Swiss Life Holding at the option of the holder. The initial conversion price was set at CHF 243.97 (later adjusted to CHF 242.84, valid since 25 April 2014). The proceeds from the issue of the convertible bonds have been split between a liability component and an equity component. The fair value of the liability component at issue date amounted to CHF 450 million and was calculated using a market interest rate for an equivalent non-convertible bond. The residual amount of CHF 50 million represents the value of the option to convert the instrument into Swiss Life Holding shares and was included in share premium. Transaction costs of CHF 6 million were deducted from the liability and costs of CHF 1 million were recognised in share premium.
Swiss Life – Annual Report 2014 amounts in CHF million (if not noted otherwise)
Swiss life Holding ag CHF 225 1.125% 2013 2019 224 223
Swiss life Holding ag CHF 200 1.875% 2013 2023 199 199 bank loans
Interest rate variable rate maturity amount amount 21 Other Financial Liabilities
Swiss Life – Annual Report 2014 22 Insurance Liabilities and Reinsurance Assets
Claims under non-life insurance contracts 953 979 195 197 758 782
gross claims under non-life insurance contracts 979 954 less: reinsurance recoverable –197 –191
Net additions from acquisition of insurance portfolio 19 – – – 19 –
Claims incurred, benefits paid and surrenders –112 –362 –1 3 –110 –366 effect of changes in actuarial assumptions and other movements –44 90 –3 –2 –41 92
BalaNCe aS aT eND oF PerIoD 92 326 87 890 116 108 92 210 87 781
Deposits released for payments on death, surrender and other terminations during the year –469 –539 reclassifications and other disposals 683 548
Insurance liabilities linked to assets for the account and risk of the Swiss life group’s customers 2 760 2 200 23 Employee Benefits employee benefit liabilities
Employees are covered under various funded and unfunded pension plans which operate under local regulations and practice. The major part of the defined benefit liability recognised arises from the plans covering employees in Switzerland. The impact on the consolidated financial statements arising from the plans covering employees in Germany and France is far less significant. Generally, the level of benefits is based on years of service and average compensation preceding retirement, and the main benefit is a pension after retirement or a lump-sum payment at the time
In Switzerland and France, insurance contracts have been issued to defined benefit plans covering own employees, which reinsure a part of the benefit promises made by the plans. Due to the requirements of IFRS 4 Insurance Contracts in combination with IAS 19 Employee Benefits, such insurance contracts are eliminated (self-insurance, non-eligibility as plan asset). To the extent the affected plans are funded by self-insurance, the defined benefit liabilities are backed by the investments relating to the eliminated insurance contracts. These investments are part of the investments presented in the consolidated balance sheet of the Swiss Life Group.
Other benefits comprise survivors’/orphans’ pensions and/or lump-sum payments in case of death as well as disability pensions (if disabled before retirement age). In these plans, which cover nearly all of the Group’s employees in Switzerland, the cost of the benefits is funded by payment of insurance premiums to group insurance contracts issued by Swiss Life Ltd (self-insurance) and is borne by the employer. In addition, the administration expenses of the plans are also borne by the employer since the personnel managing the plans are Swiss Life employees.
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 CHF 138 million as at 31 December 2014 (2013: surplus of CHF 85 million).
ToTal DeFINeD BeNeFIT exPeNSe 86 86 amounts recognised in other comprehensive income
In CHF million actuarial gains and losses on the defined benefit obligation –352 –25 return on plan assets excluding interest income 53 23
Contributions by plan participants –57 –85 actuarial gains (+)/losses (–) arising from
Switzerland/liechtenstein other countries ordinary retirement age-women 64 64 62–65 62–65 ordinary retirement age-men 64–65 64–65 62–65 62–65 average life expectation at ordinary retirement age-women 24.8 24.7 23.2–28.8 23.0–28.8 average life expectation at ordinary retirement age-men 21.4–22.3 21.3–22.2 19.8–25.6 19.3–25.3
At 31 December 2014, if the future expected salary growth had increased (decreased) by 0.5%, the defined benefit obligation would have increased by CHF 22 million (decrease CHF 22 million). At 31 December 2013, if the future expected salary growth had increased (decreased) by 0.5%, the defined benefit obligation would have increased by CHF 18 million (decrease CHF 18 million).
