Annual Report 2010 Financial Statement Section xxdd ddd ddd ddd ddd ddd ddd ddd xx xxxx xxxx
The Swiss Life Group is legally obliged to implement the accepted principles of responsible corporate conduct and continually adapts its corporate governance practices to current developments.
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 July 2002, and was revised on 1 January 2007 and 1 July 2009, and also takes into consideration the regulations on transparency stipulated in the Swiss Code of Obligations with regard to the compensation of members of the Board of Directors and the Corporate Executive Board and FINMA circular 2010/1 on minimum standards for remuneration schemes of financial institutions. Further information on the Code of Compliance and the values of the Swiss Life Group can be found in the section “Values” (page 38) in the Business Review.
SHAREHOLDERS — Shareholdings in companies that are domiciled in Switzerland and have their shares listed in Switzerland must be reported to the company in question and the SIX Swiss Exchange if the shareholdings exceed, fall below or reach certain thresholds. The relevant the voting rights. Details are set out in the Federal Act on Stock Exchanges and Securities Trading (SESTA) and Stock Exchange Ordinance-FINMA (SESTO-FINMA).
Dodge & Cox, 555 California Street, 40th Floor, San Francisco, CA 94104, USA, reported in the publication of 6 March 2008 that it held through the Dodge & Cox International Stock Fund 1 645 000 registered shares or 4.71% of the voting rights of Swiss Life Holding.
Carsten Maschmeyer, Hanebuthwinkel 17, 30655 Hanover, Germany, reported in the publication of 23 December 2008, that he and his two sons, Marcel Jo Maschmeyer and Maurice Jean Maschmeyer, as well as the asset management firms CM Vermögensverwaltung GmbH & Co.
KG and CM Vermögensverwaltungs-Geschäftsführungs GmbH, held a total of 2 174 616 purchase positions, corresponding at the time to a 6.22% share of the voting rights: 1 944 616 registered shares of Swiss Life Holding (5.56% of the voting rights), in addition to 80 000 short puts (corresponding to 0.23% of the voting rights) and 150 000 discount certificates (corresponding to 0.43%) on the shares of Swiss Life Holding (cf. also on page 26 details on share ownership as at 31 December 2010 of currently serving Board of Directors and Corporate Executive Board members).
Street, San Francisco, CA 94105, BlackRock Institutional Trust Company, N.A., 400 Howard Street, San Francisco, CA 94105-2618, BlackRock Investment Management (Dublin) Ltd., First Floor, Fitzwilton House, Wilton Place, Dublin 2 and BlackRock Asset Management Canada Limited, 161 Bay Street, Suite 2500, Toronto, Ontario M5J 2S1, held a total of 1 190 832 shares and 775 other purchase positions of Swiss Life Holding, corresponding to 3.71% of the voting rights.
SHAREHOLDER STRUCTURE — On the balance sheet date a total of 188 603 shareholders and nominees were listed in the Swiss Life Holding share register, of which about 4500 were institutional shareholders. Taken together, the shareholders entered in the share register held around 55% of the shares issued. Around half of these shares were owned by shareholders domiciled in Switzerland. Around one third of the registered shares were in private hands.
A table showing the shareholder structure is provided in the section “Information on Share Performance and Historical Comparison” on page 73 in the Business Review.
CAPITAL AND CHANGES IN CAPITAL — The capital structure of Swiss Life Holding was as follows on the balance sheet date: – Ordinary share capital: CHF 307 978 118.40, divided into 32 081 054 fully paid registered shares with a par value of CHF 9.60 each
The conditional share capital is at the disposal of the holders of conversion or option rights granted by Swiss Life Holding or by companies belonging to the Group in connection with straight bonds or similar bonds issued by Swiss Life Holding or companies belonging to the Group. The shareholders are excluded from subscription rights, but their preemptive subscription rights remain safeguarded. The Board of Directors sets the conversion and option conditions.
At Swiss Life Holding’s General Meeting of Shareholders on 6 May 2010, the shareholders approved a motion to reduce the par value by CHF 2.40 per registered share. Consequently, the share capital fell to CHF 307 978 118.40, divided into 32 081 054 fully paid registered shares with a par value of CHF 9.60 each, and the conditional capital decreased to CHF 22 650 105.60, divided into 2 359 386 registered shares with a par value of CHF 9.60 each. Again in 2010 no conversions were made on the 0.625% convertible bond (2004–2010).
Further information on the convertible bond can be found in the “Convertible Bonds and Options” section on page 8.
SHARES — 32 081 054 fully paid Swiss Life Holding registered shares with a par value of CHF 9.60 each were outstanding on the balance sheet date. Subject to the 10% limit on voting rights set out in the Articles of Association (cf. the section on “Shareholders’ participation rights” on page 30), each share grants the right to one vote at the General Meeting of Shareholders.
There are no outstanding shares with either increased or limited voting rights, privileged or restricted voting rights, privileged dividend entitlements or other preferential rights.
REGISTRATIONS — Swiss Life Holding shares are not subject to any limitations on transferability. According to the Articles of Association, resolutions for the introduction, amendment or repeal of limitations on transferability must be put before the General Meeting of Shareholders and must be approved by two thirds of the voting shares represented and by an absolute majority of the share par value represented.
Swiss and foreign banks, securities brokers and companies acting on their behalf may be entered in the share register as nominees if they are holding shares of Swiss Life Holding in their custody for the account of the beneficial owners. Professional asset managers may also be registered as nominees if, in a fiduciary capacity, they have deposited Swiss Life Holding shares for the account of third parties with Swiss or foreign banks or securities brokers in their own name. Nominees are required to be subject to banking or financial market supervision. A request must be filed to register as a nominee. The voting right representation is restricted to 10% of the share capital overall, whereby nominees who are connected with regard to capital or voting rights under uniform management or contractual agreement will be counted as a single shareholder. The Board of Directors may approve exceptions to these restrictions on registration, observing the principle of responsible judgement. No such exceptions were granted during the period under review.
CONVERTIBLE BONDS AND OPTIONS — No convertible bond issues were outstanding on the balance sheet date. The Swiss Life Holding 0.625% issue (2004–2010) amounting to CHF 317 000 000 expired on 10 June 2010; the unconverted portion of the convertible bond on that day was repaid.
On the balance sheet date neither Swiss Life Holding nor the Group companies had granted options on rights to participate in Swiss Life Holding.
COMPOSITION — In the year under review, no member of Swiss Life Holding’s Board of Directors exercised any duties relating to operational management within the Swiss Life Group. Furthermore, no such duties were exercised by any Board members during the three financial years preceding the reporting period, with two exceptions: Rolf Dörig, who held the position of Chairman of the Group’s Corporate Executive Board until his election to the Board of Directors in May 2008, and Carsten Maschmeyer, who was Co-CEO of AWD until March 2009.
Council – Züblin Real Estate Holding Ltd, Zurich, Member of the Board of Directors
AL Volker Bremkamp joined Albingia Versicherungs AG in Hamburg (a subsidiary of Guardian Royal Exchange plc, London) in 1963, receiving his qualifications as an insurance expert in 1965. Between 1969 and 1971 he was employed by various insurance companies and brokers in London and Paris. He returned to Albingia Versicherungs AG, Hamburg, in 1971, serving as an Executive Director from 1978 to 1989 and, from 1989 to 2000, as Chief Executive Officer of Albingia Lebensversicherungs AG and of Albingia Versicherungs AG.
founded HolsboerMaschmeyer NeuroChemie GmbH together with Professor Florian Holsboer, Director of the Max Planck Institute of Psychiatry in Munich.
Other appointments: – AWD Children’s Aid Foundation, Hanover, Chairman of the Election Committee – International Neurobionics Foundation, Hanover,
Other appointments: – Vontobel Holding Ltd, Zurich, Member of the Board of Directors – Bühler AG, Uzwil, Member of the Board of Directors – Zurich Chamber of Commerce, Chairman – Unitectra Ltd, Zurich and Berne, Chairman of the
She studied law at Georgetown University, Washington DC, earning an LL.M., 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 Berne, and practising business and media law in Zurich, Washington DC 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.
INTERNAL ORGANISATIONAL STRUCTURE — In accordance with the Articles of Association, the Board of Directors has issued Organisational Regulations setting forth the internal organisational structure and the duties and competencies of the Board of Directors, the Board of Directors’ committees, the Chairman of the Board of Directors and the Corporate Executive Board. The Organisational Regulations are reviewed regularly and adjusted where necessary, most recently on 8 May 2009. They are available on the internet at www.swisslife.com, “About Swiss Life” area, “Organisation” section (www.swisslife.com/ en/organisation).
advisory capacity. Further members of the Corporate Executive Board and in-house or external specialists may also be invited to attend. The Chairman’s Committee meets at least six times a year.
The NCC consists of at least three members, all of which are independent members of the Board of Directors. A Board of Director member is regarded as being independent if he has not exercised any operational management role within the Swiss Life Group for at least three years and has no or only a minor business relationship with the Group.
Seven (ordinary and extraordinary) meetings of the Investment and Risk Committee were held in the year under review. Each session lasted for around two hours on average. The attendance rate was 96%. The Chairman of the Board of Directors attended four meetings of the Investment and Risk Committee. The Group CEO was present at all meetings, with the exception of one. The Group CFO and Group CIO attended all meetings.
Generally, the Group CFO and the Head of Corporate Internal Audit attend the Audit Committee meetings or parts of the meetings in an advisory capacity. The Group CEO may attend the meetings of the Audit Committee (without voting rights). Representatives from the
Swiss Life — Financial Statements 2010 external audit services are also regularly invited (cf. also “Supervisory and control instruments vis-à-vis the auditors ”, page 31). In addition, further members of the Corporate Executive Board or in-house specialists may also be invited to attend. The Audit Committee meets at least four times a year. The frequency of meetings depends on the financial budgeting and reporting process.
The Articles of Association of Swiss Life Holding can be found at www.swisslife.com, “Shareholders & Analysts” area, “Swiss Life Share” section, “Articles of Association” subsection (www.swisslife.com/association). The Organisational Regulations are also published on Swiss Life’s internet site in the “About Swiss Life” area, “Organisation ” section (www.swisslife.com/en/organisation).
AL Ivo Furrer graduated in law from the universities of Zurich and Fribourg and earned his PhD with a thesis on employee benefits. He joined Winterthur
On 1 September 2008 Ivo Furrer joined the Swiss Life Group as Member of the Corporate Executive Board and Chief Executive Officer Switzerland (CEO Switzerland).
AL Charles Relecom graduated from the University of Namur (Belgium) with a degree in mathematics and went on to gain a master’s degree in Actuarial Science at the University of Louvain (Belgium). He began his career in 1978 as Chief Actuary and Chief Technology Officer at Swiss Life in Belgium. In 1984 he moved to the head office in Zurich, where he played a significant role in setting up the International Division. From 1988 to 1994 he worked for ELVIA Life as Director of Sales in the key accounts business. In 1994 he moved to «La Suisse» and, in 1998, was appointed CEO of the non-life business and Chief Actuary. In 2000 he became the CEO of «La Suisse», a position he held until 2005 when the company was integrated into the Swiss Life Group. Following the integration, Charles Relecom returned to Swiss Life in Belgium, initially as the CEO of Zelia S.A. and, from February 2006, as CEO for the entire Belgian business.
On 1 July 2008 Charles Relecom was appointed Chief Executive Officer France (CEO France) of the Swiss Life Group and Member of the Corporate Executive Board.
Fixed Income at Winterthur Group in 2001, where he played a key role in the further strategic development of its asset management.
COMPENSATION POLICY PRINCIPLES — The Board of Directors as a whole is responsible for establishing the guidelines on the Group’s compensation policy (incl. bonus and equity compensation plans) and on 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 must be competitive and in line with the market environment. The individual overall compensation takes into account the employee’s professional skills, engagement and personal performance. It is made up of a basic salary, a variable bonus based on achievement of the annual objectives, which is generally paid in cash and possibly in shares, as well as a deferred mid- to long-term salary component (equity compensation plan) and contributions to occupational provisions and risk insurance.
Personal performance based on the specified quantitative and qualitative objectives is assessed annually in the employee appraisal procedure implemented throughout the Group (Group Performance System, GPS). Two assessment elements/models are used for determining objectives and evaluating performance: The Group Objectives Model (GOM) relating to qualitative and quantitative objectives and the Group Competency Model (GCM) for measuring and assessing individual competencies.
The Board of Directors as a whole sets the level and distribution of the variable compensation pool for all employees on the basis of its compensation policy guidelines upon a proposal by the Nomination and Compensation Committee. When determining the level of the allocation to the compensation pool, it takes into consideration the annual result, as well as the degree of achievement of medium-term planning targets. The Board of Directors as a whole is also responsible for determining the individual compensation of members of the Corporate Executive Board. It carries out a semi-annual performance assessment of all members of the Corporate Executive Board, based on preparatory work by the Nomination and Compensation Committee. In addition, current aspects of HR policy and in particular succession planning are regularly discussed at meetings of the Board of Directors.
Pursuant to the regulations of the 2008, 2009 and 2010 equity compensation plans, two objective performance criteria have been defined, each weighted at 50%. The first criterion is the Total Shareholder Return on the Swiss Life Holding share (TSR Swiss Life Holding), requiring a performance of over 20% for a subscription right to shares to arise after three years. The second criterion involves a comparison of the Swiss Life Holding share’s TSR with the TSRs of the shares of the companies included in the Dow Jones STOXX 600 Insurance Index
1 Incl. cash bonus of CHF 4 475 000 for the 2010 financial year, determined at the beginning of 2011. 2 Incl. cash bonus of CHF 3 550 000 for the 2009 financial year, determined at the beginning of 2010.
Swiss Life — Financial Statements 2010 2 “Closely linked parties” are natural persons and legal entities pursuant to Art. 678 of the Swiss Code of Obligations that have close personal, economic, legal or de facto ties with members of the governing body. This typically includes spouses, minor children, companies controlled by members of the governing body, and natural or legal persons serving the members of the governing body in a fiduciary capacity.
At Corporate Executive Board level, the amount of the bonus depends 60% directly on the company’s success. As mentioned above, the following key figures are included in the Key Performance Indicators (KPIs) used to assess company success: The annual profit, costs, business volume, return on equity and solvency, as well as the profitability of in-force and new business and margin performance. The weighting of the individual KPIs is determined by the Board of Directors. 40% of the bonus is based on Corporate Executive Board members’ achievement of specified personal goals. On the one hand, these personal goals are linked back to the company’s success, in that each Corporate Executive Board member has to meet personal quantitative objectives contributing to the company’s success in relation to his division. On the other hand, the personal goals cover qualitative factors, namely project targets, risk management and compliance goals, as well as requirements relating to leadership and to supporting and further developing corporate culture.
No variable compensation in shares was granted to the members of the Corporate Executive Board for the 2010 financial year. As described, they are participating in the current equity compensation plan.
Details on the company’s benefit expenditure can be found in the Consolidated Financial Statements (Notes 24 and 31) and the Notes to the Swiss Life Holding Financial Statements. For reasons of transparency, information on the following benefits is provided here.
For Group CEO Bruno Pfister, the regular employer contribution in the period under review totalled CHF 234 220. This amount comprises the annual contribution of CHF 185 239 and a supplementary payment of CHF 48 990 in accordance with the pension fund regulations due to an increase in insured salary.
In addition to compensation in the form of cash, shares and contributions to occupational provisions, Bruno Pfister was allocated 6500 future subscription rights in the form of Performance Share Units (PSUs) as part of the three-year equity compensation plan. These entitle him to Swiss Life Holding shares as at 1 April 2013, provided that the relevant requirements have been satisfied at that point (deferred compensation). Depending on how the two defined performance criteria develop, the number of PSUs can increase by a factor of 2 or drop to zero. On the allocation date of 1 April 2010, the fair value of one PSU was CHF 149.98.
