The Swiss Life Group’s 2017 financial year at a glance: Business overview — The Swiss Life made further operational progress in 2017: Adjusted profit from operations increased by 5% to CHF 1475 million and net profit rose by 9% to CHF 1013 million. All units developed positively and increased their contribution to the result. The fee business was a significant factor in the good results: fee income rose by 8% in local currency to CHF 1480 million, driving the fee result to CHF 442 million or 11% over the previous year. Swiss Life posted a 6% rise in premiums in local currency to CHF 18.6 billion in 2017. Insurance reserves to the benefit of the company’s policyholders rose by 4% in local currency. In proprietary asset management Swiss Life earned direct investment income of CHF 4.3 billion. The direct investment yield was 2.8%; the net investment yield stood at 2.5%. In its third-party business, Swiss Life Asset Managers posted net new assets of CHF 7.1 billion. It had CHF 61.4 billion in third-party assets under management at the end of 2017, an increase of 24%.
Staff — Approximately 8000 employees and 5000 certified financial advisors were working for the Swiss Life Group worldwide at the end of 2017.
The key reason for our success lies in our employees. They stand behind our ambitions and the management teams. This is the picture that emerges from last autumn’s Employee Survey: our employees’ commitment is outstanding – even by international comparison. This is an invaluable asset: in the business world it is always ultimately people who make the difference. On behalf of the Board of Directors and the Corporate Executive Board, we would like to express our sincere gratitude to all our colleagues for their great commitment and the success that has been achieved.
The life and pensions market remains a growth market. The need for people to be self-determined in structuring their pension provision will continue to increase. This is where we aspire to win over customers as a proactive and reliable partner. New technologies can help us to develop even better and more individualised services and products. The concept of digitalisation dominates business reporting. However, when debating digitalisation we should not confine ourselves to technological aspects. After all, one thing remains unchanged: a prosperous society relies on a culture of trust. At Swiss Life, we work with and for people – their needs are at the heart of what we do.
We support people in living self-determined lives. That means following an individual path in many respects. But when it comes to financial security and covering risks, our customers’ needs and demands are the same – this is both an opportunity and an obligation for us.
Strategy & Brand Thanks to a clear strategy and consistent brand management, Swiss Life can make its customers a long-term, solid, attractive value proposition – so that they can lead their longer lives in an assured and self-determined way.
● Cumulative cash remittance Ahead to Holding (2016–2018): > CHF 1.5 billion
Capital, cash and dividends 1 Without Asset Managers 2 Equity excluding unrealised gains/losses on bonds
Alongside profitability, margin management and cost efficiency, disciplined asset and liability management remains central to Swiss Life’s market success. Swiss Life’s long investment duration and robust direct investment income enable it to withstand the current low interest rate environment and protect the interest margin. The investment strategy is structured so that consistent asset and liability management ensures the interest rate margin remains protected for decades. The company can thus meet its customer guarantees, even if the low interest rate environment endures over the long term.
To promote quality of earnings and earnings growth, Swiss Life is prioritising four profit sources: the savings result, the risk result, the fee result and the cost result. Swiss Life will increase the resilience of its business model by continuing the expansion of its fee business. Swiss Life will continue to consistently focus all business processes on customers. In addition, within three years, Swiss Life will increase overall investment by well over CHF 100 million to further the development of the business model. Swiss Life invests in consulting, digitalisation and organic growth. Such investments include automating processes, and thus further reducing costs. Furthermore, thanks to enhanced customer centricity, it has also been possible to augment customer satisfaction and loyalty as well as the Net Promoter Score.
This is the repository for brands whose connection to the umbrella brand is potentially the source of conflict or which are kept separate for strategic reasons. These brands have an independent existence without visible relation to the umbrella brand.
Swiss Life’s product strategy is presented in the “Products and Services” chapter on pages 92 and 93. In view of its varied positioning in the relevant markets, Swiss Life uses a multi-local approach: Swiss Life also reports on strategic focuses and investments by individual divisions as part of its segment information on pages 14 to 23.
The success of the Swiss Life brand results from a consistent brand strategy and management. On the basis of its 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.
With its brand personality and clear corporate design guidelines, Swiss Life guarantees a standardised appearance at all brand contact points. The Swiss Life brand personality always centres on the customer: “We help our customers lead a longer self-determined life with confidence.”
The success of the Swiss Life brand is constantly measured on the local front by independent institutes, which review brand awareness and perception. The findings garnered are continuously used for the development and adjustment of marketing measures.
In the Swiss domestic market, Swiss Life grew its segment result by 2% to CHF 829 million. In France, the segment result came to CHF 261 million, 7% higher than the previous year. Germany contributed CHF 153 million (plus 22%) and the International market unit generated a segment result of CHF 51 million (previous year: CHF 45 million). Swiss Life Asset Managers increased its segment result by 6% to CHF 258 million.
Swiss Life Asset Managers had a total of CHF 224 billion (plus 10%) under management as at 31 December 2017, CHF 61 billion of which was third-party asset management – a growth rate of 24% over the previous year.
In the home market of Switzerland, Swiss Life increased its segment result in 2017 by 2% to CHF 829 million (previous year: CHF 810 million). The main drivers of the increase were the improved savings result and stronger fee result. Direct investment income was slightly above the previous year at CHF 3.0 billion. Insurance benefits, including changes in insurance reserves, fell by 10% to CHF 9.9 billion, a reduction mainly attributable to lower savings premiums and the associated decline in requirement for reserves. Operating expenses fell by 2% to CHF 919 million during the reporting year, and operating administrative costs were also sustainably reduced in 2017 (–1%).
In 2017, Swiss Life in Switzerland achieved premium volume totalling CHF 9.3 billion. This 6% decline is due to the strict focus on new business profitability. Of the total premium volume, 84% came from group life business.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 9 290 9 876 –6%
In 2018, Swiss Life in France aims to continue its implementation of the “Swiss Life 2018” strategy. The core elements are the private insurer model, digitalisation initiatives to reinforce customer orientation and operational efficiency, and the development of multichannel distribution.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 5 310 4 507 18%
During the year under review, Swiss Life Germany, in spite of a challenging market environment shaped by persistently low interest rates, improved its segment result improved by 22% at CHF 153 million (previous year: CHF 125 million). The increase stems from an improved savings and cost result. The savings result contains positive one-off effects to finance the statutory additional interest rate reserve. This increase is supported by the positive development of financial consulting.
Administrative costs adjusted for one-offs remained at the previous year’s level in local currency in spite of the pronounced growth in new business and resulting workforce expansion.
The challenging market conditions look set to persist in 2018. Swiss Life nonetheless expects positive new business development in its insurance business. New products and extensions accounted for a lot of this development in 2017, (e.g. Swiss Life long-term care and asset protection and fund-linked pension withdrawal in the Maximo product family), which will establish themselves further in the market. In financial consulting, Swiss Life expects the number of advisors to increase again, which should have a positive impact on business development.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 1 313 1 290 2%
The two business areas Global Private Wealth Solutions and Global Employee Benefits Solutions are marketed externally under the “Swiss Life Global Solutions” brand introduced at the end of 2016. This is intended to strengthen the market position for international insurance solutions and the further development of the business model.
The Global Employee Benefits Solutions business area concentrates on global provisions solutions for multinational companies. Good risk development and higher reserves enabled the consolidation of profitability on its own balance sheet in Luxembourg. Swiss Life Network, the leading independent provider of global employee benefits solutions, made a strong contribution to the result due to its fee optimisation and thus reconfirmed its good market position.
Following the acquisition of Mayfair Capital Investment Management Ltd. and the commencement of operations by the German investment management company (Swiss Life KVG), the focus in 2017 was on new product development: in the securities area, one notable development was the launch of a Multi Asset Risk Premia Fund for the first time. One new real estate fund for private investors was launched in France and another in Germany. In addition, pan-European real estate funds were established, which invest in properties located in various European countries. As a result, Swiss Life Asset Managers can address a major need of institutional investors. Swiss Life Asset Managers is responding to the strong growth and rising demand by regularly conducting structural reviews. The three asset management companies located in Switzerland were consolidated during the reporting year. Similar proposals are also under review in other countries. With its extended product range and reinforced cross-border cooperation, Swiss Life Asset Managers has created the conditions for further third-party business growth and the expansion of its own position in its core markets. It will continue to pursue this strategic path.
Corporate Governance The Swiss Life Group is committed to responsible, sustainable corporate management. It structures its corporate governance openly and transparently in compliance with the acknowledged national and international standards.
The corporate governance of Swiss Life Holding Ltd (Swiss Life Holding) is based on the relevant provisions 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 December 2016. The compensation report on pages 49 to 66 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 companies falling within the Group’s scope of consolidation are presented in the Consolidated Financial Statements (note 34). Information on the listing on the SIX Swiss Exchange and market capitalisation can be found in the section “Share Performance and Historical Comparison” on pages 305 and 306. The organisational structure of the Group shows the key business markets and areas. The resulting operational responsibilities are reflected in the allocation of responsibilities among the Corporate Executive Board. With regard to insurance operations, one person with responsibility for the market and results is assigned to each specific area.
The disclosures of shareholdings that exceed the disclosure threshold on the balance sheet date of 31 December 2017 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.
BlackRock Inc., 55 East 52nd Street, New York 10055, USA, reported in a publication of 6 May 2017 that it held through various companies a total of 5.28% of the voting rights for Swiss Life Holding (1 292 673 shares, of which 56 953 shares from securities lending and comparable transactions, 342 486 voting rights transferred from a third party to exercise at its own discretion and 58 691 voting rights from equity derivatives). At the same time, BlackRock Inc. held sales positions in the amount of 0.002% of the voting rights (613 CFD).
On the balance sheet date some 159 000 shareholders and nominees were listed in the Swiss Life Holding share register, of which about 4100 were institutional shareholders. Taken together, the shareholders entered in the share register held around 50% of the shares issued. Over half of these shares were owned by shareholders domiciled in Switzerland. Approximately a third of the registered shares were in private hands.
The capital structure of Swiss Life Holding was as follows on the balance sheet date: – Ordinary share capital: CHF 174 537 840.60, divided into 34 223 106 fully paid registered shares with a par value of CHF 5.10 each
– Conditional share capital: CHF 19 675 534.80, divided into 3 857 948 registered shares with a par value of CHF 5.10 each
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 2014 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 & Shareholders” area, “Results & Reports” section, “Reports” and “Annual Reports” subsection (www.swisslife.com/annualreports).
In 2016, the convertible bond (2013–2020) issued by Swiss Life Holding Ltd in the amount of CHF 500 000 000 was partially converted, whereby another 147 new registered shares were created. The ordinary share capital thus increased by CHF 749.70 from CHF 163 613 375.40 to CHF 163 614 125.10. There were no further changes with regard to equity capital; the distribution of CHF 8.50 per share approved by the General Meeting on 26 April 2016 was made from the capital contribution reserves.
Shares 34 223 106 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 67), 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 305 and 306.
Swiss Life Holding has no convertible bonds outstanding on the balance sheet date. The 0% convertible bond (2013–2020) issued by Swiss Life Holding Ltd in 2013 in the amount of CHF 500 000 000 was fully converted or repurchased during the reporting year.
As at 31 December 2017, Swiss Life Holding and its Group companies had not granted any options on rights to participate in Swiss Life Holding.
On the balance sheet date of 31 December 2017, the Board of Directors was composed of the following members.
He became Chairman of the Board of Directors of Swiss Life Holding in May 2009.
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 24 April 2018.
Other appointments: – Adecco S.A., Chairman of the Board of Directors – dormakaba Holding Ltd, Vice Chairman of the Board of Directors – Danzer Holding AG, Member of the Supervisory Board – Emil Frey Holding AG, Member of the Board of Directors – Swiss Insurance Association (SIA), Chairman – economiesuisse, Member of the Board Committee
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 step down, having served eighteen years on the Board of Directors, at the General Meeting of Shareholders of Swiss Life Holding on 24 April 2018, due to his reaching the statutory age limit.
Frank Schnewlin will be put forward for re-election as Member of the Board of Directors and as Member of the Compensation Committee at the General Meeting of Shareholders of Swiss Life Holding on 24 April 2018.
Chairman of the Risk and Audit Committee – Twelve Capital AG and Twelve Capital Holding AG, Chairman of the Board of Directors – Drosos Foundation, Member of the Board of Trustees and Chairman of the Finance Committee
Other appointments: – Federal Communications Commission (ComCom), Member, Vice-President from January
– Nouvelle Agence Économique et Financière SA, Vice President (until May 2018)
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 AG 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 50% position at Swisscom, manages selected projects and serves on the Board of Directors of various Swisscom subsidiaries and investment companies.
Other appointments: – Sanitas Krankenversicherung and Sanitas Beteiligungen AG, Member of the Board of Trustees and the Board of Directors and Chairman of the Audit Committee – Zuckermühle Rupperswil AG, Member of the Board of Directors – BLS Ltd. and BLS Netz AG, Member of the Board of Directors and President of the Audit
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 24 April 2018.
Henry Peter will be put forward for re-election as Member of the Board of Directors at the General Meeting of Shareholders of Swiss Life Holding on 24 April 2018.
Franziska Tschudi Sauber — Born 1959, Swiss national Member of the Board of Directors bild Franziska Tschudi graduated in law at the University of Bern and passed her bar exam there in 1984. She studied law at Georgetown University, Washington, D.C., earning an LL.M. in 1986, and passed the bar exam for the US states of New York and Connecticut in 1987. Franziska Tschudi completed postgraduate studies at the University of St. Gallen (1991 to 1993), receiving an Executive MBA. After initially working as an Assistant for Media Law at the Institute for Constitutional and Administrative Law at the University of Bern, and practising business and media law in Zurich, Washington, D.C. and Geneva, she served as Secretary General at SIG Holding AG from 1992 to 1995. She then became a Member of the Executive Board of Wicor Holding AG (“Weidmann Group”), Rapperswil, in 1995, where she was Head of Corporate Development and, from 1998, Head of the Business Area Electrical Technology Asia/Pacific. She has held the positions of Chief Executive Officer and Delegate of the Board of Directors of Wicor Holding AG since 2001.
Franziska Tschudi will be put forward for re-election as Member of the Board of Directors and as Member of the Compensation Committee at the General Meeting of Shareholders of Swiss Life Holding on 24 April 2018.
