Summary of Group Results Swiss Life can look back on a successful financial year 2014: Thanks to the resilience of its business model, the Group grew profitably despite the difficult low interest rate environment. Net profit increased by 4% to CHF 818 million and adjusted profit from operations rose by 4% to CHF 1.2 billion.
Swiss Life reports by country: Switzerland, France and Germany. It also discloses separately the results of its cross-border segments: International and Asset Managers. In the Swiss domestic market, Swiss Life achieved a segment result of CHF 657 million (–8%); allowing for a positive one-off effect during the previous year the result remained stable at a high level. France increased its segment result to CHF 216 million (+12%), Germany contributed CHF 92 million (2013: CHF 96 million). The International market unit generated a segment result of CHF 34 million (2013: CHF 16 million). Swiss Life Asset Managers increased its contribution to the results by 13% to CHF 188 million. Net profit over all segments rose by 4% to CHF 818 million (2013: CHF 784 million).
The French insurance market recorded 6% growth in local currency. Savings and pension premiums increased by 8%, health, death and disability insurance by 2% and property and casualty business by 2%. The premium volume of Swiss Life in France grew by 10% in local currency, thereby again outperforming the market at CHF 5.1 billion (2013: CHF 4.7 billion). The diversification of business activities, multichannel distribution and the strong positioning in life insurance business with high net worth individuals all contributed to this performance. Premium income in savings and retirement provisions rose by 17% in local currency. The share of premium income from unitlinked contracts of 41% was above the market average of 17% thanks to the successful private insurer strategy and the bonus distribution policy for customers in the premium segment. In the hotly contested and rapidly changing health, death and disability insurance market, Swiss Life remained stable by focusing on profitable business and the ongoing repositioning in favour of group business. Swiss Life Banque Privée confirmed its profitability and concluded the integration of the asset management company Prigest. The bank has now evolved into an important component of the private insurer strategy.
Gross written premiums, poliCy Fees And deposits reCeived 2 451 2 643 –7.2%
The number of external mandates for members of the Board of Directors and the Corporate Executive Board is limited in the Articles of Association as revised on 23 April 2014 as follows: Members of the Board of Directors may hold no more than 15 additional mandates, a maximum of 4 of which in other listed companies; members of the Corporate Executive Board may hold no more than 5 additional mandates, a maximum of 1 of which in another listed company. Mandates in different legal entities that are under joint control or same beneficial ownership are deemed one mandate. This restriction does not apply to mandates that a member of the Board of Directors or the Corporate Executive Board assumes at the request of the company or to mandates in associations, charitable foundations, family foundations and occupational benefit institutions.
Other appointments: – PostFinance Ltd, Member of the Board of Directors and Chairman of the Risk Committee
bild Nils Frowein is an economics graduate with German and American accountancy certification. He is a skilled banker and has extensive expertise in the financial services sector and many years of capital market experience. From 1997 until 2004 he worked at the auditing firm BDO Deutsche Warentreuhand AG where he was responsible for the Financial Advisory Services division, most recently as partner.
Pursuant to the revised Articles of Association, the General Meeting of Shareholders is responsible for approving the maximum total amount of fixed compensation for the Board of Directors until the next ordinary General Meeting. The General Meeting of Shareholders also votes on a prospective basis on the maximum amount of the fixed compensation and the long-term variable compensation component (equity compensation plan) for the Corporate Executive Board for the next financial year. By contrast, the short-term variable compensation component for the Corporate Executive Board is submitted for approval to the General Meeting of Shareholders on a retrospective basis for the previous financial year, in full cognisance of the respective business figures.
In the year under review, as in the previous year, Swiss Life grew profitably and significantly outperformed the market in the strategically important business areas. Profit from operations and net profit were further increased compared to the previous year, exceeding the targets under the mediumterm planning by 11% and 18% respectively. In addition, Swiss Life had already achieved its cost savings targets of CHF 130 –160 million under the Group-wide programme “Swiss Life 2015” by the end of 2014, making overall cost savings of CHF 160 million. The targets set for the risk and fee result were also significantly exceeded; the latter increased in local currency by 15% (compared to the prior year) to CHF 1.3 billion. The Group generated adjusted return on equity of 9.6% in the year under review, putting it close to the top end of the target range of 10%. The targets relating to profitability, the value of new business, as well as the new business margin, which fell slightly due to the low interest rate environment, were also exceeded. Likewise, the solvency targets were met and the insurance reserves could again be substantially strengthened in the interest of policyholders.
Expenditure for occupational provisions for members of the Corporate Executive Board in the period under review amounted to CHF 1 913 184. This includes the ordinary annual employer contribution of CHF 205 224 for the occupational benefits of Patrick Frost, Group CEO.
Total outstanding deferred compensation 10 767 491 of which cash payment 581 000 of which shares 0 of which options 0 of which others (Restricted Share Units, RSU) 10 186 491
Contents 76 1.1 Basis of preparation 76 1.2 Covered business and non-covered business 78 2 Summary of MCEV Results 78 2.1 Key results 79 2.2 MCEV of covered business 80 2.3 Value of new business 81 2.4 Group MCEV — analysis of earnings 82 2.5 Covered business — analysis of earnings 86 2.7 Reconciliation of IFRS net asset value to Group MCEV 88 3 Information by Market Unit 88 3.1 Market units 89 3.2 Results by market unit 95 4.1 MCEV components for covered business 98 4.2 New business 98 4.3 Asset and liability data 99 4.4 Economic scenario generator 100 4.5 Dynamic management actions and policyholder behaviour 100 4.6 Look-through principle 101 4.8 Employee pension schemes and share-based payment programmes 102 5.1 Economic assumptions 106 5.2 Taxation and legislation 106 5.3 Operating assumptions 107 6 Auditor’s Report on Embedded Value 109 7 Glossary and List of Abbreviations
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 S.A., which is not material for MCEV purposes. MCEV (and Group MCEV) are net of ceded external reinsurance. Included are namely insurance operations in Switzerland, France, Germany, Luxembourg, Liechtenstein and Singapore. All other businesses such as investment management and Swiss Life Select 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.