Taking into consideration the mathematical value of the PSUs allocated in 2010, which came to CHF 974 870, Bruno Pfister’s total compensation for 2010 amounted to
In 2009 Bruno Pfister was allocated 6500 future subscription rights in the form of Performance Share Units (PSUs). On the allocation date of 1 April 2009, the fair value of one PSU was CHF 51.22. Taking into consideration the mathematical value of the PSUs allocated in 2009, which came to CHF 332 930, Bruno Pfister’s total compensation for 2009 amounted to CHF 2 687 284.
CLAUSES ON CHANGES OF CONTROL — No contractual provisions exist in favour of the Board of Directors or the Corporate Executive Board with regard to control of the company.
VIS THE AUDITORS — The Audit Committee maintains regular contact with the external auditors. It evaluates the independence of the external auditors and identifies possible conflicts of interest. It also examines the terms and conditions of the external audit mandates and assesses the audit plan and strategy for the year in question.
STRATEGIC RISK MANAGEMENT — Swiss Life uses various analytical methods to ensure that strategic risks are dealt with adequately in today’s very demanding economic environment. In its strategic risk management process, Swiss Life incorporates all the information on risks and the risk/return characteristics in its strategic decisions. An understanding of the interplay of individual risks is essential in order to take due account of the factors influencing risks during strategy development so that these factors can be steered appropriately.
Swiss Life’s market consistent embedded value reporting follows the European Insurance CFO Forum Market Consistent Embedded Value Principles©1. The cost of credit risk relating to bonds is calculated and disclosed in addition to the Principles’ mandatory requirements. Further details on the MCEV methodology are given in section 4.
Covered business includes all of Swiss Life’s life, health and pension business as well as assumed external reinsurance, with the exception of Swiss Life Insurance Solutions AG and Swiss Life Products (Luxembourg) S.A., which are not yet material for MCEV purposes. MCEV (and Group MCEV) are net of ceded external reinsurance. Included are namely operations in Switzerland, France, Germany, Luxembourg, Liechtenstein and Singapore. All other businesses such as investment management and AWD are generally included in the non-covered business at their IFRS net asset values, with the exception of France, where they are included in the covered business.
The net asset value is split between: – the required capital (RC): the amount of capital provided by shareholders deemed necessary to run the business under the chosen definition (see section 4.1)
For more details about the MCEV components, see section 4 on methodology. Please note that the notion of certainty equivalent value is equivalent to the notion of present value of future profits in the CFO Forum Principles.
All results and components are shown in CHF million. Rounding differences may occur.
The following table shows MCEV key results as at 31.12.2010 compared to the results as at 31.12.2009: In CHF million Value of Net asset value in-force business Total Total
Drivers for the increase are the profitable new business, margin management measures and favourable demographic experience.
The following graph and table show the MCEV by components, together with the previous year’s figures:
Time value of financial options and guarantees –1 912 –1 984
The time value of financial options and guarantees (TVOG) is calculated as the difference between the market consistent expected present value of future shareholder profits with all stochastic economic scenarios and the certainty equivalent value. The TVOG therefore represents the additional cost of financial options and guarantees in excess of the intrinsic value which is already allowed for in the certainty equivalent scenario. As a consequence of the measures mentioned, the TVOG decreased slightly despite adverse changes in the economic environment. The TVOG also includes the cost of credit risk related to investments in corporate bonds. The amount of credit risk on group level is CHF –469 million for 2010 compared to CHF –476 million for 2009.
The value of new business (VNB) represents the value added by new business written in 2010. It is calculated consistently with the methodology and assumptions used for the business in force. The value of new business is calculated as the effect on MCEV from writing new business, i.e., it is the difference between the MCEV at year end and the MCEV which would have resulted, had no new business been written during the year.
This table shows the value of new business together with the new business premium volumes and margins. Within MCEV reporting, PVNBP is used to measure the premium volume of new business. For better comparison with previous disclosures, the measure of APE is also shown. The annual premium equivalent is defined as new annual premiums plus 10% of new single premiums. The present value of new business premiums is equal to new single premiums plus the present value of new annual premiums which is calculated on the same assumptions as the value of new business.
New business values as well as new business margins are significantly higher than in the previous year. Main drivers are pricing measures, changes in business mix, expense reductions, experience driven changes to demographic assumptions, and changes to the profit sharing approach. Negative effects resulted from capital market conditions and currency effects, notably the weakened euro.
The table below shows the change in Group MCEV split by components from 31 December 2009 to 31 December 2010.
The operating MCEV earnings for non-covered business correspond mainly to results from Swiss Life Holding, AWD, Investment Management and insurance business not within the scope of covered business. The strong operating earnings compared to 2009 originate mainly from covered business. Non-covered business also contributed to the increase.
The other movements in IFRS net equity (non-covered business only) include the change in unrealised capital gains and losses and currency exchange rate effects on goodwill.
The table below shows the analysis of earnings for the covered business in 2010:
Expected existing business contribution (reference rate) – 10 17 27 80
VALUE OF NEW BUSINESS contributions from free surplus and required capital sum up to the new business strain of CHF –124 million (2009: CHF –133 million). This represents the shareholders’ share in acquisition expenses for new business. The VIF-component of CHF 333 million (2009: CHF 255 million) is the value of future risk-adjusted profits from new business.
ERENCE RATE) shows the unwinding of discount on all value of in-force components with reference rates as at start of year. Additionally the notional interest on the components of the net asset value is included.
EXCESS OF REFERENCE RATE) represents the additional contribution to MCEV by taking into account investment returns for the reporting period expected at the beginning of the period over and above the initial reference rates for the period. Also releases from the period’s contribution to the time value of financial options and guarantees and cost of residual non-hedgeable risks are included. In Swiss Life’s previous MCEV reporting, this step was not separated; its effects were part of economic variances. The expected business contribution depends on asset allocation and capital market conditions at start of the year.
income over and above the reference rates are no longer included here – as was the case in Swiss Life’s previous MCEV reporting – but in a preceding step. These do not contribute directly to economic variances anymore. Therefore, effects from deviations between actual and expected investment returns are included here. Drivers are lower reference rates and higher swaption implied volatilities compared to the 2009 closing. Foreign exchange rate fluctuations from a market unit’s assets and liabilities in foreign currencies also contribute to economic variances.
CLOSING ADJUSTMENTS represent mainly currency exchange rate translation effects resulting from the consolidation in Swiss francs.
Economic 100 bp increase of interest rates (reference rates) 473 10% 28 13%
100 bp decrease of interest rates (reference rates) –824 –17% –56 –27%
25% decrease in equity / property implied volatilities 227 5% 10 5%
Demographic 5% proportionate increase in mortality rates (death cover) –14 –0% –3 –1%
–2 090 ments, which are derived from results based on local statutory accounting rather than on IFRS. Therefore local balance sheets and profit and loss accounts are the starting point for the projections. The net asset value (of assets not backing liabilities) is based on the local balance sheet, but adjusted at market value.
RECONCILIATION OF IFRS NET ASSETS TO GROUP MCEV AS AT 31 DECEMBER 2010
SWITZERLAND — Swiss Life’s main business in the Swiss market is group life business. The individual business includes traditional savings, risk and annuity products, as well as modern savings and retirement products with flexible guarantees. Swiss Life’s own sales force plays the major role in distribution, followed by AWD. The business for assumed external reinsurance is included in the covered business as of this year.
FRANCE — Insurance products include savings, annuity, and risk products as well as health insurance products. New business for life insurance focuses on multi-support products, combining traditional savings and unit-linked components. The main distribution channels are independent financial advisors and private banking.
Frictional costs of required capital –243 –105 –63 –14 –425 1 The value for France includes CHF 93 million in goodwill and intangible assets orginating from the non-life and non-health insurance operations.
FRANCE — In local currency, the net asset value remained at previous year’s level despite a considerable new business strain and regulatory changes, such as retirement age reform and specific taxation, that lead to a reduced free surplus.
The higher TVOG of Swiss Life France at 31.12.2010 compared to the one reported a year ago, is mainly a consequence of higher interest rate volatilities and a changed strategic asset allocation, which is partly offset by hedges.
As the health business does not contain financial options and guarantees, it does not contribute to the time value of financial options and guarantees.
GERMANY — The negative free surplus stems from the assumed required coverage of 150% of statutory solvency. The free surplus would be positive at a 100% requirement of statutory solvency.
The value in-force increased considerably despite deteriorating capital market conditions, partly due to profitable new business, expense reductions and improved disability experience.
INSURANCE OTHER — The contributions of PPLI business to the total MCEV of Insurance Other accounts for about 80% of the value.
The negative net asset value is explained by not taking into account the goodwill for the acquired insurance company CapitalLeben as part of Liechtenstein. The business in force of PPLI contains only very small financial guarantees, so the TVOG is negligible.
PRESENT VALUE OF NEW BUSINESS PREMIUMS (PVNBP) 3 819 4 838 1 707 4 242 14 607
Worsening economic conditions were successfully counteracted by margin management including pricing initiatives and lower guaranteed interest rates resulting in better new business margins. In addition, assumed external reinsurance contributed positively.
GERMANY — The value of new business as well as the new business margin for the German operations have increased compared with the values reported for 2009. The higher volume of risk and supplementary disability insurance contracts written, the improved disability experience and the reduced expense base contributed substantially to this enhancement as well as a change in the profit sharing approach.
Expected existing business contribution (reference rate) 11 12 3 1 27
All market units contributed to the value creation with a positive value of new business and favourable impacts from margin management: The expected business contribution of CHF 864 million was increased to a total of
CHF 2 301 million operating MCEV earnings. The deteriorating capital market environment reduced MCEV earnings by CHF 979 million.
FRANCE — One driver of the operating MCEV earnings is the value of new business which has been described above.
GERMANY — The operating return is driven by lower expenses, an experience driven update of biometric assumptions and a change to the policyholder participation approach.
Furthermore, the low interest rates experienced triggered a reassessment of the anticipated policyholder surrender behaviour in such environments.
Much of PPLI’s business is not written in Swiss francs but in other currencies, especially in EUR and USD. Compared to 2009, the particularly strong Swiss franc resulted in a lower value of assets under control. Since this is one of the main drivers for PPLI’s value in force, a negative economic variance resulted.
Closing adjustments have a positive impact. A capital increase is partly offset by the currency exchange rate effect from Corporate Solutions (Luxembourg).
Swiss Life — Financial Statements 2010 4 Methodology 4.1 MCEV COMPONENTS FOR COVERED BUSINESS
The net asset value is further split between the required capital (RC) and the free surplus (FS).
The amount of required capital disclosed is presented from a shareholders’ perspective and thus is net of funding sources other than shareholder resources (such as subordinated loans or unallocated bonus reserves).
In the MCEV Principles, the term present value of future profits (PVFP) is used instead of certainty equivalent value.
In this scenario, future market returns are determined as the forward rates implied in the reference rates at the valuation date. Discounting is done at the same reference rates. The certainty equivalent value includes that part of the value of financial options and guarantees which materialises in the underlying scenario.
For such products or funds, a stochastic projection has been run allowing for the range of possible scenarios for financial markets. The TVOG is calculated as the difference between the average present value of shareholder cash flows (profits or losses) and the certainty equivalent value, plus the cost for credit risk (see remarks on credit risk below). The TVOG therefore represents the additional market price of those financial options and guarantees in excess of the intrinsic value which are already allowed for in the certainty equivalent value.
The initial capital for the CNHR has been calculated using the standard approach within the Swiss Solvency Test applied to Swiss Life’s MCEV framework. Therefore the corresponding economic capital is calculated by aggregating the stand-alone economic capital that corresponds to non-hedgeable risk factors, notably the following: – mortality – longevity – disability/morbidity – recovery rates – capital options – lapses – expenses
FRICTIONAL COSTS OF REQUIRED CAPITAL (FC) — The frictional costs of required capital for the covered business are defined as the present value of the costs incurred by shareholders due to investment via the structure of an insurance company (compared to direct investment as
Swiss Life — Financial Statements 2010 individuals), such as tax on profits generated by the insurance company or the costs of asset management. Other potential frictional costs such as agency costs or financial distress costs have not been taken into account in the frictional costs of required capital.
All assets and liabilities reflect the actual positions as of the valuation date.
HYBRID DEBT — The going-concern assumption stipulates that for MCEV the hybrid debt allocated to the covered business is valued assuming that the coupons and nominal are paid with certainty. The hybrid debt is valued in a market consistent way by discounting the corresponding liability cash flows using the reference rates without any credit spreads. This leads to a difference to the fair value reported in the Notes to the Consolidated Financial Statements.
The MCEV is calculated using a risk-neutral valuation, based on market consistent and arbitrage-free stochastic economic scenarios. Under this approach, the key economic assumptions are: – the reference swap rates – interest rate and equity-type volatilities – correlations between the economic risk factors – inflation rates
Anticipated dynamic management actions and policyholder behaviour mainly concern the following areas: profit sharing for participating life businesses, asset allocation and realisation of gains and losses, and assumed policyholder behaviour with regards to their contractual options. They are dependent on the time period, economic scenario considered, local regulations and type of business.
Look-through adjustments are applied on the asset management services and corporate centre costs. The future profits or losses taken into account for this adjustment are those linked to the insurance business, after “legal quote” and taxes.
For future MCEV publications, other units will be included under covered business as soon as their MCEV is significant.
The market consistent calibration of the economic scenarios is based on traded market instruments at the valuation date wherever possible. This includes nominal and real yield curves, interest rate volatility and equity volatilities. Where market data has not been available or the market has not been liquid enough, the model calibration has been based on best estimate assumptions. This notably includes correlations, exchange rate volatilities and real estate volatility.
5.1.1 REFERENCE RATES — The reference rates used for the calculation of the MCEV 2010 are based on the swap rates as at 31 December 2010.
The MCEV principles permit the use of liquidity premiums. Given the continued development of a suitable methodology to quantify liquidity premiums, Swiss Life decided to set liquidity premiums at zero for the calculation of the MCEV 2010 and 2009.
Economy 1 year 2 year 5 year 10 year 15 year 30 year 5.1.1.2 SWAP RATES AS AT 31 DECEMBER 2009
The interest rate volatilities are based on implied volatilities of at-the-money receiver swaptions. The tenors are 20 years for the euro and the US dollar and 10 years for the Swiss franc.
Economy 1 year option 2 year option 5 year option 10 year option 15 year option 30 year option 1 n/a: not available
5.1.2.3 EQUITY OPTION IMPLIED VOLATILITIES AS AT 31 DECEMBER 2010 AND 31 DECEMBER 2009
Economy 1 year 2 year 5 year 10 year 15 year 30 year
For fixed interest assets, the “real world” investment return assumptions are based on the gross redemption yield on the assets less a rating-dependent allowance for expected defaults derived from historic data.
Property (Switzerland and Europe) 200 bp n/a1 1 n/a: not applicable 5.2 TAXATION AND LEGISLATION
The Board of Directors of Swiss Life Holding AG is responsible for the preparation of the Embedded Value Report in accordance with the MCEV Principles as described in Section 1. Our responsibility is to express an opinion on the Embedded Value Report based on our audit.
This report has been prepared solely for the Board of Directors of Swiss Life Holding AG in accordance with the terms of our engagement letter. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown except where explicitly agreed by our prior consent in writing. This report does not extend to any financial statements of Swiss Life Holding AG.
CERTAINTY EQUIVALENT SCENARIO — Economic scenario under which asset returns are equal to the reference rates.
CFO FORUM — The CFO Forum is a high-level discussion group formed and attended by the Chief Financial Officers of major European listed, and some non-listed, insurance companies. Its aim is to discuss issues relating to proposed new accounting regulations for their businesses and how they can create greater transparency for investors. It published the MCEV Principles together with a detailed Basis for Conclusions on 4 June 2008 and an amendment in October 2009.
COVERED BUSINESS — Covered business includes all of Swiss Life’s major life, health and pension business as well as assumed external reinsurance. In the case of France, all business operations are included in the covered business.