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 – DMG Mori Schweiz AG, Member of the Board of Directors – responsAbility Investments AG, Member of the Board of Directors (since June 2017) – Mobilejobs AG, Member of the Board of Directors (since July 2017) – Tschütscher Networks&Expertise AG, Owner and Chairman of the Board of Directors
After serving for five years on Swiss Life Holding’s Board of Directors, Wolf Becke stepped down from the Board of Directors with effect from the General Meeting of Shareholders on 25 April 2017, due to reaching the statutory age limit. Stefan Loacker was newly elected to the Board of Directors.
Changes in the Board of Directors with effect from the 2018 General Meeting of Shareholders
Gerold Bührer (born 1948) will stand down from the Board of Directors at the next General Meeting of Shareholders due to reaching the statutory age limit. Martin Schmid (born 1969), a Member of the Council of States, former cantonal councillor and lawyer from Graubünden will be proposed to the shareholders for election.
The Board of Directors met nine times during the year under review. The meetings lasted around three hours on average. All members of the Board of Directors attended all the meetings. The Group CEO attended all the meetings apart from two where he was absent due to illness. The other members of the Corporate Executive Board attended all the meetings. The Board of Directors conducted parts of the meetings among themselves.
The Chairman’s Committee held nine meetings during the year under review. Each session lasted for around two hours on average. The meetings were attended by all members. The Group CEO attended seven and the Group CFO eight Chairman’s meetings.
The Articles of Association of Swiss Life Holding can be seen at www.swisslife.com, “The Swiss Life Group” area, “Corporate Governance” section, “Organisation and principles” subsection (www.swisslife.com/articles). The Organisa tional Regulations are also on the Swiss Life internet page, “The Swiss Life Group” area, “Corporate Governance” section, “Organisation and principles” and “Organisational regulations” subsections (www.swisslife.com/en/organisation).
Management structure of the Swiss Life Group as at 31 December 2017
bild Patrick Frost studied at the ETH in Zurich and the uni versities of Cologne, Basel and Zurich, obtaining degrees in natural science (dipl. Natural Science (dipl. Natw. ETH), economics (Dr. rer. pol.) and law (lic. iur.)). He began his career in the mid-nineties as an analyst and subsequently as a Portfolio Manager in asset management for Winterthur Group. After two years in the US as a Corporate
In 2006 Patrick Frost was appointed Member of the Corporate Executive Board and Group Chief Investment Officer of Swiss Life and in this capacity was responsible for the investment management of the Swiss Life Group. Since 1 July 2014 he has been Group Chief Executive Officer (Group CEO) of the Swiss Life Group.
Other appointments: – American Chamber of Commerce, Member of the Financial Services Chapter Board – Swiss Innovation Park Foundation, Member of the Foundation Board and of the Business
Markus Leibundgut —Born 1969, Swiss national Chief Executive Officer Switzerland (CEO Switzerland)
On 1 July 2017 Jörg Arnold took over as Chief Executive Officer Germany (CEO Germany) and Member of the Corporate Executive Board of the Swiss Life Group.
On the basis of the 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 Exe cutive Board on 26 April 2016 as follows: – For the Board of Directors: The maximum total amount of fixed compensation until the next ordinary General Meeting in 2017 in the amount of CHF 3 440 000 in total.
– For the Corporate Executive Board: The short-term variable compensation component for the 2015 financial year in the amount of CHF 4 152 500 in total (bonus and deferred compensation in cash), determined by the Board of Directors at the beginning of 2016 in view of the 2015 annual results, and the maximum total amount of the fixed compensation and the long-term variable compensation (equity compensation plan) for the 2017 financial year in the amount of CHF 13 700 000 in total.
The Articles of Association of Swiss Life Holding can be viewed online and printed out at www.swisslife.com, “The Swiss Life Group” area, “Corporate Governance” section, “Organisation and principles” subsection (www.swisslife.com/articles). 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 14–16 of the Articles of Association.
The compensation policy principles are governed by the Articles of Association of Swiss Life Holding. Within this framework, the Board of Directors as a whole establishes the compensation policy guidelines for the Group (incl. variable compensation and equity compensation plans) and relevant guidelines for the employee benefit institutions.
The compensation policy underpins the performance culture required by the corporate strategy and is part of the HR policy. The aim is to retain well-qualified employees and gain new, highly skilled staff. The compensation system is in line with the market environment and must be competitive. The individual overall compensation takes into account the employee’s professional skills, engagement and personal performance. It is made up of the basic salary, a short-term variable compensation component based on achievement of the annual objectives, which is generally paid out in cash and possibly in shares and, if applicable, as deferred compensation in cash, and a long-term variable compensation component in the form of an equity compensation plan, as well as contributions to occupational provisions and risk insurance.
Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for determining the level and make-up of compensation for its members, whereas the Compensation Committee is responsible for putting forward appropriate proposals (for the internal organisation of the Board of Directors see “Internal organisational structure”, pages 38 to 41). The Board of Directors as a whole also establishes the guidelines for the company’s compensation policy. In doing so, it takes into consideration the compensation policies of other companies in the financial services industry, drawing its findings from publicly available information and studies by independent external experts. Comparable companies in the insurance sector in Switzerland used for the purposes of providing relevant information for the current compensation policy included Allianz, AXA, Baloise Insurance, Swiss Re, Zurich Insurance Group and Helvetia.
As part of the implementation of the Compensation Ordinance and based on the amended Articles of Association as in force on 1 January 2015, the General Meeting of Shareholders approves, on the basis of a proposal by the Board of Directors, the maximum total amount of fixed compensation and long-term variable compensation for the Corporate Executive Board for the following financial year. This prospective approval excludes the short-term variable compensation component for the Corporate Executive Board, which is approved by the General Meeting of Shareholders retrospectively for the previous financial year. In addition, the General Meeting of Shareholders can, under Article 16 of the Articles of Association, pass a resolution at any time to retrospectively increase an approved total amount. If new members of the Corporate Executive Board are appointed after a resolution approving the compensation has been passed, the Articles of Association stipulate that a supplementary amount of a maximum 40% of the total amount for the year in question is available for their compensation and to offset any disadvantages in connection with the change of job; this does not require the approval of the General Meeting of Shareholders.
Within the framework of the compensation arrangements for members of the Corporate Executive Board, “deferred compensation in cash” was introduced on 1 January 2012 as a new compensation component related to the short-term variable compensation. On the basis of the corresponding regulations, a portion of the short-term variable cash compensation determined by the Board of Directors is not paid immediately but after a period of three years has elapsed and provided that the regulatory requirements are satisfied at that point. The allocated deferred compensation in cash represents an entitlement during the three-year deferral period. The underlying “deferred cash plan” also provides for adjustment and reclaiming mechanisms (clawback). A full or partial reduction of the deferred compensation is provided for in the following cases: negative impact of the key figures applying to the allocation of deferred compensation due to a restatement of the annual accounts or damage to Swiss Life as a result of a violation of statutory, regulatory or compliance standards by participants in the plan. If the employment relationship is terminated by a participant during the three-year deferral period for deferred compensation in cash, the entitlements expire worthless (retention component). For the 2017 financial year, the Board of Directors has determined that, as from a variable compensation amount in cash of CHF 500 000, 23% (33% for the Group CEO) of the total variable compensation in cash is to be allocated as deferred compensation in cash.
Since 2011 participants in the equity compensation plan have been allocated Restricted Share Units (RSUs) on 1 April (2011–2013 equity compensation plans) or on 1 March (equity compensation plans from 2014). The RSUs grant the holder future subscription rights, entitling them to receive Swiss Life Holding shares free of charge after a three-year period has elapsed. The attribution of shares after the expiry of the three-year deferral period is effected on a 1:1 basis (1 RSU = 1 share): the plan is therefore very simple, transparent throughout the whole term and directly linked to the performance of the Swiss Life Holding share price. The value of RSUs during the three-year term develops linearly with the Swiss Life Holding share price and thus symmetrically corresponds with shareholder interests. Altogether 51 members participated in the 2015 equity compensation plan, in which a total of 51 660 RSUs were allocated; 13 288 in total to the Corporate Executive Board, of which 3644 to Patrick Frost in his capacity as Group CEO since 1 July 2014. 51 members of Swiss Life Group senior management participated in the 2016 equity compensation plan, in which a total of 51 270 RSUs were allocated; 14 586 in total to the Corporate Executive Board, of which 3478 to Patrick Frost, in his capacity as Group CEO. A total of 58 members of Swiss Life Group senior management participated in the 2017 equity compensation plan with effect from 1 March 2017. A total of 43 768 RSUs were allocated: 12 177 in total to the members of the Corporate Executive Board, of which 3017 RSUs to Patrick Frost as Group CEO. 57 members of Swiss Life Group senior management participated in the 2018 equity compensation plan, in which a total of 42 950 RSUs were allocated; 11 454 in total for the Corporate Executive Board, of which 2828 to Patrick Frost as Group CEO.
With regard to the 2015 equity compensation plan, the Board of Directors has set the following performance criteria on the basis of the medium-term planning 2015–2017: IFRS profit (50% weighting), the risk and fee result (25% weighting) and Cash to Swiss Life Holding for further strengthening of the financial substance and payout capacity (25% weighting). The 2016, 2017 and 2018 equity compensation plans are based on the new Group-wide programme “Swiss Life 2018”, which was announced at the Swiss Life Group’s Investors’ Day on 25 November 2015 (see www.swisslife.com/investorsday2015). For the purpose of supporting the achievement of the respective corporate goals for the 2018 RSU plan, performance criteria have been determined by the Board of Directors analogously to the previous year’s objectives (IFRS profit, 50% weighting; risk and fee result, 25% weighting; Cash to Swiss Life Holding, 25% weighting).
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 246 and 248.
The attribution of the long-term variable compensation component (equity compensation plan, RSU plan) is deferred for a period of three years from the date of allocation, as is the case with the deferred compensation in cash. Likewise, the RSU plans provide for adjustment and reclaiming mechanisms (clawback). These apply in the case of a negative impact of the key figures applying to the allocation of deferred compensation due to a retroactive correction to a restatement of the annual accounts and in the case of damage to Swiss Life as a result of a violation of statutory, regulatory or compliance standards. If the employment relationship is terminated by a participant during the three-year term of the RSU plan, the future entitlements expire worthless.
For the period from the 2016 ordinary General Meeting to the 2017 ordinary General Meeting, the General Meeting of 25 April 2016 approved a maximum total amount of fixed compensation for the members of the Board of Directors in the amount of CHF 3 440 000 in total. Effectively the fixed compensation for the Board of Directors during the period in question (2016 General Meeting to 2017 General Meeting) came to CHF 3 131 414 in total.
At the General Meeting of 24 April 2018, the Board of Directors will submit for approval to the shareholders the maximum amount of fixed compensation for the Board of Directors for the new term from the 2018 ordinary General Meeting until the 2019 ordinary General Meeting.
Rolf Dörig, Chairman of the Board of Directors 840 000 1 407 360 240 1 200 240 110 229 – 1 310 469 1 The allocation of shares was effected on 17.06.2016 and 16.12.2016 at the stock exchange closing price of CHF 229.60 and CHF 289.30 respectively. Taking into account the blocking period of three years, the economic value, which is equal to the tax value, is CHF 192.7768 and CHF 242.9021 respectively.
2 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 178 355 in the year under review.
The long-term variable compensation component in the form of the equity compensation plan (RSU plan 2018) is also reported in the compensation table for the 2017 financial year, which serves as the basis for the amount of the allocation and the corresponding number of allocated RSUs (accrual method).
Other members of Corporate Executive Board 1,2 6 059 294 2 713 750 129 375 8 902 419 0 0 8 902 419 1 7 individuals were taken into account in the period under review. For Ivo Furrer, CEO Switzerland until 31.03.2017, the compensation both during his membership of the Corporate Executive Board as well as until the termination of his employment relationship on 30.06.2017, is taken into account.
4 Child allowances (CHF 13 200), company cars (CHF 5018), premium contributions to 3rd pillar pension plans (CHF 100 066), other (CHF 40 653) in total amounts.
Other members of Corporate Executive Board 1 447 235 0 10 349 654 5 Pursuant to the pension fund regulations, occupational provisions were financed by the employer and the employee at a ratio of 70% to 30%.
9 For the 2018 RSU plan beginning 01.03.2018 the 2017 financial year forms the basis for the amount of the allocation and the corresponding number of allocated RSUs. The allocation of RSUs on 01.03.2018 was effected at a fair value of CHF 300.66, as calculated by an independent consultancy firm. The amount listed for the participation of the other members of the Corporate Executive Board in the 2018 RSU plan also includes the value of an allocation of 1367 RSUs under the 2017 RSU plan at the fair value of CHF 281.80 as compensation for foregone equity-based compensation from the previous employer.
Shareholdings as well as future subscription rights to Swiss Life Holding shares as at 31 December 2016 are shown in the Notes to the Swiss Life Holding Financial Statements on page 299.
Total sign-on payments made in the financial year 4 785 685
Opinion In our opinion, the remuneration report of Swiss Life Holding AG for the year ended 31 December 2017 complies with Swiss law and articles 14–16 of the Ordinance.
Under the terms of the Articles of Association, a shareholder may be represented by a legal representative, or, if a written power of attorney exists, by another shareholder entitled to vote or by the independent voting representative.
Additional fees in the region of CHF 0.9 million were also paid to PwC in 2017 (prior year CHF 1.4 million), approximately CHF 0.4 million of which was for the audit of the Market Consistent Embedded Value (MCEV) report 2016. The remainder consists of fees for fiscal and other advisory services. All services were performed in compliance with the relevant independency regulations set out in the Swiss Code of Obligations, the Audit Supervision Act and FINMA circular 2013/3, “Auditing”.
Key facts and figures about the Swiss Life Group and info kits on previous years’ reports are available on the internet at www.swisslife.com, “Investors & Shareholders” area, “Results & Reports” section (www.swisslife.com/results). Details on events relevant to shareholders, analysts and the media (General Meetings of Shareholders, media conferences etc.) can be found at www.swisslife.com, “Investors & Shareholders” area, “Financial Calendar & Roadshows” section (www.swisslife.com/financialcalendar).
