Ladies and gentlemen, in an age of breath-taking innovation and quantum leaps in technology – we believe that people will remain at the heart of our life insurance business, whether that applies to working with customers, training our staff or in our drive to keep impressing our shareholders with our performance.
– We aim to achieve a payout ratio in the 30–50% range. – We continue to expect an adjusted return on equity of 8–10%.
In the year in review, Swiss Life France grew its segment result in local currency by 4% to CHF 244 million (2015: CHF 234 million). This development is primarily due to the quality of new business, a larger financial margin in life insurance, improved technical margins in property and casualty business and continuing efficiency improvement.
Corporate Governance The Swiss Life Group stands for openness and transparency within the context of responsible corporate management in compliance with the acknowledged national and international corporate governance standards.
All complete notifications can be seen on the website of the SIX Swiss Exchange’s disclosure office at www.six-exchange-regulation.com, “Publications” area, “Major Shareholders” subsection (www.six-exchange-regulation.com/de/home/publications/significant-shareholders.html).
Committee – Consitex SA, Member of the Board of Directors – Ermenegildo Zegna Holditalia SpA, Member of the Board of Directors and Chairman of the Nomination and Compensation Committee – Banque Morval SA, Member of the Board of Directors – PKB Privatbank AG, Chairman of the Board of Directors and the Executive Committee – Global Petroprojects Services Ltd, Member of the Board of Directors – Bank Lombard Odier & Co Ltd, Member of the Board of Directors and Chairman of the
Franziska Tschudi will be put forward for re-election as Member of the Board of Directors and as member of the Compensation Committee at the General Meeting of Shareholders of Swiss Life Holding on 25 April 2017.
Nine meetings of the Investment and Risk Committee were held in the year under review. Each session lasted for around two hours on average. All members attended all the meetings, with the exception of one meeting, where one member was excused. The Chairman of the Board of Directors attended eight meetings of the Investment and Risk Committee. The Group CFO attended all meetings of the Investment and Risk Committee; the Group CEO and Group CIO attended eight of the ten meetings. The Group CRO attended all the meetings.
The amount of the variable compensation (short-term variable compensation in cash and equity compensation plan as a long-term variable compensation component) is limited in the Articles of Association of Swiss Life Holding to a maximum of 181% of the fixed basic salary (statutory “bonus cap”, upper limit for the variable compensation). On the basis of the current compensation policy the Board of Directors has, with a view to harmonising fixed and variable compensation in the case of maximum target achievement and departing from a benchmark of 100%, set a range of 100–130% of the fixed basic salary for the variable compensation components; under extraordinarily positive circumstances the Board of Directors may augment this range at its own discretion to a maximum of 150%. Starting from the principle of equal apportionment, the ratio of short-term to long-term variable compensation components is determined by the Board of Directors in consideration of the results achieved in the respective business year (discretionary decision). In the case of an “on target” achievement, the range for variable compensation of members of the Corporate Executive Board is 80–100% of the fixed basic salary (“on-target bonus”).
Swiss Life – Annual Report 2016 40% of the variable compensation is based on Corporate Executive Board members’ achievement of specified personal goals. On the one hand, these personal goals are linked back to the company’s success, in that each Corporate Executive Board member has to meet personal quantitative objectives contributing to the company’s success in relation to his division. On the other hand, the personal goals cover qualitative factors, namely project targets, risk management and compliance goals, as well as requirements relating to leadership and to supporting and further developing corporate culture.
In addition to Group CEO Patrick Frost, six persons were members of the Corporate Executive Board for the entire year under review, as reported in the compensation table below.
7 All contributions are gross contributions, i.e. they include employee contributions to AHV/IV/ALV. Employer contributions to AHV/IV/ALV/FAK amounted to a total of CHF 1 051 107 in the year under review.
2 Part of the total compensation, the granting or the amount of which is at the discretion of the company or which is contingent on fulfilment of predefined conditions. This includes compensation contingent on performance or meeting certain targets. Sign-on payments and severance payments also fall within the scope of the definition of variable compensation.
The materiality matrix displays and organises the central issues from the “Corporate Responsibility ” area along two axes. The Corporate Responsibility Report covers all the subjects included in the matrix.2 The upper right quadrant of the matrix contains the issues that have proven most important to both internal and external stakeholders. These are action points, which are classified as being particularly important to business success and they feature prominently in the reporting.