NET ASSET VALUE (NAV) — The net asset value is the market value of assets attributed to the covered business over and above that required to back liabilities for covered business.
OPERATING MCEV EARNINGS — Change in MCEV and in Group MCEV in the reporting period after initial and closing adjustments, economic variances and other nonoperating variances, as well as other movements in IFRS net equity.
REQUIRED CAPITAL (RC) — The required capital is the market value of assets, attributed to the covered business over and above that required to back liabilities for covered business, whose distribution to shareholders is restricted based on statutory solvency.
TEES (TVOG) — The TVOG represents the additional market price of those financial options and guarantees in excess of the intrinsic value of options and guarantees which is already allowed for in the certainty equivalent value.
VALUE OF IN-FORCE BUSINESS (VIF) — The value of inforce business represents the net present value of future profits emerging from operations and assets backing liabilities, after accounting for TVOG, CNHR and FC.
VALUE OF NEW BUSINESS (VNB) — The value of new business reflects the additional value to shareholders created by writing new business during the reporting period.
Consolidated Financial Statements 66 Consolidated Statement of Income 67 Consolidated Statement of Comprehensive Income 68 Consolidated Balance Sheet 70 Consolidated Statement of Cash Flows 72 Consolidated Statement of Changes in Equity 73 Notes to the Consolidated Financial Statements 73 1 General Information 73 2 Summary of Significant Accounting Policies 73 2.1 Basis of preparation 73 2.2 Changes in accounting policies 74 2.3 Consolidation principles 74 2.4 Foreign currency translation and transactions 75 2.5 Cash and cash equivalents 76 2.7 Financial assets 77 2.8 Impairment of financial assets 78 2.9 Investment property 79 2.10 Insurance operations 82 2.11 Property and equipment 83 2.13 Investment management 83 2.14 Commission income and expense 83 2.15 Intangible assets 85 2.16 Impairment of non-financial assets 85 2.17 Income taxes 85 2.18 Assets held for sale and associated liabilities 85 2.19 Discontinued operations 86 2.20 Financial liabilities 86 2.21 Employee benefits 87 2.22 Provisions and contingent liabilities 87 2.23 Treasury shares 87 2.24 Earnings per share 87 2.26 Forthcoming changes in accounting policies 89 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies 93 4 Segment Information 103 5 Risk Management Policies and Procedures 103 5.1 Contracts for the account and risk of the Swiss Life Group’s customers 104 5.2 Risk budgeting and limit setting 105 5.3 Asset and liability management (ALM) 106 5.4 Financial risk management objectives and policies 116 5.5 Insurance risk management objectives and policies
Impairment of property and equipment and intangible assets 17, 18 –5 –24
Revaluation surplus on owner-occupied property transferred to investment property –18 –
Financial liabilities at fair value through profit or loss 10 17 571 16 001
Premiums, policy fees and deposits received, net of reinsurance 13 868 13 959
Benefits and claims paid, net of reinsurance –12 781 –13 412
NET CASH FLOWS FROM OPERATING ACTIVITIES BEFORE INCOME TAX –730 –126
Disposals of subsidiaries, net of cash and cash equivalents 29 0 38
CASH AND CASH EQUIVALENTS AS AT END OF PERIOD 6 940 8 683
Cash and cash equivalents for the account and risk of the Swiss Life Group’s customers 2 333 1 910
Equity-settled share-based payments – 1 – – – – 1 0 1
As approved by the shareholders at the General Meeting of Swiss Life Holding Ltd (hereinafter referred to as “Swiss Life Holding”) on 6 May 2010, a reduction in par value of CHF 2.40 per registered share was effected in 2010. The payout took place on 29 July 2010 and amounted to CHF 77 million.
THE CURRENT PERIOD — In January 2008, the International Accounting Standards Board issued a revised version of IFRS 3 Business Combinations and related revisions to IAS 27 Consolidated and Separate Financial Statements. One of the main changes is an option which has been added to IFRS 3 Business Combinations to permit the acquirer in business combinations in which control is achieved without buying all of the equity of the acquiree to recognise 100% of the goodwill, not just the acquirer’s portion of the goodwill (“full goodwill method”). The revised Standard requires that acquisition-related costs are expensed. Another change relates to partial disposals of an investment in a subsidiary while control is retained and to the acquisition of additional shares in a subsidiary after control was obtained. Such transactions are accounted for within equity. The amendments are effective for annual periods beginning on or after 1 July 2009. IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Revised) have been applied prospectively with effect from 1 January 2010 and therefore there is no impact on comparative figures in the 2010 consolidated financial statements.
In July 2008, the International Accounting Standards Board published Eligible Hedged Items (an amendment to IAS 39 Financial Instruments: Recognition and Measurement ). The amendment provides clarification on how hedge accounting should be performed with regard to identifying inflation as a hedged risk and hedging with options. The amendment is effective for annual periods beginning on or after 1 July 2009. No impact on the consolidated financial statements arose from the adoption of this amendment.
– IFRS 2 Share-based Payment – Group Cash-settled Share-based Payment Transactions
Non-controlling interest is the part of profit or loss and net assets of a subsidiary attributable to equity interest that is not owned, directly or indirectly, through subsidiaries by the parent. The amount of non-controlling interest comprises the proportion of the net fair value of the identifiable assets, liabilities and contingent liabilities not attributable, directly or indirectly, to the parent at the date of the original acquisition and the proportion of changes in equity not attributable, directly or indirectly, to the parent since the date of acquisition.
FOREIGN CURRENCY TRANSACTIONS — For individual Group entities, foreign currency transactions are accounted for using the exchange rate at the date of the transaction. Outstanding balances in foreign currencies at year-end arising from foreign currency transactions are translated at year-end exchange rates for monetary items while historical rates are used for non-monetary items. Those non-monetary items in foreign currencies recorded at fair values are translated at the exchange rate on the revaluation date.
Cash amounts represent cash on hand and demand deposits. Cash equivalents are primarily short-term highly liquid investments with an original maturity of 90 days or less.
All derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair value as assets when favourable to the Group and as liabilities when unfavourable. Gains and losses arising on remeasurement to fair value are recognised immediately in the income statement, except for derivatives that are used for cash flow hedging.
Derivatives embedded in other financial instruments or in insurance contracts which are not closely related to the host contract are separated and measured at fair value, unless they represent surrender options with a fixed strike price embedded in host insurance contracts and host investment contracts with discretionary participation features. Changes in the fair value are included in income. Derivatives embedded in insurance contracts which are
closely related or which are insurance contracts themselves, such as guaranteed annuity options or guaranteed interest rates, are reflected in the measurement of the insurance liabilities. Options, guarantees and other derivatives embedded in an insurance contract that do not carry any insurance risk are recognised as derivatives.
Derivatives and other financial instruments are also used to hedge or modify exposures to interest rate, foreign currency and other risks if certain criteria are met. Such financial instruments are designated to offset changes in the fair value of an asset or liability and unrecognised firm commitments (fair value hedge), or changes in future cash flows of an asset, liability or a highly probable forecast transaction (cash flow hedge). In a qualifying fair value hedge, the change in fair value of a hedging derivative is recognised in income. The change in fair value of the hedged item attributable to the hedged risk adjusts the carrying value of the hedged item and is also recognised in income.
A financial asset is derecognised when the contractual rights to the cash flows from the financial asset have expired or substantially all risks and rewards of ownership have been transferred or the risks and rewards have neither been transferred nor retained, but control of the asset has been transferred.
OR LOSS (FVPL) — Financial assets at fair value through profit or loss comprise financial assets held for trading and financial assets designated as at fair value through profit or loss. Financial assets which the Group buys with the intention to resell in the near term are classified as held for trading. Financial assets designated as at fair value through profit or loss are irrevocably designated as such when initially recognised. Financial assets are primarily designated as at fair value through profit or loss in the following instances: – Financial assets backing insurance liabilities and liabilities arising from investment contracts for the account and risk of the Swiss Life Group’s customers (contracts with unit-linked features, separate accounts, private placement life insurance) in order to avoid measurement inconsistencies with the corresponding liabilities.
FINANCIAL ASSETS AVAILABLE FOR SALE (AFS) — Financial assets classified as available for sale are carried at fair value. Financial assets are classified as available for sale if they do not qualify as held to maturity, held for trading, loans and receivables or if they are not designated as at fair value through profit or loss. Gains and losses arising
Swiss Life — Financial Statements 2010 from fair value changes, being the difference between fair value and cost/amortised cost, are reported in equity. On disposal of an AFS investment, the cumulative gain or loss is transferred from equity to income for the period. Gains and losses on disposal are determined using the average cost method.
FINANCIAL ASSETS PLEDGED AS COLLATERAL — Transfers of securities under repurchase agreements or under lending agreements continue to be recognised if substantially all the risks and rewards of ownership are retained. They are accounted for as collateralised borrowings, i.e. the cash received is recognised with a corresponding obligation to return it, which is included in other financial liabilities.
between the carrying amount and the new amortised cost value by adjusting the allowance account. The amount of the reversal is recognised in income.
ABLE 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 classified 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 equity and recognised in the income statement. After recognition of an impairment loss, any further declines in fair value are recognised in the income statement, and subsequent increases in fair value are recognised directly in equity.
Subject to certain limitations, the Group uses its existing accounting policies for the recognition and measurement of insurance contracts and investment contracts with discretionary participation features that it issues (including related deferred acquisition costs and related intangible assets) and reinsurance contracts that it holds. The existing accounting policies for recognition and measurement have primarily been based on the requirements of the Generally Accepted Accounting Principles in the United States (US GAAP).
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.
GERMANY — A minimum of 90% of the total investment result less 100% of the minimum guaranteed interest on the policyholder account, a minimum of 75% of the risk result and a minimum of 50% of the positive expense result is allocated to the policyholder.
FINANCE LEASE — If the lease agreement transfers the risks and rewards of the assets, the lease is recorded as a finance lease and the related asset is capitalised. At inception, the asset is recognised at the lower of the present value of the minimum lease payments or fair value and is depreciated over its estimated useful life. The corresponding finance lease obligations are recorded as liabilities.
Revenue consists principally of investment management fees, commission revenue from distribution, sales of investment fund units and custody account fees. Such revenue is recognised when earned, i.e. when the services are rendered.
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities, if applicable, 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.
FIT OR LOSS — Financial liabilities at fair value are irrevocably designated as at fair value at initial recognition. Financial liabilities are designated as at fair value through profit or loss in the following instances: – Financial liabilities for the account and risk of the Swiss Life Group’s customers where the insurance benefits are linked to unit values of investment funds or relate to private placement life insurance.
In December 2010, an amendment to IAS 12 Income Taxes was issued by the International Accounting Standards Board. The amendment is set out in Deferred Tax: Recovery of Underlying Assets. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40 Investment Property. The amendment provides a practical solution to the problem by introducing a presumption that recovery of the carrying amount will normally be through sale. The amendment applies to annual periods beginning on or after 1 January 2012. The Swiss Life Group is currently analysing the impact of these new requirements.
Swiss Life Group is currently analysing the impact of these new requirements.
The following amended Standards and Interpretations are not relevant to the Swiss Life Group: – IFRS 1 First-time Adoption of International Financial Reporting Standards – Severe hyperinflation and removal of fixed dates
– IFRS 1 First-time Adoption of International Financial Reporting Standards – Limited exemption from comparative IFRS 7 disclosures for first-time adopters 3 Critical Accounting Estimates and Judgements in Applying Accounting Policies
– Fair values for derivative financial instruments are obtained from quoted market prices and/or option pricing models as appropriate. Quoted market prices are sourced from well-known price providers such as Bloomberg. Fair values for over-the-counter derivatives are established based on well established valuation models. Market quotes of the input variables are generally used as the parameters for the models. In certain cases these market quotes may be slightly adjusted to better reflect specific market behaviour, e.g. volatility smiles.
– Private equity investments are classified as available for sale and are valued at fair value. The fair values are based on generally accepted valuation techniques. Valuation techniques use a maximum of market inputs and include the use of comparable recent arm’s length transactions, discounted cash flow analysis and other valuation techniques commonly used by market participants. Because of the inherent valuation uncertainty, those estimated fair values may differ significantly from the values that would be used if a ready market for the financial assets existed, and those differences could be material. The responsibility for determining the fair values lies exclusively with the general partner in the partnership. In determining the fair value of fund investments, the partnership considers the funds as transparent holding vehicles. The fair values of the underlying investments are determined using the general partner valuation.
using discounted cash flow calculations. – The fair value of investment contracts and deposits, which are carried at amortised cost, is estimated using discounted cash flow calculations based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. The fair values of demand or savings deposits are equal to the amount payable on demand or the carrying amount. The carrying amounts of variablerate deposits approximate their fair values at the reporting date.
As a Group policy, held-to-maturity and available-for-sale debt securities and loans and receivables are assessed for impairment when a significant decrease in market value related to credit risk arises, namely after a downgrade of a debtor’s rating below single B– after initial recognition (i.e. CCC or lower according to Standard and Poor’s or equivalent) or when payments of principal and/or interest are overdue by more than 90 days.
At each balance sheet date, an assessment is made whether there is objective evidence that an available-forsale 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.
INVESTMENT RETURNS — Assumptions relating to investment returns are based on the strategic asset allocation. From this gross investment return, projected asset
The insurance operations in the Netherlands and Belgium, which were disposed of on 29 April 2008, are presented in the separate segment “Insurance (Discontinued)”.
Banca del Gottardo, Lugano, was disposed of on 7 March 2008. For the purposes of segment reporting, Banca del Gottardo, Lugano, is presented in the separate segment “Banking (Discontinued)”.
The statement of income and the balance sheet for the segments are provided in the following:
Premiums earned on insurance contracts 6 831 2 740 1 814 95
Benefits and claims under investment contracts with discretionary participation –528 –15 – –
Other expenses –99 –274 –35 –41 of which inter-segment –137 –5 –50 –42 of which inter-segment –94 –6 –54 –48
Other expenses –111 –285 –65 –47 of which inter-segment –117 –11 –58 –34 of which inter-segment –73 –13 –56 –40
Financial liabilities at fair value through profit or loss 1 228 312
The Group’s core business is life insurance and pensions. A life insurance and pensions contract represents a longterm promise to the policyholder. To fulfil its future payment obligations to the policyholders, the insurance entities of the Group must be financially sound over an extended period of time. The ability to remain financially sound and strong depends on a number of risk factors. The Group’s risk map can be broadly divided into financial, insurance, strategic and operational risks. All of these risk categories can impact the financial stability of the Group.
Group risk management is responsible for the definition of the group-wide methodology for the measurement of the risks and produces a consolidated risk report which consolidates the main quantitative elements of the risk management of the Swiss Life Group’s operations. Furthermore, Group risk management also produces consolidated views on the operational and strategic risks of the Swiss Life Group.
Net gains/losses on financial assets 8 –4 465 –118 35 0 –4 430 –118
Share of results of associates 6 6 – – 6 6 5.2 RISK BUDGETING AND LIMIT SETTING
Risk capital and exposure limits are defined to control and limit the exposure to these risks. The limit systems and processes are set in a way that the sublimits are not utilised simultaneously in full.
Aspects other than the purely economic view must also be considered in the ALM process, such as regulatory requirements including statutory minimum distribution ratios (“legal quote”), funding ratios, solvency, local accounting rules and International Financial Reporting Standards, liquidity requirements and rating targets. Some of these views may lead to results that are not aligned with the economic approach, but nevertheless need to be taken into account.
PRODUCT DESIGN — The targets of risk management are supported by product design principles. Product design defines which guarantees and benefits are built into a specific product to respond to the demand from and
TOTAL INTEREST-SENSITIVE INSURANCE LIABILITIES 58 135 25 163 108 83 406
Insurance liabilities for the account and risk of the Swiss Life Group’s customers – – – 961
Insurance liabilities for the account and risk of the Swiss Life Group’s customers – – – 742
Most life insurance products with a savings component and investment contracts are subject to minimum guaranteed interest rates. The guaranteed rate differs according to the type of contract. In Switzerland for instance the minimum guaranteed interest rate for the occupational pensions segment (mandatory BVG savings account) stood at 2% in 2010 and will remain at 2% for 2011.
