Net earned premiums and policy fees 12 180 11 894 2.4%
In 2013, Swiss Life in France will continue to pursue its strategy of profitable growth. The company will thus maintain its focus on service quality in order to reinforce its leading position in life insurance for affluent and high net worth individuals.
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 Jan­ uary 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 remu­ neration schemes of financial institutions.
Swiss Life – Annual Report 2012 decreased to CHF 163 613 375.40, divided into 32 081 054 registered shares. At the same time the conditional capital was reduced to CHF 12 032 868.60, divided into 2 359 386 registered shares with a par value of CHF 5.10 each.
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. They are available on the internet at www.swisslife.com, “About us” area, “Organisation” section (www.swisslife.com/en/organisation).
Generally, the Group CIO, the Group CFO and the Group CRO attend the Investment and Risk Com­ mittee meetings or parts of meetings in an advisory capacity. The Group CEO may attend the meetings of the Investment and Risk Committee (without voting rights). Further members of the Corporate Executive Board and in­house specialists may also be invited to attend. The Investment and Risk Committee meets at least four times a year.
The performance of the Corporate Executive Board and the contributions made by the individual members are regularly discussed and evaluated by the Chairman’s and Corporate Governance Com­ mittee, the Nomination and Compensation Committee and the Board of Directors, with no members of the Corporate Executive Board being present. The acceptance of directorships and senior political or military roles by members of the Corporate Executive Board is subject to the consent of the Chairman of the Board of Directors.
The Corporate Executive Board may delegate operational responsibility for the management of sub­ sidiaries to individual members of the Corporate Executive Board.
allocated at values1 of CHF 67.3375 and CHF 103.6931. The shares are subject to a three-year blocking period.
Swiss Life – Annual Report 2012 switZerland The MCEV almost doubled. The increase of the value of in-force business is driven by favourable capital market developments as laid out in section 2.5 and better persistency and reduced expenses. The higher net asset value results from a considerable annual profit achieved despite substantial balance sheet strengthening. The free surplus increased by CHF 201 million due to operating earnings after financing the new business production.
PrESENT ValuE OF NEw BuSINESS PrEMIuMS (PVNBP) 3 915 3 669 1 039 2 653 11 276
As some of Swiss Life’s liabilities are running longer than asset durations are available on financial markets in sufficient depth and liquidity, an extrapolation of yields is needed to assess swap rates beyond this horizon. In 2012, Swiss Life used the approach for extrapolation prescribed by EIOPA for QIS 5.
5.1.1.3 100% lIQuIdITY PrEMIuM, rElaTIVE TO SwaP raTES, aS aT 31 dECEMBEr 2012 aNd 31 dECEMBEr 2011
Volatility 5.1.3 Correlation assuMPtions The correlation assumptions between different asset classes are based on historical market data. The correlations between returns on equities and on 10-year zero coupon bonds are assumed to be 17% for 2012 and 13% for 2011.
Cost of residual non-HedgeaBle risKs (CnHr) The cost of residual non-hedgeable risks accounts for risk factors such as mortality, morbidity, expenses and lapse rates.
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.
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.
foreign CurrenCy transaCtions For individual Group entities, foreign currency transactions are accoun ted for using the exchange rate at the date of the trans action. 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.
Hedges of net investments in foreign operations (net investment hedges) are accounted for similarly to cash flow hedges, i.e. the effective portion of the gain or loss on the hedging instrument is recognised directly in equity and any ineffective portion is recognised immediately in the income statement. The gains or losses recognised in equity are reclassified to the income statement on the disposal of the foreign operation.
insuranCe liabilities and liabilities from investment ContraCts with disCretionary partiCipation features FuTure lIFe PolICyHolDer BeNeFIT lIaBIlITIes
If the actual results show that the carrying amount of the insurance liabilities together with anticipated future revenues (less related deferred acquisition costs (DAC) and related intangible assets) are not adequate to meet the future obligations and to recover the unamortised DAC or intangible assets, the entire deficiency is recognised in profit or loss, either by reducing the unamortised DAC or intangible assets or by increasing the insurance liabilities. The liability adequacy test is performed at each reporting date in accordance with a loss recognition test considering current estimates of future cash flows including those resulting from embedded options and guarantees.
2.13 investment management 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.
deferred aCquisition Costs (daC) Costs that vary with and are directly related to the acquisition of new and renewed insurance contracts and investment contracts with discretionary participation features, including commissions, underwriting costs, agency and policy issue expenses, are deferred. Deferred acquisition costs are periodically reviewed to ensure that they are recoverable from future revenues.
Based on the terms and conditions, such as repayment provisions and contractual interest payments, hybrid instruments are considered as financial liabilities.
In the group life business, tariffs can be adjusted due to loss experience with regard to disability each year. In the group life business, the tables are based on own company records reflecting loss experience. Especially in the group life business, changes in the labour market may have a significant influence on disability. The tables are updated for significant changes.