Duration of the defined benefit obligation (weighted average no. of years) 15.4 13.0
In 2013, the number of RSUs granted under this programme amounted to 74 630. The fair value at the mea surement date amounted to CHF 127.34. The date of grant was 1 April 2013.
In 2014, the number of RSUs granted under this programme amounted to 58 800. The fair value at the mea surement date amounted to CHF 203.54. The date of grant was 1 March 2014.
Swiss Life – Annual Report 2014 24 Income Taxes income tax expense
The movements in net deferred income tax assets/liabilities during the period were as follows: In CHF million
recognised Foreign in other acquisitions currency Balance as at recognised in comprehensive recognised in and disposals translation Balance as at 1 January profit or loss income share premium of subsidiaries differences end of period movemeNTS By TyPe oF TemPorary DIFFereNCe
NeT DeFerreD INCome Tax aSSeTS/lIaBIlITIeS –877 –54 –957 – 6 3 –1 879 movemeNTS By TyPe oF TemPorary DIFFereNCe
In 2014, a distribution to shareholders out of the capital contribution reserve of CHF 176 million (CHF 5.50 per registered share) was made (2013: CHF 144 million, CHF 4.50 per registered share).
Net balance as at 1 January –819 836 47 –107 –42 71 –140 – –69 –112
NeT BalaNCe aS aT eND oF PerIoD –866 3 852 378 –132 3 232 71 –236 – –165 3 067
gains/losses arising during the period 9 –48 10 384 853 – 11 189 0 –299 – –299 10 891
Share of other comprehensive income of associates 15 – – – 0 0 – – – – 0 gains/losses transferred to the income statement 8, 9 – –223 –1 61 1 –163 – – – – –163 effects of
Swiss Life – Annual Report 2014 accumulated other comprehensive income for the year 2013
NeT BalaNCe aS aT eND oF PerIoD –819 836 47 –107 –42 71 –140 – –69 –112
Share of other comprehensive income of associates 15 – – – 0 0 – – – – 0 gains/losses transferred to
Net other comprehensive income before non-controlling interests 34 –1 658 –252 20 –1 855 0 –1 – –1 –1 856 1 amount relates to debt securities reclassified to loans in 2008 (note 13)
Principal place of business france France switzerland Switzerland ownership interests held by non-controlling interests 40.0% 40.0% 33.3% 33.3%
NeT CHaNge IN CaSH aND CaSH equIvaleNTS 55 91 0 4
Swiss Life’s objectives when managing capital are as follows: to comply with the regulatory capital requirements, to define and manage economic capital and to fulfil the company’s target on rating capital. The company also actively manages the composition and quality of the capital to continuously optimise its capital structure and interest cover ratio.
gross contractual amounts receivable 34 1 estimated uncollectible cash flows 0 –
In 2014 and 2013, no significant disposals of subsidiaries took place.
Financial assets pledged as collateral 2 763 1 999 – – – – 2 763 1 999 assets attributable to non-controlling interests of investment funds 364 2 078 299 – 427 280 1 090 2 358 assets for the account and risk of the Swiss life group’s customers 24 369 22 224 857 911 3 750 2 924 28 975 26 059
associates at fair value through profit or loss – – 212 195 7 10 219 205
Alternative investments: Alternative investments classified as level 2 assets comprise hedge fund of funds, infrastructure funds, and leveraged loans funds that are based on third-party quotes substantiated by observable market data such as recent transactions or valuation techniques that reflect the market participant’s assumptions. The level 2 classification is chosen because those funds maintain an irregular basis of price and are evaluated with some time lag.
level 3: valuation techniques and inputs The exposure of level 3 financial instruments primarily consists of alternative investments (private equity, hedge funds) and real estate funds.