On 29 November 2018, furthermore, Swiss Life will present its targets for 2021 as part of its Investor’s Day.
The key risk management elements are presented and discussed below. Additional comments on the risk management principles and procedures plus the risk budgeting process, asset liability management and the management of insurance risks (including mortality, disability and longevity) are included in Annex 5 of the consolidated financial statements.
Swiss Life uses a structured process to ensure that strategic risks are dealt with adequately in what continues to be a very challenging economic environment. Swiss Life incorporates all the information on risks and corresponding earnings opportunities in its strategic decisions as part of its strategic risk management process. An understanding of the interplay of individual risks is essential in order to take due account of the factors influencing risks during strategy development and address them accordingly.
Operational risk management at Swiss Life includes the methods and processes used for the identification, assessment, and steering or avoidance of operational risks. Operational risk management defines operational risk as the danger that losses may result from shortcomings or failures stemming from internal processes, people, systems or external events. Information security, and thus the guarantee of confidentiality, availability and integrity of data, is an integral part of operational risk management. Swiss Life’s internal control system consists of the entirety of procedures, methods and measures prescribed by the Board of Directors and the Corporate Executive Board to ensure the orderly conduct of business. The focus is on the reliability of financial reporting, the effectiveness of business processes and compliance with laws and regulations issued to protect the company’s assets.
Swiss Solvency Test The Swiss Solvency Test (SST) sets out the capital requirements valid for insurance companies and groups in Switzerland. The SST is a principle-based framework where the main objective is to align the required capital with the underlying risks. The SST 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 conditionally approved by FINMA, Swiss Life meets the capital requirements.
Monitoring of solvency under the SST is conducted continuously; calibration is effected based on the full SST calculations as at the beginning of each calendar year and as at mid-year.
Economic assessment Swiss Life uses an integrated approach to risk and capital management. The economic capital of a life insurance company for its shareholders comprises equity and the present value of future profits. The economic risk capital is determined bottom-up for each large business unit and takes into account market, credit and insurance risks. These risks are calculated on the basis of loss distributions using a specified risk measure. The overall capital requirement is obtained by taking into consideration respective diversification effects.
Swiss Life has established a target capital level in line with its rating ambition. Within the capital analysis, in addition to assessing capital adequacy, Standard & Poor’s assesses the quality of capital with respect to its structure (including the share of equity and hybrid capital). Capital adequacy is monitored on an ongoing basis according to the Standard & Poor’s model.
In 2017 we continued down the road of corporate responsibility. Following the major innovations of the last two years – the orientation to the GRI in 2015 and the integration of additional content in 2016 – the steps taken in 2017 were equally important, even if they attracted less coverage. A cross-divisional project group worked on the subject of “ecology and sustainability”, and laid the groundwork for including it in our CR framework. Our goal is to identify potential in the areas of investment, real estate and operational ecology and to translate that potential into specific measures where possible. As a result, we have enhanced our core team, which advances corporate responsibility themes operationally, with representatives of the asset management division.
We believe taking corporate responsibility also means subjecting our own actions to continuous critical scrutiny. In addition to reporting to external stakeholder groups, we also give our employees a chance to participate and let us know whether they are motivated by the work environment we have created. In everything we do, after all, we rely on the skill and engagement of our staff. In the year under review – as we do every two years – we carried out a Group-wide Employee Survey. The results are pleasing, with 86% of our employees assessing themselves as engaged and a full 44% as very engaged. This is well above the average for the European financial industry and tells us that we must be doing something right in our role as a responsible employer.
We create attractive working conditions, we support our employees with further training, talent and management programmes and offer varied development prospects in a traditional Swiss company.
Our values –What we stand for Support individuality – the way we think
Our mission We help our customers lead a longer self-determined life with confidence.
Swiss Life takes its corporate responsibility seriously, whether in its business operations, role as an employer, as a part of society or with respect to the environment.
Do you have any questions or suggestions concerning corporate responsibility at Swiss Life? Write to us at corporate.responsibility@swisslife.ch
In the Swiss domestic market, corporate responsibility – under the umbrella of the Group-wide guiding theme “a longer self-determined life” – comprises the areas of social engagement, “actively shaping your career” and ecology and sustainability. The Corporate Responsibility Report addresses all these areas.
2 The report comprises Swiss Life’s main locations in Switzerland, France and Germany and refers to all company entities are within the scope of consolidation (Annual Report 2017, pages 279–282; G4–17)
Risk management and compliance Business conduct in compliance with the law is a given for Swiss Life. Swiss Life accompanies its customers over many years. Responsible risk management is thus indispensable.
Investment strategy Swiss Life’s investment strategy is designed on a sustainable and long-term basis and harmonised with insurance liabilities. The company’s investment policy is oriented towards long-term and stable returns. Swiss Life represents its clients’ interests as an asset manager. The company is aware of its responsibility as demonstrated by its actions in investment allocation and the exercise of its voting rights according to clearly defined criteria.
Sustainable procurement Swiss Life ensures that its procurement is in full compliance with the law. When selecting suppliers and partners, Swiss Life bases its decisions on ethical and ecological principles and works with local suppliers whenever possible.
Responsibility in society Political commitment Swiss Life’s operational environment is heavily influenced by political and regulatory decisions. Swiss Life cultivates contact with representatives from the political and business communities as well as supervisory authorities and is committed inter alia to a major reduction in the excessive capital requirements placed on Swiss insurance companies. Swiss Life closely coordinates its political work and communication with trade and umbrella associations. Moreover, there are Swiss Life company executives who are members of various national business associations.
Economic responsibility As a corporation, Swiss Life takes social and economic responsibility by supporting its customers in leading a longer self-determined life with confidence. As a long-term investor, Swiss Life contributes to the stability of the financial centre and, as a leading institutional property investor in Europe and owner of the biggest private property portfolio in Switzerland, Swiss Life is also a key principal on the Swiss construction scene. Swiss Life is also mindful of its social responsibility as an employer and creates training opportunities for young professionals.
Demographic change The consequences of demographic change affect people in many ways. Swiss Life wants to offer its customers solutions that will allow them to lead a self-determined life in all phases of their lives. In addition, Swiss Life contributes to the public debate on longevity and securing retirement provisions and provides its employees with a working environment suitable for any stage of life, thus giving them the option to work for longer.
Equal treatment and non-discrimination Equality of treatment and non-discrimination are part of Swiss Life’s corporate culture.
Diversity and equal opportunities Diversity and equal opportunities are important to Swiss Life, abilities, skills and potential are promoted equally among employees of all ages.
See also “The Longer Self-Determined Life” (page 88), the “WellBeing section” in “Responsibility for Employees” (pages 115–117) and “Health and Security” (pages 118–119).
Swiss Life supports its employees in the maintenance of their employability and promotes their ongoing developments. This includes continuous internal and external education for employees of all ages, training for apprentices and trainees and entry-level opportunities for university graduates.
And with “Stage 50+” Swiss Life joins selected organisations in Switzerland in working towards increased labour-market integration and the promotion of qualified applicants in the midst of their career.
See also “CEO Foreword” (page 76), “Social Engagement” (pages 105–106) and “Responsibility for Employees” (pages 108–114).
Swiss Life is among the investors in several facilities for the generation of renewable energy. These facilities are widely distributed across the world. For instance, Swiss Life owns solar power plants in Italy, Spain, Canada, Chile and Japan (c. 100 MWh) and wind power stations in the UK and US (c. 235 MWh), allowing the company to contribute to supplying around 100 000 households with renewable electricity.
Developing a resilient infrastructure, promoting sustainable industrialisation with broad-scale effect and supporting innovation
As an investor, Swiss Life strategically supports infrastructure projects. Thus for instance in London Swiss Life is participating in the financing of the Thames Tideway Tunnel project, which is intended to drastically reduce the amount of waste water flowing into the city’s river.
As a pensions and financial services provider, Swiss Life enables people to achieve financial security. Swiss Life helps its customers to identify potential risks and income gaps at an early stage and to make provisions for them, so they can enjoy a longer life through self-determination and financial independence. Moreover, Swiss Life is a strong advocate of financial literacy. Someone who understands the intricacies of finance, after all, is better placed to make the right decisions when providing for a longer life.
The Swiss Life Group operates a digital knowledge platform on www.swisslife.com/hub/en, with a differentiated and varied approach to such issues as longevity, demographic change and self-determination.
A key evaluation criterion in customer satisfaction surveys is now the Net Promoter Score (NPS), which indicates a customer’s willingness to recommend a provider to family and friends. Swiss Life Switzerland has carried out an analysis to demonstrate the importance of willingness to recommend as an indicator, with some 53% of customers surveyed explaining that they had learned about Swiss Life by word of mouth from family and friends. The development of the NPS is the subject of regular reporting and is included in the performance review of employees with customer contact.
In Switzerland, too, the NPS at the Service Center contact point has seen a significant increase. Feedback is evaluated daily and shared with employees. The fact that the performance assessment comes directly from the customer has raised awareness among employees of their own service and given them additional motivation to improve in those areas subject to criticism.
All of the national companies have launched initiatives to promote innovation, with employees invited to take part in the development of new processes. They constitute a major source of ideas, are familiar with the organisation and its processes from their everyday work and can see where improvement might be needed.
In Switzerland, design thinking is important when it comes to anchoring a client-centric methodology in an organisation. In 2017, methods derived from the design-thinking approach were used for a strategic initiative – addressing the 65+ age group – beginning with an intensive evaluation of the target group. This in turn led to the development of ideas for offerings, which were then tested directly with potential customers. The development process for new products and services can thus be designed with great efficiency, leading to new business opportunities for Swiss Life.
The company offers private and corporate clients comprehensive and individual advice plus a broad range of proprietary and partner products through its own agents, financial advisors and distribution partners. Swiss Life Select, the subsidiary specialising in financial planning for private households and brokering financial products, as well as the advisers of Tecis, Horbach, Proventus and Chase de Vere, use the Best Select approach to let their customers choose the product from the market that suits them best. This provides customers with access to the product range of the best providers in the market. In Germany, Swiss Life has developed a product for people who cannot afford conventional occupational disability insurance that allows them to insure their labour at favourable rates. Swiss Life thus does its part to help those living on lower incomes optimise their provisions and close gaps in coverage.
Identifying and reporting misconduct, notification of investigations or proceedings and implementing the Code of Conduct
Swiss Life’s operations are oriented towards the long term. We must be able to keep promises we make to our customers for decades. That is why long-term investing plays a central role in the life insurance business. Swiss Life has crafted its investment strategy to ensure that the interest margin remains positive even when interest rates stay low for more than three decades. What is more, Swiss Life has not ceased developing its business model over recent years, and has reduced its dependency on investment results by expanding its fee business. With its successful enhancement of asset management for third parties, owned IFA channels and new initiatives, such as consulting or real estate broker business, Swiss Life has significantly increased the contribution made to its result by so-called fee business. In addition to the focus on profitability, capital efficiency remains a relevant control parameter in new business.
Assets under management1 – breakdown by asset class 5 Mortgages 6 Alternative investments 1 Total assets under management for insurance business and third-party clients
Swiss Life’s investment strategy is designed on a sustainable and long-term basis and harmonised with insurance liabilities. The goal of the investment policy is to create long-term and stable returns for both customers and the company. Assets are diversified as a rule, which means they are spread among several different asset classes. Due to the long-term nature of its liabilities, Swiss Life invests predominantly in fixed-income securities, such as government and corporate bonds, in real estate and in equity and infrastructure investments. Swiss Life bases its investment decisions on an established and multi-level investment process combined with holistic and value-oriented risk management.
Swiss Life also takes further criteria for sustainable investing into account per asset class, in addition to the regulatory requirements of the supervisory authorities in the various countries where the company is present. A company’s reputation and its concomitant entrepreneurial conduct also play a role in the selection process for investments, since behaviour damaging to a given company’s reputation can lead to a lower valuation.
In third-party business, Swiss Life responds to individual customer wishes, including with sustainable investing. Swiss Life in France, for example, is committed to ecological, social and governance criteria (ESG) with reference to special securities products. For certain customer groups in the United Kingdom, real estate funds are structured in conformity with the investment guidelines for sustainability. These investment guidelines are comparable with the United Nations Principles for Responsible Investment (UNPRI).
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 the potential of its properties is of central importance to Swiss Life’s investment activities on behalf of its policyholders and customers. Decisions are thus unaffected by short-term return considerations, but rather oriented to the long-term property life cycle. The sustainability strategy, an integral part of the real estate strategy for Switzerland, is dedicated to the strategic goal of ensuring the sustainable development of the real estate portfolio. Measures and methodologies of social or ecological value are weighed up against potential economic costs and pursued where feasible. A materiality analysis developed in Switzerland to identify the essential sustainability aspects of real estate management has determined that 18 aspects of 12 themes – from the domains of society, the economy and the environment – are of material importance. The themes of location, building structure and expansion, operation and maintenance, and energy use for heating and cooling were accorded very high material importance.
A similar project is planned in Geneva, where a residential and commercial development with some 1500 apartments and around 30 000 m2 of offi ce and commercial space is to go up on the centrally located “Caserne des Vernets” development area beginning in 2019. Three hundred apartments are reserved for students. The development is also guided by the stipulations of the 2000-watt society. In addition, the residential property confi rms to the Minergie® Eco standard. Together with seven investors and a development team, Swiss Life won the canton of Geneva’s investor competition. The project unites private investors, housing cooperatives and the public sector. Swiss Life will build a high-rise with 239 apartments and another off ering offi ce and commercial options (24 500 m2 rental space).
The potential for increasing inner-city density is subject to ongoing analysis and scouting to ensure that it is pursued in the most suitable locations. In Chêne-Bougeries in the Canton of Geneva, for instance, where an existing development had two storeys added, with a concomitant addition of residential space, Swiss Life has been able to successfully implement such increased density. Projects like these allow Swiss Life to successfully fulfi l its promise to make an active contribution to sustainable urban development and maintain Switzerland’s high quality of life over the long term.
Increased density thanks to added storeys in the canton of Geneva
All risks in the real estate area are continuously monitored at the property level and subject to detailed oversight using cutting-edge analytical and benchmarking methods. The focus of this scrutiny is on property and market risks as well as the early detection of structural and socio-economic changes.
