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, Deutsche 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 affords institutional and private investors in Switzerland, France and Germany access to investment 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.
Nevertheless the question remains, what can we expect over the next few years? What are the trends that will drive our daily business? We can already discern a number of developments, for example regulatory changes. We are bound to face yet more requirements and claims over the next few years. We will respond by continuing to strongly advocate a level of proportion in formulating these requirements so they don’t place the Swiss insurance centre and, more importantly still, our customers, at a disadvantage.
Low interest rates and strong market fluctuations are also a major hurdle given the long-term nature of our business, although we have demonstrated in recent years that we are equal to this particular challenge. There is also another trend which affords us an opportunity as well as posing a challenge: Demographic development. The social and economic consequences of increased life expectancy are insufficiently accounted for in almost all areas of life. The urgency of this issue is enhanced by people’s fundamental need to enjoy a self-determined and dignified life. We at Swiss Life want to play our part in helping the issue of a “longer self-determined life” get the attention from society it deserves given its relevance to people. In doing so, we will focus on the economic aspects.
Our new Group-wide programme into 2018 has four strategic priorities: – We will increase the quality and growth of our earnings. We want to raise the fee result from
CHF 400 to 450 million and defend our savings and risk result. – We will maintain our focus on operational efficiency and save another CHF 100 million. – We will increase our corporate room for manoeuvre to expand our capital adequacy, generate more cash for the Group and be able to pay higher dividends. To this end, we will expand our target band for payment of the dividend as a percentage of net profit by ten percentage points to between 30 and 50%.
– Finally, we will stay true to our strategic direction and consistently orient our company to the needs of its customers. That is an end in itself and talking to customers is the key to continual improvement. Customers are now better informed, they can quickly compare benefits and they demand new contact points. That is why we are investing in new digital access points; we can’t afford not to. We will invest in the region of CHF 100 million in the next three years in digitalisation and in the quality of our consultancy services and organic growth.
Swiss Life is on a strong footing and our success is due to the efforts of our staff. They guarantee the quality of our company and we would like to thank them for their strong engagement. We also thank our customers and you, our shareholders. Your trust and your support give us the platform on which we can develop our leading position in the European life and pensions market.
Rolf Dörig Patrick Frost Chairman of the Board of Directors CEO
Strengthen the quality of earnings particularly by increasing the fee result
Disciplined capital management as basis to increase the cash remittance and the payout to shareholders
Invest more than CHF ~100 m in advice and digitalisation initiatives to enhance customer centricity
The Swiss Life Group is one of Europe’s leading comprehensive life and pensions and financial solutions providers. Customers are the centrepiece of its corporate strategy: Swiss Life helps its customers lead a longer self-determined life with confidence. Its business is based on a clear strategy, strong corporate values and a powerful brand.
Swiss Life reports regularly on its strategic priorities and associated financial objectives. In November 2015 Swiss Life presented its Group-wide programme “Swiss Life 2018”.
To promote quality of earnings and earnings growth, Swiss Life is focusing on four profit sources: The savings result, the risk result, the fee and commission result and the cost result. Swiss Life will increase the resilience of its business model by continuing the expansion of its fee and commission business, which is comparatively capital-light.
The financial objectives of the “Swiss Life 2018” Group-wide programme are as follows: – We aim to increase the fee and commission result from CHF 269 million in 2014 to CHF 400–
– Our target for the risk result is CHF 350–400 million; – Cumulatively over the next three years, we are aiming at new business worth over CHF 750 million; – To free up resources for investment, we will make additional cost savings of CHF 100 million in 2018. Operating costs (excluding Asset Managers) are thus to remain stable over the next three years; – Also cumulatively over the next strategic phase, our objective is to remit at least CHF 1.5 billion in cash to Swiss Life Holding; – Our payout ratio, meanwhile, will be in the 30–50% range; – We continue to expect an adjusted return on equity of 8–10%.
In 2015, the Swiss Life Group increased net profit by 7% to CHF 878 million and adjusted profit from operations also rose by 17% to 1.3 billion. The savings result rose by 18% to CHF 773 million; the risk result by 4% to CHF 395 million; and the result from fee and commission business, or fee result, increased by 36% to CHF 342 million.
Swiss Life Switzerland increased its earning power by 10% to CHF 734 million. The main driver was the savings result of CHF 499 million (+19%). The risk result remained stable at a high level (CHF 267 million) and the fee result was slightly negative due to investments in growth initiatives (CHF –4 million). In France Swiss Life saw earnings enhanced by 20% to EUR 219 million. In addition to the savings result of EUR 163 million (+12%), the risk result of EUR 82 million (+18%) and fee result of EUR 43 million (+38%) also contributed to this increase. Germany posted earnings of EUR 121 million, up 51% over 2014, comprising a savings result of EUR 86 million (+33%), fee result of EUR 37 million (+159%) and a risk result of EUR 26 million (+8%). Swiss Life International improved its segment result of EUR 30 million to EUR 38 million (+26%), mainly driven by the fee result of EUR 29 million (+61%). An equally pleasing increase in the segment result was achieved by Swiss Life Asset Managers with 28% growth to CHF 242 million.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 18 853 19 102 –1%
Swiss Life reports by country: Switzerland, France and Germany. It also discloses separately the results of its cross-border segments: International and Asset Managers. In the Swiss domestic market, Swiss Life grew its segment result by 10%, to CHF 734 million. France increased its segment result to CHF 234 million (2014: CHF 222 million), while Germany contributed CHF 129 million (2014: CHF 97 million). The International market unit generated a segment result of CHF 41 million (2014: CHF 37 million). Swiss Life Asset Managers increased its contribution to the results by 28% to CHF 242 million. Net profit over all segments rose by 7% in the reporting period to CHF 878 million (2014: CHF 818 million).
In the reporting year, Swiss Life managed an impressive 10% improvement in its segment result in its home market of Switzerland, to CHF 734 million (2014: CHF 669 million). The main driver of this pleasing outcome was the improved savings result and the risk result, which remained stable despite considerable margin pressure. Direct investment income was 1% lower than in 2014 at CHF 3.0 billion.
Long-term initiatives also contributed to this result, such as the proven distribution strategy with the sales force channels, Swiss Life Select plus brokers and partners, the expansion of the service and product offering, increased customer orientation and a renewed reduction in operating costs.
According to the Swiss Insurance Association (SIA), premiums in the Swiss Life insurance market remained steady relative to the previous year at CHF 32.5 billion. In Group life business, the market on the whole posted premium growth of 0.7% and a 2.2% reduction in individual life business. Swiss Life increased its premium volume by 4.9% to CHF 10.5 billion, thus again significantly outperforming the market as a whole. Group life business accounted for 85% of this result. Swiss Life increased its market share of group life business to 34.9% (2014: 33.2%) and of individual life business to 20.9% (2014: 20.1%), enabling the company to further consolidate its leadership position in the Swiss market.
Operating expenses rose by 10% to CHF 972 million due to higher acquisition costs from a lot of new business, higher writedowns and activated acquisition costs. Operational administrative costs, on the other hand, were reduced again.
Insurance benefits, including changes in insurance reserves, rose by 8% to CHF 12.3 billion. This mainly stemmed from higher savings premiums and the associated higher need for provisions.
The renewed optimisation of the product offering, which dovetails with the provider’s strategy of comprehensive life and pensions and financial solutions, provided a strong foundation for premium growth. In individual life business, the successful product family Swiss Life FlexSave again proved very popular, despite necessary guarantee adjustments. The sale was also concluded of a further tranche of the Swiss Life Premium Immo product, which is a unit-linked life insurance policy whereby the customer’s single premium is invested in a Swiss Life real estate fund comprising Swiss commercial real estate. The development and launch of the product innovation Swiss Life Calmo IncomePlan brought to market a new solution for leading a longer self-determined life. Swiss Life Calmo Income Plan provides older customers with a comprehensive package comprising a guaranteed payout plan, flexible investment, a component for longevity protection and digital services.
Swiss Life aims to position itself as a leading provider of comprehensive life and pensions and financial solutions in Switzerland, supporting and accompanying its customers as they live a longer self-determined life. In this respect, the expansion of its service and product offering and a complete, fully synchronised customer experience via analogue and digital channels is a fundamental part of Swiss Life in Switzerland’s strategy. The distribution successes – both in the core business and in the additional product categories of comprehensive life and pension provision – testify to Swiss Life’s increased customer orientation. One example of this is Swiss Life Immopulse. Launched in 2012, the offering has established itself within three years as a leading Swiss real estate broker for private residential property.
For 2016, Swiss Life in Switzerland will focus on its long-term initiatives to strengthen its core business as part of the “Swiss Life 2018” strategy, to strengthen its product, service and advisory offering and expand the scope for customer access. Digital transformation initiatives including the use of analogue and digital channels play a key role in this strategy.
In 2016, 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 drive the development of its group business offering. Furthermore, the Group will also continue to expand its digital services and financial advice in France through its LaFinBox application, which affords users an overview of all bank and savings accounts.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 4 536 5 069 –11%
Swiss Life Germany generated premium volume of CHF 1.4 billion in 2015, equivalent to a fall of 14% (–2% in local currency). The core product areas of Swiss Life Germany are employee 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. New business premiums increased by 8.8% relative to 2014 (in local currency). The insurance benefits and bonus distribution were significantly lower than in the previous year, mainly due to the lower financial result in 2015.
Administrative costs adjusted for one-offs fell by 5% in local currency to CHF 214 million. Swiss Life Germany thus continued its strict cost management and achieved additional cost savings.
The challenging market conditions look set to persist in 2016. Nevertheless, Swiss Life expects to again achieve an increase in its insurance business due to the extension and updating of its product range complemented by its efficient distribution structure. In financial consulting, Swiss Life expects the number of advisors to increase, which should have a positive impact on business development.
The International segment covers business with international high net worth individuals (private clients), multinationals (corporate clients) and the financial distribution companies Swiss Life Select in Austria and the Czech Republic, as well as Chase de Vere in the United Kingdom.
The Private Clients business 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 in fee income thanks to the development of the portfolio in local currency.
In 2016, the main focus is on continued growth in all business areas. Swiss Life International is also targeting an increase in its fee and commission income and risk result.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 2 453 2 451 0%
The Asset Managers segment comprises Group-wide asset management activities. The German real estate asset management service provider Corpus Sireo, acquired in 2014, is incorporated for the first time for a full year in the 2015 financial year.
In 2015, Swiss Life Asset Managers achieved a segment result of CHF 242 million, which equates to an increase of CHF 53 million or 28% compared to the previous year. Assets under management by Swiss Life Asset Managers increased overall by CHF 2.3 billion to CHF 185.3 billion. Proprietary assets fell to CHF 146.5 billion and assets invested in investment funds and thirdparty customer mandates increased to CHF 38.8 billion. The expansion of higher-margin business and the first-time incorporation of Corpus Sireo for a full year led to an increase in income of 28.8%. Due in particular to the full deduction for Corpus Sireo, as well as to the continuing growth of third-party business, operating costs rose by 29%.
The support of Swiss Life Asset Managers enabled Corpus Sireo to significantly strengthen its operations in the German real estate market. Swiss Life Asset Managers aims to exploit its synergies further in 2016 to pursue its growth strategy in its third-party client business and strengthen its position in core markets.
Swiss Life complies with accepted standards of corporate governance and, in the interests of its shareholders, policyholders and staff, attaches great importance to the requirements entailed in terms of the management and organisation of the Swiss Life Group. The corporate governance of Swiss Life Holding Ltd (Swiss Life Holding) is based on the relevant directives issued by the SIX Swiss Exchange and the Swiss Financial Market Supervisory Authority FINMA and is modelled on leading national and international corporate governance standards, in particular the Swiss Code of Best Practice for Corporate Governance issued by the Swiss Business Federation, “economiesuisse”, as well as the Organization for Economic Cooperation and Development’s (OECD) principles on corporate governance.
This report describes the essential features of corporate governance within the Swiss Life Group. The structure below largely follows the Directive on Information Relating to Corporate Governance issued by the SIX Swiss Exchange, which came into force on 1 October 2014. The compensation report on pages 51 to 68 takes into consideration the regulations on transparency stipulated in the Compensation Ordinance and FINMA circular 2010/1 on minimum standards for remuneration schemes of financial institutions.
The public limited company Swiss Life Holding was established in 2002 and is incorporated under Swiss law. Its registered office is located in Zurich. Since 19 November 2002, its stock has been listed on the SIX Swiss Exchange. Swiss Life Holding brings together all the Swiss Life Group companies and activities under a single holding company. The holding company structure makes it easier to effect investments, enter into partnerships or cooperation agreements and execute capital market transactions. Transparency is also improved by separating the interests of shareholders from those of policyholders.
The disclosures of shareholdings that exceed the disclosure threshold on the balance sheet date of 31 December 2015 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.
Deutsche Bank AG, Taunusanlage 12, 60325 Frankfurt am Main, Germany, reported in a publication of 6 January 2015 that it held 1 714 876 shares of Swiss Life Holding, equivalent to a 5.35% share of the voting rights. At the same time, Deutsche Bank AG held sales positions in the amount of 5.09% of the voting rights (1 631 627 equity swaps).
BlackRock Inc., 55 East 52nd Street, New York 10055, USA, reported in a publication of 13 December 2014 that it held through various Group companies a total of 1 750 937 shares of Swiss Life Holding, equivalent to 5.58% of the voting rights.