Premiums earned on investment contracts with discretionary participation 661 – – – – – – 661 – 661
Intangible assets including intangible insurance assets 698 484 1 314 177 12 1 028 9 3 722 – 3 722
Net gains/losses on financial assets 8 691 515 86 35 776 550
Debt securities classified as loans 6 932 8 608 – – 6 932 8 608 loaNs aND reCeIvaBles
FINaNCIal asseTs PasT Due (NoT ImPaIreD) – aGe aNalysIs as aT 31 DeCemBer 2012
The Swiss Life Group’s European insurance and investment operations (excluding Switzerland) generally invest in assets denominated in the same currency as their insurance and investment contract liabilities, which mitigates the currency risk for these operations. As a result, currency risk arises from recognised assets and liabilities denominated in other currencies and net investments in foreign operations. Although the Swiss Life Group actively engages in currency management to reduce the effect of exchange rate fluctuations on its assets and liabilities, particularly by hedging against the risk of such movements in relation to part of its investments denominated in euros and in US dollars, significant movements in exchange rates could adversely affect the Swiss Life Group’s earnings and financial position, including the value of its investment portfolio. Foreign exchange exposure is hedged to a large extent in line with the strategic asset allocation. The Group’s hedging arrangements are directed
assets held for sale – 22 – – – – – 22
Intangible assets including intangible insurance assets – – 2 893 3 722 – – 2 893 3 722 lIaBIlITIes
In CHF million whole life and term life 11 330 11 531
Interest expense on deposits under insurance contracts 23 84 100 other interest expense 44 34
Swiss Life – Annual Report 2012 derivatives designated as fair value hedges
ToTal DerIvaTIves DesIGNaTeD as CasH Flow HeDGes 239 63 175 0 –2 6 497 n/a n/a
Investment property held by the Group includes residential, commercial and mixed-use properties primarily located within Switzerland, and comprises both completed investment property and investment property under construction. Property held for investment purposes comprises land and buildings owned by the Group to earn rentals and/or for capital appreciation. Property that is used by the Group itself or leased to, and occupied by, another entity of the Group is classified as owner-occupied property under property and equipment. Property acquired with a view to its subsequent disposal in the near future is carried under assets held for sale.
BalaNCe as aT eND oF PerIoD 576 53 54 25 708
BalaNCe as aT eND oF PerIoD –189 –37 –39 –10 –275
The key assumptions used for the impairment testing on the carrying amount of goodwill were as follows: In CHF million
The growth rates were adjusted in 2012 to reflect the long-term inflation expectations of the International Monetary Fund for the respective markets.
The calculations relating to the recoverable amounts which have been determined on a value-in-use basis use cash flow projections based on financial budgets approved by management.
Investment contracts without discretionary participation at amortised cost 33 43 53
BalaNCe as aT eND oF PerIoD 43 53 investment ContraCts without disCretionary partiCipation at fair value through profit or loss
The expected weighted-average tax rate for the Group in 2012 before impairment losses on the intangible assets relating to the “AWD” segment was 26.1% and after these impairment losses 10.9% (2011: 26.5%). 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
NeT DeFerreD INCome Tax asseTs/lIaBIlITIes –991 9 –390 0 0 –1 373 movemeNTs By TyPe oF TemPorary DIFFereNCe DurING THe year 2011
NeT BalaNCe as aT eND oF PerIoD –833 1 523 145 –124 1 544 711
ToTal asseTs HelD For sale – 22 – – – 22
net gains/losses on financial assets – – –1 – –15 –
CGPI 2014, levallois Perret Ins. Fr from 28.11.2012 100.0% 100.0% eur 1
1 segment (Ins. CH = Insurance switzerland, Im = Investment management, Ins. Int. = Insurance International, Ins. Fr = Insurance France, Ins. De = Insurance Germany)
share capital segment 1 Consolidation period Group share Direct share Currency in 1000
awD Consultanta Financiara srl, Târgu mureş awD until 15.04.2011 – –
Share capItal As at 31 December 2012, the share capital of Swiss Life Holding consisted of 32 081 054 fully-paid shares with a par value of CHF 5.10 each. In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of his own shares and those he represents. As at 31 December 2011, Swiss Life Holding had 32 081 054 registered shares outstanding with a par value of CHF 5.10 per share. Conditional share capital was CHF 12 032 868.60 as at 31 December 2012 (2011: CHF 12 032 868.60).
Swiss Life – Annual Report 2012 free reSerVeS and retaIned earnInGS Free reserves and retained earnings comprise accumulated retained earnings which have not been distributed to the shareholders, or which have not been allocated to the reserve for treasury shares.
Pursuant to the regulations of the 2010 equity compensation plan, future subscription rights were allocated in the form of so-called Performance Share Units (PSUs), whereby share allocation after expiry of the three-year period was based on two objective performance criteria, 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 under the 2010 equity compensation plan can increase by up to a factor of 2.0 or drop to zero. The number
2 the allocation of shares was effected on 18.06.2012 and 14.12.2012 at economic value, which is equal to the tax value (CHF 67.3375 and CHF 103.6931 respectively), taking into account the blocking period of three years. the share prices (closing prices) on the days of allocation were CHF 80.20 and CHF 123.50 respectively. 3 all contributions are gross contributions, i.e. they include employee contributions to aHv/Iv/alv. employer contributions to aHv/Iv/alv/FaK amounted to a total of
Compensation in shares total total compensation bonus for 2012 Other compensation in cash and shares salary paid in 2013 2 compensation 3 in cash Number amount (amount)