Swiss Life mainly uses the following external services for its real estate operations: – Architecture and expert planning services (e.g. general contractors, architects, construction physicists and engineers etc.)
Swiss Life promotes projects and institutions in the fields of culture, science, education and the environment and research that promote self-determination and confidence. Swiss Life also observes its sociopolitical responsibility through active exchange with politicians and associations.
As an insurance company, Swiss Life plays an important role in a healthy economy: Swiss Life covers risks and, with its products and services, offers people the chance to focus on their strengths and skills and look to the future with confidence. But Swiss Life’s economic contribution is much more than that. As a long-term investor, Swiss Life contributes to the stability of the financial centre. As one of Europe’s leading institutional real estate investors and owner of Switzerland’s largest private real estate portfolio, Swiss Life invests several hundred million francs every year in the renewal of its properties, and is thus also a key principal on the Swiss construction scene. By investing in its properties and with its active property management approach, Swiss Life shapes the urban character of Switzerland, creates residential and office space and makes the country an attractive place to live. As a tax payer, Swiss Life contributes to the economy and offers many people jobs and training opportunities.
Public Affairs is responsible for monitoring matters of political significance, guiding and coordinating Swiss Life’s positions on such matters both internally and externally, and strategically developing and expanding a network among the involved parties. The Political Communications Steering Committee is the relevant strategic body. Its members are the Group CEO and the Group CFO, the CEOs of divisions headquartered in Switzerland, General Counsel, the Chief Risk Officer and the head of Group Communications. The Head of Public Relations is also an active participant in the meetings. The Steering Committee, chaired by the Group CEO, meets four times a year and defines its political communication priorities.
Swiss Life fosters contacts with representatives from the political, administrative and business communities as well as supervisory authorities. In its direct exchanges with political groups, Swiss Life aims to better understand their opinions, expectations and perceptions while at the same time gauging how the enactment or amendment of legal principles could affect its business. 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 around CHF 500 000. No (significant) support was provided to parties or politicians in the other markets.
Swiss Life France is a member of the French Insurance Federation, the largest trade association in France. The company is represented through a number of employees who actively participate in the committees for different insurance-related themes.
In addition, in 2017 Swiss Life expanded its Public Affairs area within the Asset Managers division. One focus of this body is Swiss real estate policy.
The “Perspectives” Foundation, founded in 2005, plays a leading role in the Swiss domestic market. The foundation supports charitable initiatives in the fields of health, science, education, culture and sport and spends CHF 1.3 to 1.5 million every year on sociable-charitable projects in Switzerland. In the year under review, 137 projects were supported with around CHF 1.4 million. There is a film on the engagements of the “Perspectives” Foundation: www.swisslife.com/perspectivesfilm
In France, philanthropic engagements are managed mainly through the Fondation Swiss Life, founded in 2009, which collaborates with charitable healthcare facilities such as the Institut Curie or the Association France Alzheimer. Through its partnership with the Institut Curie, Swiss Life finances immunotherapy research, a promising, effective and less painful treatment for cancer patients. Swiss Life supports the Association France Alzheimer in its campaign to improve the quality of life for Alzheimer’s sufferers, by means of art therapy, workshops, museum visits and concerts. Swiss Life employees and business partners are also involved in these engagements, aided in their efforts by the Foundation’s “Aider à Aider” programme.
The Swiss Life Stiftung für Chancenreichtum und Zukunft helps disadvantaged young people integrate into the education and employment market
Corpus Sireo, a German subsidiary of Swiss Life Asset Managers, supports the charitable “Cornelius Stiftung für Kinder suchtkranker Eltern” (Foundation for children of parents suffering from addiction).
In France, the Fondation Swiss Life supports a cultural initiative through its award “Prix Swiss Life à 4 mains” for up-and-coming talent in photography and music. Swiss Life France is also a partner, through its foundation, of “Rencontres capitales: redonner du sens au progrès” (podium discussions on the meaning of progress), a public dialogue on trend-setting topics featuring experts from politics, research, technology and art.
Together with the distribution companies Swiss Life Select and Proventus, Swiss Life Germany supports mass sports for regional amateur clubs. The company is also a regular supporter of sporting occasions, such as the football benefit event “Münchner Legendenspiel”, the proceeds of which go to charitable organisations.
You can find further information on our charitable engagement and sponsoring activities under: www.swisslife.com/society
Swiss Life’s leadership priorities: – We act as if Swiss Life were our own business – We communicate openly and clearly – We trust, motivate, empower and support people – We develop efficient teams across the company – We deliver results on time – We accept accountability – follow through and act consequently
Group-wide standard processes are used to provide optimal support to managers and employees.
Swiss Life’s leadership processes: – Performance reviews with all employees – Performance assessments with all employees (setting of objectives and subsequent performance assessment) – Professional development interviews and measures – Decisions on salaries and promotions – Strategy and value-oriented behaviour – as per the Group-wide competency model – Assessment and management of employee risks
1 Financial industry in Europe 2 Swiss Life 2015 3 Swiss Life 2017
At 86% (+1% over 2015), Swiss Life Group employee engagement is above average, as the results of the 2017 survey demonstrate. The value is 14 percentage points over the “Financial industry in Europe” external benchmark.
Eighty-nine percent of employees (+1% over 2015) support their unit’s strategy and direction, a value 18 percentage points above that of the external benchmark.
Eighty-eight percent (+2% over 2015) of employees confirm that their direct line manager communicates candidly and honestly, which is 14 percentage points above the external benchmark.
Despite excellent results, managers are discussing their team’s numbers with their colleagues and implementing strategic measures where called for.
Swiss Life continuously invests in the internal and external training and development of its employees. True to the principle of lifelong learning, employees, specialists and managers are offered a range of learning opportunities on specialist topics enhanced by modules on social and methodological skills.
Expenses for training and development within the Group in 2017 amounted to CHF 28.6 million, or some CHF 2082 per employee. As a proportion of staff costs, the outlay for training and development is 2.3%. The investment is earmarked for a varied, needs-based training offering.
Supplementary to the classic training options, learning content is also offered on a digital platform to allow management and employees to add to their training efficiently without regard to time or place. The platform permits quick access to standardised management processes, skills-oriented training and other topics associated with social and methodological skills. Swiss Life enhances these offerings with customised training, advising and coaching.
Alumni of the Key Persons Programme meet the participants every year at the “Shaping the Future Day”, where there is in-depth analysis of the Swiss Life Group’s strategic orientation, an update and ensuing discussion on the progress of the Group-wide programme with the Corporate Executive Board.
Mutual respect fosters trust and helps create a comfortable working atmosphere for employees. Personal well-being is also a focus of the Employee Survey, which asks about such issues as diversity and inclusion, work-life balance, mutual respect, workload and workplace atmosphere. Eighty-three percent of employees rate these factors as generally positive (no change from 2015). This value is 11 percentage points over the “Financial industry in Europe” external benchmark¹. Equal opportunities and non-discrimination are observed on a daily basis at Swiss Life. Eightynine percent of employees say they feel highly respected in their team (+3% over 2015). This value is 12 percentage points over the “Financial industry in Europe” external benchmark.
In accordance with valid national and international law, the Swiss Life Group follows fair employment procedures free of discrimination. Recruitment or promotion is based exclusively on ability, competence and potential in view of the requirements of the position in question. Fair and equal compensation for all employees is ensured by the Group-wide Group Compensation Policy. Swiss Life has used instruments for a number of years in all its major national companies to review and ensure equal pay for men and women. In Switzerland, for example, Logib software based on data provided by the Swiss Federal Statistical Office is used to review equal treatment.
The Swiss Life Group aims to ensure and maintain a safe and healthy working environment for all employees. The nature of the work Swiss Life performs as a service provider means that general health and safety risks are relatively low. The framework conditions for health and security at the workplace are provided by the local regulatory measures governing each Swiss Life company. Furthermore, all companies implement measures and initiatives aimed at preserving employee health.
Good working conditions influence employee health. Swiss Life supports this strategically by promoting uniform work structuring, providing a variety of tasks, fostering social interaction, enabling autonomy, room to manoeuvre and learning and development opportunities, ensuring meaningfulness and showing appreciation for its employees and their performance and contributions. The measures to maintain employee health, promote good working conditions and prevent incapacity to work are based on three pillars: – Prevention – Early intervention – Reintegration
All employees of the Swiss Life Group have access to online offerings consisting of texts, short videos, checklists and learning programmes on the topic of “Health and well-being”, which they can use anytime and anywhere they like. The topics on the online platform are divided among three groups: meaningfulness, dealing with stress and dealing with others (line managers, colleagues).
Turnover by segment 1 Switzerland 2 France 3 Germany 4 International 5 Asset Managers 6 Other 7 Total
What is more, Swiss Life maintains local employee representation in numerous countries as legally required.
Switzerland – The agreement concerning “simplified recording of working hours”, which entered into force on 1 April 2016, was formally confirmed at the annual review and will be continued. – In 2017 the staff committee concentrated on providing support for the revision of staff regulations for employees on monthly and hourly pay as well as on collaborating on subprojects of the “Actively shaping your career” initiative.
– As part of the 2018 salary review, the staff committee made a formal application to the Executive Board for a salary increase of 1.5%.
Four agreements for business advisors: – Agreement on status and compensation – Mandatory annual wage negotiations 2018 (NAO) – Agreement on working hours – Agreement on compensation for absence
Germany Swiss Life Germany In 2017, five works agreements were reached between the Executive board and the Works Council on the following topics for which co-determination is mandatory: –Summary of individual regulations concerning a framework agreement on “Rollout, deployment and further development of all currently available technical features (IT systems) or those in use in future”.
– Work agreement on “Team screening”: this involves a comprehensive, modular advisory concept restricted at the moment to one unit.
Number of Works Council members broken down by full time and part time
Germany Swiss Life Germany Works Council Internal Services (responsible for the German branch in Garching as well as SLPM Schweizer Leben PensionsManagement GmbH, Swiss Life Asset Managers and Swiss Life Invest): – Eleven members, two of them with 50% work dispensation for Works Council activities (Works
Works Council Sales Force (responsible for intermediary distribution at branch office): – 7 persons: six without dispensation and one with 50% dispensation (Works Council chair Sales
Central works council (responsible for Internal Services and Sales Force): – Five persons (2 representatives of Works Council Internal Services, 2 representatives of Works
members, one member with 100% work dispensation (Works Council chair), all other members without dispensation
Luxembourg The number of employee representatives and the time required for their work are directly pro portional to the number of employees. In the Global Solutions area in Luxembourg, the current employee representation consists of four ordinary representatives and four deputies. The employee representatives have at their disposal a total of 16 hours a week to perform their mandate.
In its own operations, Swiss Life supports energy-saving measures and the sparing use of resources. Swiss Life has published comprehensive indicators on operational ecology for ten years, thus demonstrating clearly how environmental data have developed from year to year.
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). Since their Group-wide collection is time consuming, the data for the year under review are not published until May of the following year. All data are published on swisslife.com/operationalecology as soon as they have been gathered. Its annual data collection allows Swiss Life to determine where progress has been made, where risks lie and where steps must be taken. The VfU key figures conform to the international Greenhouse Gas Protocol (Scope 1, 2 and 3) standards and the Carbon Disclosure Project (CDP). The data are gathered, evaluated and analysed across the Group. All the major Swiss Life locations have environmental officers and the individual divisions work closely together. Our aim is to consistently reduce our environmental impact and continually improve energy efficiency.
TOTAL ENERGY CONSUMPTION (IN MWH) 54 110 52 280 56 300
Proportion of paper with FSC label (in %) 60 54 39
1 The VfU figures for 2017 come out in May and will be posted at swisslife.com/operationalecology 2 The data-collection processes were refined in 2017; to improve comparability, the 2015 and 2016 values were retroactively surveyed with the new processes and adapted accordingly.
TOTAL ENERGY CONSUMPTION (IN KWH/FTE) 6 720 6 630 7 210
TOTAL GREENHOUSE GAS EMISSIONS (IN KG/FTE) 3 450 3 330 3 530
1 The VfU figures for 2017 come out in May and will be posted at swisslife.com/operationalecology.
The Swiss Life Group was able to markedly reduce its waste production in 2016 once again (–19%). Water and paper consumption was also down (–10%). What is more, the share of paper with FSC label was increased anew (+10%). Greenhouse gas emissions increased over the previous year by 5%, business travel by 4%. This increase of consumption values in 2016 stems from a new and more detailed inventory of vehicular and railway data by one market unit. Building energy consumption rose slightly over the previous year (+3%). The share of fossil fuels in the energy mix was further reduced (–7%).
In Switzerland, Swiss Life is a member of the Zurich Energy Model and has been drawing all its electricity for company buildings from renewable energy sources since October 2006. This has enabled the company to reduce its annual greenhouse gas emissions by over 1300 tonnes. With its energy model, Swiss Life has pledged to improve its energy efficiency at its Zurich location by 1.76% every year until 2020. The head office in Zurich is heated and cooled with water from Lake Zurich. All the sanitary facilities at the Zurich office are equipped with water-saving installations, which allows Swiss Life Switzerland to save some three million litres of water each year. Rainwater has also been one of the water sources used for the sanitary facilities since 1999. All printers and copiers use paper with FSC label from environmentally- and socially-friendly forestry. Employees are instructed to keep their paper consumption to a minimum.
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 efforts to reduce CO2 emissions and save resources. Swiss Life uses green electricity at both branches. In Garching, in addition, Swiss Life moved into a new energy-efficient building some years ago whose heat requirements are covered by district heating from a local geothermal power station.
In France, regular awareness campaigns have been held since 2008 to sensitise employees to the urgent need to reduce their impact on the environment. The energy generation facilities in that country were replaced by more effective installations requiring less energy, and the air conditioning installations were optimised to make them more energy efficient. Swiss Life France will also look more closely at its employees’ travel arrangements, which account for a large proportion of the company’s greenhouse gas emissions. That’s why additional rooms are being organised to host video conferences at different locations. Moreover, charging stations for electronic vehicles were installed in some car parks and employees were sensitised to environmentally -friendly driving.