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).
In addition, Norges Bank (the Norwegian central bank) reported during the year under review, in a publication of 28 January 2015, that it had exceeded (holdings of 3.23%), and, in a publication of 27 August 2015, that it had once again fallen below (holdings of 2.97%) the disclosure threshold.
All full disclosures can be found on the publication platform of the SIX Swiss Exchange’s disclosure office at www.six-exchange-regulation.com, “Issuer” area, “Obligations” sub-area, “Disclosure of Shareholdings” section and “Significant Shareholders” subsection (www.six-exchange-regulation. com/de/home/publications/significant-shareholders.html).
A table showing the shareholder structure is provided in the section “Share Performance and Historical Comparison” on page 313.
The conditional share capital is at the disposal of the holders of conversion or option rights granted by Swiss Life Holding or by companies belonging to the Group in connection with the issuing of new or existing convertible bonds, bonds with option rights, loans or other financing instruments (“equity-linked financing instruments”). The shareholders are excluded from subscription rights. The respective owners of the equity-linked financing instruments are entitled to subscribe to the new shares. The Board of Directors is entitled to limit or exclude the preemptive subscription rights of the existing shareholders in connection with the issuing of equity-linked financing instruments up to a value of 3 000 000 registered shares or up to a maximum amount of CHF 15 300 000, if the equity-linked financing instruments are placed on national or international capital markets or with selected strategic investors or are used in connection with the financing or refinancing of the acquisition of companies, parts of companies, participations or new investment projects. If the preemptive subscription rights are not granted either directly or indirectly when issuing equity-linked financing instruments, the equity-linked financing instruments must be issued according to the prevailing market conditions and the exercise period may not exceed 7 years for option rights and 15 years for conversion rights from the issuance of the relevant equity-linked financing instruments.
Since the establishment of Swiss Life Holding on 17 September 2002, a number of capital market transactions have been conducted. A detailed description of the transactions carried out up to and including the end of 2012 can be found in the Corporate Governance section of the annual reports for the relevant years. The annual reports can be accessed at www.swisslife.com, “Investors ” area, “Results & Reports” section, “Archive Reports” and “Annual Reports” subsections (www.swisslife.com/annualreports).
Shares 32 081 054 fully paid Swiss Life Holding registered shares with a par value of CHF 5.10 each were outstanding on the balance sheet date. Subject to the ten per cent limit on voting rights set out in the Articles of Association (cf. the section on “Shareholders’ participation rights” on page 69), each share grants the right to one vote at the General Meeting of Shareholders.
Additional information on the Swiss Life share is available in the section “Share Performance and Historical Comparison” on pages 312 and 313.
Swiss and foreign banks, securities brokers and companies acting on their behalf may be entered in the share register as nominees if they are holding shares of Swiss Life Holding in their custody for the account of the beneficial owners. Professional asset managers may also be registered as nominees if, in a fiduciary capacity, they have deposited Swiss Life Holding shares for the account of third parties with Swiss or foreign banks or securities brokers in their own name. Nominees are required to be subject to banking or financial market supervision. A request must be filed to
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 247 and in the issue prospectus of 13 November 2013.
Klaus Tschütscher Member Audit Committee 2013 1 In order to implement the Federal Ordinance against Excessive Compensation in Listed Stock Companies (Compensation Ordinance, VegüV), which came into force on 1 January 2014, the General Meeting of Shareholders on 23 April 2014 passed a resolution to amend the Articles of Association. Under the revised Articles of Association, members of the Board of Directors are to be elected for a one-year term of office, as had already been introduced by Swiss Life at the 2013 General Meeting and also implemented at the 2014 General Meeting.
2 Member of the Board of Directors of Swiss Life Ltd since 2000. 3 The Board of Directors proposes that the General Meeting of 26 April 2016 elect Henry Peter to the Compensation Committee in place of Gerold Bührer.
Rolf Dörig will be put forward for re-election as Member and Chairman of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 26 April 2016.
Gerold Bührer — Born 1948, Swiss national First Vice Chairman of the Board of Directors bild Gerold Bührer graduated in economics (lic. oec. publ.) from the University of Zurich in 1972. Following 17 years with the Union Bank of Switzerland as a member of senior management in its financial sector and a Member of the Executive Board of its fund investment company, he joined Georg Fischer Ltd in 1991, where he served as a Member of its Executive Board (Finances) from 1991 until 2000. He began working as an independent economic consultant in 2001 and, from 2006 until 2012, he held the office of Chairman of economiesuisse. Gerold Bührer was a Member of the Grand Council of the Canton of Schaffhausen from 1982 to 1991 and, from 1991 to 2007, a Member of the Swiss Parliament (National Councillor).
Gerold Bührer will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 26 April 2016.
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
Other appointments: – Vontobel Holding Ltd and Bank Vontobel Ltd, Vice Chairman of the Board of Directors/
Wolf Becke — Born 1947, German national Member of the Board of Directors bild Wolf Becke studied mathematics, physics and economics at the Universities of Bonn and Freiburg and obtained a degree in mathematics. Between 1973 and 1977, he worked as a research assistant at the Mathematical Institute of the University of Freiburg and earned a doctorate in science. In 1978 Wolf Becke joined Hamburger Internationale Rückversicherung AG (HIR), where he was employed in various positions until 1990, ultimately responsible for the Life and Health Reinsurance, Finance and Accounting and Investments divisions. He then moved to Hannover Re and E+S Rück. From 1992 to 1999, as a Member of the Executive Board, he was responsible for both global life and health insurance business, and for non-life business in Asia, Africa and Australasia. From 1999 until his retirement for age reasons at the end of 2011, Wolf Becke concentrated on his responsibilities as CEO of the life and reinsurance business area (Hannover Life Re).
Wolf Becke will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 26 April 2016.
Other appointments: – Hannover Life RE America, Vice Chairman of the Board of Directors – AEGON Blue Square Re N.V., Member of the Board of Directors
Adrienne Corboud Fumagalli will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 26 April 2016.
Ueli Dietiker — Born 1953, Swiss national Member of the Board of Directors bild Certified accountant Ueli Dietiker started his career at Ernst & Young. He later assumed management responsibility in the finance division at Motor-Columbus Ltd. From 1995 to 2001 he worked at Cablecom Holdings Ltd, ultimately as CEO. In 2001 he switched to the Swiss telecommunications company Swisscom Ltd where he held several positions of responsibility. From 2002 until 2006 he was CFO and deputy CEO of the Swisscom Group. In 2006 and the first half of 2007 he was CEO of Swisscom Fixnet AG and afterwards became CFO and deputy CEO of the Swisscom Group again until the end of 2012. Today he still has a 60% position at Swisscom, manages selected projects and serves on the Board of Directors of various Swisscom subsidiaries and investment companies.
– Renaissance KMU Schweizerische Anlagestiftung, Member of the Board of Trustees (since 16 January 2015)
Damir Filipovic will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 26 April 2016.
Henry Peter will be put forward for re-election as Member of the Board of Directors and for election as Member of the Compensation Committee at the General Meeting of Shareholders of Swiss Life Holding on 26 April 2016.
Committee – Consitex SA, Member of the Board of Directors – Ermenegildo Zegna Holditalia SpA, Member of the Board of Directors and Chairman of the Compensation Committee – Banque Morval SA, Member of the Board of Directors – PKB Privatbank AG, Chairman of the Board of Directors and the Executive Committee – 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
Other appointments: – Büchel Holding AG, Member of the Board of Directors – Grand Resort Bad Ragaz Ltd., Member of the Board of Directors – Montfort Werbung AG, Member of the Board of Directors – Tschütscher Networks & Expertise AG, Owner and Chairman of the Board of Directors – DMG Mori Schweiz AG and DMG Mori Europe Holding AG, Member of the Board of
The Board of Directors proposes that the General Meeting of 26 April 2016 elect Henry Peter to the Compensation Committee in place of Gerold Bührer. There are no other changes planned to the Board of Directors.
In accordance with the Articles of Association, the Board of Directors has issued Organisational Regulations setting forth the internal organisational structure and the duties and competencies of the Board of Directors, the Board of Directors’ committees, the Chairman of the Board of Directors and the Corporate Executive Board. The Organisational Regulations are reviewed regularly and adjusted where necessary. They are available on the internet at www.swisslife.com, “About us” area, “Organisation” section (www.swisslife.com/en/organisation).
The Chairman of the Board of Directors coordinates the work of the Board and the committees, and ensures reporting from the Corporate Executive Board to the Board of Directors. In urgent situations, the Chairman may also determine the necessary measures and take steps falling within the scope of the competencies of the Board until the Board of Directors takes a decision. If a timely decision cannot be reached by the Board of Directors, the Chairman is empowered to take a decision.
Chairman’s and Corporate Governance Committee The Chairman’s and Corporate Governance Committee (Chairman’s Committee) assists both the Chairman of the Board of Directors in performing his leadership and coordination duties and the Board of Directors with issues relating to corporate governance. The Committee also supports the Board of Directors in key strategic decisions.
The Compensation Committee generally consists of three members, who are elected by the Annual General Meeting of Shareholders. All members of the Compensation Committee are independent members of the Board of Directors. A Board of Directors member is regarded as being independent if he has not exercised any operational management role within the Swiss Life Group for at least three years and has no or only a minor business relationship with the Group.
Generally, the Group CIO, the Group CFO and the Group CRO attend the Investment and Risk Committee meetings or parts of meetings in an advisory capacity. The Group CEO may attend (without the right to vote) the meetings of the Investment and Risk Committee. Further members of the Corporate Executive Board and in-house specialists may also be invited to attend. The Investment and Risk Committee meets at least four times a year.
Eleven meetings of the Investment and Risk Committee were held in the year under review. Each session lasted for around two hours on average. All members attended all the meetings, with the exception of one meeting, where one member was excused. The Chairman of the Board of Directors attended nine meetings of the Investment and Risk Committee. The Group CEO was present at ten of eleven meetings of the Investment and Risk Committee; the Group CFO, the Group CIO and the Group CRO were present at all meetings.
In the year under review, the Audit Committee convened five times, with a meeting lasting over two hours on average. There was full attendance at all meetings, with the exception of one meeting, which one member was unable to attend. The Chairman of the Board of Directors was present at four meetings of the Audit Committee. The Group CEO, the Group CFO and the Head of Corporate Internal Audit, as well as representatives from the external audit services, attended all meetings. To prepare for the meetings relating to the annual and half-year reports, the Audit Committee regularly calls on the services of an independent financial and business expert.
Management structure of the Swiss Life Group as at 31 December 2015
On 31 December 2015 the Corporate Executive Board of Swiss Life Holding was composed of the following members.
bild Charles Relecom graduated from the University of Namur (Belgium ) with a degree in mathematics and went on to gain a master’s degree in Actuarial Science at the University of Louvain (Belgium). He began his career in 1978 as Chief Actuary and Chief Technology Officer at Swiss Life in Belgium. In 1984 he moved to the head office in Zurich, where he played a significant role in setting up the International Division. From 1988 to 1994 he worked for ELVIA Life as Director of Sales in the key accounts business. In 1994 he moved to “La Suisse” and, in 1998, was appointed CEO of the non-life business and Chief Actuary. In 2000 he became the CEO of “La Suisse”, a position he held until 2005 when the company was integrated into the Swiss Life Group. Following the integration, Charles Relecom returned to Swiss Life in Belgium, initially as the CEO of Zelia S.A. and, from February 2006, as CEO for the entire Belgian business.
Other appointments: – French Insurance Association (FFSA), Member of the Board of Directors
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.
bild Nils Frowein is an economics graduate with German and American accountancy certification. He is a skilled banker and has extensive expertise in the financial services sector and many years of capital market experience. From 1997 until 2004 he worked at the auditing firm BDO Deutsche Warentreuhand AG where he was responsible for the Financial Advisory Services division, most recently as partner. From 2004 to 2007 Nils Frowein was CFO of financial services provider MLP. There he was significantly involved in laying the strategic foundations for the company. Nils Frowein joined AWD as deputy Chief Executive Officer in January 2008. He was initially Chief Financial Officer and was appointed Chief Operating Officer on 1 September 2008. Between 2009 and 2010 he additionally took charge of the Swiss business of AWD as acting CEO. Since 2010 he has also been Chairman of the Swiss Life subsidiary Chase de Vere in the UK and since 2011 Chairman of the Supervisory Board of Swiss Life Select Austria.
The General Meeting of Shareholders of Swiss Life Holding resolved on 23 April 2014 on a corresponding proposal by the Board of Directors to make various amendments to the Articles of Association in order to implement the Ordinance against Excessive Compensation in Listed Stock Companies (Compensation Ordinance, VegüV). The amendments take account of the new requirements and powers of the General Meeting of Shareholders in relation to corporate governance and compensation.
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 General Meeting of Shareholders approved the compensation for the Board of Directors and the Corporate Executive Board on 27 April 2015 as follows: – For the Board of Directors: The maximum total amount of fixed compensation until the next ordinary General Meeting in 2016 in the amount of CHF 3 300 000 in total.
The 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 following information takes into account the requirements under the directive of the SIX Swiss Exchange on information relating to corporate governance and Circular 2010/1 of the Swiss Financial Market Supervisory Authority FINMA on minimum standards for remuneration schemes of financial institutions, as well as the transparency requirements under the Compensation Ordinance.