Counterparty risk is managed through the holding of credit default swaps or 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-thecounter 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 exchange-traded derivative.
Swiss Life — Financial Statements 2010 ing their financial strength and also prior to any contract being signed. The general policy of the Swiss Life Group is to reinsure its insurance risks only with counterparties rated A– or above (Standard & Poor’s or equivalent). In exceptional cases, reinsurers with a lower rating may be considered. Additionally, the Group holds substantial collateral under related reinsurance agreements in the form of deposited funds and securities.
In certain countries, specific additional guidelines and rules have been defined locally to monitor credit risk. Such guidelines cover investments in fixed-income securities which are mostly based on the average rating of the issuers (calculated by weighting default probabilities). Minimum and maximum thresholds apply with regard to permitted investments in non-government bonds. For investments in government bonds with a rating lower than AA- (according to Standard & Poor’s or equivalent) and non-government bonds additional exposure limits are in place. For certain businesses, credit risk is monitored and controlled with a risk limit framework whereby maximum limits are reviewed and at least approved annually. The majority of the bond portfolio is invested in government bonds (including supranational and sovereigns) and bonds issued by the financial sector covered by collateral or government guarantees.
Financial assets held to maturity 5 229 6 432 – – 5 229 6 432
Debt instruments pledged as collateral 1 060 330 – – 1 060 330
TOTAL EXPOSURE TO CREDIT RISK 99 272 99 114 8 181 6 997 107 453 106 111
Collateral and credit enhancements primarily consist of property collateral for mortgage loans.
asset allocation. The Group’s hedging arrangements are directed at covering its exposure mainly from an economic perspective. The instruments which the Swiss Life Group uses to hedge exposure may not be perfectly correlated to the related assets, so the Group will still be exposed to losses if the value of the hedge and the value of the underlying asset or liability do not correspond appropriately.
Due to the limitations of the Swiss capital market with regard to liquidity, investments in Switzerland are also made in currencies other than the Swiss franc.
Investment contracts with discretionary participation 8 313 25 45 241 1 925 1 952 4 127
Financial liabilities at fair value through profit or loss 900 – – 951 0 – –
Investment contracts with discretionary participation 8 868 29 51 274 2 130 2 754 3 630
TIES — The table below shows the expected recovery 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 due to be settled within twelve months after the balance sheet date. All other assets and liabilities are classified as non-current.
In CHF million For the account and risk of the Current Non-current Swiss Life Group’s customers Total
Assets held for sale 94 2 – – – – 94 2
Financial assets at fair value through profit or loss 2 381 1 998 2 072 3 258 18 942 16 741 23 395 21 997
Financial assets pledged as collateral 33 – 1 027 330 – – 1 060 330
Financial liabilities at fair value through profit or loss 312 900 – – 17 259 15 101 17 571 16 001
Current income tax liabilities 295 286 – – – – 295 286
UNDERWRITING STRATEGY — Underwriting is the process of selecting and classifying insurable risks. The underwriting strategy attempts to ensure that the risks underwritten are well diversified in terms of type of risk and level of insured benefits. Life insurance underwriting is performed to ensure that the premiums and the general conditions of the insurance policies are consistent with the risks to be insured. The first step in the underwriting process is to determine which individual risks can be accepted. The second step is to place the accepted risks into groups of roughly equivalent levels of risk. Both processes must be conducted objectively and consistently.
The Group sets limits for the acceptance of insurance coverage arising from new and renewal business. Medical selection is part of the Group’s underwriting procedures, whereby premiums are charged to reflect the health condition and family medical history of the applicants. The limits relate to sums at risk, maximum insured losses or present value of premiums at the contract or insured person level. Depending on the type of business and the limit exceeded, the new or renewed contract must be approved by a specific investment and risk committee or senior management. Contracts exceeding the set limits must be tested for profitability according to predefined procedures before approval. Certain contracts which include specific risks relating to derivatives or demographic risk factors for which no reliable data is available must be submitted for approval irrespective of the amount of coverage offered. Insurance coverage exceeding set limits is subject to regular internal reporting requirements. Additionally, it must be ensured that the underwriting practices are in line with local laws.
CURRENT ESTIMATE OF CUMULATIVE CLAIMS 412 378 382 308 309 324 322 334 410 358 3 537
Cumulative payments to date –368 –328 –321 –250 –248 –255 –235 –227 –244 –147 –2 623
LIABILITIES FOR THE CURRENT AND 9 PREVIOUS YEARS 44 50 61 58 61 69 87 107 166 211 914
Acceptance rules for risks are consistent with both the Code des Assurances and the French regulations. Underwriting guidelines and tariffs are reviewed on an annual basis.
Approximately 1.9% of insurance in force from continuing operations in terms of earned insurance premiums was ceded as at 31 December 2010 (2009: 2.0%).
The market consistent embedded value calculations are based on economic scenarios which are calibrated to market conditions at valuation date. Best estimate assumptions were made regarding a number of factors, in particular asset allocation, policyholder participation, development of costs and claims, policyholder behaviour, mortality and morbidity. Business is assumed to be continuing at the same level (going concern) and the current 1 Copyright © Stichting CFO Forum Foundation 2008 cost ratios – adjusted for inflation – are thus assumed to hold good for the future as well. Future costs for maintaining classic solvency capital funded by the shareholders and which underpins the insurance business are charged to the MCEV. The Swiss Life Group calculates the embedded value for all its life and health insurance companies. All other companies are taken into account at their IFRS net asset value. As a consequence, embedded value sensitivities do not affect the value of these companies.
At 31 December 2010, if morbidity had been 5% higher, the embedded value would have been CHF 78 million lower (2009: CHF 107 million lower).
At 31 December 2010, if morbidity had been 5% lower, the embedded value would have been CHF 81 million higher (2009: CHF 105 million higher).
The sensitivity analysis with regard to market risk is as follows: The MCEV calculations of the Swiss Life Group are based on economic scenarios which are calibrated to market conditions at valuation date. At 31 December 2010, if the interest rates had been 100 basis points higher, the embedded value would have been CHF 473 million higher (2009: CHF 982 million higher).
At 31 December 2010, if the equity securities and property implied volatilities had been 25% lower, the embedded value would have been CHF 227 million higher (2009: CHF 302 million higher).
At 31 December 2010, if the euro had weakened by 10% against the Swiss franc, the embedded value of the foreign life and health insurance companies would have been CHF 254 million lower (2009: CHF 249 million lower).
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 as an issuance of shares for no consideration.
In CHF million (if not noted otherwise) Continuing operations Discontinued operations Group
Weighted average number of shares outstanding 31 904 887 31 374 354 – 31 374 354 31 904 887 31 374 354
BASIC EARNINGS PER SHARE FOR THE NET RESULT ATTRIBUTABLE TO EQUITY HOLDERS OF SWISS LIFE HOLDING (IN CHF) 17.46 10.36 – –1.50 17.46 8.86
Net result attributable to equity holders of Swiss Life Holding 557 325 – –47 557 278
Assumed conversion of convertible bonds – 201 113 – – – 201 113
DILUTED EARNINGS PER SHARE FOR THE NET RESULT ATTRIBUTABLE TO EQUITY HOLDERS OF SWISS LIFE HOLDING (IN CHF) 17.37 10.33 – –1.50 17.37 8.83 7 Premiums, Policy Fees and Deposits Received
Deposits received under insurance and investment contracts 7 914 7 846
NET EARNED PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 19 965 19 981
Swiss Life — Financial Statements 2010 8 Details of Certain Items in the Consolidated Statement of Income
Financial assets designated as at fair value through profit or loss 57 445
Financial liabilities designated as at fair value through profit or loss 11 –8
Financial instruments for the account and risk of the Swiss Life Group’s customers 1 24
TOTAL NET GAINS/LOSSES ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS 4 250 315
Net benefits and claims under insurance contracts 12 161 11 755
Change in liability for future life policyholder benefits, gross 379 18
Net benefits and claims under investment contracts with discretionary participation 543 129
Derivatives embedded in insurance contracts – – 0 0 6 6
Derivatives designated as fair value hedges 11 10 3 15 822 2 068
Derivatives designated as cash flow hedges 2 – – – 25 –
Interest rate swaps to hedge available-for-sale bond portfolios – – – 2 –17 –45 16 44 – 734
TOTAL DERIVATIVES DESIGNATED AS CASH FLOW HEDGES 2 – 2 – – 25 n/a n/a
In 2010 the Group entered into a forward contract to hedge EUR 300 million of the investment in AWD Holding.
TOTAL FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 23 395 21 997
Share of net assets of investment funds attributable to minority unitholders 312 900
Share of net assets of investment funds attributable to minority unitholders 312 900 312 900
Debt securities previously classified as available for sale 8 831 12 169 –47 –79 8 784 12 090
Investment contracts ceded to reinsurers 34 49 – – 34 49
BALANCE AS AT END OF PERIOD 8 5 16 15 24 20
Gains/losses that would have been recognised in equity if the assets had not been reclassified (excluding adjustments for income tax and policyholder participation) 564 3 159
TOTAL FINANCIAL ASSETS HELD TO MATURITY 33 5 229 6 432 – – 5 229 6 432
Rental income from investment property from continuing operations was CHF 718 million for the period ended 31 December 2010 (2009: CHF 735 million). Operating expenses arising from investment property from continuing operations that generated rental income stood at CHF 153 million for the period ended 31 December 2010 (2009: CHF 158 million). Operating expenses arising from investment property from continuing operations that did not generate rental income during the period stood at CHF 0.1 million for the period ended 31 December 2010 (2009: CHF 0.1 million).
Classification as assets held for sale and other disposals –2 0
Classification as assets held for sale and other disposals –28 –19 –14 –2 –63
TOTAL PROPERTY AND EQUIPMENT AS AT END OF PERIOD 526 26 14 3 569 of which assets held under a finance lease – – 2 – 2
No borrowing costs were capitalised in property and equipment in 2010 and 2009.
The adoption of an amendment to IAS 40 Investment Property and a consequential amendment to IAS 16
Foreign currency translation differences –3 0 –217 –6 –3 0 –223 –6
BALANCE AS AT END OF PERIOD 16 20 1 986 2 299 31 19 2 033 2 338
Classification as assets held for sale and other disposals – –6 0 – –10 –4 –10 –10
Foreign currency translation differences –202 –8 –54 –2 –42 –2 –298 –12
Classification as assets held for sale and other disposals – 6 0 – 7 4 7 10
TOTAL OTHER INTANGIBLE ASSETS AS AT END OF PERIOD 1 588 1 790 233 307 128 141 1 949 2 238
No impairment losses were recognised in 2010 and 2009. A reasonably possible change in the key assumptions would not cause an impairment loss of the goodwill allocated to the “AWD” segment.
CUSTOMER RELATIONSHIPS — As at 31 December 2010 customer relationships comprise customer relationships relating to AWD CHF 186 million (2009: CHF 248 million ), France CHF 25 million (2009: CHF 34 million) and CapitalLeben CHF 22 million (2009: CHF 25 million).
BRANDS AND OTHER — Consists of brands, trademarks, computer software and other intangible assets relating to AWD CHF 103 million (2009: CHF 124 million) and other CHF 24 million (2009: CHF 17 million).
Investment contracts without discretionary participation at amortised cost 33 170 433
In 2010 the change in the carrying amount was primarily due to foreign currency effects. In 2009, hybrid debt was repurchased. The gain on the repurchase, calculated as the difference between the carrying amount and the amount paid to extinguish the liability, amounted to CHF 95 million and was included in other income.
In March 1999, Swiss Life AG privately placed a subordinated perpetual step-up loan comprising three simultaneous advances of EUR 443 million (at a rate of interest of Euribor plus a margin of 1.05%, increasing by 100 basis points as from April 2009), CHF 290 million (at a rate of interest of Libor plus a margin of 1.05%, increasing by 100 basis points as from April 2009) and EUR 215 million (at a rate of interest of 5.3655%, as from October 2009 the rate of interest is an aggregate of Euribor plus a margin of 2.05%). In 2009, Swiss Life AG renounced the right to call the loan on its first call date. Swiss Life AG can next call the EUR 443 million floating rate loan and the CHF 290 million floating rate loan on 6 April 2014 and the EUR 215 million loan on 6 October 2014 or at fiveyear intervals thereafter, upon notice and subject to the consent of the Swiss Financial Market Supervisory Authority.
Amounts in CHF million (if not noted otherwise) Nominal value Nominal value Optional Carrying Carrying in year of issue at 31.12.2010 Interest rate Year of issue redemption amount amount
Swiss Life AG 2 EUR 350 EUR 343 5.000% 2005 2015 421 499
Swiss Life AG EUR 443 EUR 443 +2.050% 1999 2014 553 657
Swiss Life AG EUR 215 EUR 15 +2.050% 1999 2014 19 22 1 Hybrid loan notes granted by ELM B.V. 2 Hybrid bank loan originally granted by J.P. Morgan Bank Luxembourg S.A.
In CHF million Minimum lease payments Present value of minimum lease payments
Claims under life insurance contracts 6 274 6 505 66 81 6 208 6 424
TOTAL INSURANCE LIABILITIES AND REINSURANCE ASSETS 90 305 92 317 365 412 89 940 91 905 of which for the account and risk of the Swiss Life Group’s customers 5 961 742 – – 961 742
Claims incurred, benefits paid and surrenders –72 –206 –2 7 –70 –213
Effect of changes in actuarial assumptions and other movements 89 –23 –2 0 91 –23
Effect of changes in actuarial assumptions and other movements 938 –11 108 –75 830 64
Foreign currency translation differences –3 771 –127 –12 1 –3 759 –128
BALANCE AS AT END OF PERIOD 77 173 78 528 95 101 77 078 78 427
Employees are covered under various funded and unfunded pension plans. When a third party will reimburse some or all of the expenditure for employee benefits and the rights to reimbursement do not qualify as plan assets, they are treated as a separate asset rather than as a deduction from the obligation. In all other respects the treatment is the same as for plan assets. Participation in the various plans is based either on completion of a specific period of continuous service or on the date of hire. Benefits are based on the employee’s credited years of service and average compensation in the years preceding retirement. Annual funding requirements are determined based on actuarial methods or local requirements.
The major part of the defined benefit liability arises from plans covering employees in Switzerland. The primary benefit of those plans is an old-age pension paid out after reaching retirement age. The amount of the pension is defined in relation to final salary and depends on completion of years of service (including years of service purchased by the employee with transferred funds from plans of former employers). There are options for early retirement (with reduction of the pension amount determined with actuarial methods) and for choosing to receive a lump-sum payment instead of a pension. Other benefits comprise survivors’/orphans’ pensions in case of death as well as disability pensions (if disabled before retirement age). The plans are funded by the employer through ordinary contributions determined with actuarial methods where, under Swiss law, a part (generally less than 50% of the total contribution) is deducted from the employee’s gross salary. Further funding comprises mandatory transfers of funds made by new employees from plans of former employers, discretionary contributions by employees (within plan restrictions) and the earnings on the plan assets.
Swiss Life — Financial Statements 2010 old age pension benefits that change from benefit-oriented to contribution-oriented, changes in the level of certain long-term death and disability benefits, and to a reduction in benefits for early retirements. The curtailment gain amounted to CHF 39 million.
Employee benefit liabilities consist of gross defined benefit liabilities –1 965 –2 025 other employee benefit liabilities –84 –96
Present value of defined benefit obligation –2 370 –2 385 –2 292 –2 320 –3 065
The termination benefit liability totalling CHF 0.05 million for the year ended 31 December 2010 (2009: CHF 0.1 million) arose as a result of early retirements.
Related expenses in 2010 were CHF 10 million (2009: CHF 11 million).