All the departments forming Swiss Life International work in modern, energy-efficient offices. Optimal workspace occupancy and digitalisation measures help to consistently reduce the company ’s environmental impact. Employees are instructed to keep their paper consumption and generation of waste to a minimum. Furthermore, the number of parking spaces is limited to encourage staff to use public transport, and thus to help reduce CO2 emissions.
Swiss Life Germany is also represented in the Klima-Allianz der Stadt Hannover network and undertakes, in cooperation with other companies, to reduce CO2 emissions and increase energy efficiency in urban areas.
Page number in GENERAL STANDARD DISCLOSURES Annual Report 2017 Reasons for omission STRATEGY AND ANALYSIS
G4-2 Sustainability driven risks, opportunities and impacts p. 76–77, p. 98–100 ORGANISATIONAL PROFILE
G4-7 Nature of ownership and legal form p. 25, p. 306
G4-13 Significant changes during the reporting period p. 4–7, p. 279–282
G4-20 Material aspects and report boundaries within the organisation p. 82
G4-21 Material aspects and report boundaries outisde the organisation p. 82
G4-22 Corporate changes compared to the previous year No significant changes
G4-27 Key topics and concerns raised by stakeholders p. 80 REPORT PROFILE
G4-29 Date of last report CR Report 2016, published in March 2017
G4-31 Contact point for questions regarding the report Media Relations, p. 308
G4-LA6 Injuries, occupational diseases, lost days and work-related fatalities p. 119 Other key figures being established
G4-LA11 Employee performance and career development reviews p. 108–109 Diversity and Equal Opportunity p. 115–116
G4-LA13 Basic salary ratio of women to men p. 116 Grievance Mechanisms p. 116
G4-SO8 Monetary value of significant fines p. 95 PRODUCT RESPONSIBILITY Customer Health and Safety p. 89–91
G4-PR1 Product and service categories tested for safety and health implications p. 92–93
FS10 Portfolio-based commitment to social and environmental issues p. 86–87, p. 97
Total energy consumption (in 1000 MWh) 1 54.11 52.28 56.30 AR, p. 123
Electricity used (in 1000 MWh) 1 37.84 35.16 36.40 AR, p. 123
Renewable energy used (in MWh) 1 15.00 15.63 14.29 AR, p. 123
Climate change listed as a business risk factor yes yes yes yes AR, p. 82, p. 98–100, p. 123–125
Emissions reduction initiatives yes yes yes yes AR, p. 82, p. 86–87, p. 98–100, p. 123–125
Environmental supply chain management policy yes yes yes yes AR, p. 101–102
Climate change opportunities discussed yes yes yes yes AR, p. 82, p. 98–100, p. 123–125
1 The environmental data for 2017 come out in May and will be posted at swisslife.com/operationalecology.
Workforce absences per segment yes yes yes n/a AR, p. 119
Total number of employees 8457 7801 7595 7492 AR, p. 109
Total number of part-time employees 1380 1285 n/a n/a AR, p. 115
Company monitors employee satisfaction yes yes yes yes AR, p. 111–112 on a regular basis
Costs spent for training per employee (in CHF) 2082 2034 1749 n/a AR, p. 113
Formal talent pipeline development strategy yes yes yes yes AR, p. 114 (forecasts hiring needs, actively develops new pools of talent)
Sustainable supplier guidelines encompassing yes yes yes no AR, p. 101–102 ESG areas that are publicly disclosed
Total Group-wide spending on foundations in 1.8 AR, p. 105 Switzerland, France and Germany (in CHF million)
Board oversight of anti-corruption / ethics yes yes yes yes AR, p. 31 and Swiss Life Holding Ltd, Articles of Association, Article 11
Obesity and emerging health issues listed yes yes yes yes AR, Notes of the Consolidated Financial Statements, as a business risk factor Note 5 “Risk management policies and procedures” and Note 5.5 “Insurance risk management objectives
Prevents unauthorised access to personal data yes yes yes yes AR, p. 72–74
Former CEO or equivalent on Board yes yes yes yes AR, p. 32
Number of women on Board 2 2 2 2 AR, p. 117
Stated commitment to Board diversity yes yes yes yes AR, p. 32–37
Deviation from one share one vote yes yes yes yes AR, p. 28, p. 67
Net gains/losses on financial instruments at fair value through profit or loss 5, 8 –1 181 –420
Share of profit or loss of associates 5, 15 3 9
Financial assets pledged as collateral 12, 33 3 601 2 942 2 109
Intangible assets including intangible insurance assets 17 2 931 2 717 2 840
Investment and unit-linked contracts 19 41 756 36 920 36 730
Benefits and claims paid, net of reinsurance –13 413 –13 157
Acquisitions of subsidiaries, net of cash and cash equivalents 28 –16 –17
Disposals of subsidiaries, net of cash and cash equivalents 28 101 –
Cash and cash equivalents as at 1 January 7 333 5 296
CASH AND CASH EQUIVALENTS AS AT END OF PERIOD 6 611 7 333
Cash and cash equivalents for the account and risk of the Swiss Life Group’s customers 2 829 2 489
Distribution out of capital contribution reserve 1 – –356 – – – –356 – –356
Reduction in capital – – – – – – –2 –2
Consolidated statement of changes in equity for the year ended 31 December 2016
Distribution out of capital contribution reserve – –271 – – – –271 – –271
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.
The consolidated financial statements of Swiss Life have been prepared in accordance and comply with International Financial Reporting Standards (IFRS). The consolidated financial statements have been prepared on a historical cost basis, except for the following assets and liabilities, which are stated at their fair value: derivatives, financial assets and liabilities at fair value through profit or loss, financial assets classified as available for sale and investment property.
2.3 Reclassifications in the consolidated statement of income and consolidated balance sheet
Costs of CHF 77 million relating to inventory property was reclassified from other income to other expenses in order to achieve gross presentation. Interest expense from mortgage loans of CHF 2 million was reclassified from borrowing costs to interest expense in order to improve consistency in the presentation of financing activities. The consolidated statement of income for 2016 was adjusted for both effects.
As at 1 January 2016, mortgage loans of CHF 278 million (31.12.2016: CHF 103 million) were reclassified from borrowings to other financial liabilities in order to improve consistency in the presentation of financing activities. The consolidated balance sheets as at 1 January and 31 December 2016 were adjusted accordingly.
The Swiss Life Group acts as a fund manager for various investment funds. In order to determine if the Group controls an investment fund, aggregate economic interest (including performance fees, if any) is taken into account. Third-party rights to remove the fund manager without cause (kick-out rights) are also taken into account.
The Group has elected to measure certain associates held by venture capital entities and investment -linked insurance funds at fair value through profit or loss, as permitted by IAS 28 Investments in Associates and Joint Ventures. Changes in the fair value of such investments are included in net gains /losses on financial instruments at fair value through profit or loss.
Swiss Life – Annual Report 2017 2.5 Foreign currency translation and transactions
The Group enters into forward contracts, futures, forward rate agreements, currency and interest rate swaps, options and other derivative financial instruments for hedging risk exposures or for trading purposes. The notional amounts or contract volumes of derivatives, which are used to express the volume of instruments outstanding and to provide a basis for comparison with other financial instruments, do not, except for certain foreign exchange contracts, represent the amounts that are effecti vely exchanged by the parties and, therefore, do not measure the Group’s exposure to credit risk. The amounts exchanged are calculated on the basis of the notional amounts or contract volumes and other terms of the derivatives that relate to interest or exchange rates, securities prices and the volatility of these rates and prices.
“Regular way” purchases and sales of financial assets are recorded on the trade date. The amortisation of premiums and discounts is computed using the effective interest method and is recognised in profit or loss as an adjustment of yield. Dividends are recorded as investment income on the ex-dividend date. Interest income is recognised on an accrual basis.
Financial assets available for sale (AFS) Financial assets classified as available for sale are carried at fair value. Financial assets are classified as available for sale if they do not qualify as held to maturity, 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
Swiss Life – Annual Report 2017 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 carried at fair value (available for sale) At each balance sheet date, an assessment is made whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of an equity instrument classi fied as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered objective evidence of impairment. In this respect, a decline of 30 % or more is regarded as significant, and a period of 12 months or longer is considered to be prolonged. In such a situation, the impairment loss – measured as the difference between the acquisition cost and the current fair value – is removed from other comprehensive income and recognised in profit or loss. After recognition of an impairment loss, any further declines in fair value are recognised in profit or loss, and subsequent increases in fair value are recognised in other comprehensive income.
IFRS 4 Insurance Contracts is silent on the measurement of the amounts identified as DPF. This topic will be addressed in IFRS 17 Insurance Contracts, effective from 1 January 2021. Cash flows to policyholders that vary depending on returns on underlying items are included in the measurement of insurance liabilities. If these cash flows are substantial, a modification of the general measurement model in IFRS 17 Insurance Contracts applies (“variable fee approach” for direct participating contracts).
The accounting for the amounts identified as DPF has been done as follows: In jurisdictions where no statutory minimum distribution ratio (“legal quote”) exists, the contrac tual right to receive, as a supplement to guaranteed benefits, additional benefits which are likely to be a significant portion of the total contractual benefits arises when management ratifies the allocation of policyholder bonuses. When ratified by management, a corresponding liability is set up. To the extent discretion with regard to amount and/or timing is involved, these amounts are included within policyholder participation liabilities. In that respect the policyholder bonus reserve set up in the statutory accounts for these contracts is regarded as discretionary. For these contracts the entire DPF is classified as a liability.
Reinsurance The Group assumes and/or cedes insurance in the normal course of business. Reinsurance assets principally include receivables due from both insurance and reinsurance companies for ceded insurance liabilities. Amounts recoverable or due under reinsurance contracts are recognised in a manner consistent with the reinsured risks and in accordance with the terms of the reinsurance contract. Reinsurance is presented in the consolidated balance sheet and income statement on a gross basis unless a right and the intention to offset exist.
If a reinsurance asset is impaired, the impairment loss is recognised in profit or loss and the carrying amount is reduced accordingly.
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.
Assets associated with separate account/unit-linked contracts and private placement life insurance are included in financial assets designated as at fair value through profit or loss, derivatives and cash and cash equivalents. The related income and gains or losses are included in the income statement under the respective line items. The Group has allocated on a rational basis the
Swiss Life – Annual Report 2017 proportion of acquisition costs related to the insurance and deposit components. The accounting policy for deferred acquisition costs applies to the portion of acquisition costs associated with the insurance component, and the policy for deferred origination costs applies to the other portion (see 2.17 Intangible assets).
Subsequent costs are included in the asset’s carrying amount or are recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to the income statement during the financial period in which they are incurred. Borrowing costs directly attributable to the construction or acquisition of a qualifying asset are capitalised as part of the cost of that asset. Realised gains and losses on disposals are determined by comparing proceeds with the carrying amount and are included in profit or loss.
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use.
Inventory property comprises land and buildings that are intended for sale in the ordinary course of business or in the process of construction or development for such a sale, primarily property acquired with a view to subsequent disposal in the near future or for development and resale. Such property is included in other assets.
Deferred acquisition costs for other traditional life insurance contracts and annuities with life contingencies are amortised in proportion to the expected premiums.
Goodwill represents the excess of the fair value of the consideration transferred and the amount of any non-controlling interest recognised, if applicable, over the fair value of the assets and liabilities recognised at the date of acquisition. The Group has the option for each business combination in which control is achieved without buying all of the equity of the acquiree to recognise 100 % of the goodwill in business combinations, not just the acquirer’s portion of the goodwill (“full goodwill method”). Goodwill on acquisitions of subsidiaries is included in intangible assets. Acquisition-related costs are expensed. Goodwill on associates is included in the carrying amount of the investment.
Swiss Life – Annual Report 2017 2.23 Provisions and contingent liabilities
In February 2018, the International Accounting Standards Board issued amendments to IAS 19 Employee Benefits. The amendments require a company to use updated assumptions from the remeasurement of the defined benefit asset/liability due to an amendment, curtailment or settlement of a plan. The updated assumptions are used to determine current service cost and net interest for the remainder of the reporting period after the change to the plan. The amendments are effective on 1 January 2019. The Swiss Life Group is currently not affected by the amendments.
In October 2017, the International Accounting Standards Board issued Prepayment Features with Negative Compensation (amendments to IFRS 9 Financial Instruments) to address the concerns about how IFRS 9 Financial Instruments classifies particular prepayable financial assets. Prepayment Features with Negative Compensation amends the existing requirements in IFRS 9 Financial Instruments regarding termination rights in order to allow measurement at amortised cost (or, depending on the business model, at fair value through other comprehensive income) even in the case of negative compensation payments. Under the amendments, the sign of the prepayment amount is not relevant, i.e. depending on the interest rate prevailing at the time of termination, a payment may also be made in favour of the contracting party effecting the early repayment. In addition, an aspect of the accounting for financial liabilities following a modification was clarified (in the Basis for Conclusions). An entity recognises any adjustment to the amortised cost of the financial liability arising from a modification or exchange in profit or loss at the date of the modification or exchange. The amendments will be effective for annual periods beginning on or after 1 January 2019. However, as set out below, the Swiss Life Group will defer the application of IFRS 9 and continue to apply IAS 39 Financial Instruments: Recognition and Measurement, as its activities were predominantly connected with insurance on 31 December 2015.
In June 2017, IFRIC 23 Uncertainty over Income Tax Treatments was issued. The Interpretation clarifies how to apply the recognition and measurement requirements when there is uncertainty over income tax treatments. IFRIC 23 Uncertainty over Income Tax Treatments is applicable for annual periods beginning on or after 1 January 2019. The Swiss Life Group does not expect a material impact of the amendments on its financial statements.