Additional information on compensation and benefit expenditure for the management and employees of the Swiss Life Group can be found in the Consolidated Financial Statements (notes 23 and 29) on pages 251 to 260 and 273 to 274. The information according to Art. 663c of the Swiss Code of Obligations regarding the shareholdings of members of the Board of Directors and the Corporate Executive Board is shown in the Notes to the Swiss Life Holding Financial Statements on pages 306 to 308.
The variable compensation components are linked to the strategic objectives of the Group and the individual divisions, and the associated financial and HR-related targets. They are based on the achievement of annual objectives defined in advance for a period of three years as part of medium-term planning and determined on the basis of the actual performance of individuals or teams in relation to the objectives set (performance-linked payment) and on the degree of achievement of the Swiss Life Group targets as reflected in its annual result (share in the company’s success). Quan titative and qualitative performance is assessed also on the basis of the competencies required for the function held, such as professional expertise, entrepreneurship, task fulfilment, cooperation and leadership. The percentage weighting between the individual and/or team performance and the share in the company’s success depends on the position and responsibilities of the function holder.
Swiss Life – Annual Report 2015 the short-term achievement of key indicators with a higher weighting, the individual KPIs are not mechanistically weighted in advance. Their individual weighting is determined at the end of each financial year by the Board of Directors as a whole on the basis of a proposal by the Compensation Committee taking all developments into account and consideration (discretionary decision).
The Board of Directors may consult independent professionals where deemed appropriate. In the year under review, Swiss Life was advised on specific compensation-related matters by PricewaterhouseCoopers (PwC).
After expiry of the thee-year period of the RSU plan, the target value for each performance criterion according to the medium-term planning is compared with the actual result achieved. The share allocation corresponds to the number of allocated RSUs (1 RSU = 1 share) if all three performance criteria have been achieved or exceeded after the three-year period has elapsed; overperformance does not lead to a higher share allocation. If the targets are only partly achieved, the share allocation is correspondingly reduced in accordance with the weighting of the performance target concerned or the RSUs expire worthless. For reasons of trade secrecy, the precise target values cannot be disclosed in advance; after expiry of the equity compensation plan, the number of RSUs available for exercise according to the effective performance and, respectively, the corresponding degree of target achievement and the corresponding share allocation (vesting) will be disclosed. The corresponding information on the vesting of the various equity compensation plans, and the shares allocated, is set out in Note 23 of the Consolidated Financial Statements on pages 259 and 260. In distinction to the equity compensation plans in effect from 2013, no performance criteria were set for the 2012 equity compensation plan, which expired during the reporting period on 31 March 2015.
For the period from the 2015 ordinary General Meeting to the 2016 ordinary General Meeting, the General Meeting of 27 April 2015 approved a maximum total amount of fixed compensation for the members of the Board of Directors in the amount of CHF 3 300 000 in total. On this basis, the Board of Directors determined the compensation for the members of the Board of Directors unchanged at the same level as in the previous year. For the Chairman of the Board of Directors the fixed compensation in cash and blocked shares had been reduced by CHF 240 000 to CHF 1 200 000 as from the General Meeting of 23 April 2014.
Total compen- sation Extra- Amount (at in cash ordinary Aggregate closing price and shares Regular contri- total Amount Number on allocation) (amount) 2 contributions 3 butions (amount)
Total compen- sation Extra- Amount (at in cash ordinary Aggregate closing price and shares Regular contri- total Amount Number on allocation) (amount) 4 contributions 5 butions (amount)
Rolf Dörig, Chairman of the Board of Directors 896 000 1 761 384 401 1 280 401 286 416 – 1 566 817 3 The allocation of shares was effected on 17.06.2014 and 15.12.2014 at the stock exchange closing price of CHF 213.80 and CHF 223.60 respectively. Taking into account the blocking period of three years, the economic value, which is equal to the tax value, is CHF 179.5108 and CHF 187.7390 respectively.
4 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV/FAK amounted to a total of CHF 191 671 in the year under review.
Compensation remitted to members of the Corporate Executive Board comprises the fixed basic salary, short-term variable compensation in cash and other compensation (child allowances, company cars, premium contributions to 3rd pillar pension plans). The short-term variable compensation in cash is allocated as a bonus and as deferred compensation in cash. The deferred compensation in cash is paid out after a period of three years has elapsed and provided that the regulatory requirements have been satisfied. In addition, a long-term variable compensation component is in place in the form of an equity compensation plan linked to the performance of the Swiss Life Holding share price, respectively to medium-term planning and corresponding target achievement (RSU plan). As already mentioned, participants are entitled to Swiss Life Holding shares after a period of three years has elapsed and provided that the relevant requirements are satisfied at the time of allocation.
The fixed basic salary is determined annually by the Board of Directors, on the basis of a proposal by the Compen sation Committee, taking into account the individual member’s function-related responsibility and the current market conditions.
The short-term and long-term components of the variable compensation are in principle allocated in equal amounts (1:1 ratio), whereby the deferred compensation components (RSU plan and deferred compensation in cash) are considered as a whole. The Board of Directors may determine a different ratio for the Corporate Executive Board as a whole or for the Chairman or individual members of the Corporate Executive Board (discretionary decision).
At Corporate Executive Board level, variable compensation depends 60% directly on the com pany’s success. The Key Performance Indicators (KPIs) used to assess company success include, as mentioned above, key figures relating to annual profit, payout capacity, cost savings, the risk and fee result, new business profitability, return on equity and solvency (Swiss Solvency Test, SST).
Swiss Life – Annual Report 2015 40% of the variable compensation is based on Corporate Executive Board members’ achievement of specified personal goals. On the one hand, these personal goals are linked back to the company ’s success, in that each Corporate Executive Board member has to meet personal quantitative objectives contributing to the company’s success in relation to his division. On the other hand, the personal goals cover qualitative factors, namely project targets, risk management and compliance goals, as well as requirements relating to leadership and to supporting and further developing corporate culture.
The compensation for members of the Corporate Executive Board for the 2015 financial year is reported in detail in the 2015 compensation table below. Patrick Frost, Chairman of the Corporate Executive Board (Group CEO) since 1 July 2014, received the highest compensation of the members of the Corporate Executive Board in the 2015 financial year; accordingly his compensation is disclosed individually.
In the 2015 financial year, the compensation is reported, in addition to the compensation of Group CEO Patrick Frost, for six persons who were members of the Corporate Executive Board for the entire year under review.
The short-term variable compensation component for the Corporate Executive Board of a total CHF 4 152 500 (cash bonus of CHF 3 603 500 and deferred compensation in cash of CHF 549 000), which was determined by the Board of Directors at the beginning of 2016 for the 2015 financial year and will be proposed to the General Meeting of Shareholders on 26 April 2016 for approval, is disclosed in the following compensation table on an accrual basis as compensation for the 2015 financial year (accrual method). The members of the Corporate Executive Board did not receive any compensation in shares for the 2015 financial year; they are participating in the current equity compensation plan that provides for the allocation of so-called Restricted Share Units (RSUs).
Other members of Corporate Executive Board 2,3 6 156 420 2 773 500 121 125 9 051 045 0 0 9 051 045 1 Patrick Frost has been Group CEO since 1 July 2014. His salary as Group CEO is thus measured for the full reporting year in 2015 but not in 2014.
3 The salary amounts also include tax-equalisation payments and international travel expenses totalling CHF 1 178 820. 4 The short-term variable compensation component for the 2015 financial year (bonus and deferred compensation in cash) was determined by the Board of Directors at the beginning of 2016 for the 2015 financial year. 5 Child allowances (CHF 8200), allowance for years of service (CHF 6512) and premium contributions to 3rd pillar pension plans (CHF 131 175).
Other members of Corporate Executive Board 1 1 707 960 0 10 231 582 5 Pursuant to the pension fund regulations, occupational provisions were financed by the employer and the employee at a ratio of 70% to 30%.
6 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV/FAK amounted to a total of CHF 959 830 in the year under review.
On the balance sheet date of 31 December 2015, 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).
SLH shares 1 Total number of RSUs allocated in the years 2013, 2014 and 2015 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.
We have audited the sections on pages 59 and 63 to 65 of the accompanying compensation report of Swiss Life Holding Ltd for the year ended 31 December 2015.
Opinion In our opinion, the compensation report of Swiss Life Holding Ltd for the year ended 31 December 2015 complies with Swiss law and articles 14–16 of the Ordinance.
In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of his own shares and those he represents. Legal entities and partnerships which are connected through capital, voting rights, uniform management or in any other way, as well as individuals or legal entities and partnerships which act in concert by virtue of agreement, as a syndicate or in any other way, are deemed to be a single person. Any amendment to or revocation of restrictions on voting rights must be approved by at least two thirds of the voting shares represented at the General Meeting of Shareholders and an absolute majority of the share par value represented. The Board of Directors can permit exceptions to this limit on the basis of its discretionary powers. During the year under review, no such exceptions were granted.
The rules set out in the Articles of Association for convening a General Meeting of Shareholders and drawing up the agenda comply with the stipulations of the law. Shareholders who represent at least 0.25% of the share capital can submit a written request within a time limit published in advance by Swiss Life Holding for the inclusion on the agenda of an item for discussion, together with the relevant motions. The written application must be accompanied by a blocking certificate issued by a bank to confirm that the shares are deposited with it until after the General Meeting of Shareholders is held.
Corporate Responsibility Swiss Life attaches great importance to corporate responsibility – be this in its business activities, society, its role as an employer or towards the environment. This year Swiss Life is presenting a complete Corporate Responsibility Report for the first time as part of its Annual Report 2015. The reporting corresponds to the guidelines of the Global Reporting Initiative (GRI).
Our reporting on the subject of “Corporate Responsibility” in our Annual Report now conforms to the voluntary standards of the Global Reporting Initiative (GRI), recognised worldwide. This is our way of contributing to the promotion of transparency, comparability and standardisation in sustainability reporting.
The Corporate Responsibility Report sets out what corporate responsibility means to Swiss Life and what topics are relevant in this context to the company and its stakeholders. It focuses on business activities, society, employees and the environment and is guided by the principle of materiality. For Swiss Life, the responsible and economically successful pursuit of its business in line with the values set out in the Code of Conduct is of pivotal importance. Reporting is oriented to GRI, the world’s leading standard for comparable sustainability reporting based on key figures (www.globalreporting.org). Swiss Life applies the guidelines in conformity with the GRI-G4 “Core” option. In addition, industry-specific requirements for financial services providers (financial sector disclosures) have also been taken into account.
The expanded reporting is intended to enhance our communication with target groups. Swiss Life’s stakeholders include, in addition to its employees and customers, investors, authorities and legislators as well as representatives of the media, politics and associations, all of whom are affected either directly or indirectly by Swiss Life’s activities. Swiss Life is in regular dialogue with all of its stakeholders, which ensures that it is aware of the requirements and expectations of its stakeholder groups and is able to react to challenges or changes (G4-24, G4-26).
Diligence, integrity and forward-looking actions form the basis for successful and responsible business operations. We consistently orient our business to customer needs and invest in consulting, digitalisation and organic growth.This benefi ts our customers, investors, shareholders and employees.
We are at the centre of public life and very much aware of our social responsibility. That is why we engage in public dialogue around the subject of “a longer selfdetermined life”, and are involved in many charitable initiatives and foundations as well as contributing to culture, health and sport.
The materiality matrix displays and organises the central issues from the “Corporate Responsibility ” area along two axes: The upper right quadrant of the matrix contains the issues that have proven most important to both internal and external stakeholders. These are action points, which are classified as being particularly important to business success and they feature prominently in the reporting.
Swiss Life maintains high standards for its consulting, service and product range. Diligence and responsible action form the basis for successful business operations.
Diligent business conduct in compliance with the law is a given for Swiss Life. The basis for this is provided by the values set out in the Code of Conduct, diligent and forward-looking risk management and a regular inventory of customer requirements.
Customer Services review customer’s answers and discuss with Sales Force as necessary
On the basis of this information Swiss Life has built special processes and services, and created committees tasked with the regular analysis of customer opinion and the conveyance of their findings to the company. Recent months have thus seen a wide and varied range of measures implemented to help Swiss Life further improve its customer value.
In Switzerland customer service training courses were offered by leading providers from other sectors (aviation, hospitality) to allow employees to learn and adopt new and best-practice service approaches. The success of this measure is shown by increased customer satisfaction with the Corporate Clients Service Center, as well as the rise in the net promoter score (NPS).
In addition to direct feedback, Swiss Life has established a host of local instruments to assess customer satisfaction and responsiveness to customer needs, such as with its own customer panels.
In Switzerland and France digital platforms and services have been introduced to provide customers with round-the-clock access to contract information and other data, and to channel inquiries more effectively.
In the United Kingdom the ratio of customers to advisors has been significantly reduced to ensure more intensive consulting and improved accessibility.
As a counterpoint to the external perspective, Swiss Life surveys all of its employees once a year on their perception of progress in customer centricity. The survey results are compiled in an internal index. The feedback received in 2015 shows the success of the measures taken. The Swiss Life Employees’ Customer Centricity Index (ECCI) thus increased in 2015 by three points over 2014, to post a value of 81, significantly above the target value of 75 points. The survey is conducted together with an independent market research institute.
Last year saw various internal initiatives undertaken Group-wide to increase customer centricity.
In 2015, Swiss Life launched a total of 147 products in the market.