In 2009, other income taxes (incl. withholding taxes) of CHF 43 million were mainly based on a transaction at a lower income tax rate compared to the ordinary income tax rate. Positive intercompany effects of CHF 80 million in 2009 were primarily due to tax group effects and to intragroup income and expense.
The increase in the deferred tax asset relating to “Other” in 2010 is primarily due to a change in the French tax legislation.
NET DEFERRED INCOME TAX ASSETS/LIABILITIES –676 65 –63 0 3 –671
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:
Additional provisions made during the reporting period 10 18 28 169
Unused amounts reversed during the reporting period –2 –15 –17 –17
As approved by the shareholders at the General Meeting of Swiss Life Holding (SLH) on 6 May 2010, a reduction in the par value of CHF 2.40 per registered SLH share was effected in 2010 (2009: CHF 5 per registered share). The payout took place on 29 July 2010 and led to a reduction in the share capital of SLH of CHF 77 million (2009: CHF 160 million).
On 7 May 2009, the General Meeting of Shareholders authorised the Board of Directors to cancel the 3 003 500 SLH shares bought back through a second trading line as part of the share buyback programme. The reduction in share capital due to the share cancellation amounted to CHF 51 million.
As at 31 December 2010, the share capital of SLH consisted of 32 081 054 fully-paid shares with a par value of CHF 9.60 each. In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of own shares or shares they represent. As at 31 December 2009, SLH had 32 081 054 registered shares with a par value of CHF 12 per share. Conditional share capital was CHF 22 650 105.60 as at
Share premium comprises additional paid-in capital in excess of the par value (net of transaction costs), gains/ losses on own equity instruments and equity compensation benefits.
Due to the reduction in the par value of CHF 2.40 per registered SLH share in 2010 (2009: CHF 5 per registered SLH share), an amount of CHF 0.4 million was credited to share premium in respect of treasury shares (2009: CHF 1 million).
Gains/losses recognised directly in equity comprise fair value changes of available-for-sale investments, revaluation surpluses on the transfer of owner-occupied property to investment property and the effective portion of the
Revaluation surplus on owner-occupied property transferred to investment property 17 – – – 3 3
Net balance as at 1 January –195 –89 – –356 –445
The gains/losses transferred to the income statement of CHF 232 million in 2010 (2009: CHF 241 million) shown in “Other” relate to financial assets reclassified to loans and receivables.
The requirement that insurers establish – over and above the technical provisions – a buffer against unforeseen events such as higher than expected claims or unfavourable investment results is a key element for the protection of the policyholders. The Swiss Life Group’s Solvency I ratio amounted to 172% as at 31 December 2010 (2009: 164%). Following regulatory requirements, the available solvency margin consists of the IFRS equity and other equity-type instruments such as hybrid capital or unattributed policyholder reserves, minus foreseen dividend payments and intangible assets such as goodwill. The basic formula for the required solvency margin of a life insurance company is 4% of mathematical reserves plus 0.3% of the capital sum-at-risk.
The Swiss Solvency Test (SST) is the new Swiss legislation which governs the future capital requirements of insurance companies. It was enacted in 2006 with the revised Insurance Supervision Law and corresponding Insurance Supervision Ordinance and solely constituted a reporting requirement during a five-year transition period before the capital requirements ultimately became binding from 1 January 2011. The SST is a principles-based framework where the main objective is the alignment of the required capital with the underlying risks of an insurance company. The SST capital requirement underpins a high level of confidence that insurers will meet their obligations towards policyholders even in adverse circumstances.
Economic and statutory capital constraints and the profit target are the main elements determining the risk budgets. Based on these risk budgets, the Corporate Executive Board (Group Risk Committee) defines the risk limits for each country and business unit. Monitoring the limits is performed monthly.
Swiss Life — Financial Statements 2010 30 Assets Held for Sale and Discontinued Operations
Gain/loss on disposal of operations – – – –47 – –47
Income tax expense on the gain/loss on remeasurement to fair value less costs to sell/disposal of operations – – – – – –
Net cash flows from investing activities – – – –33 – –33
SLH shares issued to key management under equity compensation plans (number) – 5 114 – 5 114 2 940
Sales to and purchases from related parties are made at normal market prices. Outstanding balances at year-end are unsecured and settlement is made in cash. There have been no guarantees provided or received for any related party receivables. For the year ended 31 December 2010, 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.
Swiss Life — Financial Statements 2010 33 Fair Value of Financial Instruments
Equity securities available for sale 2 861 369 812 4 042
Debt securities at fair value through profit or loss 2 055 353 226 2 634
Debt securities available for sale 45 166 1 954 46 47 166
Equity securities at fair value through profit or loss 2 018 604 – 2 622
net gains/losses on financial instruments at fair value through profit or loss 1 4 – 0 – –105
net gains/losses on financial instruments at fair value through profit or loss – 4 – 0 – –105
Total gains/losses recognised directly in equity – – 7 – 213 –
Total gains/losses recognised in the income statement are presented in net gains/losses on financial assets – – –24 – –64 –
Financial assets held to maturity pledged as collateral 88 – 83 –
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 2.7 and 12. Securities pledged under other transactions 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.
Swiss Life — Financial Statements 2010 36 Future Minimum Lease Payments under Non-Cancellable Operating Leases – Lessor
Later than 1 year and not later than 5 years 414 489
The Swiss Life Group announced in January 2011 that the entire group life business of Nationale Suisse will be taken over. This transaction is expected to be completed in the first half of 2011 and is subject to approval by the Swiss Financial Market Supervisory Authority (FINMA).
In March 2011 the Swiss Life Group issued hybrid debt of CHF 325 million, first callable in October 2016. The coupon has been fixed for the first five and a half years at 5.25%.
Neue Warenhaus AG, Zürich Ins. CH 100.0% 100.0% CHF 5 000
S.I. Eaux-Vives 2000 AG, Zürich Ins. CH until 24.06.2010 – –
Swiss Life Asset Management AG, Zürich IM 100.0% 100.0% CHF 250
Swiss Life Products (Luxembourg) S.A., Strassen, Branch Zürich, Zürich Ins. Other 100.0% 100.0% – –
Swiss Life Property Management AG, Zürich IM 100.0% 100.0% CHF 250
Swiss Life Selection AG, Zürich Ins. CH until 02.06.2010 – –
Financière du Capitole SAS, Balma Ins. FR 80.0% 80.0% EUR 1 700
Swiss Life Assurances de Biens S.A., Paris Ins. FR 100.0% 100.0% EUR 80 000
Swiss Life Banque Privée S.A., Paris Ins. FR 60.0% 60.0% EUR 36 471
Swiss Life France S.A., Paris Ins. FR 100.0% 100.0% EUR 267 767
Swiss Life Prévoyance et Santé S.A., Paris Ins. FR 99.4% 99.4% EUR 150 000
Allgemeiner Wirtschaftsdienst Gesellschaft für Wirtschaftsberatung und Finanzbetreuung mbH, Hannover AWD 100.0% 100.0% EUR 2 700
AWD Gruppe Deutschland GmbH, Hannover AWD 100.0% 100.0% EUR 1 501
AWD – Versicherungsmakler und -beratungs GmbH, Hannover AWD 100.0% 100.0% EUR 31
AWD Zweite Vermögensverwaltungsgesellschaft mbH, Hannover AWD 100.0% 100.0% EUR 25 1 Segment (Ins. CH = Insurance Switzerland, IM = Investment Management, Ins. Other = Insurance Other, Ins. FR = Insurance France, Ins. DE = Insurance Germany)
Segment 1 Consolidation period Group share Direct share Currency in 1000
Swiss Life Products (Luxembourg) S.A. Branch Germany, München Ins. Other 100.0% 100.0% – –
Swiss Life Vermittlungs GmbH, München Ins. DE 100.0% 100.0% EUR 50 tecis Finanzdienstleistungen AG, Hamburg AWD 100.0% 100.0% EUR 500
Swiss Life Assurance Solutions S.A., Strassen Ins. Other 100.0% 100.0% EUR 6 000
Swiss Life Immo-Arlon S.A., Strassen Other 100.0% 100.0% EUR 1 000
Swiss Life International Pension Fund ASBL, Strassen Ins. Other – – – –
Swiss Life Products (Luxembourg) S.A., Strassen Ins. Other 100.0% 100.0% EUR 65 031
Swiss Life Solutions S.A., Strassen Ins. Other 100.0% 100.0% EUR 22 450 1 Segment (Ins. CH = Insurance Switzerland, IM = Investment Management, Ins. Other = Insurance Other, Ins. FR = Insurance France, Ins. DE = Insurance Germany)
AWD Chase de Vere Corporate Services Limited, Manchester AWD 100.0% 100.0% GBP 0
AWD Chase de Vere Limited (formerly AWD Chase de Vere Wealth Management Limited), London AWD 100.0% 100.0% GBP 23 088
AWD Chase de Vere Limited, London AWD until 04.05.2010 – –
AWD Private Client Trustees Limited, London AWD 100.0% 100.0% GBP 0
Swiss Life Insurance Solutions AG, Branch Italy, Milano Ins. Other from 28.01.2010 100.0% 100.0% – –
European Consulting Group Sp.z o.o., Warszawa AWD 100.0% 100.0% PLN 498
AWD Consultanta Financiara SRL, Târgu Mureş AWD 100.0% 100.0% RON 1
Swiss Life (Liechtenstein) AG, Singapore Branch, Singapore Ins. Other until 27.04.2010 – –
Swiss Life Network (Asia) Pte.Ltd., Singapore Ins. Other 100.0% 100.0% SGD 0
Report of the Statutory Auditor to the General Meeting of Swiss Life Holding Ltd Zurich
As statutory auditor, we have audited the accompanying consolidated financial statements of Swiss Life Holding Ltd, which comprise the consolidated statement of income, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of cash flows, consolidated statement of changes in equity and notes to the consolidated financial statements (pages 66 to 175), for the year ended 31 December 2010.
In our opinion, the consolidated financial statements for the year ended 31 December 2010 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with the International Financial Reporting Standards (IFRS) and comply with Swiss law.
Swiss Life Holding Financial Statements 179 Review of Operations 180 Statement of Income 181 Balance Sheet 182 Notes to the Financial Statements 195 Appropriation of Profit 196 Report of the Statutory Auditor
Review of Operations — Swiss Life Holding generated a profit of CHF 200 million in the 2010 financial year compared with CHF 40 million the previous year.
This marked improvement in annual profit vis-à-vis the previous year was largely achieved as a result of higher dividend payouts by subsidiaries, which climbed from CHF 57 million in 2009 to CHF 197 million in 2010.
A new loan for EUR 60 million was granted to Swiss Life Insurance Finance Ltd in the period under review. The total value of loans made in euros came to EUR 430.5 million as at the end of 2010. As a result of the strong Swiss franc, an unrealised currency loss of CHF 42 million was incurred after hedging operations. Interest received on loans fell to around CHF 40 million due to the lower euro. Since the end of the second quarter of 2010, the EUR/CHF exchange rate risk has been fully hedged with forward contracts.
In order to finance ongoing business operations, Swiss Life Holding made capital increases at Swiss Life International Holding AG of CHF 50 million in 2010. With foreign insurance companies grouped together in Swiss Life International Holding AG, the participation in Swiss Life Products (Luxembourg) SA was transferred to Swiss Life International Holding AG and not recognised through profit or loss. In addition, by merging its stake in Swiss Life Selection Ltd with Swiss Life Asset Management Ltd, Swiss Life Holding continued to streamline Group structure. The total value of participations amounted to CHF 3258 million.
The convertible bond issued in 2004 for CHF 317 million was bought back on 10 June 2010. The outstanding nominal value was CHF 43 million. As a result, Swiss Life Holding is exclusively financed by equity.
Swiss Life Products (Luxembourg) S.A., Strassen – – – EUR 60 031 100.00%
Swiss Life Selection AG, Zürich – – – CHF 250 100.00%
PARTICIPATIONS — The foreign insurance companies are grouped together in Swiss Life International Holding AG. For this reason, equity participation in Swiss Life Products (Luxembourg) SA was transferred to Swiss Life International Holding AG and not recognised in profit or loss. In addition, equity participation in Swiss Life Selection Ltd was merged with Swiss Life Asset Management Ltd.
SHARE CAPITAL — As at 31 December 2010, the share capital of Swiss Life Holding consisted of 32 081 054 fully-paid shares with a par value of CHF 9.60 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 2009, Swiss Life Holding had 32 081 054 registered shares outstanding with a par value of CHF 12 per share. Conditional share capital was CHF 22 650 105.60
LEGAL RESERVES — Legal reserves comprise the general reserves (plus the additional paid-in capital in excess of the par value, net of transaction costs) and the reserve for treasury shares (equivalent in value to own Swiss Life Holding shares held by the Swiss Life Group).
TREASURY SHARES — In the year under review the companies in the Swiss Life Group purchased a total of 11 217 Swiss Life Holding shares at an average price of CHF 106.16. In the same period, they sold 74 819 shares at an average price of CHF 131.82. As at 31 December 2010, the Swiss Life Group held 168 556 treasury shares.
Swiss Life Holding further gives several capital guarantees for a maximum net asset value of CHF 150 million to Swiss Life Funds, CHF 150 million to Swiss Life Funds (Lux) Management Company, CHF 100 million to Swiss Life Products and CHF 400 million to Swiss Life Ltd.
The variable compensation components are linked to the strategic objectives of the Group and the individual divisions, and the associated financial and HR-related targets.
Swiss Life — Financial Statements 2010 cooperation and leadership. The percentage weighting between the individual and/or team performance and the share in the company’s success depends on the position and responsibilities of the function holder.
The share in the company’s success is measured using quantitative Group objectives (Key Performance Indicators, KPIs). The main KPIs, besides the key figures relating to annual profit, costs, business volume, return on equity and solvency, are the profitability of in-force and new business and margin development.
As Chairman of the Board of Directors, Rolf Dörig is affiliated to the employee benefits institutions of Swiss Life for the purpose of occupational provisions. No such affiliation exists for other members of the Board of Directors and no contributions have been made on their behalf.
Swiss Life — Financial Statements 2010 50% of PSU x Factor
Here, too, interim values are determined by linear interpolation. The results (factor TSR Swiss Life Holding multiplied by one half of the PSUs and the factor TSR Outperformance multiplied by the other half) are added up.
Performance requirements for the 2010 equity compensation plan have been increased over the 2008 and 2009 plans to the extent that 35% performance (previously 30%) is required in the TSR Swiss Life Holding for factor 1 and at least 50% performance (previously 40%) for the maximum factor. The maximum factor has in turn been increased from 1.5 or 150% to 2 or 200%.
The value of the PSUs allocated equals the fair value as at 1 April of the year of allocation. It is determined by an independent consultancy company. The value of the PSUs allocated is a maximum of 35% of total compensation and requires that all objectives have been considerably exceeded.
From 2011, participants in the equity compensation plan will be allocated Restricted Share Units (RSUs) instead of PSUs. As with PSUs, 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, but without any additional performance leverage. The attribution of shares after the expiry of the threeyear deferral period will be effected in future on a 1:1 basis (1 RSU = 1 share): the plan is therefore very simple and the process transparent throughout the whole term. The value of RSUs during the three-year term develops linear with the Swiss Life Holding share price and thus systematically corresponds with shareholder interests.
If the participant’s employment relationship is terminated during the term of the RSU, the future subscription rights expire worthless. The plan also provides for adjustment and reclaiming mechanisms (clawback) in the following cases: negative impact of the key figures applying to the allocation of RSUs 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 of the RSU plan.
There was one resignation from the Board of Directors in the period under review. After serving for seven years on the Swiss Life Board of Directors, Rudolf Kellenberger announced his resignation with effect from the General Meeting of Shareholders of 6 May 2010.
There were no personnel changes on the Corporate Executive Board during the year under review.
2010 — The compensation table below shows the variable compensation in blocked shares for the 2010 financial year which was determined by the Board of Directors at the beginning of 2011. It is disclosed on an accrual basis as compensation for 2010.