5% proportionate increase in mortality rates (death cover) –29 –0% –4 –2%
Switzerland The MCEV increased by CHF 729 million due to operating earnings including a value of new business of CHF 155 million.
Value of new business by market unit – premiums and margins for the year 2014 amounts in CHF million
PrESENT ValuE OF NEw BuSINESS PrEMIuMS (PVNBP) 5 791 3 709 1 081 2 348 12 929
In health, the impact of the health reform was mitigated by the general shift of the product offering to group business and some niches in individual business, as well as lower commissions and expenses.
Share of profit or loss of associates 5, 15 3 7 exPeNSeS
Treasury shares –31 –26 accumulated other comprehensive income 26 3 067 –112
Purchases of computer software and other intangible assets –11 –22 acquisitions of subsidiaries, net of cash and cash equivalents 28 –222 –63
BalaNCe aS aT eND oF PerIoD 164 1 237 –31 3 067 8 319 12 755 76 12 831
brands and other Brands and other intangible assets with a definite useful life of generally 5 to 20 years are amortised using the straight-line method over their useful lives.
Debt instruments with embedded conversion options to a fixed number of shares of the Group are separated into a debt and an equity component. The difference between the proceeds and fair value of the debt component at issuance is recorded in equity. The fair value of the debt component at issuance is determined using a market interest rate for similar instruments with no conversion rights. The Group does not recognise any change in the value of these options in subsequent reporting periods.
Benefits and claims recovered from reinsurers 14 133 26 4 – –5 171 –64 107
Current and non-current assets and liabilities 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.
Financial assets available for sale 6 306 5 293 90 857 75 777 – – 97 162 81 071
Financial liabilities at fair value through profit or loss 468 1 784 622 573 24 325 22 436 25 415 24 794
In accordance with its retention policy, for mortality and disability benefits, the Group limits its exposure to CHF 5 million per life. Retention limits can be lower for other products (e.g. critical illness or long-term care) or for exposure in international markets. In addition, catastrophe reinsurance is in place to protect against accumulation of losses from a single event or a series of connected events.
At 31 December 2014, if the market value of equity securities and property had been 10% higher, the embedded value would have been CHF 722 million higher (2013: CHF 624 million higher).
At 31 December 2014, if the market value of equity securities and property had been 10% lower, the embedded value would have been CHF 818 million lower (2013: CHF 693 million lower).
Information technology and systems 80 76 rental, maintenance and repair 66 65
In 2014, investment funds were deconsolidated due to loss of control. This resulted in a significant decrease in the amount of assets attributable to non-controlling interests of investment funds and of the related liability.
In the case of traditional contracts in the life insurance business, future life policy benefit liabilities are determined by using the net-level-premium method on the basis of actuarial assumptions as to mortality, persistency, expenses and investment return, including a margin for adverse deviation. For participating contracts where the contribution prin ciple applies to the allocation of the policyholder bonus, future life policy benefit liabilities are determined by using the net-level-premium
For 2014, 2013, 2012 and 2011, participants in the share-based payment programme are allocated restricted share units (RSUs). RSUs grant the holder future subscription rights, entitling him to receive Swiss Life Holding shares free of charge after a three-year period has elapsed and if certain conditions are fulfilled.
The RSU programmes also provides for adjustment and reclaiming mechanisms (clawback).
The expected weighted-average tax rate for the Group in 2014 was 26.6% (2013: 24.5%). This rate was derived by obtaining a weighted average of the expected income tax rates in the various jurisdictions in which the Group operates. The change of the weighted-average tax rate is due to the geographical allocation of the profits and the different tax rates in these jurisdictions. The actual income tax expense differs from the expected amount as follows: reconciliation of income tax expense
– Gains and losses from fair value changes of financial assets available for sale. – Effective portion of gains and losses on hedging instruments in qualifying cash flow hedges. – Other items consisting of unrealised losses on financial assets reclassified from available for sale to loans in 2008 due to the disappearance of an active market, and the Group’s share of other comprehensive income of investments in associates accounted for using the equity method.
Net other comprehensive income before non-controlling interests –48 3 017 331 –26 3 274 0 –96 – –96 3 178 1 amount relates to debt securities reclassified to loans in 2008 (note 13)
The fair value hierarchy of assets for the account and risk of the Swiss Life Group’s customers is consistent with the categorisation of assets for the account and risk of the Swiss Life Group.
The weakening of the euro against the Swiss franc since 15 January 2015 has negatively impacted foreign currency translation differences in equity as well as the results of the Group’s foreign operations when reported in Swiss francs. If at the balance sheet date the exchange rate had been 1.05 Swiss francs per euro, total equity would have been lower by approx. CHF 440 million. The negative effect on total equity is compensated by the decision of the Swiss National Bank to lower interest rates and the resulting effect on fair value gains/losses on the Group’s debt securities.
CorPuS SIreo Projektentwicklung Neuenhöfer allee gmbH, Köln am from 01.10.2014 99.9% 100.0% asset management & real estate