Responsible employer Swiss Life is a responsible employer, which offers its employees attractive and fair working conditions. Swiss Life is currently working on measures and offers in all its divisions to contribute to helping their staff to perform and stay motivated throughout all the stages of their career.
A survey by Swiss Life Germany showed that customers particularly value the “closing-the-loop calls”, i.e. initiating contact following negative feedback.
Swiss Life sets great store by compliance with all applicable legal provisions and regulatory stipulations in all its activities. The Code of Conduct is an important tool in compliance terms. It contains Swiss Life’s values and principles as well as the rules of conduct, which are binding for all employees.
Swiss Life’s operations are oriented towards the long term. We must be able to keep promises we make to our customers for decades. That is why long-term investing plays a central role in the life insurance business. Swiss Life has crafted its investment strategy to ensure that the interest margin remains positive even when interest rates stay low for more than three decades. What is more, Swiss Life has not ceased developing its business model over recent years, and has reduced its dependency on investment results by expanding its fee and commission business. With its successful enhancement of asset management for third parties, independent IFA channels and new initiatives, such as consulting or real estate broker business, Swiss Life has significantly increased the contribution made to its result by so-called fee business.
Swiss Life fosters contacts with representatives from the political and business communities as well as supervisory authorities. Political work and communication are closely coordinated with trade associations in all the core markets. Moreover, a number of company executives are members of various national trade associations.
The Public Affairs organisational unit is responsible for monitoring political challenges. In addition, the Political Communications Steering Comittee meets four times a year. This internal committee is chaired by the Group CEO and sets the topical priorities.
Moreover, Swiss Life Germany founded the “Swiss Life Stiftung für Chancenreichtum und Zukunft” (Swiss Life foundation for opportunities and the future), which became operational in 2017. The foundation is committed to knowledge, social innovation and equal opportunity. It works towards having as many people as possible in Germany – regardless of their social background – remain curious, acquire knowledge and, as a result, lead a longer self-determined life.
Swiss Life International has supported sporting initiatives for a number of years at its international locations, e.g. Garisart Tennis Academy in Belgium, which works with young athletes.
Expenses for training and development within the Group in 2016 amounted to CHF 17.2 million – or some CHF 2034 per employee. As a proportion of staff costs, the outlay for training and development is 2.2%. The investment is earmarked for a varied, needs-based training offering.
Luxembourg In the Luxembourg financial sector as well as in the insurance sector, salary agreements are signed at sector level. The most recent agreement was concluded in June 2015 between employee and employer representatives for a period of three years. Swiss Life played an active role in these negotiations, seeking to reconcile the rights of employees with those of the employer. The goal was to maintain provisions for employees while enhancing cost control for the employer and further developing performance-based remuneration.
Germany Swiss Life Germany Works Council Internal Services (responsible for German branch in Garching as well as SLPM, Swiss Life Asset Managers and Swiss Life Invest): – Eleven members, two of them with 50% work dispensation for Works Council activities (Works
Corpus Sireo, Germany – Asset Management Commercial GmbH: nine (seven full-time, two part-time) – Asset Management Residential GmbH: three (two full-time, one part-time) – Holding GmbH: five (five full-time) – Group works council: six
Greenhouse gas emissions Scope 1 and 2 (CO2 equivalents in t)
G4-7 Nature of ownership and legal form p. 27, p. 349
G4-19 Material aspects Economic Performance, Indirect Economic Performance, Energy Emissions, Employment, Labour/Management Relations, Occupational Health and Safety, Training and Education, Diversity and Equal Opportunity, Equal Remuneration, Grievance Mechanisms, Non-discrimination, Public Policy, Compliance, Customer Health and Safety, Product and Service Labelling, Product Compliance, Active Ownership
Page number in SPECIFIC STANDARD DISCLOSURES Annual Report 2016 Reasons for omission
G4-PR2 Violation of regulations and codes of conduct concerning product p. 96, p. 98 guidelines for health and safety Product and Service Labelling p. 95–96
Swiss Life presents itself with a strong umbrella brand. As a rule all products and services are offered under the umbrella brand.
The brand identity is a key instrument in making the Swiss Life brand personality tangible for internal and external target groups, and in distinguishing it from the competition. All advertising campaigns – in Switzerland, France, Germany and Austria – address the guiding theme, “A longer self-determined life”. That common theme, a longer self-determined life, is treated with a range of creative approaches. In Germany and Austria, for instance, under the slogan “Live longer. But not slower”, the appealing campaign features an unexpected combination of words and pictures.