significant unobservable inputs other countries long-term vacancy rate 4.0–7.0% 4.0–6.0% – –
market rental value p.a. (price/m2/year) – – eur 130–590 eur 115–737
Swiss Life – Annual Report 2014 reconciliation of fair value measurements categorised within level 3 The following tables show a reconciliation from the opening balances to the closing balances for fair value measurements categorised within level 3 of the fair value hierarchy: assets measured at fair value based on level 3 for the year 2014
Financial assets for the account associates and risk at fair of the value
BalaNCe aS aT eND oF PerIoD – 139 1 665 1 103 2 924 10 18 517 23 359 unrealised gains/losses recognised in profit or loss
Due to the adoption of IFRS 13 Fair Value Measurement in 2013 the fair value hierarchy for equity instruments was subject to a review. This resulted in the transfers of equity securities of CHF 67 million from level 2 into level 3, and transfers of investment funds of CHF 480 million from levels 1 and 2 into level 3. In addition, assets for the account and risk of the Swiss Life Group’s customers of CHF 2416 million were transferred from level 2 into level 3. Debt securities of CHF 20 million were transferred from level 2 into level 3 as the predominant inputs are no longer derived from market observable inputs.
BalaNCe aS aT eND oF PerIoD – – 113 427 540 unrealised gains/losses recognised in profit or loss for liabilities held at the end of the period – – 0 0 0 liabilities measured at fair value based on level 3 for the year 2013
Share of net Investment assets of contracts investment funds without attributable to discretionary unit-linked non-controlling Derivatives participation contracts interests Total
Total gains/losses recognised in profit or loss – – 39 7 46
BalaNCe aS aT eND oF PerIoD – – 107 280 387 unrealised gains/losses recognised in profit or loss for liabilities held at the end of the period – – 39 7 46
Swiss Life – Annual Report 2014 gains/losses recognised in profit or loss Gains/losses on level 3 fair value measurements recognised in profit or loss are presented in the income statement as follows: In CHF million
Total gains/losses recognised in profit or loss 18 40 609 22 288 505 unrealised gains/losses recognised in profit or loss
for assets held at the end of the period –38 –9 605 15 278 481 lIaBIlITIeS
Total gains/losses recognised in profit or loss – – 0 –46 – –
The following table shows the carrying amounts and fair values of those financial assets and liabilities not measured at fair value in the Group’s balance sheet: In CHF million
Swiss Life – Annual Report 2014 investment contracts without discretionary participation Level 2: The fair value of investment contracts without discretionary participation is estimated using discounted cash flow calculations based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. The fair values of deposits are equal to the amount payable on demand or the carrying amount. The carrying amounts of variable-rate deposits approximate their fair values at the reporting date.
borrowings Level 1: This category consists of hybrid debt listed on the stock exchange.
of recognised ties set off in the presented in the related amounts
financial assets balance sheet balance sheet not set off in the balance sheet
Financial Cash collateral instruments received amouNTS aS aT 31 DeCemBer 2014
financial liabilities balance sheet balance sheet not set off in the balance sheet
Contractual obligations to purchase or construct investment property 1 253 210 other contingent liabilities and commitments 451 437 future minimum lease payments under non-cancellable operating leases – lessee
Contractual obligations for repairs and maintenance of investment property amounted to CHF 182 million as at 31 December 2014, which are included in this line item (2013: CHF 89 million ).
Securities under derivative and other transactions 2 392 2 041 2 392 2 041
1) of which can be sold or repledged by transferee 2 763 1 999 2 763 1 999
Securities received as collateral in exchange for securities lent 4 810 3 840
Not later than 1 year 336 348 later than 1 year and not later than 5 years 1 014 1 249
On 15 January 2015 the Swiss National Bank announced that it was discontinuing the minimum exchange rate of 1.20 Swiss francs per euro. The amounts reported in these Consolidated Financial Statements do not reflect any changes in foreign currency exchange rates after 31 December 2014. At the balance sheet date the Swiss insurance operation was to a large extent hedged with regard to foreign currency exposure against the euro.
Translation of the Group’s net profit would have been lower by approx. CHF 35 million in 2014 if the average exchange rate had been 1.05 Swiss francs per euro.