Additional compen- compen- 2010 finan- ordinary Aggregate Basic compen- sation sation cial year Regular contri- total compensation sation in cash Number Number Amount contributions3 butions (amount)
Rolf Dörig, Chairman of the Board of Directors 960 000 0 960 000 1 970 761 302 399 1 262 399 195 656 – 1 458 055 2 The compensation in shares was, on the one hand, part of the basic compensation (3619 shares in total) and, on the other, variable compensation in shares for the 2010 financial year, allocated in 2011 (1495 shares in total). The allocation of shares was effected on 18.06.2010, 15.12.2010 and 04.03.2011 at economic value, which is equal to the tax value (CHF 95.464, CHF 110.242 and CHF 132.492 respectively), taking into account the blocking period of three years. The share prices (closing prices) on the days of allocation were CHF 113.70, CHF 131.30 and CHF 157.80 respectively.
2009 — The members of the Board of Directors did not receive any variable compensation in shares for the 2009 financial year. All shares allotted in this financial year form part of the basic compensation, which was paid 80% in cash and 20% in shares with a blocking period of three years.
Basic compen- sation sation cial year and shares Regular contri- total compensation sation in cash Number Number Amount (amount) contributions6 butions (amount)
Rolf Dörig, Chairman of the Board of Directors 1 1 121 132 0 1 121 132 1 093 – 117 558 1 238 690 195 656 – 1 434 346 1 BoD Delegate until 07.05.2009 / BoD Chairman from 07.05.2009. As BoD Delegate until 07.05.2009, Rolf Dörig received compensation of CHF 19 662 for a company car and a premium contribution of CHF 41 470 to his 3rd-pillar pension plan. This total of CHF 61 132 was added to his basic compensation of CHF 1 060 000.
4 BoD member until 07.05.2009. 5 The compensation in shares was part of the basic compensation (2940 shares in total). The allocation of shares was effected on 24.06.2009 and 18.12.2009 at economic value, which is equal to the tax value (CHF 77.6649 and CHF 107.5553 respectively), taking into account the blocking period of three years. The share prices (closing prices) on the days of allocation were CHF 92.50 and CHF 128.10 respectively. No variable compensation in shares was granted for the 2009 financial year.
BOARD IN 2009 — The compensation table below shows the bonus in cash for the 2009 financial year which was determined by the Board of Directors at the beginning of 2010. It is disclosed on an accrual basis as compensation for 2009.
Amounts in CHF Compensation in cash Compensation in shares for 2009
Bonus for 2009 Other compensation in cash and Salary paid in 20102 compensation3 in cash Number Amount shares (amount)
31.12.2010 — As at the balance sheet date, acting members of the Board of Directors and the Corporate Executive Board (including closely related parties) held the following number of registered Swiss Life Holding shares and future subscription rights to Swiss Life Holding shares in the form of Performance Share Units (PSUs).
Rolf Dörig, Chairman of the Board of Directors 1 33 277
TOTAL BOARD OF DIRECTORS 1 664 873 1 Rolf Dörig owns an additional 6717 PSUs, which were allocated to him under the 2007 equity compensation plan for his former role of Group CEO. They represent future subscription rights that entitle him to receive SLH shares after a period of three years, provided that the relevant conditions are then met. Following his election to the Board of Directors on 8 May 2008 and resultant resignation from the Corporate Executive Board, Rolf Dörig was not allocated any further PSUs in 2008 or 2009.
The net profit for the year amounts to CHF 200 184 288. 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 in the form of a par value reduction of CHF 4.50 per share will be paid.
The Board of Directors is responsible for the preparation of the financial statements in accordance with the requirements of Swiss law and the company’s articles of incorporation. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
We aim to become a leading international specialist for risk, life and pensions solutions. The values we stand for are expertise, proximity, openness, clarity and engagement. These values represent a promise to our clients. We are committed to helping them create a financially secure future.
The kind of future you will have largely depends on the decisions you make at key points. The pictures in this year’s Business Review portray people at critical moments in their lives as they face a crucial decision: The future starts here.
The Swiss Life Group’s 2010 financial year at a glance: Course of business — Swiss Life more than doubled its net profit in 2010, from CHF 277 million to CHF 560 million. The main reasons for this very good result are improvements at operational level, a reduction in costs and an outstanding investment result. The Group achieved profitable growth in all key markets and reported a premium volume of CHF 20.2 billion. By comparison with the previous year, this represents a currency-adjusted growth of 4%. Thanks to the MILESTONE revitalisation programme, Swiss Life has made further substantial progress in improving margins and in capital management. Return on equity improved from 4.0% to 7.6%.
Markets — Swiss Life is a leading life and pensions provider in Switzerland with a market share of 26%. It is one of the top ten companies in the European life insurance market. The company is also one of the leading providers in the global business for high net worth individuals.
2 Shareholders’ Letter 4 CEO Interview 21 Strategy and Markets 25 Results and Course of Business 25 Summary of Group Results 28 Segment Reporting 28 Insurance Switzerland 30 Insurance France 31 Insurance Germany 32 Insurance Other 33 Investment Management 34 AWD 35 Corporate Social Responsibility 35 Employees 38 Values 38 Society 40 Environment 42 “Surprise”– Lucky-break jobs 43 Brand as a Factor for Success 44 Corporate Governance 46 Board of Directors 52 Corporate Executive Board 56 Compensation 66 Extract from the Financial Statements 72 Share Performance and Historical Comparison 74 Contacts and Impressum
Swiss Life achieved a net profit of CHF 560 million, which was more than double the previous year’s figure. Improvements at an operational level, disciplined cost and margin management, and a strong investment performance all contributed to this very good result. In particular, we have made significant progress in increasing our new business margin. This rose from 0.9% to 1.4%, despite historically low interest rates and an unfavourable exchange rate with the euro. Furthermore, with a continued emphasis on profitable growth, we grew in all key markets. Overall our achievements in the past year represent an important milestone on the path towards our goals for 2012, but we still have a lot of work ahead of us.
Our claim, “The future starts here.”, represents our promise as a company. It expresses our commitment to do everything we can to ensure a secure future for our clients, our employees and our shareholders. We also accept our socio-political responsibility. Through our work we make an essential contribution to people’s financial security and independence. This not only makes good sense, it is actually enormously important for society. Global demand for the type of solutions we offer is growing – as a result of demographic developments and also due to the increasing importance of private life and pensions solutions, as state pension funds come under rising pressure.
Operational excellence is indispensable if we are to remain competitive in the attractive life and pensions market. Along with cost efficiency, improvements in service quality and faster product launches are essential. Swiss Life will also make further developments in its range of products and innovative services, as the new capital requirements cause insurers to reduce guarantees on their balance sheets. Nevertheless guarantees respond to a real customer need, particularly in uncertain times, and this is where innovative solutions come in.
A key factor for our industry remains the quality of our client relationships; this is what determines future growth. We want to develop our multichannel strategy into an important competitive advantage. The distribution of innovative products requires more than just a good salesperson. Clients would like to have advisory services further stepped up and to be optimally supported over the years. Everything we do is based on trust. In an ever more complex world, trust is increasingly becoming a prerequisite for success.
Swiss Life and its committed and dedicated employees are extremely well equipped to take advantage of the opportunities offered by these developments. Our Group stands for expertise, openness, engagement, proximity and clarity. With a tradition going back over 150 years. We sincerely appreciate the trust and support of you our shareholders, and we look forward to working together with you to build a successful future for Swiss Life.
“Through our work we make an essential contribution to people’s financial security and independence. This not only makes good sense, it is actually enormously important for society.”
Swiss Life put in a strong performance for 2010. What do you personally see as its biggest success? I was particularly happy with one figure that didn’t seem to have a high priority for financial analysts or the media. A survey last autumn found that 56% of our employees are highly committed to our company, and are ready to go the proverbial “extra mile”. In other words, Swiss Life’s employees show a level of engagement above the average for the European financial industry. This is all the more significant because the challenging market and changes in the company in recent years have demanded a considerable amount of professionalism, flexibility and engagement from all our employees. I am proud of them.
Bruno Pfister, CEO of the Swiss Life Group, looks back on a successful 2010. He sees the operational improvements, higher earning power and undiminished strong customer presence as just one stage victory along the challenging road to 2012. For him it is clear that there can be no sustainable success without employees’ engagement.
Which figures best reveal the progress Swiss Life has made? Besides the notable rise in income compared with the previous year, I am particularly happy with another figure: The new business margin was raised from the previous year’s 0.9% to 1.4%. And this despite the negative impact of lower interest rates and the weakening of the euro against the Swiss franc. The cost reductions and the development of a systematic approach to margin management were mainly responsible for this. An outstanding achievement.
AWD had already returned to the profit zone at the end of 2009. Last year provided confirmation. What’s the formula for success? AWD delivered a strong performance in 2010. This can be seen in the company’s earning power and its operational improvements. In this regard, AWD is a step ahead of the competition among financial services providers. And surveys show that customers also have a high regard for AWD. AWD is on target. What the new
Moments of decision Every single day there are decisions to be made, and what we decide will sometimes change our lives. The following portraits are of people facing immensely difficult choices – whether to emigrate or stay in Switzerland, whether to switch to organic farming or carry on with traditional methods, whether to donate half their liver or not.
The cover photo shows Dominic Beschle, entrepreneur, wrestling with the decision of whether or not to expand into South America and Asia. He comes from a long line of Basel confectioners. None of his forebears ever thought of expanding the business abroad. What if the São Paolo venture should fail?
Rudolf Speiser and his sons have a decision to make. 22 years ago the farmer followed his pioneering instinct and started to breed Aberdeen Angus cattle. What he now decides will again impact his family’s livelihood for generations to come.
It’s not an easy decision for Nicole Jäger. The surgeon at the university hospital told her that her liver would regenerate. But if she goes ahead and her children should then ever need a liver graft, she would not be able to donate a second time.
He comes from a long line of Basel confectioners. None of his forebears ever thought of expanding the business abroad. The chocolatier faces the decision of whether or not to invest in the markets of South America and Asia.
Nadia has stage fright. The moment she steps out from behind the curtain, the jury will decide the course of her budding career. This up-and-coming young dancer is competing for the part of Giselle at the Palais des Festivals in Cannes.
The judgement he must pronounce will have far-reaching consequences. If he rules that construction was f lawed, skilled workers will lose their jobs.
Vera Krebs will soon become a grandmother. But she’s thinking of buying a house in the Auvergne and moving there to fulfil her childhood dream. But then she will no longer be readily available for her children and their families.
THANKS We would like to thank the following people for making possible our photo editorial “Moments of Decision” in our 2010 Business Review.
NADIA TERESZKIEWJCZ Student at the Ecole Supérieur de Danse, Cannes, France
JÖRG RATHEMACHER Presiding judge at the court of financial jurisdiction, Thüringen, Gotha, Germany
2010 was a challenging year economically, characterised by the debt crisis of certain European countries and the resulting stabilisation packages. As a result, the euro depreciated against all leading currencies, interest rates plummeted to record lows in Switzerland and Germany, and stock markets were correspondingly volatile. Against this background, performance of the life insurance markets in which Swiss Life operates was solid in 2010.
In the life insurance market in France, the positive growth trend of the previous year continued, with growth of 4%. Premium volume of unit-linked life insurance products grew by 7%, for the first time since 2006.
The German life insurance market also saw 6% growth, well above the European average. The chief contribution here was made by single-premium contracts for immediate and deferred annuities, as well as capitalisation products.
The market for insurance solutions for high net worth individuals, which Swiss Life addresses with its cross-border business, also experienced positive growth.
Swiss Life in France has been growing at well above the market average in both the life and health insurance sectors for years now. With a market share of 1.6%, the company is a niche player in the French life insurance market. The “private insurer” model helps it to benefit from synergies between insurance company and bank, and enables it to maintain a leading position in life insurance for high net worth individuals. As an innovative health insurer,
Strategy and Markets 2010 was a challenging year due to persistently low interest rates and falling euro exchange rates, despite the fact that the financial crisis had given way to global economic recovery. The life insurance market proved resilient in this environment and Swiss Life further improved its market position during 2010. Systematic implementation of the MILESTONE revitalisation programme enabled the Group to become more profitable and more competitive and to successfully develop its positioning as a leading international specialist for risk, life and pensions solutions.
With AWD, Swiss Life also has a leading financial services provider as a partner, boosting its distribution power in Switzerland and Germany and providing access to new markets. AWD also supports Swiss Life with its product management know-how and contributes to the diversification of earnings.
This offers life insurance companies, with their core competencies centred on covering biometric risks and offering long-term life and pensions solutions, good prospects for growth. However, the current market environment also poses some challenges to life insurers: REGULATORY ENVIRONMENT — The financial crisis has caused regulators to give higher priority to factors such as equity ratio, investor protection and accounting principles and forced them to take action which will have a longterm impact on the insurance industry. This is most evident in the new Solvency II guidelines, which are set to come into force in Europe in 2013 at the earliest and were already introduced in Switzerland in January 2011 in the form of the Swiss Solvency Test (SST). These new solvency systems measure insurance companies’ economic risk situation, with the objective of guaranteeing protection for insured persons, even in the case of extreme situations.
STRATEGY — Increasing competitiveness and profitability with MILESTONE — Swiss Life aims to become a leading international specialist for risk, life and pensions solutions. In order to achieve this ambition, the Group launched its MILESTONE programme at the end of 2009. This long-term revitalisation programme is specifically and systematically aimed at increasing competitiveness and profitability. MILESTONE has since become incorporated into Swiss Life’s strategy.
Swiss Life — Business Review 2010 the opportunities offered by the current market environment and to take up the challenges posed: 1. With its consistent focus on modern life and pensions solutions and risk products, Swiss Life aims to enhance customer value by providing greater flexibility and higher potential returns. At the same time, the Group wants to increase profitability and to reduce capital requirements for new business.
– Due to more than 30 new or adapted products, Swiss Life generated 69% of its new business in 2010 through modern life and pensions solutions and risk products. This means the 2012 target of 70% has already almost been achieved.
– By means of consistent margin management, the company was able to compensate for negative economic impacts on new business like falling interest rates and the weak euro and to increase its margin to 1.4%. Its target is still a new business margin of 2.2%.
– Return on equity in 2010 grew from 4.0% to 7.6%. The objective set for 2012 is 10-12%. The proposed dividend of CHF 4.50 in the form of a repayment of par value gives a dividend payout ratio of 26%, which is within the target range of 20-40%.
In 2010, Swiss Life doubled its net profit to CHF 560 million (2009: CHF 277 million). This corresponds to diluted earnings per share of CHF 17.37 and a return on equity of 7.6%. In investment management Swiss Life achieved a net investment result on the insurance portfolio of CHF 4.6 billion. This represents a very strong net investment return of 4.1% (2009: 3.9%).
GROWTH — Focus remains on profitable growth — Swiss Life successfully achieved profitable growth in all units, despite the difficult market conditions. The Group generated premium volume of CHF 20.2 billion, which represents a currency-adjusted increase of 4% over the previous year. It grew in its key markets of Switzerland, Germany and France and was able to confirm its top-level position in business with high net worth individuals. In Switzerland, premium income climbed 2% to CHF 7.6 billion. Premium income (currency adjusted) in France rose by 9% to CHF 5.3 billion, and in Germany by 4% to CHF 2.1 billion. The Insurance Other segment, with premiums earned primarily through business with high net worth individuals, was able to further expand its premium volume on a currency-adjusted basis to CHF 5.2 billion compared with the previous year (+4%). Swiss Life Investment Management’s assets under management totalled CHF 120 billion (a currency-adjusted increase of 9%). These include third-party assets under management (CHF 9.9 billion in total, as in the previous year), in which the Group achieved growth of CHF 1.2 billion and was thus able to offset the negative currency effects. Insurance reserves totalled CHF 122 billion – a currency-adjusted increase of 7%. AWD improved its sales revenues by 4% to EUR 547 million.