Swiss Life sets great store by transparent and accessible information about product and service offerings. Swiss Life supports customer-oriented advice by providing clear and comprehensive documentation. Swiss Life holistically promotes the comprehensibility and transparency of its products and services. Thus there are supporting video sequences on the various insurance and provisions topics available on the local internet pages, along with publications for download.
Long-term benefit commitments and obligations arising from pension and financial products demand a precise preliminary analysis of the legal and regulatory environment, and the associated risk. This also provides the basis for customer-oriented consulting and is a major factor in the avoidance of mistakes or violations in advising, and their possible consequences.
The practical design of products and services is guided by Group-wide standards and is in strict accordance with the local regulatory environment and legislation. The ability of Compliance to make adjustments even to existing products and services is guaranteed. Group-wide standards for the development of products and services are also adapted to framework conditions as required.
Group-wide compulsory regulations are implemented locally in the relevant directives. Swiss Life regularly reviews its product solutions and provides information on innovations and products with added customer value in its Annual Report.
Swiss Life sets great store by compliance with all applicable legal provisions and regulatory stipulations in all its activities. In addition to the Code of Conduct there is also a comprehensive directives system which defines minimum standards mandatory Group-wide, and implemented in all business units in corresponding local regulations. In this directives system, Swiss Life sets out, for example, the duties, responsibilities and competencies of Compliance.
Compliance focuses in particular on the prevention of money laundering and the financing of terrorism, the observance of sanctions and embargoes, data confidentiality, conformity with data protection, avoidance of conflicts of interest, preventing insider trading and market manipulation and monitoring and assessing the legal and regulatory environment. It ensures that employees receive ongoing training in topics relevant to compliance.
By means of precise investigations in accordance with the local regulatory environment and local legislation, Compliance supports employees and management in their work with an eye to avoiding infringements of legal and regulatory stipulations. Regular risk assessments as well as permanent and comprehensive compliance reporting to the top echelons provide support for the implementation of all requisite measures at Group level as well as within the business units.
The compliance framework is subject to periodic review and is reworked and adapted to new prerequisites as necessary.
A further pillar of Swiss Life’s responsible, sustainable business is its integrated, value-oriented risk management involving both quantitative and qualitative elements. The goal is to protect customers’ funds and ensure the best possible investment of risk capital, while complying with regulatory requirements and taking into account persistently challenging economic conditions.
Swiss Solvency Test The Swiss Solvency Test (SST) sets out the capital requirements valid for insurance companies and groups in Switzerland. It was enacted in 2006 with the revised Insurance Supervision Law and corresponding Insurance Supervision Ordinance and constituted a reporting requirement during a five-year transition period before it ultimately became binding on 1 January 2011. The SST is a principles-based framework where the main objective is the alignment of the required capital with the underlying risks. The SST capital requirements are based on the understanding that insurers will meet their obligations towards policyholders even under difficult conditions. Swiss Life uses an internal model to calculate the available and required capital for the SST. Based on this internal model, which has been partially or conditionally approved by FINMA, Swiss Life meets the capital requirements.
Economic capital The value of a life insurance company for its shareholders comprises the economic net worth and the present value of future profits. The optimal amount of economic capital an insurance company needs to hold in order to maximise the company value is based on a risk/return trade-off. For risk and capital management decisions, Swiss Life uses an integrated approach. The economic risk capital is determined bottom-up for each large business unit and takes into account market risks, credit risks and insurance risks. These risks are calculated on the basis of loss distributions using a specified risk measure. The overall capital requirements are obtained by taking into consideration respective diversification effects.
Economic and statutory capital requirements and the profit target are the main elements determining the risk budgets. Based on the overall risk budget set by the Investment and Risk Committee of the Board of Directors, the Group Risk Committee of the Corporate Executive Board defines the risk limits for the business areas. Adherence to these limits is also checked on a monthly basis.
Standard & Poor’s rating capital In the Standard & Poor’s risk-based 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.
Following the rating upgrade to “A–” in May of 2012 and the raising of the outlook from “stable” to “positive” in May 2014, Standard & Poor’s once again recognised Swiss Life’s operational progress and increased its rating to “A with stable outlook” in May 2015.
Self-determination and pension provision are an opportunity for Swiss Life, as a co-founder of private pension provision in Switzerland, given demographic trends, to improve its solutions and products and add customer value in a growing pensions market by providing high-quality, targeted advice. Politicians and society are being called on to bring about changes that take the many consequences of rising life expectancy into account. Swiss Life set the ball rolling in Switzerland at the start of 2015 by launching the “Look after yourself” image campaign; in 2016, the “longer self-determined life” campaign will be rolled out across the Swiss Life Group. The company wants to engage in public discussion to raise cross-generational awareness around the subject of the social and economic consequences of ageing.
In Switzerland, parties of the political centre-right and individual politicians receive financial support mainly for their election campaigns. The total amount of support provided during the year under review was CHF 400 000. No donations are provided in Germany or France.
Swiss Life is committed to the militia principle in Switzerland and it encourages its employees to exercise public and political mandates. As a company operating in the social insurance sector, Swiss Life has an interest in promoting a fully functional and integrated society. This led Swiss Life to join an initiative launched by economiesuisse and the Swiss Employer’s Association in June 2015 designed to strengthen the militia system.
Swiss Life has been supporting a host of charitable projects for many years. The emphasis here is on projects and initiatives compatible with confidence and self-determination.
The “Perspectives Foundation”, founded in 2005, has a leading role in the Swiss home market. It promotes charitable initiatives in the areas of health, science, education, culture and sport, donating between CHF 1.3 and 1.5 million every year to social and charitable projects in Switzerland.
In France, Swiss Life gives support to the Fondation Swiss Life, which was founded in 2009 and works with charitable healthcare institutions, such as the Institut Curie or Association France Alzheimer.
Swiss Life Select, with locations in Germany, Switzerland, Austria and the Czech Republic, has been helping children in need since 1991 through its charity known as “Foundation Confidence for Children”.
Swiss Life has supported the Swiss national football teams for years and promotes up-and-coming talent
The Fondation Swiss Life in France supports cultural initiatives in France through its “Art en partage” initiative. The project focuses mainly on events for people whose daily lives make it difficult to obtain access to culture. For example, the foundation finances concerts and art exhibitions for the benefit of people in nursing homes, sick children or patients with dementia.
The corporate culture of Swiss Life is based on respectful interaction and responsible team-based cooperation. Since we operate in a dynamic environment, we attach great importance to lifelong learning and the ongoing professional and personal development of all employees. Readiness to question the status quo leads to new ideas.
The success factors of this performance culture at Swiss Life include open dialogue and a cooperative management style. The leadership priorities contain binding principles for collaboration between managers and employees in day-to-day activities. These priorities help managers achieve their goals and deliver on their promises to customers, partners and investors.
Swiss Life regularly conducts employee surveys in cooperation with an independent research institute.1 The 2015 results show that employee engagement in the Swiss Life Group is above average: – 86% of all employees took part in the survey (+5 percentage points over the 2013 survey); the global engagement value is 85% (+10 percentage points over the European financial industry external benchmark)
– 90% of all employees are proud to work at Swiss Life (+13 percentage points over the European financial industry external benchmark)
– 94% of employees say they would go the extra mile for Swiss Life (+14 percentage points over the European financial industry external benchmark)
– 88% of employees support the strategy and direction of their unit 1 Source: Global Employee Engagement Survey, IPSOS (Suisse) SA 2015
Investments in training and development 1 Apprentices and trainees 2 Management and talent development 3 Specialist training, social and methodological skills
Swiss Life attaches great importance to the ongoing development and motivation of its employees and therefore provides target-oriented support to junior staff with potential. Employees displaying a high level of performance and potential are nominated each year for the talent programme. The initiative supports efforts to open up career paths within the company – in management, project management or specialist functions – with a view to filling key positions with qualified young staff from within Swiss Life.
The Key Persons Programme (KPP) implemented at Group level in 2015 is based on the Senior Manager programme, which proved a success over a number of years. Now, in addition to line managers, professional experts or project managers already in a key position or who have the potential for such a role are eligible for the programme. The aim of the Key Persons Programme is to prepare people who show the desire and ability to help shape the company’s future in their own areas for a key position so they can live up to their role as a decision maker. The programme also plays a role in employee and succession planning. Within a 12-month period, the participants acquire a detailed insight into the Swiss Life Group, give and receive new impulses and directly apply what they have learnt to their daily work. The programme is based on the following four modules: – Leadership (communication) – Finance – Innovation, including dealing with competition and trends – Corporate strategy
Wellbeing is a part of the employee survey, which also asks about such issues as diversity and inclusion, work-life balance, mutual respect, workload and workplace atmosphere. 82% of employees rate these factors as positive (+9 percentage points over the European financial industry benchmark)1.
The principles by which we work together at the Swiss Life Group are set out in the Group-wide Code of Conduct. Among these is our zero-tolerance policy regarding mobbing and discrimination on the basis of race, sex, religion, confession, national origin, disability, age, sexual orientation, physical or mental handicap, marital status, political views or other attributes. Swiss Life undertakes to offer its employees a work environment characterised by respect and mutual recognition, and to uphold such an environment.
In explicit terms that entails behaving responsibly and adhering to the compliance standards, laws, risks etc. The competency model is applied to the Group-wide management processes for all employees. Employees are regularly informed about the legal framework in which they operate, backed up by training courses to ensure they behave with integrity.
Besides the “Health and wellbeing” platform, the divisions – plus their social partners – provide additional services in movement and sport, massages and therapy, relaxation rooms and all types of consulting (nutrition, social counselling, prevention etc.).
The employee representatives and Corporate Executive Board maintain close contact with each other. Since 1996, Swiss Life has had a European Works Council (Art. 13 of Council Directive 94/45/EC of the European Parliament and Council). The nine-person “Europa Forum”, a committee comprising delegates from four countries, meets regularly with representatives of the Corporate Executive Board at ordinary and extraordinary meetings. It deals with transnational information and consultation on topics which affect all Swiss Life employees. There was, by way of example, an in-depth discussion in 2015 on the Swiss Life 2015 Group-wide programme.
In Germany the sales force works council had to be restructured due to the new sales structure for intermediary distribution. This realignment resulted in a structural simplification. Instead of five individual works council committees for the five organisational offices, there is now one committee for the entire salesforce, comprising seven members.
The reduction of about 200 jobs organised with the works councils in 2013, involving a reconciliation of interests, social plan and voluntary programme at the Munich, Hanover, Bremen, Hamburg and Cologne locations, was completed by 31 December 2015.
Swiss Life places a high value on operational ecology and climate protection: In its own operations and in its capacity as an investor in property, Swiss Life supports energy-saving measures, renewable energies and the sparing use of resources. Moreover, Swiss Life encourages its employees to use public transport.
Environmental data on operational ecology are gathered annually in accordance with the globally recognised standard of the Association for Environmental Management and Sustainability at Financial Institutions (VfU) and published every May of the following year at swisslife.com/ betriebsoekologie. The data is gathered, evaluated and analysed on a Group-wide basis. Environmental officers work closely with the individual divisions at all Group locations. The aim is to consistently reduce the environmental impact and improve energy efficiency.
In Switzerland, Swiss Life is a member of the Zurich Energy Model and it has been drawing all its electricity from renewable energy sources for almost ten years. This has enabled the company to reduce its annual greenhouse gas emissions by over 1300 tonnes. The head office in Zurich is also heated and cooled with water from Lake Zurich. All the sanitary installations are equipped with water-saving installations, which allows Swiss Life Switzerland to save some three million litres of water each year. Rain water has also been one of the water sources used for the sanitary facilities since 1999.
In Germany, the two main branch offices, in Garching near Munich and in Hanover, have repeatedly been awarded the Ecoprofit seal for their outstanding commitment to corporate environmental protection. The seal rewards the efforts of Swiss Life in Germany in terms of CO2 reduction and saving resources. For example in Garching, from where the insurance business is managed, Swiss Life uses green electricity and has a new energy-efficient building.
Swiss Life also wants to make an active contribution to climate protection. It is for this reason that it set up the Swiss Climate Foundation in 2008 in cooperation with other Swiss companies. Through the foundation, Swiss Life undertakes to consistently reduce its greenhouse gas emissions at all locations in Switzerland. The foundation also supports SMEs in becoming more energy-efficient and reducing their CO2 emissions.
Swiss Life Germany is also represented in the Klima-Allianz der Stadt Hannover and undertakes, in cooperation with other companies, to reduce CO2 emissions and increase energy efficiency in urban areas.
Swiss Life is one of Europe’s leading real estate investors and has the biggest private real estate portfolio in Switzerland. The long-term maintenance and appreciation of its properties is therefore an important aspect of Swiss Life’s investment activities on behalf of its policyholders and customers. This includes outfitting its buildings for the future. Swiss Life invests several hundred million francs a year in the upkeep of its properties, ensuring the responsible use of resources and active environmental management in doing so and meeting its responsibility of reducing the property portfolio’s environmental footprint.
Swiss Life assesses the use of alternative energies and ecologically sound, sustainable construction methods against the relevant standards for its renovation and construction projects. The aim is a steady diminution of the environmental impact through targeted reduction of energy use and CO2 emissions.