Segment 1 Consolidation period group share Direct share Principal activity adroit Private equity ag, Zürich CH 100.0% 100.0% Private equity axenta ag, Baden-Dättwil CH 100.0% 100.0% Information technology geNBlaN ag, Zürich CH 100.0% 100.0% real estate livit ag, Zürich am 100.0% 100.0% asset management & real estate livit Fm Services ag, Zürich am 100.0% 100.0% Services
Swiss life International Services ag, Schaan, Branch Zürich, Zürich IN 100.0% 100.0% Services
Swiss life Private equity Partners ag, Zürich am 100.0% 100.0% asset management
(formerly Swiss life Property management ag), Zürich am 100.0% 100.0% asset management
Segment 1 Consolidation period group share Direct share Principal activity agamI, levallois-Perret Fr 100.0% 100.0% Services and broker aTIm université SCI, levallois-Perret Fr 100.0% 100.0% real estate axyalIS PaTrImoINe, valence Fr 76.8% 96.0% Services
Swisslife Prévoyance et Santé, levallois-Perret Fr 99.8% 99.8% Non-life insurance 1 Segment (CH = Switzerland, am = asset managers, IN = International, Fr = France, De = germany)
Segment 1 Consolidation period group share Direct share Principal activity anatol acquisition gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate awD Zweite vermögensverwaltungsgesellschaft mbH, Hannover De 100.0% 100.0% Services
CitCor Commercial Properties management gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo asset management Commercial gmbH, Heusenstamm am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo asset management residential gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo Holding gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo Investment Commercial No. 6 gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo Investment residential No. 30 gmbH & Co. Kg, Köln am from 01.10.2014 99.0% 100.0% asset management & real estate
CorPuS SIreo Projektentwicklung Frankfurt-mitte gmbH, Köln am from 01.10.2014 99.9% 100.0% asset management & real estate
CorPuS SIreo Projektentwicklung münchen gmbH, Köln am from 01.10.2014 99.9% 100.0% asset management & real estate
CorPuS SIreo Projektentwicklung wohnen residenz gmbH, Köln am from 01.10.2014 99.9% 100.0% asset management & real estate 1 Segment (CH = Switzerland, am = asset managers, IN = International, Fr = France, De = germany)
SeleCT Bauprojektentwicklung gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
Sl Beteiligungs-gmbH & Co. Immobilien I Kg, garching b. münchen De 100.0% 100.0% real estate
Sl Beteiligungs-gmbH & Co. Immobilien II Kg, garching b. münchen De 100.0% 100.0% real estate
Sl Private equity gmbH, Frankfurt am main De 98.9% 98.9% Private equity
Solviva Immobilien gmbH, Köln am from 01.10.2014 100.0% 100.0% asset management & real estate
Swiss life ag, garching b. münchen (Branch Swiss life ag) De 100.0% 100.0% life insurance
Swiss life asset management gmbH, garching b. münchen am 100.0% 100.0% Services
Swiss life Deutschland operations gmbH, Hannover De from 21.08.2013 100.0% 100.0% Services
Swiss life Deutschland vertriebsgruppe gmbH, Hannover De until 12.11.2013 – –
Swiss life Deutschland vertriebsholding gmbH, Hannover De until 12.11.2013 – –
Swiss life Partner Service- und Finanzvermittlungs gmbH, garching b. münchen De 100.0% 100.0% Services
Swiss life Pensionsfonds ag, garching b. münchen De 100.0% 100.0% life insurance
Swiss life vermittlungs gmbH, garching b. münchen De 100.0% 100.0% Services tecis Finanzdienstleistungen ag, Hamburg De 100.0% 100.0% Services 1 Segment (CH = Switzerland, am = asset managers, IN = International, Fr = France, De = germany)
CorPuS SIreo Investment management S.à.r.l., luxembourg am from 01.10.2014 100.0% 100.0% asset management & real estate
CorPuS SIreo Trust No. 1 S.à.r.l., luxembourg am from 01.10.2014 100.0% 100.0% asset management & real estate
Swiss life Funds (lux) management Company S.a., luxembourg am until 17.12.2014 – –
Swiss life International Pension Fund aSBl, Strassen IN – – Pension Funds
Swiss life Products (luxembourg) S.a., Strassen De 100.0% 100.0% life insurance/reinsurance
Swiss life real estate management Funds I S.C.S., Strassen De from 05.11.2014 100.0% 100.0% real estate