MILESTONE — Significant advances at all levels — Swiss Life succeeded in making considerable improvements in all aspects of its MILESTONE revitalisation programme in 2010. Through consistent margin management, the Group was able to improve its new business margin to 1.4%, compared with the previous year’s figure of 0.9%, thus more than offsetting the negative impacts of historically low interest rates. The value of new business grew by 70% to CHF 209 million, representing an improvement in all units over the previous year. Swiss Life also succeeded in increasing the share of new business generated with modern and risk products from 64% in the previous year to 69%. In addition, the Group was able to reduce costs by a further CHF 121 million. Of the CHF 350-400 million cost savings announced as part of the MILESTONE programme, CHF 311 million had already been achieved by the end of 2010. Progress was also made in optimising in-force business and in balance sheet management – in asset and liability management for example, by lowering borrowings, increasing reserves and implementing a new reinsurance strategy. Thanks to MILESTONE, Swiss Life has been able to substantially reduce interest rate sensitivity.
In CHF million 1 Insurance Switzerland 2 Insurance France 3 Insurance Germany 4 Insurance Other 5 Investment Management 6 AWD
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 20 191 20 219 –0.1%
Net earned premiums and policy fees 12 051 12 135 –0.7%
Financial result (without share of results of associates) 4 368 4 588 –4.8%
Equity securities and equity funds 4 266 3.8% 3 803 3.4%
Cash and cash equivalents and other 2 586 2.3% 5 387 4.8%
ASSET ALLOCATION ON FAIR VALUE BASIS AS AT 31 DECEMBER (INSURANCE PORTFOLIO AT GROUP’S OWN RISK)
All segments generated significant operational improvements and therefore higher profit from operations. AWD successfully returned to profitability. Gross written premiums, policy fees and deposits received for all segments remained at the previous year’s level of CHF 20.2 billion.
INSURANCE SWITZERLAND — Swiss Life in Switzerland posted a segment result of CHF 488 million for 2010, an increase of 4% on the previous year. This increase is particularly pleasing bearing in mind the low interest rate environment, a collapse in the value of key currencies, and the strong pressure on margins in the life business.
The good result was driven on the one hand by previously implemented efficiency measures, and on the other by long-term initiatives such as the restructuring of risks on the investment side, the strengthening of the multichannel distribution strategy, and the sustainable reduction of costs. The financial result was maintained at a high level of CHF 2.5 billion, a decline of around 7% on the previous year. Although direct investment income increased by 5% to CHF 2.8 billion, negative currency effects led to an overall decrease in the financial result. This is more than compensated by the foreign currency gain of CHF 396 million in hybrid capital, which was entered under other income.
Insurance benefits, including changes in insurance reserves, increased by 9% to CHF 8.6 billion. This rise is primarily attributable to the increased need for reserves for future risks and to the higher premiums (savings deposits). The higher insurance reserves are also the reason for the significantly lower allocation to reserves for policyholder bonuses.
The new products launched in 2010 were a key driver of premium growth, as well as ensuring the continued increase in the share of business generated with modern life and pensions solutions and risk products, together with healthy sales via the AWD distribution channel. In
Swiss Life — Business Review 2010 the area of individual insurance, Swiss Life launched its unit-linked life and pensions solutions Swiss Life Champion Uno and Swiss Life Champion Timeplan in the first semester. Since the second semester, the spectrum of products has also included Swiss Life Premium Select, a non-tax-qualified (pillar 3b) unit-linked life insurance product. In addition, Swiss Life also launched a savings product especially for children and a pure risk insurance solution for customers who prefer an online solution. For corporate clients, Swiss Life launched Swiss Life Business Invest in the first semester, an attractive life and pensions solution with a modern investment concept.
Swiss Life is looking to grow further in 2011 too, with an even stronger focus on the client. The service mentality is to be enhanced and response times accelerated. Further innovations in relation to products and marketing will follow. The acquisition of the group life portfolio of Nationale Suisse, announced in January 2011, will contribute further to the profitable growth of Swiss Life thanks to the realisation of economies of scale. Moreover, the two partners are signing a distribution cooperation agreement. Swiss Life will continue to strive for efficiencies and will undertake additional optimisations to increase both distribution capabilities and profitability.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 7 631 7 518 1.5%
In 2011, Swiss Life in France aims to reinforce its leading position both in life insurance for affluent and high net worth individuals and also in health and disability insurance by expanding multichannel distribution.
Net earned premiums and policy fees 2 724 2 952 –7.7%
INSURANCE GERMANY — Swiss Life in Germany posted a segment result of CHF 102 million, an increase of CHF 10 million on the previous year.
GROSS WRITTEN PREMIUMS, POLICY FEES AND DEPOSITS RECEIVED 2 073 2 169 –4.4%
Champion product family has been expanded to include a state-subsidised variant (“Riester”) and a more riskaligned occupational disability insurance solution is being introduced, which can be adapted to individual customer requirements.
INSURANCE OTHER — The segment Insurance Other comprises the areas Private Placement Life Insurance (PPLI), Corporate Solutions, Swiss Life Products (Luxembourg ) S.A., Swiss Life Österreich AG and Payment Pro-
CHF 43 million) due to investments in expansion of global business and in the product platform in Luxembourg. At CHF 5.2 billion, gross written premiums, policy fees and deposits received were roughly at the previous year’s level (previous year: CHF 5.3 billion), which represents a rise of 4% in local currency. Due to an increased focus on the pension business, new business in the PPI area is being discontinued as of 2011.
The PPLI business area specialises in life insurance for high net worth individuals, and is represented in Liechtenstein, Luxembourg, Singapore, Dubai and Switzerland. In 2010, it built on the strong result of the previous year, writing CHF 5 billion in gross premiums. This success stems from the recovery of the markets, the unique global approach and its established international sales team. Thanks to further growth and strict cost management, PPLI turned a profit in 2010.
INVESTMENT MANAGEMENT — The Investment Management segment comprises the Group-wide institutional asset management activities. At CHF 103 million, the 2010 segment result is CHF 26 million up on the previous year. This equates to an increase of 34%. Thanks to new business and positive market developments on the one hand, and despite heavy currency-related losses on the other, assets under management increased by CHF 3 billion to just under CHF 120 billion. Insurance assets rose by CHF 3 billion to almost CHF 110 billion. Assets invested in funds and third-party mandates stagnated at around CHF 10 billion. Thanks to a greater volume of assets under management, income rose by 6%. At the same time, expenses fell by 8% due to lower investment and increased efficiency.
In the year under review, the newly developed application for asset management was successfully launched in Switzerland. This tool facilitates more efficient administration of assets under management. The new strategy for the third-party business (TPAM), which was presented on Investors’ Day 2009, yielded very good results with a net inflow of CHF 1 billion. Cooperation with the insurance units was successfully stepped up. Among other things, this fed through into the growth of the Swiss Life Investment Foundation, which was one of the strongest growing investment foundations in Switzerland in 2010, just as it had been the previous year.
AWD — The AWD Group posted a segment result of CHF 43 million, as compared to a loss of CHF 92 million the previous year. This figure also includes expenditure for the amortisation of customer relationship assets taken on as part of the acquisition.
The successes of restructuring measures played their part in ensuring that AWD once again posted positive EBIT of EUR 49.1 million, an improvement of EUR 90.2 million compared to the previous year. As part of the efficiency improvement programme, administrative costs were cut by EUR 48.4 million compared to the previous year.
At the end of 2010, the AWD Group had 5292 fully trained and registered financial advisors, as well as 2280 trainee advisors under contract. 148 107 new clients were acquired in the year under review.
Swiss Life has developed a whole range of initiatives and activities throughout all its organisational units, which illustrate the active role the company plays within society. They are proof of its sense of social responsibility.
Employees are the basis of Swiss Life’s success; the quality of the services it provides depends upon their competence and commitment. The aim of human resources management is therefore to find the most suitable employees, to get them interested in working for Swiss Life, to retain them and systematically develop their skills. It positions Swiss Life in the market as a responsible and attractive employer.
In Germany, Swiss Life introduced lean management in 2010. 21 employees from all sectors, who had previously received training in lean management, led “lean workshops ” in which they showed their specialist areas how best to reduce waste and add value to processes. The first process improvements have already been made.
Swiss Life is a life insurance company and a pension provider – life insurance and retirement provisions are both sustainability in action. In fact, with the time horizon stretching to the end of our lives, there is no longer-term arrangement. To Swiss Life, however, sustainability also means corporate social responsibility: an obligation towards clients, employees, society and the environment, and an integral part of corporate culture.
employees towards performance, customer orientation, innovation and change, cooperation and management. In addition, it was intended to reveal to what extent they understood the company’s goals and strategies. The Group response rate was a very high 79%.
A senior management programme (SMP) is in place at Swiss Life Group level for managers destined for senior management roles. In a series of five modules, participants from all countries and units work on strategically relevant themes and strategic projects in five modules. In 2010, 4 of the 17 participants were women, and the retention rate among the past participants in the senior management programme stands at 90%.
Swiss Life has continued to actively foster leadership and management skills at top management level by making new appointments to 40% of the top one hundred posts within the last 24 months. 60% of new top managers came from outside the company. The intention was to bring in to the team additional skills and experience from outside.
Swiss Life in France launched the “55+” programme, aimed at safeguarding expertise within the company and sustaining employee performance. It involves the obligation to reserve 12% of posts for the over 55s. At the same time, older employees are encouraged to pass on their specialist knowledge as tutors. “55+” allows a flexible reduction in working hours, with partial salary compensation in the final year of work.
Training and development for all employees focuses on tailored courses mainly involving social and methodological skills. Expenses for staff training and development within the Group in 2010 amounted to CHF 16 million – approximately CHF 2250 per employee. Expressed as a proportion of total personnel costs, the outlay for training and development came to 2.4%.
By comparison with the 2009 reporting period, the number of full-time positions Group-wide fell by 337 to 7483. 1094 employees left the Group in 2010, the departure of 5.6% of these being undesired (net fluctuation).
Swiss Life is one of the leading providers of life insurance and pension solutions. A good many people and institutions place their trust in Swiss Life: clients, business partners, shareholders, governmental bodies, employees. With this trust comes responsibility. In order to create and cultivate trust, the company has laid down five basic values: – Expertise: Professional competence and experience – Proximity: Close relationships with clients and business partners – Openness: Nurturing an open dialogue both within and outside the organisation – Clarity: Clear communication and a range of comprehensible products – Engagement: Motivation and enthusiasm to help our clients, employees and shareholders achieve their goals.
AWD implemented a new corporate mission in January 2010. It is based on the values of customer orientation, quality, professionalism, trust and team spirit. In order to improve understanding of the mission, AWD assigns a value to every new year. 2010 was the team spirit year, while the key value for 2011 is professionalism.
Swiss Life employs several compliance officers, both at Group level and in the operational units. Through advice, training and monitoring, they create the basis for timely recognition and avoidance of regulatory and reputationdamaging risks. Examples are the special due diligence requirements and preventive measures to combat money laundering and the financing of terrorism. The compliance officers also ensure protection of client data and business secrets. Reputation and trust are a company’s assets. The compliance units ensure that these assets are preserved through data protection and legally compliant conduct at all times. Swiss Life is an active member of the Swiss Business Data Protection Association.
Swiss Life has been providing pension services for over 150 years, and with its two million plus customers in Switzerland and the rest of Europe, it stands at the centre of public life. This traditional Swiss company is aware of its social responsibility. It supports community life in a variety of ways and works towards constant improvement of its ecological balance sheet.
Swiss Life in France has had its own foundation, the Fondation Swiss Life, since 2009. In 2010, this foundation supported the Institut Curie (a cancer research institute and hospital) and the Association France Alzheimer (providing training for Alzheimer patients). The Fondation Swiss Life provided funding for concerts and art exhibitions for people in nursing homes, sick children and patients with dementia. It also supported four charitable
Swiss Life — Business Review 2010 projects, run by Swiss Life employees, for disabled children and children with leukaemia.
Likewise in Germany, AWD has been helping children in need since it created the AWD-Stiftung Kinderhilfe foundation in 1991, which the local AWD companies in Austria, Switzerland and the Czech Republic also support. The foundation is funded mainly by contributions from the salaries of AWD employees. It runs two large-scale operational projects of its own. The Noma project run by the AWD-Kinderstiftung in Sokoto in West Africa is devoted to the surgical rehabilitation of victims of a disease caused by a mixed infection which results in severe facial disfigurement. In Bischkek in Kyrgyzstan, the Swiss AWD-Kinderstiftung is building a treatment centre for children with facial malformations (like cleft lip and palate); EUR 100 000 was donated for this purpose in 2010 alone. Altogether, AWD employees donated EUR 122 000 in 2010 to help the victims of the earthquake in Haiti and the floods in Pakistan.
Swiss Life is convinced that raising the social competence of individual employees increases the competitiveness of the company. So employees who are active in a military capacity or in public service are acting in the interests of the company, and Swiss Life is strongly in favour of their commitment to the community. The staff regulations expressly approve the engagement of employees in political and military functions. The company offers all reasonable support for such engagement, for example through a flexible approach to working hours.
POLITICS — Swiss Life’s active approach to dialogue — Swiss Life regards an exchange of ideas with political bodies as extremely important. The company brings its expertise into political discussion and defends its interests in the public arena at all stages of the decision-making process. In this way it tries to exert influence throughout the whole political cycle, aiming for optimal and appropriate outcomes for all concerned. Through its specialists, Swiss Life advises the various decision-makers in political parties, committees and parliamentary bodies, bringing its expert knowledge to bear at all stages from the drafting of legislation to the formal processes of consultation and approval. In addition, the company supports individual politicians and selected political parties with financial contributions.
In September 2010, Swiss Life organised a conference in France on the planned pension reform, which attracted a great deal of attention. In Germany, at the “Salon Palais Leopold” series of events held several times a year in Munich, decision makers from the worlds of business, politics, academia and the media engaged in regular dialogue on key social and political issues. In 2010 Federal Economics Minister Rainer Brüderle attended the event. Since 2007, Swiss Life has been regularly providing a platform for dialogue at its Munich Specialist Forum series of events for corporate clients, business partners and experts. Another event which attracted a great amount of interest was the fourth German Swiss Life Pension Day in October 2010 with former Federal Minister of Finance Peer Steinbrück as the keynote speaker.
Keenly aware of its responsibility to society, Swiss Life strives to conserve natural resources in a sustainable manner, thus helping to keep the environment intact. Since 1998, Swiss Life in Switzerland has been a member of the Energy Model Zurich and is thus committed to increasing the energy efficiency of its business premises in Zurich by at least 1.5% per year until 2012. The company again reached its target in 2010, lowering not only energy consumption and emissions, but also costs.
Swiss Life is one of the 11 companies which founded the Swiss Climate Foundation in 2008. It donates its steering tax reimbursements on CO2 emissions to the non-profit foundation. With the contributions from all its partner companies, the Swiss Climate Foundation helps small and medium-sized enterprises (SMEs) to improve their energy efficiency and thus protect the climate.
In 2010 the computer centre at Swiss Life in Switzerland was no longer cooled to such a low temperature as previously, the result being an electricity saving of 300 000 kWh. The consumption of both power and water by the Group has been going down steadily for years.
– Ms K. has been selling “Surprise” for a long time. She lived from that and occasional part-time cleaning jobs. As the years went by, the 54-year-old gradually found the harder cleaning jobs too strenuous. For just over a year, Ms K. has been preparing lunch once a week for the Surprise team.
Together with her sales of “Surprise”, this “lucky-break job” provides her with a secure regular income that she can live on without claiming supplementary state benefits.
Swiss Life’s corporate design has been consistent throughout the Group since 2004. The Swiss Life umbrella brand also encompasses the two sub-brands Swiss Life Asset Management and Swiss Life Banque Privée. The German subsidiary SLPM (Schweizer Leben Pensionsmanagement ) has an independent market presence as what is called an endorsement brand. The fourth level of the brand structure is occupied by the independently managed brands Livit (in Switzerland only) and AWD, which have no connection with the umbrella brand.