G4-2 Sustainability driven risks, opportunities and impacts p. 76 ORGANISATIONAL PROFILE
G4-7 Nature of ownership and legal form p. 27, p. 313
G4-13 Significant changes during the reporting period p. 10-12, p. 290-296
G4-16 Memberships p. 46-49, p. 91 IDENTIFIED MATERIAL ASPECTS AND BOUNDARIES
G4-21 Material aspects and report boundaries outisde the organisation p. 79
G4-22 Corporate changes compared to the previous year Initial report. No changes. Significant changes in scope as well as report boundaries from Initial report. G4-23 the previous period No changes. STAKEHOLDER ENGAGEMENT
G4-27 Key topics and concerns raised by stakeholders p. 77 REPORT PROFILE
G4-56 Organisation values, principles, standards and norms p. 78, p. 80
Page number in SPECIFIC STANDARD DISCLOSURES Annual Report 2015 Reasons for omission
G4-EC4 Financial assistance received from the public sector Indirect Economic Performance p. 90
G4-LA9 Average annual number of hours for education and training p. 95
G4-LA13 Basic salary ratio of women to men p. 99 Grievance Mechanisms p. 98
G4-LA16 Grievances regarding labour practices p. 98 HUMAN RIGHTS Non-discrimination p. 98-99
G4-HR3 Total number of incidents of discrimination and actions taken p. 98 SOCIETY Public Policy p. 90-91
G4-SO6 Donations to politicians and political parties p. 91 Compliance p. 85
Page number in SPECIFIC STANDARD DISCLOSURES Annual Report 2015 Reasons for omission PRODUCT RESPONSIBILITY Customer Health and Safety p. 80, p. 84
G4-PR1 Product and service categories tested for safety and health implications p. 84-85
G4-PR9 Fines due to non-compliance with respect to the provision of p. 85 products and services FINANCIAL SECTOR SPECIFIC INDICATORS Active Ownership p. 89
Brand The success of the Swiss Life brand results from a consistent marketing strategy. On the basis of a corporate strategy and positioning as a provider of comprehensive life and pensions and financial solutions, the Swiss Life umbrella brand, flanked by its sub-brands, provides orientation and creates confidence.
The brands are assigned to various levels in a clear brand hierarchy. The strategic management of the entire brand portfolio is an element of corporate communications.
Swiss Life sets great store by the global and local protection of its brands. It takes vigorous action in cases of brand or copyright infringement, so customers can be sure that the Swiss Life logo and corporate name stand for Swiss Life quality and service wherever they appear.
With a uniform brand personality and clear corporate design guidelines, Swiss Life guarantees a standardised appearance at all brand contact points. The Swiss Life personality always centres on the customer: “We help our customers lead a longer self-determined life with confidence.”
Market consistent embedded value (MCEV) is a measure of the consolidated value of shareholders’ interests in the in-force covered business of the Swiss Life Group. Covered business includes life, health and pension business of the company. The Group MCEV is a measure of the consolidated value of shareholders’ interest in the covered and non-covered business in force of the company. Business in force includes business written as at 31 December 2015; future new business is not included. The notion of market consistent embedded value (MCEV) will alternatively refer within the course of this report to the MCEV of Swiss Life’s covered business, of one of its market units, or to Swiss Life’s Group MCEV.
PricewaterhouseCoopers have audited this market consistent embedded value report. Their opinion is part of this report (section 6).
Swiss Life’s Group MCEV consists of the MCEV for covered business and the IFRS net asset value for non-covered business.
The value of in-force covered business is defined as the sum of: – the certainty equivalent value of future profits (CEV) – the time value of financial options and guarantees (TVOG), including the cost of credit risks – the cost of residual non-hedgeable risks (CNHR) – the frictional costs of required capital (FC)
Swiss Life – Annual Report 2015 2 Summary of MCEV Results 2.1 Key results
The following tables show key results as at 31 December 2015 compared to the results as at 31 December 2014.
–78255 2.3 Value of new business 2.3.1 Value of new business, premiums and margins
PRESENT VALUE OF NEW BUSINESS PREMIUMS (PVNBP) 15 643 14 414
In local currency all market units contributed to the new business growth of 14% measured in PVNBP. Including the adverse currency development the volumes increased by 9%. This, in combination with active new business steering, pricing discipline and cost efficiency gains, mitigated the adverse impacts of the challenging capital market environment on both the new business value and margin.
The table below shows the development of Group MCEV split by components from 31 December 2014 to 31 December 2015.
The opening adjustment of the Group MCEV represents the distribution in 2015 to shareholders out of the capital contribution reserve of CHF 6.50 per share, corresponding to a total of CHF 207 million as described in the Consolidated Financial Statements (note 26), and foreign currency translation effects of CHF –4 million.
The other movements in IFRS net equity (non-covered business only) include effects from the sale and purchase of treasury shares, changes in unrealised gains and losses and effects from equity-settled share-based payments.
The closing adjustments result mainly from foreign currency translation effects and the transfer of funds between covered and non-covered business.
The graph and table below show the analysis of earnings for the covered business in 2015.
Expected existing business contribution (in excess of reference rate) 14 0 253 267 306
Transfers from VIF and required capital to free surplus 661 –182 –479 – –
Value of new business Value of new business contributions from free surplus and required capital sum up to the new business strain of CHF –165 million (2014: CHF –133 million). This represents the shareholders’ share in acquisition expenses for new business. The VIF-component of CHF 433 million (2014: CHF 388 million) is the value of future profits from new business.
Assumption changes Assumption changes refer to the impact of the change on assumptions such as future expense, surrender, mortality, morbidity and longevity rates. The impacts of positive longevity experience and efficiency gains in France were reduced by effects from updated policyholder behaviour parameters in Germany.
Other operating variance Other operating variance includes effects from the revised profit-sharing in view of the low interest rate environment.
Closing adjustments Closing adjustments represent foreign currency translation effects resulting from the consolidation in Swiss francs and the transfer of funds into the covered business.
100 bp increase of interest rates (reference rates) 987 9% 88 33%
100 bp decrease of interest rates (reference rates) –1 428 –14% –154 –57%
5% proportionate increase in mortality rates (death cover) –27 –0% –6 –2%
5% proportionate decrease in mortality rates (annuities) –163 –2% –19 –7%
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. 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 noncovered business, and Swiss Life Asset Management in France, which is reported for MCEV purposes under France.
International Swiss Life International provides life and pension solutions for High Net Worth Individuals (HNWI) in Europe and Asia through its Private Clients business with insurance carriers in Luxembourg, Liechtenstein and Singapore. For multinational corporations, Corporate Clients business, together with its network, offers local employee benefit and expatriates solutions out of Luxembourg.
Swiss Life – Annual Report 2015 3.2 Results by market unit
VALUE OF IN-FORCE BUSINESS 5 240 1 405 380 290 7 315
Switzerland The positive operating earnings including the value of new business, were offset by the negative capital market development, which led to a decrease of the MCEV by CHF 318 million.
The reduction of the free surplus is driven by further balance sheet strengthening. The value of the in-force business decreased following the adverse capital market development. This was partly offset by sustained business growth and in-force management. In group life, characterised by variable guarantees, the business-inherent shareholder options drive the time value of options and guarantees.
France The MCEV increased by CHF 204 million excluding the currency translation effect, notably due to an enhanced financial margin and the correspondingly revised profit-sharing for life business, as well as the increased new business value.
Value of new business by market unit – premiums and margins for the year 2014
Value of new business before new business strain 225 113 14 36 388
International Both new business value and margin could be expanded in International. This is due to increased volumes in Private Clients business and a higher share of risk business in Corporate Clients business.
All market units contributed positively to the value creation with their operating earnings.
Operating earnings of CHF 441 million correspond to a return of 6% on MCEV.
The positive other operating variances stem mostly from changes in the asset allocation and the reduction of the minimum interest rate for non-mandatory group life business, slightly reduced by the effect of hybrid debt issued in the reporting period.
Economic variances are influenced by the significantly lower interest rates in Swiss francs following the decisions of the Swiss National Bank in January 2015 and widened credit spreads, mitigated by a good real estate performance.
Operating earnings of CHF 402 million correspond to a return of 14% on MCEV. In addition to the expected business contribution and the positive new business value, this is driven by an enhanced financial margin and the correspondingly revised profit-sharing for life business, a favourable longevity development and efficiency gains for the life operations.
Economic variances reflect mainly the increased credit spreads, positive real estate and equity performance, and related changes of the asset allocation.
Closing adjustments relate to the depreciation of the Euro against the Swiss franc.
Operating earnings of CHF 67 million correspond to a return of 9% on MCEV.
Closing adjustments include foreign currency translation effects of CHF –40 million and capital transfers of CHF 23 million.
Required capital (RC) The required capital is the market value of assets, attributed to the covered business – over and above that required to back liabilities for covered business – whose distribution to shareholders is restricted. As in prior years Swiss Life bases the amount of required capital on 150% of the level according to Solvency I, except for assumed external reinsurance where an economic approach is used instead.
The rules for anticipated management and policyholders’ actions applied in the certainty equivalent scenario are the same as those for the stochastic projection used to determine the time value of financial options and guarantees.
Swiss Life – Annual Report 2015 2 Copyright © 2009 JPMorgan Chase & Co. All rights reserved.
Cost of residual non-hedgeable risks (CNHR) The cost of residual non-hedgeable risks for risk factors such as mortality, morbidity, expenses and lapse rates is calculated under a cost of capital approach. It is defined as the present value of annual charges on the projected economic capital for residual non-hedgeable risks.
The value of new business of a period represents the effect on the MCEV as at end of period from writing new business, i.e. it is the difference between the actual closing MCEV and the closing MCEV which would result if no new business had been written during the period. This is known as the “marginal” approach to value of new business. It applies to every MCEV component: CEV, TVOG, CNHR and FC. Legal constraints – e.g. “legal quotes” – or management rules often apply to books of contracts as a whole instead of individual contracts. That is why the value of new business can be dependent on the business in force before the writing of new business.
The value of new business is generally calculated with economic scenarios and assumptions as at end of period.
Assets The asset model used for the calculation of the MCEV differentiates three main asset classes: – cash and fixed income instruments – equity-type investments (including real estate) – derivatives
The crediting rules for policyholders are consistent with current company practices and local regulatory and legal requirements, in particular regarding the existence of a “legal quote”.
The Group MCEV for Swiss Life comprises MCEV results for covered business and IFRS net asset values for non-covered business.
Covered business comprises all of Swiss Life’s major life, health and pension business as well as assumed external reinsurance with the exception of Swiss Life Insurance Solutions S.A., which is not material for MCEV purposes. In the case of France, the remaining operations are sub-consolidated with their IFRS net asset value and also included in the French covered business.
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 CORPUS SIREO), financing and holding companies. Non-covered business is added to the MCEV results from the covered business to form the Group MCEV.
5.1.1 Reference rates The reference rates used for the calculation of the MCEV 2015 are based on the swap rates as at 31 December 2015 and include, where appropriate, a liquidity premium. Extrapolation of the interest curves and determination of liquidity premiums closely follow the QIS 5 framework.
We apply no liquidity premium to unit-linked, portfolio-linked and variable annuities business, 50% of the underlying liquidity premium to health insurance and assumed external reinsurance, and 75% to all participating and other businesses, including traditional annuities. Liquidity premiums are applied over a term of 10 years for Swiss franc, 15 years for euro and 30 years for US dollar, and phased out over the following five years.
Swiss Life – Annual Report 2015 5.1.1.1 Swap rates as at 31 December 2015
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.1.1.2 Swap rates as at 31 December 2014
United States 84bp 63bp 1 Liquidity premium for British pound: 83bp (2014: 69bp), for Canadian dollar: 48bp (2014: 25bp)
5.1.2 Volatility assumptions Volatility assumptions for the year-end 2015 and 2014 calculations are derived from market data as at 31 December 2015 and 2014.
Swiss Life – Annual Report 2015 5.1.2.2 Swaption implied volatilities as at 31 December 2014
5.1.2.3 Equity option implied volatilities as at 31 December 2015 and 31 December 2014
Volatility 5.1.3 Correlation assumptions The correlation assumptions between different asset classes are based on historical market data. The correlations between returns on equities and on 10-year zero coupon bonds are assumed to be 15% for 2015 and for 2014.
Swiss Life – Annual Report 2015 5.1.4 Inflation assumptions The inflation assump tions have been derived from inflation-linked bond prices, where inflationlinked bonds are traded. For the Swiss economy, the real interest rate model is calibrated on the inflation forecast by Consensus Economics, an international economic survey organisation.
5.1.4.1 Forward inflation rates used for the calculation as at 31 December 2015
We have audited the Market Consistent Embedded Value Report (“MCEV Report”) of Swiss Life Holding Ltd for the year ended 31 December 2015. 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 2015 is prepared, in all material respects, in accordance with the MCEV Principles.
Non-traditional business Unit-linked-type contracts, with or without additional financial guarantees and policyholder options.
Zinszusatzreserve (ZZR) Additional statutory reserve requirement in Germany in view of the low interest rate environment.