In May 2017, IFRS 17 Insurance Contacts was published and replaces IFRS 4 insurance contracts, which currently permits a wide variety of practices. IFRS 17 Insurance Contracts will fundamentally change the accounting by entities that issue insurance contracts, reinsurance contracts and investment contracts with discretionary participation features. IFRS 17 Insurance Contracts requires a current measurement model, where estimates are remeasured in each reporting period. The measurement is based on the building blocks of discounted, probability-
Swiss Life – Annual Report 2017 weighted cash flows, a risk adjustment and a contractual service margin (“CSM”) representing the unearned profit of the contract. The standard provides a simplified approach for certain liabilities. At initial recognition, insurance contracts are grouped into contracts of similar risks which are managed together and further into three groups of profitability, whereby each group is limited to contracts written in one year. Changes in cash flows related to future services should be re cognised against the CSM, which cannot be negative, so any excess is recognised in profit or loss. To reflect the service provided, the CSM is released to profit or loss in each period on the basis of passage of time. IFRS 17 Insurance Contracts provides an accounting policy choice to recognise the impact of changes in discount rates and other assumptions that relate to financial risks either in profit or loss or in other comprehensive income. The variable-fee approach is required for insurance contracts that specify a link between payments to the policyholder and the returns on underlying items. Requirements in IFRS 17 Insurance Contracts align the presentation of revenue with other industries. Revenue is allocated to periods in proportion to the value of expected coverage and other services that the insurer provides in the period, and claims are presented when incurred. The disclosure requirements are more detailed than currently required under IFRS 4. On transition to IFRS 17 Insurance Contracts, an entity applies the standard retrospectively to groups of insurance contracts, unless it is impracticable, in which case there is a choice between a modified retrospective approach and the fair value approach. IFRS 17 Insurance Contracts is effective for annual periods beginning on or after 1 January 2021. The Swiss Life Group is currently assessing the impact on its financial statements, which will be significant.
In December 2016, Annual Improvements to IFRS Standards 2014–2016 Cycle was published. The amendments to IFRS 12 Disclosure of Interests in Other Entities clarify that an entity is not required to disclose summarised financial information for interests classified as held for sale. However, the other disclosure requirements in IFRS 12 apply to interests in entities within the scope of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations. The Swiss Life Group currently does not have any interests in entities classified as held for sale. An entity shall apply those amendments retrospectively for annual periods beginning on or after 1 January 2017. Additionally, amendments to IAS 28 Investments in Associates and Joint Ventures were issued which clarify that a venture capital organisation, or a mutual fund, unit trust and similar entities may elect, at initial recognition, to measure investments in an associate or joint venture at fair value through profit or loss separately for each associate or joint venture. An entity shall apply those amendments retrospectively for annual periods beginning on or after 1 January 2018.
In September 2016, the International Accounting Standards Board published amendments to IFRS 4 Insurance Contracts “Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts”. The amendments address concerns arising from implementing the new financial instruments standard, IFRS 9, before implementing the replacement standard that the Board is developing for IFRS 4. The amendments introduce an overlay approach which will give all companies that issue insurance contracts the option to recognise in other comprehensive income the volatility that could arise when IFRS 9 is applied before the new insurance contracts standard is issued. The amendments also include a deferral approach which will give companies whose activities are predominantly connected with insurance an optional temporary exemption from applying IFRS 9. Such a deferral is available until the new insurance contracts standard comes into effect, but it cannot be used after 1 January 2021. The Swiss Life Group has assessed that its activities were predominantly connected with insurance on 31 December 2015 (i.e. at the date required by the amendments) and will defer the application of IFRS 9 and continue to apply IAS 39 Financial Instruments: Recognition and Measurement.
In January 2016, IFRS 16 Leasing was issued by the International Accounting Standards Board. The new standard eliminates the classification of leases as either operating leases or finance leases for lessees. Instead all leases are treated in a way similar to finance leases, applying the current standard IAS 17 Leases. The new Standard brings leases on-balance sheet for lessees, the effect being that reported assets and liabilities increase. IFRS 16 Leases replaces the straight-line operating lease expense with a depreciation charge for the lease asset and an interest expense on the lease liability. This change aligns the lease expense treatment for all
Swiss Life – Annual Report 2017 leases. As a practical expedient, short-term and low-value leases are exempt from this treatment. The exemption permits a lessee to account for qualifying leases in the same manner as existing operating leases (IAS 17 Leases). For lessors, the accounting treatment from IAS 17 Leases is substantially carried forward. The new standard is effective for annual periods beginning on or after 1 January 2019. The Swiss Life Group is currently analysing the effect of the adoption of IFRS 16 on its financial statements.
In September 2014 the International Accounting Standards Board published 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.
IFRS 15 Revenue from Contracts with Customers was published in May 2014. The core principle is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. IFRS 15 also introduces disclosure requirements that provide comprehensive information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. IFRS 15 is effective for annual periods beginning on or after 1 January 2018. The adoption of the amendment will not have a material impact on Swiss Life Group’s financial statements.
At each balance sheet date, an assessment is made whether there is objective evidence that an available-for-sale equity instrument is impaired. A significant or prolonged decline in the fair value of the security below its cost is considered objective evidence of impairment. In this respect, a decline of 30 % or more is regarded as significant, and a period of 12 months or longer is considered to be prolonged.
For insurance contracts and investment contracts with discretionary participation features without fixed and guaranteed terms, future premiums can be increased in line with experience. The assumptions used to determine the liabilities do not contain margins and are not locked-in but are updated at each reporting date to reflect the latest estimates.
Mortality and longevity Pricing and valuation assumptions for mortality and longevity are generally based on the statistics provided by national insurance associations and complemented with internal claims experience reflecting own company records.
In Germany, disability insurance products for the group life business are based on tables of the German Actuarial Association, which are reviewed periodically. New disability insurance products for the individual life business are developed in close collaboration with reinsurance companies, which evaluate pricing and valuation assumptions for disability and morbidity on
In Germany, expenses are divided into the following cost categories based on German regulation: acquisition costs, administration costs, regulatory costs and asset management expenses. They are subdivided into recurring and non-recurring costs. All recurring costs except asset management expenses are allocated to the different lines of business and transformed into cost parameters. An assumption on future inflation is applied to all cost parameters in euro.
The reportable segments have been identified based on information about the components of the entity that management uses to make decisions about operating matters. The business is managed based on IFRS results.
Non-life operations involve operations in France and mainly include property and casualty, liability and motor insurance, accident and health insurance and payment protection insurance.
“Other” refers principally to various finance and service companies, as well as payment protection insurance.
Total before Switzer- Inter- Asset elimi- Elimi- land France Germany national Managers Other nations nations Total
Net gains/losses on financial instruments at fair value through profit or loss –1 434 35 246 9 –1 –36 –1 181 0 –1 181
Benefits and claims under insurance contracts –9 047 –2 223 –1 114 –12 – 0 –12 395 3 –12 392
Depreciation and amortisation expense –87 –213 –81 –5 –12 0 –399 – –399
Additions to non-current assets 2 417 547 637 37 11 – 3 649 – 3 649
Premiums earned on insurance contracts 8 607 2 601 1 168 49 – 0 12 425 –23 12 402
Policy fees earned on insurance contracts 6 8 5 0 – – 19 – 19
Share of profit or loss of associates 1 4 – – 4 – 9 – 9
Impairment of property and equipment and intangible assets – – – –4 – –3 –7 – –7 of which intersegment –220 –7 –43 –5 –33 –9 –317 317
Financial assets at fair value through profit or loss 6 609 14 009 1 627 17 983 0 – 40 228 – 40 228
Financial assets pledged as collateral 2 214 1 344 – – – 42 3 601 – 3 601
Liabilities associated with assets held for sale – – – – 3 – 3 – 3
Financial assets available for sale 72 318 17 332 7 849 1 318 49 1 388 100 256 – 100 256
Financial assets pledged as collateral 1 428 1 515 – – – – 2 942 – 2 942
Intangible assets including intangible insurance assets 621 372 1 292 231 202 0 2 717 – 2 717
Swiss Life – Annual Report 2017 5 Risk Management Policies and Procedures
The risk appetite is defined by the Board of Directors and expressed as an SST ratio limit. Furthermore, it is allocated by the Group Risk Committee of the Corporate Executive Board to the largest operations in the insurance business. These limits at unit level are used as a framework for the asset and liability management process, the objective of which is to define a strategic asset allocation. From this strategic asset allocation a scenario-based expected return is calculated, which forms the basis for the Group’s mid-term planning.
Swiss Life – Annual Report 2017 5.1 Risk budgeting and limit setting
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 various 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.
Product design The targets of risk management are supported by product management principles. Product design defines among other things which guarantees and benefits are built into a specific product to respond to the demand from and expectations of customers. The actuarial bases used for this purpose support each individual product generating a sufficient contribution margin. To ensure that the Group’s principles are observed, guidelines and directives on product management and underwriting are in place. Since the Group’s insurance entities operate in a number of different countries, the local regulatory constraints may have an impact on the business units’ product range. These constraints must always be observed.
Swiss Life – Annual Report 2017 5.3 Contracts for the account and risk of the Swiss Life Group’s customers
The assets relating to certain life insurance and investment contracts are managed for the account and risk of the Swiss Life Group’s customers (separate account/unit-linked contracts, private placement life insurance). They are segregated and managed to meet specific investment objectives of the policyholders. The assets back the insurance liabilities and the financial liabilities arising from these contracts. The fair values of the liabilities reflect the fair values of the assets. Certain contracts with unit-linking features contain financial and insurance guarantees. The liabilities relating to these guarantees are included in financial liabilities and insurance liabilities, respectively.
Net gains/losses on financial assets 8 659 426 –8 –2 651 425
at fair value through profit or loss 8 –1 192 –433 11 13 –1 181 –420
Net gains/losses on investment property 651 763 – – 651 763
Insurance liabilities linked to assets for the account and risk of the Swiss Life Group’s customers 5 462
In addition to these fixed and guaranteed payments, which are exposed to interest rate risk, contractual rights exist for certain contracts to receive additional benefits whose amount and /or timing is contractually at the discretion of the issuer.
The Group manages interest rate and interest rate volatility risk by managing the interest rate sensitivity of its investment portfolio against the corresponding sensitivity of liabilities issued. The interest rate and volatility exposure of the liabilities is determined by projecting the expected cash flows from the contracts using best estimates of mortality, disability, expenses, surrender and exercise of policyholder options in combination with interest rate and volatility scenarios. The ALM process defines the strategic asset allocation optimising the net interest rate sensitivity of the investment and liability portfolios. Where this is not practicable, swap contracts and other instruments are used to hedge interest rate risk. In certain markets payer swaptions are used to hedge the risk of fair value changes of interest-sensitive financial assets. A minimum interest rate risk is accepted, since a perfect interest rate hedge can either not be achieved or may not be targeted.
Regarding interest rate risk exposure existing on contracts with guaranteed benefits where the risk is that the interest rates earned on the assets are insufficient to fund the guaranteed payments, puttable bonds are used to counter the impact of increasing interest rates.
Counterparty risk is primarily managed by counterparty exposure limits and diversification in a broad debtor universe. The specific credit risk is managed through the holding of credit default swaps or credit default swap indices and options on credit default swap indices. A credit default swap provides insurance to the debt holder against a default of the debt issuer. It is traded over-the-counter and itself underlies the collateral management process described above. The credit default swap index is a hedge on credit risk of a basket of counterparties and is an over- the-counter derivative. A put option on a credit default swap index provides protection against adverse credit spread movements in the underlying basket of counterparties, and is traded over-the-counter.
Debt securities available for sale 87 446 85 895 – – 87 446 85 895
Debt securities pledged as collateral 3 601 2 942 – – 3 601 2 942
TOTAL EXPOSURE TO CREDIT RISK 123 484 122 897 9 476 8 227 132 960 131 124
Exposure to credit risk of debt instruments – credit rating by class as at 31 December 2017
Derivatives designated as cash flow hedges – – 212 579 36 375 1 203 94
Current and non-current assets and liabilities The table below shows the expected realisation or settlement of assets and liabilities. Assets are classified as current if they are expected to be realised within twelve months after the balance sheet date. Liabilities are classified as current if they are expected to be settled within twelve months after the balance sheet date. All other assets and liabilities are classified as non-current.
Financial assets at fair value through profit or loss 3 542 3 969 3 862 3 483 32 824 27 479 40 228 34 931
Financial assets available for sale 7 734 8 801 97 188 91 454 – – 104 922 100 256
Liabilities associated with assets held for sale 3 – – – – – 3 –
The quantification of life insurance risk is based on a sensitivity analysis. Insurance risk is thus measured as the deviation of (the realisations of) the insurance risk factors from the corresponding best estimate values. Life insurance risk factors include mortality rates, disability rates and longevity.
The Swiss occupational pensions (BVG) segment of the group life insurance business in Switzerland is a significant part of the Group’s overall life insurance business. The BVG business provides an example of a minimum return guarantee. The guarantee takes the form of the right to convert an assured sum into a life annuity at a guaranteed conversion rate: The prevalent annuity conversion rate for the mandatory part of the BVG business is set at 6.8 % for men (retirement age 65) and 6.8 % for women (retirement age 64).
Disability income and other annuities – deferred 7 348 6 877
Morbidity and disability Disability risk reflects the financial consequences of groups of individuals getting disabled more often and/or recovering less quickly than expected. With regard to morbidity, the most significant risk factors are epidemics, widespread changes in lifestyle, such as eating, smoking and exercise habits, and economic effects.
At end of year of loss occurrence 345 392 323 311 303 335 342 296 267 297 n/a
In accordance with its retention policy for mortality and disability benefits, the Group limits its exposure to CHF 5 million per life. Retention limits can be lower for other products (e.g. critical illness or long-term care) or for exposure in international markets. In addition, catastrophe reinsurance is in place to protect against accumulation of losses from a single event or a series of connected events.
Approximately 1.2 % in terms of earned insurance premiums was ceded as at 31 December 2017 (2016: 1.2 %).
Reinsurance The Group assumes and/or cedes reinsurance risks during the normal course of business. For reasons of diversification, some risks are ceded and others are assumed.
The Group defines risk categories for risk management in connection with derivatives transactions and monitors those risk positions. Price risks for derivatives and their underlying instruments are managed according to the risk limits defined by management for the purchase or sale of instruments or closing of positions. The risks arise through open positions in interest rates, currencies and equity capital instruments dependent on general and specific market movements.
The Swiss Life Group has in the past used market consistent embedded value (MCEV) information for its sensitivity analysis with regard to insurance risk and market risk. Due to the reduced focus, MCEV can no longer be used for this purpose. Therefore, effective from 2017, the sensitivity analysis is based on how IFRS profit or loss and other comprehensive income would have been affected if changes in the relevant risk variables that were reasonably possible at the end of the reporting period had occurred.