Swiss Life – Annual Report 2016 2 Summary of MCEV Results 2.1 Key results
Expected existing business contribution (reference rate) Expected existing business contribution (reference 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 net asset value is included.
Swiss Life – Annual Report 2016 3.2 Results by market unit
Value of new business by market unit – premiums and margins for the year 2015
International Lower volumes in business with Global Private Wealth, related efficiency losses, and a reduced share of risk business in Global Employee Benefits led to a decrease of new business value and margin. Furthermore, the higher projected tax rate in Luxembourg and a refinement of the fund projection in Global Private Wealth had negative impacts. This was mitigated by higher fee levels and lower administration expenses in the Global Private Wealth business.
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 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.
The stochastic economic scenarios are generated by the economic scenario generator developed and provided by Barrie & Hibbert, part of Moody’s Analytics, Inc. In view of the sustained low interest rate environment, an interest rate model allowing for negative interest rates is used as of 31 December 2016. For variable annuity products a dedicated economic scenario generator is used.
In connection with our audit of the MCEV Report, our responsibility is to read the other information in the annual report and, in doing so, consider whether the other information is materially inconsistent with the MCEV Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Free surplus (FS) The free surplus is the market value of any assets allocated to, but not required to support, the in-force covered business at the valuation date.
For the 2015 financial year, a distribution was made to the shareholders of Swiss Life Holding Ltd (hereinafter referred to as “Swiss Life Holding”) from the capital contribution reserve instead of a dividend payment from profit. This amounted to CHF 271 million (CHF 8.50 per registered share) and was paid in 2016.
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.
TOTAL OTHER LOANS AND RECEIVABLES 3 184 2 759 1 027 920 98 4 731 48 12 767
Approximately 1.2% in terms of earned insurance premiums was ceded as at 31 December 2016 (2015: 1.0%).
Interest income on financial assets available for sale 2 554 2 605
Financial liabilities at fair value through profit or loss –1 0
Derivatives designated as fair value hedges as at 31 December 2016
BALANCE AS AT END OF PERIOD 7 7 17 20 24 28
BALANCE AS AT END OF PERIOD –516 –76 –143 0 –736
The details regarding key management compensation in accordance with the Article 663bbis of the Swiss Code of Obligations or the Ordinance against Excessive Compensation in Listed Stock Companies (Compensation Ordinance, VegüV), respectively, are set out in the Compensation Report, which forms part of the Corporate Governance section of the Annual Report 2016 of the Swiss Life Group. The information according to Article 663c of the Swiss Code of Obligations is shown in the Notes to the Swiss Life Holding Financial Statements.
Foreign currency translation differences – –5 – –43 –42 –294 –302 –686
The table below presents marketable securities received from third parties that are not recognised in the balance sheet, but are held as collateral in respect of the following transactions.
We focused our audit on these liabilities due to their significance to the consolidated financial statements, the sensitivity to changes in the economic conditions, and the level of management judgment involved in setting assumptions. Management’s process for updating assumptions varies by territory and product.
We also reviewed management’s sensitivity analyses to ascertain the level of prudency used.
Overall we found the value of goodwill for all businesses acquired to be supportable.
Swiss Life Holding further provides capital guarantees for a maximum net asset value of CHF 1100 million to Swiss Life Ltd, CHF 150 million to Swiss Life Funds, CHF 139 million to Swiss Life Products, CHF 6 million to Swiss Life Liechtenstein and CHF 23 million to Corpus Sireo.
Compensation in 2016 The Board of Directors is responsible for drawing up a written compensation report each year to include the information required by Articles 14–16 of the Federal Ordinance against Excessive Compensation in Listed Stock Companies (Compensation Ordinance). This compensation report supersedes the details in the notes to the balance sheet according to Art. 663bbis CO. Swiss Life’s compensation report for the 2016 financial year is provided on pages 51 to 68.
Participations represent a significant amount of the balance sheet (CHF 3716 million, 63% of total assets). We refer to page 334 of the financial statements of Swiss Life Holding AG.
In addition, we assessed the main parameters used in the calculation of the weighted average cost of capital, from which the discount rate is derived. In particular, we identified the market data inputs used by management and compared these against independent data.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor ’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.