In 2010, no new brands were introduced and no brands were repositioned. But the brand managers continued their vigorous consolidation of the measures first implemented in 2009 for uniform positioning of the Swiss Life brand. In this connection the corporate design was slightly modified to align it with the claim introduced in the previous year: “The future starts here.” This succinct expression of Swiss Life’s positioning is a perfect match for the company and the brand. It communicates an optimistic spirit of change both within the organisation and to the outside world. At critical points of customer contact, visual improvements have been introduced to make the claim and the company colours (red and white) more tangible. Brand management is handled centrally at Swiss Life Group level, but adaptations can be made in the individual markets.
In a competitive market environment, a strong brand is a major factor for success. Swiss Life displays its identity partly through the powerful claim “The future starts here.”
In the interests of its shareholders, policyholders and staff, Swiss Life attaches great importance to corporate governance and the requirements it entails in terms of the management and organisation of the Swiss Life Group. The corporate governance of Swiss Life Holding Ltd (Swiss Life Holding) is based on the Directive on Information Relating to Corporate Governance issued by the SIX Swiss Exchange and the circulars 2008/32 on corporate governance, risk management and internal control systems for insurance companies and 2010/1 on minimum standards for remuneration schemes of financial institutions published by the Swiss Financial Market Supervisory Authority FINMA. It is also 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.
Reference is made in the following to the latest disclosures of shareholdings on the balance sheet date which exceed the disclosure threshold. In accordance with the disclosure requirements, the percentage figures given relate to the share capital/number of outstanding shares pursuant to the Articles of Association applicable at the time of the relevant disclosure.
Dodge & Cox, USA, reported in the publication of 6 March 2008 that it held through the Dodge & Cox International Stock Fund 1 645 000 registered shares or 4.71% of the voting rights of Swiss Life Holding.
BlackRock, USA, reported in a publication of 9 January 2010 that a group consisting of various companies and funds of the BlackRock Group held a total of 1 190 832 shares and 775 other purchase positions of Swiss Life Holding, corresponding to 3.71% of the voting rights.
SHARES — Subject to the 10% limit on voting rights set out in the Articles of Association (cf. the section on “Shareholders’ participation rights” on page 64), each share grants the right to one vote at the General Meeting of Shareholders.
CONVERTIBLE BONDS AND OPTIONS — No convertible bond issues were outstanding on the balance sheet date. The Swiss Life Holding 0.625% issue (2004–2010) amounting to CHF 317 000 000 expired on 10 June 2010; the unconverted portion of the convertible bond on that day was repaid. Neither Swiss Life Holding nor the Group companies had granted options on rights to participate in Swiss Life Holding.
Rolf Dörig will be put forward for re-election at the General Meeting of Shareholders of Swiss Life Holding Ltd on
Other appointments: – Adecco S.A., Glattbrugg, Chairman of the Board of Directors – Kaba Holding Ltd, Rümlang, Vice Chairman of the
AL 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, since the end of 2006, has 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).
Chairman of the Supervisory Board – Everpublic AG, Hamburg, Chairman of the
AL After studying medicine and gaining many years of sales experience in the financial services sector in various management positions, in 1988 Carsten Maschmeyer founded the company Allgemeiner Wirtschaftsdienst Gesellschaft für Wirtschaftsberatung und Finanzbetreuung mbH. In 1998 he was appointed Chairman of the Board of Management of AWD Holding AG and, in 2000, launched an initial public offering of shares in AWD. Carsten Maschmeyer sold AWD to Swiss Life at the end of 2007 and, as Co-CEO of AWD from September 2008 until March 2009, he was responsible for strategic development and opening up new markets. In January 2010 he founded MaschmeyerRürup AG – an independent and internationally focused advisor concentrating on retirement provisions for key players in banking and insurance. He heads the company as Chairman of the Board. He is also expanding CM Vermögensverwaltung GmbH & Co.
KG. At the end of December 2010, Carsten Maschmeyer founded HolsboerMaschmeyer NeuroChemie GmbH together with Professor Florian Holsboer, Director of the Max Planck Institute of Psychiatry in Munich.
Chairman of the Board – “Germany – Land of Ideas” initiative, Hanover,
AL Henry Peter completed his studies in law at the University of Geneva in 1979, and in 1981 he was called to the Geneva bar. Following a pupillage in Geneva, a period of study as a visiting scholar at the University of California in Berkeley and legal work in Lugano, he obtained his PhD at the University of Geneva in 1988. Since 1988 he has been a partner in a law firm in Lugano, currently Peterlegal SA. In addition, he has held the position of Professor of Business Law at the University of Geneva since 1997. He became a Member of the Swiss Takeover Board in 2004 and a Member of the Sanction Commission of the SIX Swiss Exchange in 2007.
– Otis, Fribourg, Member of the Board of Directors – Autogrill Switzerland LTD, Olten, Member of the Board of Directors – Swiss Olympic Association, Berne, Vice Chairman of the disciplinary chamber in charge of doping cases
Industry, St. Gallen, Vice Chairperson – economiesuisse, Zurich, Member of the Board of Directors – Swissmem, Zurich, Member of the Board of Directors
RESIGNATIONS — After serving for seven years on Swiss Life’s Board of Directors, Rudolf Kellenberger did not stand for re-election at the General Meeting of Shareholders in 2010 and no longer serves on the Board of Directors.
If required, the Board of Directors and its individual committees regularly invite all or some members of the Corporate Executive Board and in-house specialists to its meetings. Outside the meetings, each member of the Board of Directors may request information about the course of business from the Corporate Executive Board subject to the prior notification of the Chairman of the Board of Directors. Requests for information on individual transactions require the prior approval of the Chairman of the Board of Directors.
The Chairman of the Board of Directors may participate (without voting rights) in the meetings of the Corporate Executive Board. He receives the invitations and the minutes of the meetings.
Corporate Internal Audit, which reports directly to the Chairman of the Board, represents a suitable means of independent monitoring and information gathering for the Board of Directors. Swiss Life’s Internal Control System (ICS) also serves the Board of Directors for information and controlling purposes. Further details on this system are available in the “Risk Management” section of the Financial Statements on page 33.
The organisation and division of tasks within the Corporate Executive Board reflects the key business areas and functions. The members of the Corporate Executive
Port, Guernsey, Member of the Board of Directors – Swiss Insurance Association (SIA), Zurich, Member of the Board and the Board Committee – SIX Exchange Regulation, Zurich, Member of the
– Avenir Suisse, Member of the Board of Trustees and Member of the Finance Committee
Credit Suisse Group, where he developed and implemented an internet bank in Luxembourg and was subsequently appointed Head of e-Investment Services Europe and member of the Personal Financial Services’ management. Ivo Furrer began working for Zurich Financial Services in 2002, initially in Germany as head of the international key account business, and in 2005 as a Member of the Global Corporate Executive Committee with responsibility for the development of key account and distribution management at global level. In 2007 he was appointed CEO Life Switzerland and Member of the Global Life Executive Committee of Zurich Financial Services.
Other appointments: – Swiss Insurance Association (SIA), Zurich, Chairman of the Life Insurance Committee – German-Swiss Chamber of Commerce, Zurich,
AL After graduating with a degree in economics from the University of Augsburg, Klaus G. Leyh worked for two years as a market researcher and advisor in the consumer goods industry. In 1995 he changed to the insurance sector, building up Generali’s Market Research department in Munich. He subsequently held management positions in marketing, product management and e-business at Generali Lloyd Versicherung AG, AXA Colonia Konzern and ARAG Lebens- und Krankenversicherung, and received a Master of Business Research (MBR) from the Ludwig Maximilian University of Munich. In 2001 Klaus G. Leyh joined Swiss Life in Germany as the head of its e-commerce and e-business activities and was assigned responsibility for distribution service, control and promotion in 2002. From January 2006 to September 2008 he held the position of Chief Market Officer and
On 1 October 2008 Klaus G. Leyh was appointed Chief Executive Officer of Swiss Life in Germany (CEO Germany ) and Member of the Swiss Life Group’s Corporate Executive Board.
Other appointments: – German Insurance Association (GDV), Berlin, Member of the Main Committee Life Insurance – DEPFA Holding Verwaltungsgesellschaft mbH,
Other appointments: – Swiss Insurance Association (SIA), Zurich, Member of the Finance and Regulation Committee
AL After graduating in law, Manfred Behrens initially worked as an attorney in a Hamburg-based law firm.
The information in this report is presented in the same way as the previous year. Also included in the information on compensation disclosed for the period under review is the variable compensation to Corporate Executive Board members as a cash bonus for the 2010 financial year, determined and payable at the beginning of 2011. Likewise, the variable compensation payable for the 2010 financial year in the form of blocked shares amounting to 10% of the fixed compensation, which was allocated to members of the Board of Directors at the beginning of 2011, is shown as part of the compensation for 2010.
COMPENSATION POLICY PRINCIPLES — The Board of Directors as a whole is responsible for establishing the guidelines on the Group’s compensation policy (incl. bonus and equity compensation plans) and on 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 wellqualified employees and gain new, highly skilled staff. The compensation system must be competitive and in line with the market environment. The individual overall compensation takes into account the employee’s professional skills, engagement and personal performance. It is made up of a basic salary, a variable bonus based on achievement of the annual objectives, which is generally paid in cash and possibly in shares, as well as a deferred mid- to long-term salary component (equity compensation plan) and contributions to occupational provisions and risk insurance.
Pursuant to the regulations of the 2008, 2009 and 2010 equity compensation plans, two objective performance criteria have been defined, each weighted at 50%. The first criterion is the Total Shareholder Return on the Swiss Life Holding share (TSR Swiss Life Holding), requiring a performance of over 20% for a subscription right to shares to arise after three years. The second criterion involves a comparison of the Swiss Life Holding share’s TSR with the TSRs of the shares of the companies included in the Dow Jones STOXX 600 Insurance Index (TSR Outperformance). A subscription right arises if the performance on expiry of the three-year term is above the first quartile in comparison with the companies in question. Depending on the fulfilment of the two performance criteria within the three-year period, the number of PSUs can increase by up to a factor of 1.5 and 2.0 respectively, or drop to zero. Performance requirements for the
47 members of the Swiss Life Group senior management, including members of the Corporate Executive Board, participated in the 2008 equity compensation plan. A total of 52 618 PSUs were allocated, 23 695 to the Corporate Executive Board, of which 5924 to Bruno Pfister as Group CEO. In 2009, 65 members of the Swiss Life Group senior management took part in the plan, in which a total of 53 216 PSUs were allocated; 22 200 to the Corporate Executive Board, of which 6500 to Bruno Pfister in his capacity as Group CEO. In the period under review, 69 members of the Swiss Life Group senior management participated in the 2010 equity compensation plan, which came into effect on 1 April 2010. A total of 68 510 PSUs were allocated; 24 700 to the Corporate Executive Board, of which 6500 to Group CEO, Bruno Pfister.
Two members of the Board of Directors resigned in the 2009 financial year. Bruno Gehrig resigned from his position as Chairman of the Board of Directors of Swiss Life Holding after the General Meeting of Shareholders on 7 May 2009 due to his election to the Board of Directors of UBS AG in October 2008. After serving for six years, Pierfranco Riva stepped down from the Board of Directors at the 2009 General Meeting of Shareholders after reaching the statutory age limit. Two new members were appointed: Frank Schnewlin and Carsten Maschmeyer. Rolf Dörig ceded the position of Delegate of the Board of Directors with effect from 7 May 2009 to take over from Bruno Gehrig as Chairman of the Board of Directors.
In the 2009 financial year, the composition of the Corporate Executive Board changed as follows: Reto Himmel, Group Chief Technology & Operations Officer (Group CTO), left the Corporate Executive Board with effect from 31 March 2009 due to the discontinuation of the Group CTO function. Thomas Buess joined the Board as of 1 August 2009 as Group Chief Financial Officer (Group CFO), replacing Thomas Müller who resigned from the Corporate Executive Board with effect from
Swiss Life — Business Review 2010 2 “Closely linked parties” are natural persons and legal entities pursuant to Art. 678 of the Swiss Code of Obligations that have close personal, economic, legal or de facto ties with members of the governing body. This typically includes spouses, minor children, companies controlled by members of the governing body, and natural or legal persons serving the members of the governing body in a fiduciary capacity.
Corporate Executive Board none 1 Economic value equal to the tax value, taking the blocking period into account. The share prices (closing prices) on the days of allocation of 18.06.2010, 15.12.2010 and 04.03.2011 were CHF 113.70, CHF 131.30 and CHF 157.80 respectively.
TORS — As Chairman of the Board of Directors, Rolf Dörig received the highest total compensation for a member of the Board of Directors of Swiss Life Holding in 2010.
The compensation granted in 2010 to Bruno Pfister in the form of cash, shares and contributions to occupational provisions was as follows: In CHF
2 Excluding the mathematical value of the PSUs allocated in 2010; incl. the mathematical value of CHF 974 870, total compensation amounted to CHF 3 694 525. 3 Annual contribution of CHF 185 230 and a supplementary payment of CHF 48 990 due to an increase in insured salary. 4 Excluding the mathematical value of the PSUs allocated in 2009; incl. the mathematical value of CHF 332 930, total compensation amounted to CHF 2 687 284.
In addition to compensation in the form of cash, shares and contributions to occupational provisions, Bruno Pfister was allocated 6500 future subscription rights in the form of Performance Share Units (PSUs) as part of the three-year equity compensation plan. These entitle him to Swiss Life Holding shares as at 1 April 2013, provided that
the relevant requirements have been satisfied at that point (deferred compensation). Depending on how the two defined performance criteria develop, the number of PSUs can increase by a factor of 2 or drop to zero. On the allocation date of 1 April 2010, the fair value of one PSU was CHF 149.98.
DUTY TO MAKE AN OFFER — Swiss Life Holding’s Articles of Association provide for neither an “opting up” nor an “opting out” clause within the meaning of Art. 32 and 22 of the Federal Act on Stock Exchanges and Securities Trading.
Benefits and claims under investment contracts with discretionary participation –543 –129
Intangible assets including intangible insurance assets 18 3 982 4 576
Sales of treasury shares – 2 8 – – – 10 – 10
Purchases of non-controlling interests – – – – – – – –9 –9
In 2010 the equity markets were deeply impacted by the debt crisis in certain European countries and were subject to a high degree of volatility. This affected interest rates in Switzerland and Germany, and in turn exerted a marked influence on the Swiss Life share price, which fell in line with interest rates to an annual low in mid-August. By year-end 2010, the share price had made a pronounced recovery, resulting in an increase of 2.4% for the year as a whole. At the Annual General Meeting in May, the shareholders approved a distribution of profit of CHF 2.40 per share. For the 2010 financial year, the Board of Directors proposes a dividend of CHF 4.50 per share in the form of a repayment of par value.
Total dividend payout to shareholders (in CHF million) 29.07. 77 27.07. 160
Gross written premiums, policy fees and deposits received 20 191 20 219 18 515 21 213 19 421
Financial result (without share of results of associates) 4 368 4 588 600 4 923 5 364
Net result from continuing operations 560 324 –1 143 726 576
Equity holders of Swiss Life Holding 557 278 350 1 345 933
PUBLISHER — Swiss Life Holding Ltd, Zurich EDITORIAL RESPONSIBILITY — Swiss Life Group Communications, Zurich CONCEPT AND DESIGN — Eclat AG, Erlenbach, Canton of Zurich PHOTOGRAPHY — Beat Schweizer, Berne; Franz Rindlisbacher and Gerry Amstutz, Zurich; Stefan Kröger, Hanover; Strassenmagazin Surprise GmbH, Basel PRODUCTION — Management Digital Data AG, Schlieren, Canton of Zurich PRINTERS — Neidhart + Schön Group, Zurich © Swiss Life Holding Ltd, 2011