At 31 December 2017, if interest rates had been 50 basis points higher, profit or loss would have been CHF 25 million lower (2016: CHF 5 million) and other comprehensive income would have been CHF 1407 million lower (2016: CHF 1449 million). If interest rates had been 50 basis points lower, profit or loss would have been CHF 47 million higher (2016: CHF 20 million) and other comprehensive income would have been CHF 1588 million higher (2016: CHF 1653 million). These impacts are net after policyholder and tax. The sensitivity includes financial assets as well as insurance liabilities. “Investment funds – debt” and investment funds with substantial investment in debt instruments are included in the analysis. This sensitivity measures the impact of a parallel shift of the bond interest rates at the closing date.
At 31 December 2017, if equity prices had been higher by 10 %, profit or loss would have been CHF 379 million lower (2016: CHF 315 million) and other comprehensive income would have been CHF 651 million higher (2016: CHF 733 million). If equity prices had been lower by 10 %, profit or loss would have been CHF 343 million higher (2016: CHF 218 million) and other comprehensive income would have been CHF 602 million lower (2016: CHF 727 million). These impacts are gross before policyholder and tax. This sensitivity measures the impact of an increase/decrease in the market value of equities (incl. hedge funds and private equity) at the closing date. Investment funds with substantial investment in equities are included in the analysis, as are hedging effects.
Diluted earnings per share include the dilutive effect of convertible bonds and share options issued. In the diluted EPS calculation, the convertible debt is assumed to have been converted into shares and the profit attributable to shareholders is adjusted for the applicable interest expense minus the related taxes. Share options are dilutive when they would result in the issuance of shares for less than the average market price during the period. Dilutive share options are assumed to have been exercised. The assumed proceeds are regarded as having been received from the issuance of shares at the average market price during the period. The difference between the number of shares issued and the number of shares that would have been issued at the average market price during the period is considered an issuance of shares for no consideration.
Net result attributable to equity holders of Swiss Life Holding 1 007 922
Weighted average number of shares outstanding 32 502 204 31 879 422
BASIC EARNINGS PER SHARE FOR THE NET RESULT ATTRIBUTABLE TO EQUITY HOLDERS OF SWISS LIFE HOLDING (IN CHF) 30.98 28.92
DILUTED EARNINGS PER SHARE FOR THE NET RESULT ATTRIBUTABLE TO EQUITY HOLDERS OF SWISS LIFE HOLDING (IN CHF) 29.63 27.27
Swiss Life – Annual Report 2017 7 Premiums, Policy Fees and Deposits Received
Deposits received under insurance and investment contracts 5 298 3 701
Interest income on financial assets available for sale 2 533 2 554
Financial assets designated as at fair value through profit or loss 1 235 182
Associates at fair value through profit or loss 1 0 –
Assets for the account and risk of the Swiss Life Group’s customers 1 1 076 747
Liabilities linked to assets for the account and risk of the Swiss Life Group’s customers –1 065 –734
Change in liability for future life policyholder benefits, gross 1 768 2 699
Change in liability for future life policyholder benefits, gross 194 398
Net benefits and claims under investment contracts with discretionary participation 867 1 009
Derivatives designated as fair value hedges 162 97 101 113 14 103 11 746
Interest rate swaps to hedge bond portfolios 123 94 8 526 69 78 78 69
Currency forwards to hedge non-monetary investments 40 7 5 577 311 350 350 311
Interest rate swaps to hedge bond portfolios 83 86 7 536 92 72 75 93
The Swiss Life Group used interest rate swaps to hedge available-for-sale fixed-rate bonds and bonds classified as loans in Swiss francs, euro, British pounds and US dollars against changes in the fair value attributable to interest rate risk. The nominal amount of these bonds as at 31 December 2017 was CHF 8.2 billion (2016: CHF 7.0 billion).
Forward contracts are used as hedging instruments to protect non-monetary investments against adverse movements in euro, British pound, US dollar and Canadian dollar exchange rates. Such investments include equity securities, hedge funds and investment funds (equity funds, real estate funds and corporate loan funds).
In 2017 and 2016, hybrid debt denominated in euro was used to protect non-monetary investments (hedge funds, equity securities and real estate funds) against adverse movements in euro exchange rates.
In 2017, a gain of CHF 23 million was reclassified from other comprehensive income to profit or loss (2016: gain of CHF 26 million), of which CHF 25 million were included in investment income (2016: CHF 17 million), and CHF 2 million (loss) in net gains /losses on financial assets (2016: gain of CHF 9 million).
TOTAL DERIVATIVES DESIGNATED AS NET INVESTMENT HEDGES 19 14 2 057 89 –
TOTAL DERIVATIVES DESIGNATED AS NET INVESTMENT HEDGES 5 19 2 057 –85 –
In 2017, investments in senior secured loan funds of USD 2211 million (2016: USD 2104 million) and investments in real estate funds of EUR 320 milllion (2016: nil) were hedged.
Financial assets for the account and risk of the Swiss Life Group’s customers 5 32 824 27 479
Swiss Life – Annual Report 2017 11 Financial Assets Available for Sale
Debt securities previously classified as available for sale 1 932 3 008 – – 1 932 3 008
Other debt securities classified as loans 270 435 – – 270 435
BALANCE AS AT END OF PERIOD 8 7 18 17 26 24
TOTAL ALLOWANCE FOR IMPAIRMENT LOSSES 13 11 33 30 45 42
Interest income accrued on impaired loans was CHF 0.04 million as at 31 December 2017 (2016: CHF 0.02 million). The Group’s loan port folio is monitored closely through the review of information such as debt service, annual reports and assessments. This information is evaluated in light of current economic conditions and other factors, such as diversification of the property portfolio. This evaluation is part of the regular review to determine whether the allowance for potential loan losses is warranted. Management believes that the allowance for loan losses is sufficient. However, management cannot predict with assurance the impact of future economic circumstances or how the mortgage and real estate portfolios would be affected by various economic circumstances.
As at 1 July 2008, certain financial assets were reclassified from financial assets available for sale to loans due to the disappearance of an active market. The financial assets reclassified primarily consist of corporate debt instruments and debt instruments relating to emerging markets. The fair value as at 1 July 2008 of the financial assets reclassified amounted to CHF 14 966 million. At the date of reclassification the effective interest rate ranged from 0.8 % to 9.7 %, and the amount of cash flows expected to be recovered was estimated at CHF 32 658 million. In 2008, unrealised losses of CHF 740 million were recognised in other comprehensive income in respect of these assets.
Classification as assets held for sale and other disposals –522 –3
TOTAL PROPERTY AND EQUIPMENT AS AT END OF PERIOD 356 20 11 17 404 of which assets held under a finance lease – – 0 – 0 1 includes elimination of fully depreciated assets
TOTAL PROPERTY AND EQUIPMENT AS AT END OF PERIOD 344 16 10 13 383 of which assets held under a finance lease – – 0 – 0 1 includes elimination of fully depreciated assets
Swiss Life – Annual Report 2017 17 Intangible Assets including Intangible Insurance Assets
BALANCE AS AT END OF PERIOD 9 9 1 453 1 319 20 15 1 482 1 343
BALANCE AS AT END OF PERIOD 1 865 157 215 25 2 262
TOTAL OTHER INTANGIBLE ASSETS AS AT END OF PERIOD 1 238 70 44 22 1 374 1 includes elimination of fully amortised/impaired assets
The calculations relating to the recoverable amounts, which have been determined on a valuein -use basis, use cash flow projections based on financial budgets approved by management. The projection covers a three-year period for Lloyd Continental and Corpus Sireo. Due to the duration of the insurance and investment contracts a five-year period was used for CapitalLeben. The calculations for Lloyd Continental, Corpus Sireo and CapitalLeben are based on present values that traditionally use a single set of estimated cash flows and a single discount rate.
The growth rates reflect the long-term inflation expectations of the International Monetary Fund for Switzerland and Liechtenstein and of the European Central Bank for the euro zone.
Net carrying amount of goodwill 152 152 472 433 75 70 699 655
Certain contracts that do not contain significant insurance risk and do not have discretionary participation features are carried at amortised cost or fair value.
On 24 March 2016, Swiss Life Ltd issued subordinated dated callable bonds in the amount of CHF 150 million. The bonds are guaranteed by Swiss Life Holding, have their maturity date on 24 September 2046 and are first callable on 24 September 2026 or at each interest payment date thereafter at the option of the issuer, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The interest has been fixed at 4.375 % p.a. until 24 September 2026. If the bonds are not redeemed on 24 September 2026, the interest resets at a rate fixed for the subsequent five years, consisting of the aggregate of the then-prevailing five-year CHF swap rate and the initial margin of 4.538 % p.a.
On 24 March 2016, Swiss Life Ltd issued subordinated perpetual callable bonds in the amount of CHF 450 million. The bonds are guaranteed by Swiss Life Holding, have no fixed maturity date and are first callable on 24 September 2021 or at each interest payment date thereafter at the option of the issuer, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The interest has been fixed at 3.75 % p.a. until 24 September 2021. If the bonds are not redeemed on 24 September 2021, the interest resets at a rate fixed for the subsequent five years, consisting of the aggregate of the then-prevailing five-year CHF swap rate and the initial margin of 4.392 % p.a.
In November 2012, Swiss Life Insurance Finance Ltd. offered to existing lenders under the subordinated perpetual step-up loan placed in 1999 by Swiss Life Ltd to purchase their loan holdings against a consideration consisting of both a cash component and a credit component. Altogether, EUR 265 million and CHF 290 million were purchased from lenders. The cash component amounted to a total of CHF 139 million. The credit component consists of a tranche of a subordinated dated step-up loan newly issued by Swiss Life Ltd. The subordinated dated step-up loan placed in connection with the offer amounts to CHF 471 million, is guaranteed by Swiss Life Holding, has a tenor of thirty years and is first repayable on 30 November 2022 at the option of the issuer, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority. The interest rate is six-month Libor plus a margin of 4.20 % p.a. until 30 November 2022. If the loan is not redeemed on 30 November 2022, the margin increases by 1 %.
Swiss Life AG CHF 300 CHF 300 5.500% 2012 2018 300 299
In December 2013, Swiss Life Holding issued CHF 500 million in senior unsecured convertible bonds due in 2020. The coupon was set at 0 %. The bonds were convertible into registered shares of Swiss Life Holding at the option of the holder. The initial conversion price was set at CHF 243.97 (in 2017 adjusted to CHF 232.13, valid since 27 April 2017). The proceeds from the issue of the convertible bonds have been split between a liability component and an equity component. The fair value of the liability component at issue date amounted to CHF 450 million and was calculated using a market interest rate for an equivalent non-convertible bond. The residual amount of CHF 50 million represented the value of the option to convert the instrument into Swiss Life Holding shares and was included in share premium. Transaction costs of CHF 6 million were deducted from the liability and costs of CHF 1 million were recognised in share premium.
In May 2013, Swiss Life Holding raised CHF 425 million debt through the issuance of a CHF public bond dual tranche transaction, split into a CHF 225 million tranche with a tenor of six years and a CHF 200 million tranche with a tenor of ten years. The unsecured senior bonds bear coupons of 1.125 % p.a. and 1.875 % p.a., respectively. Settlement took place on 21 June 2013.
Unearned premiums represent the portion of the premiums written relating to the unexpired terms of coverage.
Effect of changes in actuarial assumptions and other movements 359 645
Deposits released for payments on death, surrender and other terminations during the year –318 –333
In Switzerland, France and Germany, insurance contracts have been issued to defined benefit plans covering own employees, which reinsure a part of the benefit promises made by the plans. Due to the requirements of IFRS 4 Insurance Contracts in combination with IAS 19 Employee Benefits, such insurance contracts are eliminated (self-insurance, non-eligibility as plan asset). To the extent the affected plans are funded by self-insurance, the defined benefit liabilities are backed by the investments relating to the eliminated insurance contracts. These investments are part of the investments presented in the consolidated balance sheet of the Swiss Life Group.
Plan descriptions Switzerland Pension plans in Switzerland are governed by the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG). Pension plans must be managed by independent, legally autonomous entities and are under regulatory supervision. The plans covering the Group’s employees in Switzerland are set up as foundations. The foundation board as the most senior governing body must be composed of equal numbers of employee and employer representatives. Main responsibilities of the foundation board are the definition of plan benefits, funding system and the setting of actuarial parameters and investment policies for the plan assets. The BVG defines minimum levels with regard to benefits (including conversion rate for old-age pensions), employer/employee contributions and the interest rate for the accrual of the employee’s pension account. An annual actuarial report according to BVG requirements is prepared which shows the funding level of the respective plan. The measurement basis for the plan’s assets and benefit obligations for this purpose is in accordance with BVG rules.
For some plans, the level of the pension benefits is determined by the years of service and the last salary before retirement according to the benefit formula as defined in the pension plan. Other benefits comprise widows’/widowers’ pensions in case of death as well as disability pensions (if disabled before retirement age). The levels of these benefits are determined similar to the old-age pensions assuming service up to normal retirement age. Widows’/widowers’ pensions are 60 % of the old age/disability pension benefits.
Defined benefit expense in 2017 comprises negative past service cost of CHF 4 million due to plan amendments in Switzerland.
Transfer to intragroup insurance contracts, reclassifications and other disposals –2 –5
Average life expectation at ordinary retirement age (women) 25.4 25.3 23.2–29.9 23.2–29.8
At 31 December 2017, if the discount rate had been 50 basis points higher (lower), the defined benefit obligation would have decreased by CHF 262 million (increase CHF 297 million). At 31 December 2016, if the discount rate had been 50 basis points higher (lower), the defined benefit obligation would have decreased by CHF 258 million (increase CHF 293 million).
At 31 December 2017, if the average life expectancy had increased by one year (for both men and women), the defined benefit obligation would have increased by CHF 118 million. At 31 December 2016, if the average life expectancy had increased by one year (for both men and women), the defined benefit obligation would have increased by CHF 113 million.
Duration of the defined benefit obligation (weighted average no. of years) 15.6 15.6
The contributions expected to be paid for the year ending 31 December 2018 are CHF 67 million. These contributions include amounts payable under insurance contracts issued to defined benefit plans covering own employees.