Net gains/losses on financial instruments at fair value through profit or loss 5, 8 81 –2 009
Benefits and claims under investment contracts with discretionary participation –1 053 –932
Impairment of property and equipment and intangible assets 16, 17 –16 –12
Financial assets at fair value through profit or loss 10 33 590 32 389
Financial assets pledged as collateral 12, 33 2 109 2 763
Acquisitions of subsidiaries, net of cash and cash equivalents 28 –7 –222
CASH AND CASH EQUIVALENTS AS AT END OF PERIOD 5 296 6 062
TOTAL CASH AND CASH EQUIVALENTS AS AT END OF PERIOD 5 296 6 062
Capital contributions from non-controlling interests – – – – – – 3 3
Distribution out of capital contribution reserve 26 – –176 – – – –176 – –176
Purchases of treasury shares – – –15 – – –15 – –15
Swiss Life Select, tecis, HORBACH, Proventus and Chase de Vere advisors choose suitable products for customers from the market according to the Best Select approach. Swiss Life Asset Managers offers institutional and private investors access to investment and asset management solutions. Swiss Life provides multinational corporations with employee benefits solutions and high net worth individuals with structured life and pensions products.
Swiss Life – Annual Report 2015 2 Summary of Significant Accounting Policies
No new or revised accounting standards or interpretations were adopted in 2015.
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.
Financial assets available for sale (AFS) Financial assets classified as available for sale are carried at fair value. Financial assets are classified as available for sale if they do not qualify as held to maturity, held for trading, loans and receivables or if they are not designated as at fair value through profit or loss. Gains and losses arising from fair value changes, being the difference between fair value and cost/amortised cost, are reported in 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 at amortised cost The Group assesses at each balance sheet date if there is objective evidence that a financial asset or a group of financial assets is impaired. It is assessed whether there is objective evidence of impairment individually for financial assets that are individually significant and collectively for financial assets that are not individually significant.
Investment property under construction is also measured at fair value with changes in fair value being recognised in profit or loss. However, where the fair value is not reliably deter min able, the property is measured at cost until either its fair value becomes reliably measurable or construction is completed.
Definition of insurance contracts Insurance contracts are contracts under which one party accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event adversely affects the policyholder. Significant insurance risk exists if an insured event could cause an insurer to pay significant additional benefits in any scenario, excluding scenarios that lack commercial substance (i.e. have no discernible effect on the economics of the transaction). The classification of contracts identifies both the insurance contracts that the Group issues and reinsurance contracts that the Group holds. As a Group policy, Swiss Life considers those contracts to be insurance contracts that require the payment of additional benefits in excess of 10% of the benefits that would be payable if the insured event had not occurred, excluding scenarios that lack commercial substance.
In other jurisdictions, a statutory minimum distribution ratio (“legal quote”) exists for certain types of business. Geographical areas in which the Swiss Life Group is present and in which such a statutory minimum distribution ratio (“legal quote”) exists are as follows: Switzerland (only group business subject to “legal quote”), France (life insurance business) and Germany. For these contracts the Swiss Life Group defines DPF as the policyholder bonus reserve set up in the statutory accounts and the amount of temporary valuation differences between the IFRS basis and statutory basis on the assets and liabilities relating to the respective insurance portfolio measured using the statutory minimum distribution ratio (“legal quote”). The policy of the Swiss Life Group is to classify as a liability the entire DPF as defined.
The statutory minimum distribution ratios (“legal quote”) relating to the Swiss Life Group’s operations are as follows: Switzerland Group business subject to “legal quote”: At least 90% of the calculated income on the savings, risk and cost components minus the expenses thereof must be allocated to the policyholders. All other business: No “legal quote”.
Separate account/unit-linked contracts/private placement life insurance Separate account contracts represent life insurance contracts with a separated part that is invested in assets managed for the account and risk of the Swiss Life Group’s customers according to their specific investment objectives. Separate account liabilities are included in insurance liabilities. Separate account liabilities include the right of the policyholder to participate in the performance of the underlying assets.
Revenue consists principally of investment management fees, commission revenue from distribution and sales of investment fund units. Such revenue is recognised when earned, i.e. when the services are rendered.
PVP is amortised in proportion to gross profits or gross margins over the effective life of the acquired contracts, which generally ranges from 20 to 30 years. Realised gains/losses are thereby taken into account as well as gains/losses recognised in other comprehensive income (unrealised gains/losses). If these unrealised gains/losses were to be realised, the gross profits or gross margins used to amortise PVP would be affected. Therefore, an adjustment relating to these unrealised gains/losses is recognised in other comprehensive income and is also reflected in the amount of PVP in the balance sheet (“shadow accounting”).
Brands and other Brands and other intangible assets with a definite useful life of generally 5 to 20 years are amortised using the straight-line method over their useful lives.
Impairment losses and reversals on non-financial assets are recognised in profit or loss.
Where the entity has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority, the corresponding assets and liabilities are presented on a net basis.
Financial liabilities at fair value through profit or loss Financial liabilities at fair value are irrevocably designated as at fair value at initial recognition. Financial liabilities are designated as at fair value through profit or loss in the following instances: – Financial liabilities where the insurance benefits are linked to unit values of investment funds or relate to private placement life insurance.
Based on the terms and conditions, such as repayment provisions and contractual interest payments, hybrid instruments are considered financial liabilities.
In January 2016, the International Accounting Standards Board published amendments to IAS 7 Statement of Cash Flows in order to improve information provided to users of financial statements about an entity’s financing activities. The amendments are 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 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 does not expect a major 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 does not expect a major effect of the amendments on its financial statements.
The International Accounting Standards Board published in September 2014 amendments to IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures. The amendments relate to sale or contribution of assets between an investor and its associate or joint venture. A full gain or loss is recognised when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognised when a trans action involves assets that do not constitute a business, even if these assets are housed in a subsidiary. The amendments apply prospectively for annual periods beginning on a date to be determined by the International Accounting Standards Board.
– Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests – IFRS 14 Regulatory Deferral Accounts – Amendments to IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets (Clarification of Acceptable Methods for Depreciation and Amortisation) – Amendments to IAS 16 Property, Plant and Equipment and IAS 41 Agriculture – Bearer Plants – Amendments to IAS 27 Separate Financial Statements (Equity Method in Separate Financial
For insurance contracts and investment contracts with discretionary participation features with fixed and guaranteed terms, the definition of estimates occurs in two stages. At inception of the contract, estimates of future deaths, surrender, exercise of policyholder options, investment returns and administrative expenses are made and form the assumptions used for calculating the liabilities during the life of the contract. A margin for risk and uncertainty (adverse deviation) is added to these assumptions. These assumptions are “locked-in” for the duration of the contract. Subsequently, new estimates are made at each reporting date in order to determine whether the values of the liabilities so established are adequate in the light of these latest estimates (liability adequacy test). If the valuation of the liabilities is deemed adequate, the assumptions are not altered. However, if the valuation of the liabilities is deemed inadequate, the assumptions underlying the valuation of the liabilities are altered (“unlocked”) to reflect the latest estimates; no margin is added to the assumptions in this event.
The recognition of provisions involves assumptions about the probability, amount and timing of an outflow of resources embodying economic benefits. A provision is recognised to the extent that an outflow of resources embodying economic benefits is probable and a reliable estimate can be made.
Premiums earned on insurance contracts 9 218 2 502 1 207 44 – 9 12 979 –76 12 903
Premiums earned on investment contracts with discretionary participation 1 009 – – – – – 1 009 – 1 009
Policy fees earned on insurance contracts 7 10 1 0 – – 18 – 18
Net gains/losses on financial instruments at fair value through profit or loss 385 –36 –285 –21 0 39 81 – 81
Share of profit or loss of associates 0 3 0 – 3 0 7 – 7
Depreciation and amortisation expense –149 –246 –55 –4 –12 –2 –468 – –468
Premiums ceded to reinsurers –28 –190 –44 –11 – 0 –273 81 –192
Net gains/losses on financial instruments at fair value through profit or loss –1 804 15 –198 2 0 –25 –2 009 – –2 009
Net gains/losses on investment property 217 43 27 – – 0 288 – 288
Benefits and claims under investment contracts with discretionary participation –932 – – – – – –932 – –932
Net insurance benefits and claims –11 333 –2 288 –1 591 –9 – 2 –15 218 0 –15 218
Employee benefits expense –254 –198 –150 –65 –152 –5 –823 2 –821
Financial assets available for sale 69 768 16 394 7 502 1 246 48 1 068 96 026 – 96 026
Intangible assets including intangible insurance assets 606 429 1 484 239 213 3 2 972 – 2 972
Financial liabilities at fair value through profit or loss 3 233 651 847 20 684 – – 25 415 – 25 415
Swiss Life – Annual Report 2015 5 Risk Management Policies and Procedures
5.1 Contracts for the account and risk of the Swiss Life Group’s customers
Net gains/losses on investment property 655 288 – – 655 288
The risk capacity and the risk appetite of the Swiss Life Group’s insurance operations are primarily defined based on economic principles. Consequently, the market values or best estimates of both the assets and the liabilities are obtained by discounting the cash flows generated by these assets and liabilities by direct observation of market values or with another appropriate discount rate. The available economic capital is defined as the difference of the economic value of the assets compared to liabilities. The available economic capital is used to cover the different risks to which the Swiss Life Group’s insurance operations are exposed by the nature of their activities. The final decision on the risk appetite for each insurance operation rests with the Corporate Executive Board.
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 net equity and foreign currency exposure.
Depending on the regulatory framework in which the Swiss Life Group’s insurance operations evolve, the asset portfolios might need to be split to reflect the different categories of insurance products. The asset portfolios of the insurance operations in Switzerland have been separated to distinguish between individual life and group life. As a consequence, such separation is also reflected in the ALM process. Insurance companies are generally obliged to hold tied assets in view of claims arising from insurance contracts. Special rules apply to investments in tied assets. They specify the eligible asset classes as well as requirements to be met in terms of investment organisation and processes.
External constraints must be considered in the definition of the distribution policy. Important elements which influence such policy are minimum guaranteed interest rates and the statutory minimum distribution ratio (“legal quote”), which depend on the regulatory environments of the Swiss Life Group’s insurance operations.
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.
Hedging strategies involve hedge accounting in accordance with International Financial Reporting Standards as well as “economic hedging”. “Economic hedges” comprise derivatives in combination with financial assets and financial liabilities which have a common risk factor and give rise to opposite changes in fair value that tend to offset each other.
TOTAL INTEREST-SENSITIVE INSURANCE LIABILITIES 69 239 23 414 88 92 742
Insurance liabilities linked to assets for the account and risk of the Swiss Life Group’s customers 2 760
Debt securities pledged as collateral 2 109 2 763 – – 2 109 2 763
Past due or AAA AA A BBB Below BBB Not rated impaired Total
Up to More than 3 months 3–6 months 6–12 months 1 year Total
Financial assets past due (not impaired) – age analysis as at 31 December 2014
At 31 December 2015 and 2014, no reinsurance assets were past due or impaired.
Additionally, foreign currency translation of the Group’s equity would be affected by a strengthening /weakening of foreign currency exchange rates. If at the balance sheet date the euro exchange rate had been 1% higher/lower, total equity would have been higher/lower by approximately CHF 34 million.
The balance sheet currency exposure is to a large extent hedged using foreign currency derivatives. Hedging is done on an overall basis for monetary and non-monetary items.
Derivatives designated as cash flow hedges – – 301 612 – – 913 –
Swiss Life – Annual Report 2015 5.5 Insurance risk management objectives and policies
Annuities payable per annum by type of annuity – individual life
Annuities payable per annum by type of annuity – group life
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 group 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.
In the accident and health business, the underwriting strategy comprises biometric and financial data of the persons to be insured, type of contract and experience.
At end of year of loss occurrence 447 416 345 392 323 311 303 335 342 296 n/a
Approximately 1.0% in terms of earned insurance premiums was ceded as at 31 December 2015 (2014: 1.4%).
The market consistent embedded value calculations are based on economic scenarios which are calibrated to market conditions at valuation date. Best estimate assumptions were made regarding a number of factors, in particular asset allocation, policyholder participation, development of costs and claims, policyholder behaviour, mortality and morbidity. Business is assumed to be continuing at the same level (going concern) and the current cost ratios – adjusted for inflation – are thus assumed to hold good for the future as well. Future costs from taxation and investment management expenses on assets backing solvency capital funded by the shareholders and which underpins the insurance business are charged to the MCEV. The Swiss Life Group calculates the embedded value for all its life and health insurance companies. All other companies are taken into account at their IFRS net asset value. As a consequence, embedded value sensitivities do not affect the value of these companies.
At 31 December 2015, if morbidity had been 5% higher, the embedded value would have been CHF 41 million lower (2014: CHF 59 million lower).
At 31 December 2015, if morbidity had been 5% lower, the embedded value would have been CHF 40 million higher (2014: CHF 54 million higher).
At 31 December 2015, if the swaption implied volatilities (interest rates) had been 10% higher, the embedded value would have been CHF 37 million higher (2014: CHF 61 million lower).
At 31 December 2015, if the equity securities and property implied volatilities had been 25% higher, the embedded value would have been CHF 338 million lower (2014: CHF 322 million lower).
At 31 December 2015, if the equity securities and property implied volatilities had been 25% lower, the embedded value would have been CHF 273 million higher (2014: CHF 263 million higher).
The sensitivity of insurance liabilities is also analysed on an economic basis for internal risk management purposes and to satisfy regulatory requirements (Swiss Solvency Test).