Chase de vere Financial Solutions limited, manchester IN 100.0% 100.0% Dormant
Chase de vere IFa group Plc, london IN 100.0% 100.0% Finance
Chase de vere IFa Services limited, manchester IN 100.0% 100.0% Dormant
Chase de vere Independent Financial advisers limited, manchester IN 100.0% 100.0% life insurance/reinsurance
Swiss life Products (luxembourg) S.a., Branch austria, wien De 100.0% 100.0% life insurance/reinsurance
Swiss life Insurance Finance ltd., grand Cayman other 100.0% 100.0% Finance
Segment 1 Consolidation period group share Direct share Principal activity awD magyarország Pénzügyi Szolgáltató Korlátolt Felelősségű
Swiss life Select Spólka z ograniczona odpowiedzialnoscia, warszawa IN 100.0% 100.0% Services singapore
Swiss life (Singapore) Pte. ltd., Singapore IN 100.0% 100.0% life insurance
Swiss life Network (asia) Pte. ltd., Singapore IN 100.0% 100.0% Services united arab emirates
Report of the Statutory Auditor to the General Meeting of Swiss Life Holding Ltd Zurich report of the statutory auditor on the Consolidated financial statements
Swiss Life – Annual Report 2014 opinion In our opinion, the consolidated financial statements for the year ended 31 December 2014 give a true and fair view of the financial position, the results of operations and the cash flows in accor dance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.
Swiss Life Holding Financial Statements 258 Management Report 259 Statement of Income 260 Balance Sheet 261 Notes to the Financial Statements 265 Disclosure of compensation to the Board of Directors and the Corporate Executive Board in accordance with Art. 663bbis of the Swiss Code of Obligations (CO) and Art. 14–16 of the Federal Ordinance against Excessive Compensation in Listed Stock Companies, and disclosure of the shareholdings of members of the Board of Directors and the Corporate Executive Board in accordance with Art. 663c of the CO
Swiss Life Holding generated a profit of CHF 258 million in the 2014 financial year, significantly higher than in the previous year (CHF 89 million).
As at the end of the year Swiss Life Holding holds debt capital amounting to CHF 917 million. It consists of two senior bonds in the total nominal amount of CHF 425 million, comprising a tranche of CHF 225 million with a six-year maturity (coupon 1.125%) and a tranche of CHF 200 million with a ten-year maturity (coupon 1.875%), as well as a seven-year convertible bond in the nominal amount of CHF 500 million (coupon 0%). All financial instruments were issued in the previous year. Interest on the bonds in 2014 came to CHF 6.7 million. As a result of the additional interest on debt capital and increased operating expenses, total expenses including tax increased from CHF 18 million in the previous year to CHF 31 million.
liabilities towards third parties 83 63 total short-term liabilities 83 63 total long-term liabilities 917 915 eqUIty
Reserve for treasury shares 32 26 balance carried forward from previous year 1 2 total profit shown in the balance sheet 259 91 totAl liABilitieS AND equity 5 739 5 635
explanations on the balance sheet and statement of income participations authorised authorised share capital share capital in 1000
swiss life Intellectual property management ag, Zürich CHf 250 100.00% CHF 250 100.00%
issue of a convertible bond in 2013 On 2 December 2013, Swiss Life Holding launched a bond issue in the amount of CHF 500 million with a coupon of 0%, due in 2020. The bonds may be converted into registered Swiss Life Holding shares. The conversion price is set at CHF 242.84.
issue of two senior bonds in 2013 Two senior bonds for a total amount of CHF 425 million were issued on 21 June 2013, split into a tranche of CHF 225 million with a tenor of six years until 2019 (coupon of 1.125%) and a tranche of CHF 200 million with a tenor of ten years until 2023 (coupon of 1.875%).
treasury shares In the year under review the companies in the Swiss Life Group purchased a total of 74 739 Swiss Life Holding shares at an average price of CHF 204.10. No shares were sold in the same period. As at 31 December 2014, the Swiss Life Group held 192 697 treasury shares.