The 2017 and 2016 equity compensation plans are based on the new Group-wide programme “Swiss Life 2018”. For the purpose of supporting the achievement of the respective corporate goals, performance criteria have been determined by the Board of Directors analogously to the previous year’s objectives: IFRS profit (50 % weighting), the risk and fee result (25 % weighting) and cash to Swiss Life Holding for further strengthening of the financial substance and payout capacity (25 % weighting).
The 2013–2015 equity compensation plans are based on the Group-wide programme “Swiss Life 2015”, which was announced at the Swiss Life Group’s Investors’ Day on 28 November 2012. On the basis of the medium-term planning 2013–2015 (2013 equity compensation plan) and 2014 – 2016 (2014 equity compensation plan), performance criteria relating to cost efficiency (50 % weighting), the risk and fee result (25 % weighting) and IFRS profit (25 % weighting) have been determined by the Board of Directors. With regard to the 2015 equity compensation plan, the Board of Directors has set the following performance criteria on the basis of the mediumterm planning 2015–2017: IFRS profit (50 % weighting), the risk and fee result (25 % weighting) and cash to Swiss Life Holding for further strengthening of the financial substance and payout capacity (25 % weighting). After expiry of the three-year period of the RSU plan, the target value for each performance criterion according to the medium-term planning is compared with the actual result achieved. The share allocation corresponds to the number of allocated RSUs (1 RSU = 1 share) if all three performance criteria have been achieved or exceeded after the threeyear period has elapsed; overperformance does not lead to a higher share allocation. If the targets are only partly achieved, the share allocation is correspondingly reduced in accordance with the weighting of the performance target concerned, or the RSUs expire worthless.
The fair value of the RSUs granted for each programme is determined at the grant date. The fair value was determined by an independent consulting company using the Black-Scholes formula taking into account input factors such as the dividend yield and the historical volatility of the Swiss Life Holding share. The associated expense during the vesting period is recognised under employee benefits expense with a corresponding increase in share premium.
The expense recognised for share-based payment amounted to CHF 12 million in 2017 (2016: CHF 12 million).
TOTAL DEFERRED INCOME TAX ASSETS/LIABILITIES 40 39 2 216 1 998
Equity Foreign Other component Acquisitions currency Balance as at comprehensive convertible and disposals translation Balance as at 1 January Profit or loss income debt of subsidiaries differences end of period
Deferred tax liabilities have not been recognised on the aggregate amount of temporary differences with consolidated investments in subsidiaries to the extent the Group considers such undistributed earnings as being indefinitely reinvested. The amount of such temporary differences was approximately CHF 10.1 billion as at 31 December 2017 (2016: CHF 8.7 billion). If such amounts from entities controlled by the Group are ever distributed, no material tax liabilities would be incurred due to participation exemption rules, unrecognised tax loss carryforwards and applicable double taxation treaties.
Deferred tax assets are recognised for tax-loss carryforwards only to the extent that realisation of the related tax benefit is probable. Swiss tax assets are calculated in accordance with cantonal and municipal tax legislation. The uncertainty of the utilisation of tax losses is taken into account in establishing the valuation allowance. For the following tax-loss carryforwards, which will expire as follows, no deferred tax asset has been recognised.
Additions from business combinations 28 – – – – 0 – 0 –
BALANCE AS AT END OF PERIOD 9 11 28 49 37 16 74 75
Provisions for restructuring were set up in 2017 in Switzerland (2016: Switzerland, Germany and Liechtenstein). The outflow of the amounts is expected within the following one to two years.
Remea- Gains/ sure- losses Revalu- ments Foreign financial Gains/ ation net currency assets losses surplus defined translation available cash flow Other investment benefit Other differences for sale hedges items Total property liability items Total
Net investment hedges – gross 89 – – – 89 – – – – 89
Net other comprehensive income before non-controlling interests 272 441 –54 8 668 8 29 – 37 705 1 Amount relates to debt securities reclassified to loans in 2008 (note 13).
NET BALANCE AS AT END OF PERIOD –1 157 3 685 464 –30 2 962 64 –353 – –289 2 673
Swiss Life reports to the Swiss Financial Market Supervisory Authority FINMA. The reporting covers risk management and solvency, liquidity, legal structure, management organisation and intra-group transactions. The reporting is submitted on an ad-hoc, quarterly, half-yearly or yearly basis depending on the topic and is reviewed on a yearly basis by the statutory auditor according to the legal requirements. As at 31 December 2017 and 2016, Swiss Life was compliant with the legal requirements.
The Swiss Life Group acquired in October 2017 Medical Money Management Ltd., Liverpool, a company specialised in providing financial planning advice to medical, dental and other professionals.
In 2017, the real estate companies Vestas Germany ACB GmbH & Co. KG, Cologne, CS Stella (Lux) S.à r.l., Luxembourg and Agrippa Quartier GmbH & Co. Geschlossene InvKG, Heusenstamm, as well as Swiss Life Immo-Arlon, Société Anonyme, Strassen, were sold.
Asset management and other commission income 1 – – 1 2
For the years ended 31 December 2017 and 2016, no impairment allowance has been made for doubtful debts in respect of the amounts owed by related parties. This assessment is undertaken each financial year by examining the financial position of the related party and the market in which the related party operates.
The details regarding key management compensation in accordance with Article 663bbis of the Swiss Code of Obligations or the Ordinance against Excessive Compensation in Listed Stock Companies (Compensation Ordinance, VegüV), respectively, are set out in the Compensation Report, which forms part of the Corporate Governance section of the Annual Report 2017 of the Swiss Life Group. The information according to Article 663c of the Swiss Code of Obligations is shown in the Notes to the Swiss Life Holding Financial Statements.
In the exceptional case that a theoretical valuation of an OTC derivative is not available in Swiss Life’s asset management system, the fair value is provided by counterparties. The appropriateness of such quotes is validated by Swiss Life based on established models using observable market data as input.
Market rental value p.a. (price/m2/year) CHF 231–288 CHF 230–286 EUR 85–928 EUR 130–928
Assets measured at fair value based on level 3 for the year 2017
Total gains/losses recognised in other comprehensive income – – 0 – 27 – – 27
for assets held at the end of the period – 0 – 63 –8 –105 601 551 1 including associates at fair value through profit or loss
Assets measured at fair value based on level 3 for the year 2016
Total gains/losses recognised in other comprehensive income – – 0 – 2 – – 2
During 2017, debt securities of CHF 120 million (2016: CHF 76 million) were transferred from level 1 into level 2 due to reduced frequency of price quotations, and debt securities of CHF 114 million (2016: CHF 190 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 2017: nil (2016: nil) from level 1 into level 2, and nil (2016: CHF 21 million) from level 2 into level 1.
Total gains/losses recognised in profit or loss – – 0 0 6 12 6 12
at the end of the period –8 –19 –42 –24 601 763
at the end of the period – – –6 –12 – –
Swiss Life – Annual Report 2017 31 Offsetting Financial Assets and Liabilities
Gross amounts of recognised financial assets before offsetting 1 675 1 885 – – 1 675 1 885
Gross amounts of recognised financial liabilities set off – – – – – –
NET AMOUNTS PRESENTED IN THE BALANCE SHEET 1 675 1 885 – – 1 675 1 885
Other contingent liabilities and commitments 559 465 1 of which relating to investments in associates 2 2
They represent agreements to provide liquidity to protection funds in the insurance industry, commitments to make investments in real estate funds and other commitments.
The Group has entered into various operating leases as a lessee. Rental expenses for these items totalled CHF 48 million for the year ended 31 December 2017 (2016: CHF 44 million). Minimum lease payments totalled CHF 48 million in 2017 (2016: CHF 41 million).
Later than 1 year and not later than 5 years 115 91
Contractual obligations for repairs and maintenance of investment property amounted to CHF 304 million as at 31 December 2017, which are included in this line item (2016: CHF 214 million ).
The following table provides details of financial assets which have been sold or otherwise transferred, but which do not qualify for derecognition because substantially all risks and rewards of ownership are retained. Repurchase agreements and securities lending transactions are discussed in notes 2.8 and 12. Other securities pledged include debt securities pledged as collateral under reinsurance contracts issued and debt securities pledged as collateral under prime broker contracts to cover margins due in respect of derivative transactions.
Securities pledged under repurchase agreements 1 3 601 2 942 3 601 2 942
Securities lent in exchange for securities received 5 516 4 613 5 516 4 613 1 of which can be sold or repledged by transferee 3 601 2 942 3 601 2 942
Securities received as collateral in exchange for securities lent 5 516 5 125
SL RETAIL FRANCE 1, Paris FR/DE from 16.03.2017 100.0% 100.0% Real estate
CORPUS SIREO Investment Residential No. 2 GmbH, Köln AM 100.0% 100.0% Asset management & Real estate
CORPUS SIREO Investment Residential No. 30 GmbH & Co. KG, Köln AM 99.0% 100.0% Asset management & Real estate
CORPUS SIREO Projektentwicklung München II GmbH, Köln AM 100.0% 100.0% Asset management & Real estate
S Corpus Immobilienmakler GmbH (formerly CORPUS SIREO Makler GmbH), Köln AM 100.0% 100.0% Asset management & Real estate
SL Beteiligungs-GmbH & Co. Immobilien I KG, Garching b. München DE 100.0% 100.0% Real estate
SL Beteiligungs-GmbH & Co. Immobilien IV KG, Garching b. München DE 100.0% 100.0% Real estate
Swiss Life AG, Garching b. München (Branch Swiss Life AG) DE 100.0% 100.0% Life insurance
CORPUS SIREO RetailCenter-Fonds Deutschland SICAV-FIS, Luxembourg DE 57.0% 57.0% Real estate
SL Place de Paris S.à r.l., Luxembourg FR 100.0% 100.0% Real estate
Swiss Life Loan Fund (LUX) SA, SICAV-SIF, Luxembourg CH/DE from 19.09.2017 100.0% 100.0% Investment funds
Swiss Life REF (LUX) European Retail SCS, SICAV-RAIF, Luxembourg FR/DE from 08.03.2017 100.0% 100.0% Real estate
MONTOYER 51 LEASEHOLD, Etterbeek FR from 03.11.2016 100.0% 100.0% Real estate
          
             
          
             
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 from subsidiaries to the holding company increased from CHF 519 million to CHF 555 million during the year under review. Guarantee fees including processing fees on new loans came to CHF 44 million (previous year: CHF 49 million). New loans totalling EUR 41 million were awarded to Group units in Germany and France to finance new real estate projects. The volume of loans to Group companies increased from CHF 708 million in the previous year to CHF 758 million. Interest earned on loans to Group companies amounted to CHF 24 million (previous year: CHF 32 million). The decline in interest income is due to new loans awarded at lower rates in accordance with the current interest rate environment.
As at the end of the year Swiss Life Holding had assets (liquid funds, debt securities, investment funds and equities) of CHF 1743 million. Liquid funds reduced from CHF 119 million to CHF 65 million, and debt security, investment fund and equity holdings increased from CHF 1321 million to CHF 1647 million. All debt securities are eligible for repo transactions. Earnings from investments in bonds and fund units rose from CHF 36 million to CHF 44 million.
The conversion of the convertible bond reduced the long-term debt capital from CHF 919 million to CHF 424 million. This 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). These debt financing instruments were issued in 2013. Interest on the bonds came to CHF 7 million.
Staff costs and operating expenses including taxes came to CHF 21 million (2016: CHF 15 million). The increase is due to the stamp duty on issues resulting from the convertible bond conversions.
Swiss Life Intellectual Property Management AG, Zürich CHF 250 100.00% CHF 250 100.00%
A value adjustment totalling CHF –300 million was made to Swiss Life Deutschland Holding GmbH following the annual assessment of participations.
Share capital As at 31 December 2017, the share capital of Swiss Life Holding (SLH) consisted of 34 223 106 fully-paid shares with a par value of CHF 5.10 each. In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of his own shares and those he represents. As at 31 December 2016, Swiss Life Holding had 32 081 201 registered shares outstanding with a par value of CHF 5.10 per share. Conditional share capital was CHF 19 675 534.80 as at 31 December 2017 (previous year: CHF 30 599 250.30).
Free reserves This post comprises accumulated retained earnings which have not been distributed to the shareholders.
Issue of two senior bonds in 2013 Two senior bonds for a total amount of CHF 425 million were issued on 21 June 2013, split into a tranche of CHF 225 million with a tenor of six years until 2019 (coupon of 1.125%) and a tranche of CHF 200 million with a tenor of ten years until 2023 (coupon of 1.875%).
Treasury shares The Swiss Life Group companies did not purchase any treasury shares during the year under review. In the same period, they sold 17 shares at an average price of CHF 196.72. As at 31 December 2017, the Swiss Life Group held 131 201 treasury shares.
Contingent liabilities 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 4010 million at the balance sheet date.
In addition, Swiss Life Holding grants a line of credit in the amount of CHF 48 million to Swiss Life Products, a line of credit in the amount of CHF 6 million to Swiss Life Schweiz Holding, a line of credit of CHF 25 million to Pierre Capitale and a line of credit in the amount of CHF 77 million to Corpus Sireo.
Annual profit amounts to CHF 313 645 014. The Board of Directors proposes to the General Meeting of Shareholders that the profit be appropriated in accordance with the table below. If this proposal is adopted, a distribution of CHF 13.50 per share will be made from the capital contribution reserve.
TOTAL PROFIT SHOWN IN THE BALANCE SHEET 313 695 784 359 050 770
Share Performance and Historical Comparison The Swiss Life share price developed strongly in 2017, closing the year at CHF 345.00. This amounts to an appreciation of 20%, or 24% taking into account the dividend distribution of CHF 11.00.
Dow Jones STOXX 600 Insurance Index (in EUR) 29.12. 288.35 269.66 285.56 250.55 228.22
Performance of Dow Jones STOXX 600 Insurance Index (in %) +7 –6 +14 +10 +29
Market capitalisation (in CHF million) 29.12. 11 807 9 246 8 704 7 584 5 941
Total dividend payout to shareholders (in CHF million) 02.05. 356 271 207 176 144
Number of employees (full-time equivalents) 7 979 7 801 7 595 7 492 6 992 2 equity excl. unrealised gains/losses on bonds
Annual Report 2017 The Annual Report is published in German and English and contains information on corporate governance, risk management, corporate responsibility and the annual accounts. The English text is definitive for the Consolidated Financial Statements; the original German text is binding in all other respects.