BASIC EARNINGS PER SHARE FOR THE NET RESULT ATTRIBUTABLE TO EQUITY HOLDERS OF SWISS LIFE HOLDING (IN CHF) 27.41 25.52
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 18 853 19 102
Other commissions and fees 179 182 1 Comparative amounts have been adjusted due to refined definitions for the line items
Interest income on financial assets available for sale 2 605 2 812
Associates at fair value through profit or loss 1 –13 28
TOTAL NET GAINS/LOSSES ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 5 81 –2 009 1 includes interest and dividend income of CHF 274 million (2014: CHF 103 million) 2 includes changes attributable to credit risk: nil (2014: nil)
Realised gains/losses on sales of subsidiaries and other assets 1 0
Net benefits and claims under investment contracts with discretionary participation 1 053 932
Swiss Life – Annual Report 2015 9 Derivatives and Hedge Accounting
Derivatives designated as cash flow hedges 393 744 3 – 2 110 3 584
Derivatives designated as fair value hedges as at 31 December 2015
Derivatives designated as fair value hedges as at 31 December 2014
Currency forwards to hedge non-monetary investments – 46 22 160 153 17 1 312
The Swiss Life Group used interest rate swaps to hedge available-for-sale fixed-rate bonds in Swiss francs, euro and US dollars against changes in the fair value attributable to interest rate risk. The nominal amount of these bonds as at 31 December 2015 was CHF 4.5 billion (2014: nil).
In 2015 and 2014, the Group used forward starting swaps and forward starting bonds to hedge the exposure to variability in interest cash flows arising on the highly probable purchase of bonds in order to achieve an adequate yield level for reinvestments.
In 2015, a gain of CHF 8 million was reclassified from other comprehensive income to profit or loss and included in investment income (2014: gain of CHF 1 million).
Assets attributable to non-controlling interests of investment funds 2 496 1 090
TOTAL FINANCIAL ASSETS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS 33 590 32 389
FINANCIAL LIABILITIES DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS
Share of net assets of investment funds attributable to non-controlling interests 2 496 1 090
TOTAL FINANCIAL LIABILITIES DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS 25 111 25 415
Swiss Life – Annual Report 2015 11 Financial Assets Available for Sale
TOTAL FINANCIAL ASSETS AVAILABLE FOR SALE 86 680 84 567 9 345 12 595 96 026 97 162
Debt securities previously classified as available for sale 3 959 5 617 – –6 3 959 5 611
TOTAL ALLOWANCE FOR IMPAIRMENT LOSSES 11 15 32 26 44 42
Gains (+)/losses (–) recognised in profit or loss (including impairment) 72 0
Share of net assets (carrying amount) 44 47 12 12 n/a n/a
BALANCE AS AT END OF PERIOD 570 54 61 27 713
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
No borrowing costs were capitalised in property and equipment in 2015 and 2014.
Swiss Life – Annual Report 2015 17 Intangible Assets including Intangible Insurance Assets
Deferred origination costs (DOC) These costs are recoverable and are directly attributable to securing the right to investment management services within investment contract policies. They relate to contracts in Luxembourg and Switzerland.
BALANCE AS AT END OF PERIOD 1 843 191 190 23 2 247
TOTAL OTHER INTANGIBLE ASSETS AS AT END OF PERIOD 1 301 91 59 23 1 475 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.
In 2015, Actuaires & Associés, Petit-Lancy, ABCON AG, Bern, and Sobrado Software AG, Cham, were acquired. The goodwill amounted to CHF 15 million in total. The goodwill of all three acquisitions has been allocated to the “Switzerland” segment and was fully impaired in 2015.
In October 2014, the acquisition of Corpus Sireo Holding GmbH & Co. KG, Cologne, led to the recognition of goodwill of CHF 117 million. The goodwill has been allocated to the “Asset Managers” segment.
Net carrying amount of goodwill 287 287 149 149 105 116 27 30
Customer relationships In October 2014, the acquisition of Corpus Sireo Holding GmbH & Co. KG, Cologne, led to the recognition of customer relationships of CHF 62 million.
TOTAL OTHER ASSETS 471 431 1 of which CHF 103 million pledged as security for loans (2014: CHF 124 million)
Investment contracts with discretionary participation with deposit accounting 10 644 11 167
Investment contracts with discretionary participation with actuarial valuation 3 118 2 630
Investment contracts without discretionary participation at amortised cost 30 9 11
Liabilities released for payments on death, surrender and other terminations during the year –565 –476
Investment contracts without discretionary participation at fair value through profit or loss
On 16 June 2015, Demeter Investments B.V., a Dutch repackaging vehicle, issued EUR 750 million in fixed/floating rate subordinated perpetual notes (at an issue price of 99.105%) secured by loan notes granted to Swiss Life Ltd, which are guaranteed by Swiss Life Holding. Swiss Life Ltd may repay the loan notes in full on 16 June 2025 or on any interest payment date thereafter, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The notes bear interest from 16 June 2015 to 16 June 2025 at a rate of 4.375% p.a. If the notes are not redeemed on 16 June 2025, the interest will be the aggregate of Euribor 3-month deposits and a margin of 4.3% p.a.
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.
On 16 November 2005, J.P. Morgan Bank Luxembourg S.A. issued on a fiduciary basis EUR 350 million fixed/floating rate subordinated perpetual notes at a price of 99.423% to fund a loan made by it to Swiss Life Ltd. The notes bore interest from 16 November 2005 to 16 November 2015 at a rate of 5% p.a. Redemption took place on the first call date on 16 November 2015.
Swiss Life AG CHF 300 CHF 300 5.500% 2012 2018 298 298
Swiss Life AG CHF 500 CHF 500 5.250% 2011 2016 499 496
Swiss Life AG 2 EUR 700 EUR 590 5.849% 2007 2017 640 708
Additions from acquisition of insurance portfolio – 19 – – – 19
Effect of changes in actuarial assumptions and other movements 90 –44 0 –3 90 –41
BALANCE AS AT END OF PERIOD 6 102 6 193 84 85 6 018 6 108
Claims incurred, benefits paid and surrenders –8 448 –8 093 –29 –37 –8 419 –8 056
Effect of changes in actuarial assumptions and other movements 1 290 1 257 –1 –4 1 291 1 261
Foreign currency translation differences –2 267 –424 –8 –2 –2 259 –422
For investment-type contracts with significant insurance risk, savings premiums collected are reported as deposits (deposit accounting).
Insurance liabilities linked to assets for the account and risk of the Swiss Life Group’s customers 3 167 2 760
For some plans, the level of old-age pensions is determined by yearly amounts. Contributions are made in the form of premiums to an individual insurance contract with Swiss Life Germany. The premium is a fixed amount, determined by the rules of the pension plan, and depends on the employee’s status. Every three years, there is an adjustment of the contribution amount due to the general development of salaries in the German insurance industry. There is a risk that the employer has to make additional payments in case the benefits of the individual insurance contract do not cover the benefits promised by the plan. Other benefits comprise lump-sum payments in case of death as well as disability pensions (if disabled before retirement age). The levels of these benefits are determined as fixed amounts by the plan depending on the employee’s status. This part of the plan is also covered by insurance contracts with Swiss Life Germany.
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 267 million as at 31 December 2015 (2014: deficit of CHF 138 million).
Actuarial gains and losses on the defined benefit obligation –216 –352
The process and methodology for the determination of future salary increases for the plans in Switzerland/Liechtenstein were refined in 2015.
A sensitivity analysis was performed for each significant actuarial assumption which shows the impact on the defined benefit obligation of changes in the respective actuarial assumption that were reasonably possible at the balance sheet date. The calculation is done by leaving all other assumptions unchanged (i.e. at their value used in the calculation of the defined benefit obligation
At 31 December 2015, if the discount rate had been 50 basis points higher (lower), the defined benefit obligation would have decreased by CHF 240 million (increase CHF 272 million). At 31 December 2014, if the discount rate had been 50 basis points higher (lower), the defined benefit obligation would have decreased by CHF 221 million (increase CHF 251 million).
At 31 December 2015, if the future expected salary growth had increased (decreased) by 50 basis points, the defined benefit obligation would have increased by CHF 18 million (decrease CHF 18 million). At 31 December 2014, if the future expected salary growth had increased (decreased) by 50 basis points, the defined benefit obligation would have increased by CHF 22 million (decrease CHF 22 million).
The contributions expected to be paid for the year ending 31 December 2016 are CHF 63 million. These contributions include amounts payable under insurance contracts issued to defined benefit plans covering own employees.
Certain subsidiaries sponsor various defined contribution plans. Participation in the various plans is based either on completion of a specific period of continuous service or on the date of hire. The plans stipulate contributions by both employers and employees. The expenses under these plans amounted to CHF 1 million in 2015 (2014: CHF 1 million).
Income tax calculated using the expected weighted-average tax rate 283 270
TOTAL DEFERRED INCOME TAX ASSETS/LIABILITIES 47 34 1 720 1 913
NET DEFERRED INCOME TAX ASSETS/LIABILITIES –1 879 –81 260 1 27 –1 673
NET DEFERRED INCOME TAX ASSETS/LIABILITIES –877 –54 –957 6 3 –1 879
Deferred tax liabilities have not been recognised on the aggregate amount of temporary differences with consolidated investments in subsidiaries to the extent the Group considers such undistributed earnings as being indefinitely reinvested. The foreign entities are controlled by the Group and these earnings are not expected to be repatriated in the foreseeable future. The amount of such temporary differences was approximately CHF 7.4 billion as at 31 December 2015 (2014: CHF 8.0 billion). If such amounts are ever repatriated, no material tax liabilities would be incurred due to participation exemption rules, unrecognised tax loss carryforwards and applicable double taxation treaties.
Unwinding of discount and effect of change in discount rate 0 – 0 0 – – 0 0
BALANCE AS AT END OF PERIOD 18 28 66 84 18 16 101 128
Under the “Swiss Life 2015” programme, provisions for restructuring were set up in Germany, Switzerland, Liechtenstein and Luxembourg in 2015 and 2014. The outflow of the amounts is expected within the following one to two years.
“Litigation” relates to several proceedings in several jurisdictions with uncertain outcome including customer claims relating to the distribution units in Germany. Litigation provisions have been set up to cover legal and administrative proceedings that arise in the ordinary course of business. These provisions concern numerous cases that are not of public knowledge or whose detail disclosure could prejudice the interests of the Group.
As at 31 December 2015 and 2014, the share capital of Swiss Life Holding consisted of 32 081 054 fully-paid shares with a par value of CHF 5.10 each. In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of own shares or shares they represent. Conditional share capital was CHF 30 600 000.00 as at 31 December 2015 (2014: CHF 30 600 000.00).
Share premium comprises additional paid-in capital in excess of the par value (net of transaction costs), gains/losses on own equity instruments and equity compensation benefits.
SHARES ISSUED AS AT END OF PERIOD 32 081 054 32 081 054
Gains/losses arising during the period 9 –294 –2 439 146 – –2 587 – –183 – –183 –2 770
Gains/losses transferred to the income statement 8, 9 0 –527 –8 64 1 –471 – – – – –471
NET BALANCE AS AT END OF PERIOD –866 3 852 378 –132 3 232 71 –236 – –165 3 067
Summarised financial information for subsidiaries with material non-controlling interests is as follows.
The Swiss Solvency Test (SST) is the Swiss legislation which governs the capital requirements of insurance companies and groups. It was enacted in 2006 with the revised Insurance Supervision Law and corresponding Insurance Supervision Ordinance and constituted a reporting requirement during a five-year transition period before the capital requirements ultimately became binding from January 2011. The SST is a principle-based framework where the main objective is the alignment of the required capital with the underlying risks. The SST capital requirement underpins a high level of confidence that insurers will meet their obligations towards policyholders even in adverse circumstances. Swiss Life uses an internal model to calculate the available and the required capital for the SST.
In addition to the Group’s solvency requirements, constraints at local level are considered to address the specific situation of each country and business unit.
Swiss Life – Annual Report 2015 28 Acquisitions and Disposals of Subsidiaries
In October 2014, the Swiss Life Group acquired a 100% share in Corpus Sireo Holding GmbH & Co. KG, Cologne, the leading independent real estate asset management service provider in Germany. Goodwill arose on the acquisition because of expected synergies and leveraging effects with existing business.
In 2015 and 2014, no significant disposals of subsidiaries took place.
Swiss Life – Annual Report 2015 30.1 Assets and liabilities measured at fair value on a recurring basis
Financial assets pledged as collateral 2 109 2 763 – – – – 2 109 2 763
Assets attributable to non-controlling interests of investment funds 1 658 364 268 299 570 427 2 496 1 090
Associates at fair value through profit or loss – – 1 212 5 7 6 219
Investment contracts without discretionary participation – – 343 262 – – 343 262
The following sections outline the valuation techniques and significant inputs used in the fair value measurement of financial instruments categorised within level 2 and level 3 of the fair value hierarchy.
Debt instruments: Debt instruments categorised as level 2 of the fair value hierarchy comprise government, supranational and corporate bonds for which prices are only available on an irregular basis or with a significant time lag. The price for such assets is obtained from an independent, acknowledged market data provider, which refers to quotes of recent transactions with the same or similar, actively traded bonds and systematically derives a comparable price for those less liquid securities. Alternatively, if such a derived price is missing, level 2 fair values of debt instruments are measured on a discounted cash flow basis using risk-adjusted discount factors. Main inputs to determine the discount factor are zero coupon yield curves and observable, rating-implied flat spreads to account for credit risk.
Investments in associates: The valuation methods of investments in associates categorised as level 3 of the fair value hierarchy are identical to the methods outlined for level 3 private equity investments.