Swiss Life Holding further provides capital guarantees for a maximum net asset value of CHF 1100 million to Swiss Life Ltd, CHF 150 million to Swiss Life Funds, CHF 150 million to Swiss Life Management (LUX) S.A. and CHF 126 million to Swiss Life Products.
In addition, Swiss Life Holding grants a credit line of CHF 12 million to Swiss Life Products.
balance as at 1 January 91 107 allocation to free reserves –90 –105 tOtal pROFIt sHOwN IN tHe balaNCe sHeet 259 91 risk assessment For information on risk assessment, please refer to note 5 of the Swiss Life Group’s Consolidated Financial Statements.
Swiss Life – Annual Report 2014 events after the reporting period
On 15 January 2015, the Swiss National Bank announced that it was discontinuing the minimum exchange rate of 1.20 Swiss francs per euro. The amounts reported in these financial statements do not reflect any changes in foreign currency exchange rates after 31 December 2014. As at the balance sheet date, Swiss Life Holding was to a large extent hedged with regard to foreign currency exposure against the euro.
Disclosure of compensation to the Board of Directors and the Corporate executive Board in accordance with Art. 663bbis of the Swiss Code of obligations (Co) and Art. 14–16 of the federal ordinance against excessive Compensation in listed Stock Companies, and disclosure of the shareholdings of members of the Board of Directors and the Corporate executive Board in accordance with Art. 663c of the Co
Compensation in 2014 The Board of Directors is responsible for drawing up a written compensation report each year to include the information required by Articles 14–16 of the Federal Ordinance against Excessive Compensation in Listed Stock Companies (Compensation Ordinance). This compensation report supersedes the details in the notes to the balance sheet according to Art. 663bbis CO. Swiss Life’s compensation report for the 2014 financial year is provided on pages 48 to 66.
The following tables contain information on the share ownership and participation rights of members of the Board of Directors and the Corporate Executive Board in accordance with Art. 663c CO.
Share ownership/participation rights as at 31 December 2014 As at 31 December 2014, acting members of the Board of Directors and the Corporate Executive Board (including closely linked parties) held the following number of Swiss Life Holding registered shares and future subscription rights to Swiss Life Holding shares in the form of Restricted Share Units (RSUs).
Rolf Dörig, Chairman of the board of Directors 37 308 wolf becke 654 adrienne Corboud Fumagalli 134
patrick Frost, group CeO 9 704 stefan mächler 0 tOtal CORpORate exeCUtIve bOaRD 39 687 1 total number of RsUs allocated in the years 2012, 2013 and 2014 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.
Rolf Dörig, Chairman of the board of Directors 36 547 wolf becke 474
The net profit for the year amounts to CHF 258 210 747. The Board of Directors proposes to the General Meeting of Shareholders that the profit be appropriated in accordance with the table below. If this proposal is adopted, a distribution of CHF 6.50 per share will be made from the capital contribution reserve.
balance carried forward from previous year 1 090 961 2 197 310 tOtal pROFIt sHOwN IN tHe balaNCe sHeet 259 301 707 91 090 961
opinion In our opinion, the financial statements for the year ended 31 December 2014 comply with Swiss law and the company’s articles of incorporation.
Share Performance and Historical Comparison The Swiss Life share price developed very positively in 2014, closing at the end of the year at CHF 236.40. This represents a strong performance of 28%, or 31% taking into account the dividend distribution of CHF 5.50.
Market capitalisation (in CHF million) 30.12. 7 584 5 941 3 895 2 772 4 337
Total dividend payout to shareholders (in CHF million) 30.04. 176 144 144 144 77
Annual Report 2014 The Annual Report is published in German and English and contains additional information on risk management, market consistent embedded value (in English only), corporate governance and the annual accounts. The English text is definitive for the Consolidated Financial Statements; the 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 Production — Management Digital Data AG, Lenzburg © Swiss Life Holding Ltd, 2015