Trends in fair value are determined by various fundamental parameters. A distinction has to be made between property-specific factors and exogenous factors that relate to the real estate and finance market environments. Changes in the property management situation on both the income and the cost side directly trigger an adjustment in the reported market value. Key determinants are new and expiring leases, change in the vacancy situation, as well as movements in running, maintenance and repair costs. Developments in the relevant local real estate market have an impact on the calculation of potential rental values. Changes in the capital or transaction markets have an influence on discount rates. Property ageing is another key factor.
Total gains/losses recognised in profit or loss – 0 5 6 47 –380 0 655 334
other comprehensive income – – – – –36 – – – –36
BALANCE AS AT END OF PERIOD – 15 1 1 702 1 283 2 750 5 21 557 27 313
During 2015, debt securities of CHF 183 million (2014: CHF 197 million) were transferred from level 1 into level 2 due to reduced frequency of price quotations, and debt securities of CHF 415 million (2014: CHF 321 million) were transferred from level 2 into level 1 due to available quoted prices. Changes in fund pricing frequency (daily/weekly) resulted in the following transfers of investment funds during 2015: CHF 10 million (2014: CHF 493 million) from level 1 into level 2, and CHF 15 million (2014: CHF 63 million) from level 2 into level 1.
for liabilities held at the end of the period – – 0 0 1 0 1 0
Total gains/losses recognised in profit or loss – – –1 0 – –
Receivables and other financial liabilities The carrying amounts of receivables and other financial liabilities represent a reasonable estimate of fair value as the effect of discounting is immaterial and changes in credit risk are not significant. Such instruments include insurance receivables and payables, demand and short-term deposits and repurchase agreements. The disclosure of the fair value hierarchy is not applicable for these instruments.
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.
Swiss Life – Annual Report 2015 31 Offsetting Financial Assets and Liabilities
Gross amounts of recognised financial assets before offsetting 2 113 2 358 – – 2 113 2 358
NET AMOUNTS PRESENTED IN THE BALANCE SHEET 2 113 2 358 – – 2 113 2 358
Gross amounts of recognised financial liabilities before offsetting 989 2 165 2 146 2 780 3 135 4 944
Represent agreements to provide liquidity to protection funds in the insurance industry.
The Group has entered into various operating leases as a lessee. Rental expenses recognised in income for these items totalled CHF 41 million for the year ended 31 December 2015 (2014: CHF 39 million). Minimum lease payments totalled CHF 41 million in 2015 (2014: CHF 39 million).
Later than 1 year and not later than 5 years 88 93
Contractual obligations for repairs and maintenance of investment property amounted to CHF 152 million as at 31 December 2015, which are included in this line item (2014: CHF 182 million ).
Cash pledged for other liabilities 31 33 31 33 1 of which can be sold or repledged by transferee 2 109 2 763 2 109 2 763
Securities received as collateral in exchange for securities lent 3 619 4 810
Later than 1 year and not later than 5 years 1 159 1 014
Swiss Life Products (Luxembourg) S.A., Strassen, Branch Zürich, Zürich DE until 26.08.2014 – –
SwissLife Agence Régionale (formerly CGPI 2014), Levallois-Perret FR 100.0% 100.0% Asset management
CitCor Residential Verwaltungs GmbH, Düsseldorf AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Projektentwicklung Adlershof GmbH & Co. KG, Köln CH from 18.12.2015 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
(formerly CORPUS SIREO Holding GmbH & Co. KG), Köln AM from 01.10.2014 100.0% 100.0% Holding
CORPUS SIREO Investment Residential Berlin GmbH, Köln AM until 23.04.2015 – –
CORPUS SIREO Investment Residential No. 24 S.à.r.l. – Branch Köln, Köln AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Makler GmbH, Branch Frankfurt am Main, Frankfurt am Main AM from 19.03.2015 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Makler GmbH, Branch KölnBonn, Bonn AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Makler Frankfurt GmbH, Frankfurt am Main AM until 09.03.2015 – –
(formerly CORPUS SIREO Holding GmbH), Köln AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Projektentwicklung Düsseldorf 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
Maicor Projektentwicklung Winterhafen GmbH, Mainz AM from 01.10.2014 74.2% 74.2% Asset management & Real estate
SELECT Bauprojektentwicklung GmbH, Köln AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
SL Beteiligungs-GmbH & Co. Immobilien IV KG, Garching b. München DE from 22.01.2014 100.0% 100.0% Real estate
SLPM Schweizer Leben PensionsManagement GmbH, Garching b. München DE 100.0% 100.0% Services
Swiss Life Deutschland erste Vermögensverwaltungs AG, Garching b. München DE 100.0% 100.0% Services
Swiss Life Insurance Solutions S.A. Branch Germany, Garching b. München Other 100.0% 100.0% Life insurance/Reinsurance
Swiss Life Products (Luxembourg) S.A. Branch Germany, Garching b. München DE 100.0% 100.0% Life insurance/Reinsurance
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 Health Care III SICAV-FIS, Luxembourg AM from 17.06.2015 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Investment Residential No. 24 S.à.r.l., Luxembourg AM from 01.10.2014 100.0% 100.0% Asset management & Real estate
CORPUS SIREO RetailCenter-Fonds Deutschland SICAV-FIS, Luxembourg AM from 22.12.2014 57.0% 57.0% Asset management & Real estate
CORPUS SIREO Trust No. 1 S.à.r.l., Luxembourg AM until 31.12.2015 – –
DRED Real Estate Deutschland GP S.à.r.l., Luxembourg AM from 17.07.2015 100.0% 100.0% Asset management & Real estate
Stella (LUX) Holding S.à.r.l., Luxembourg CH from 16.11.2015 100.0% 100.0% Asset management & Real estate
Swiss Life GIO Holdings S.à.r.l., Luxembourg AM 100.0% 100.0% Asset management
Swiss Life Real Estate Management I S.à.r.l., Strassen DE from 03.11.2014 100.0% 100.0% Real estate
Société en Commandite simple, Luxembourg AM from 06.07.2015 – – Asset management & Real estate
Bazalgette (Investments) Limited, London AM from 07.04.2015 99.0% 99.0% Asset Management
Chase de Vere IFA Services Limited, Manchester IN 100.0% 100.0% Dormant
Chase de Vere Independent Financial Advisers Limited, London IN 100.0% 100.0% Finance
Chase de Vere Private Client Trustees Limited, London IN 100.0% 100.0% Dormant
Chase de Vere Trustees Limited, Leicestershire IN until 01.09.2014 – –
Swiss Life International Services AG, Branch Austria, Wien CH 100.0% 100.0% Services
Swiss Life GIO Canada Group Ltd, Montréal AM 100.0% 100.0% Asset management
Swiss Life Financial Services (Cayman) Ltd., Grand Cayman Other 100.0% 100.0% Services
Swiss Life Insurance Finance Ltd., Grand Cayman Other 100.0% 100.0% Finance
Swiss Life Select Ceska Republika s.r.o., Brno IN 100.0% 100.0% Services 1 Segment (CH = Switzerland, AM = Asset Managers, IN = International, FR = France, DE = Germany)
Swiss Life Select Spólka z ograniczona odpowiedzialnoscia, Warszawa IN 100.0% 100.0% Services
Swiss Life Network (Asia) Pte. Ltd., Singapore IN 100.0% 100.0% Services 1 Segment (CH = Switzerland, AM = Asset Managers, IN = International, FR = France, DE = Germany)
Board of Directors’ responsibility The Board of Directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control system. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Swiss Life Holding Financial Statements 300 Management Report 301 Statement of Income 302 Balance Sheet 303 Notes to the Financial Statements 306 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
The annual profit of Swiss Life Holding consisted mainly of dividends, guarantee fees and interest income within the Group, as well as investment income. Dividend payments received by the holding company from subsidiaries increased from CHF 232 million to CHF 337 million. Guarantee fees including processing fees for new loans rose from CHF 44 million to CHF 45 million. Corpus Sireo units were granted two new loans totalling EUR 44 million to finance new real estate projects. In addition, the Group-wide credit structure was simplified, as a result of which the volume of loans to Group companies rose from CHF 638 million to CHF 642 million. Interest earned on loans to Group companies increased from CHF 25 million to CHF 30 million. Most of the additional interest income arises from loans granted to subsidiaries in the previous year. Earnings from investments in bonds and fund units rose from CHF 16 million to CHF 29 million. All loans granted internally and external investments in foreign currencies are hedged with currency futures. The cost of hedging during the reporting period was CHF 9 million (2014: CHF 1.3 million). During the period under review, CHF 31 million in loans granted to subsidiaries was converted into equity capital. Furthermore, the investment book value of Swiss Life Deutschland Holding was revalued by CHF 41 million. The value of all participations thus declined slightly, from CHF 3946 million to CHF 3936 million.
As at the end of the year Swiss Life Holding holds debt capital amounting to CHF 918 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%; maturing 2019) and a tranche of CHF 200 million with a ten-year maturity (coupon 1.875%; maturing 2023), as well as a sevenyear convertible bond in the amount of CHF 500 million (coupon 0%; maturing 2020). All financial instruments were issued in 2013. Interest on the bonds came to CHF 7 million. Total expenditure including taxes remained unchanged at CHF 33 million.
Swiss Life Ltd, Zürich CHF 587 350 100.00% CHF 587 350 100.00%
Swiss Life Schweiz Holding AG, Zürich CHF 250 100.00% CHF 250 100.00%
Loans to Group companies CHF 556 million of the loans to Group companies is classified as subordinated.
In 2015 no convertible bonds were converted into Swiss Life Holding shares.
Treasury shares In the year under review the companies in the Swiss Life Group purchased a total of 158 001 Swiss Life Holding shares at an average price of CHF 219.76. No shares were sold in the same period. As at 31 December 2015, the Swiss Life Group held 254 495 treasury shares.
Contingencies Swiss Life Holding acts as warrantor for all Swiss Life Ltd liabilities with regard to the various tranches of the subordinated perpetual step-up loans (hybrid debt), which amounted to an equivalent value of CHF 3730 million at the balance sheet date.
As a result of the adaptation to new provisions of the Code of Obligations, treasury shares are now represented as a negative value in equity capital. A reserve for treasury shares is thus now only to be created if other Group companies hold treasury shares. Since no other Group companies hold treasury shares, the reserve for treasury shares has been accordingly released to free reserves.
Compensation in 2015 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 2015 financial year is provided on pages 51 to 68.
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.
TOTAL PROFIT SHOWN IN THE BALANCE SHEET 349 331 790 259 301 707
As statutory auditor, we have audited the financial statements of Swiss Life Holding Ltd, which comprise the statement of income, balance sheet and notes to the financial statements (pages 301 to 308), for the year ended 31 December 2015.
Share Performance and Historical Comparison The Swiss Life share price developed strongly in 2015, closing the year at CHF 271.30. This amounts to an appreciation of 15%, or 18% taking into account the dividend distribution of CHF 6.50.
Weak economic growth and political uncertainties in emerging markets fed unease regarding deflationary risks in the developed world in 2015. Swiss equities came under pressure with the announcement by the SNB on 15 January 2015 that it was discontinuing the minimum exchange rate of CHF 1.20 against the euro and introducing negative interest rates. The ECB’s interest and monetary policy had some 40% of European sovereign debt trading at a negative yield by the end of 2015. Meanwhile, the markets prepared for the first monetary policy-tightening cycle in the US since 2004, which came into effect in December 2015 with an increase of the Fed Funds Target by 25 basis points. Against this backdrop, Swiss Life’s share price performed well: With an increase of 15%, the shares outperformed the Swiss Market Index (–2%) and were slightly higher than the European insurance index Dow Jones STOXX 600 Insurance (+14%). At the Annual General Meeting in April 2015, the shareholders approved a withholding tax-free distribution from the capital contribution reserve of CHF 6.50 per share.
Dow Jones STOXX 600 Insurance Index (in EUR) 31.12. 285.56 250.55 228.22 177.11 133.25
Performance of Dow Jones STOXX 600 Insurance Index (in %) +14 +10 +29 +33 –14
Gross written premiums, policy fees and deposits received 18 853 19 102 17 969 17 046 17 143
Net insurance benefits and claims –15 516 –15 218 –13 920 –13 819 –12 614
Publishing details Publisher — Swiss Life Holding Ltd, Zurich Editorial responsibility — Swiss Life, Group Communications and Strategic Marketing, Zurich Concept, design and technical realisation — EQS Group, Munich Production — Management Digital Data AG, Lenzburg © Swiss Life Holding Ltd, 2016
Caution regarding forward-looking statements This document may contain projections or other forward-looking statements related to Swiss Life that are subject to known and un known risks, uncertainties and other important factors. The reader should be aware that these statements are only projections which could differ materially from the actual results, financial situation, development, performance or expectations and that therefore no undue reliance should be placed on such forward-looking statements. Neither Swiss Life nor any of its directors, officers, employees or advisors, nor any other person connected or otherwise associated with Swiss Life, makes any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this document. Neither Swiss Life nor any of its directors, officers, employees or advisors, nor any other person connected or otherwise associated with Swiss Life, shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this document. All forward-looking statements are based on the data available to Swiss Life at the time the present document was compiled. Unless otherwise required by applicable law, Swiss Life assumes no responsibility to publicly update or alter its forward-looking statements or to adapt them, whether as a result of new information, future events or developments or any other reason.