Net realised investment gains (total impairments for the years ended 31 December were 683 in 2010 and 439 in 2011, of which 423 and 258, respectively, were recognised in earnings) 2, 13 2 783 409
Interest paid was USD 1 278 million and USD 1 099 million for the twelve months ended 31 December 2010 and 2011, respectively. Tax paid was USD 476 million and USD 706 million for the twelve months ended 31 December 2010 and 2011, respectively.
Total net cash provided/used –11 899 –5 532 Effect of foreign currency translation 224 –98 Change in cash and cash equivalents –11 675 –5 630 Cash and cash equivalents as of 1 January 27 810 16 928 Impact of adoption of ASU No. 2009-172 793 Cash and cash equivalents as of 30 September 16 928 11 298 1 From 1 January 2011, the Group presents the amortisation of deferred acquisition cost in “Depreciation, amortisation and other non-cash items”. Comparatives for 2010 are presented accordingly.
A reconciliation of the other-than-temporary impairment related to credit losses recognised in earnings was as follows: USD millions 2010 2011
The maximum potential payout is based on notional values of the credit derivatives. The Group enters into total return swaps mainly with variable interest entities which issue insurance-linked and credit-linked securities.
Financial statements | Notes to the Group financial statements 5 Deferred acquisition costs (DAC) and acquired present value of future profits (PVFP)
For the years ended 31 December, the DAC and PVFP were as follows: Retroceded DAC and PVFP may arise on retrocession of reinsurance portfolios, including reinsurance undertaken as part of a securitisation. The associated potential retrocession recoveries are determined by the nature of the retrocession agreements and by the terms of the securitisation.
Claims and claim adjustment expenses; life and health benefits –7 254 –8 236 –15 490 –8 810 –8 414 –17 224
Deferred�tax�liabilities Present value of future profits –1 059 –1 082 Income accrued /deferred –591 –629 Bond amortisation –184 –139 Deferred acquisition costs –538 –687 Technical provisions –1 642 –2 446 Unrealised gains on investments –529 –1 932 Untaxed realised gains –336 –373 Foreign exchange provisions –416 –418 DFI losses –99 –17 Other –930 –783 Total� –6 324 –8�506
The balance of gross unrecognised tax benefits as of 31 December 2011 presented in the table above is less than the liability for unrecognised tax benefits reflected in the deferred and other non-current taxes section due to the removal of interest expense (USD 209 million).
Fair value of plan assets as of 1 January 2 723 1 670 4 393 Actual return on plan assets 128 149 277
Net gain /loss 671 224 –143 752 Prior service cost /credit 44 –122 –78
Other assets classified within level 3 mainly consist of private equity investments valued with the same methodology as mentioned in Note 3.
Options sold 73 –51 350 Options forfeited or expired 186 –990 960 Reclassification to liabilities 88 –1 849 000 Outstanding�as�of�31�December� 109 2�363�734 Exercisable�as�of�31�December� 109 2 363 734
A summary of the movements in shares relating to outstanding awards granted under the restricted share plans as of 31 December 2011 is as follows: The weighted average fair value of restricted shares, which equals the market price of the shares on the date of the grant, was CHF 65 and CHF 48 in 2010 and 2011, respectively.
The 2008 LTI grant was expected to be settled in cash. The payout factors are driven by average ROE and EPS compound annual growth over the vesting period. The LTI grant from 2008 vested in March 2011 and there was no payout as the plan performance targets were not achieved.
Net realised investment gains /losses 97 –3 2 237 2 331 Other revenues
Net realised investment gains /losses 769 39 808 Other revenues 25 25 2011 USD millions Credit & Rates
Method of consolidation f full e equity 1 Net asset value instead of share capital 14 Subsidiaries, equity investees and variable interest entities
United Kingdom Admin Re UK Limited, Shropshire 114 106 100 f Banian Investments UK Limited, St. Helier 0 0 100 f BL Telford Limited, Shropshire 47 44 100 f European Credit and Guarantee Insurance PCC Limited, St. Peter Port 0 0 100 f NM Insurance Holdings Limited, Shropshire 204 191 100 f NM Life Group Limited, Shropshire 233 218 100 f NM Life Limited, Shropshire 148 138 100 f NM Pensions Limited, Shropshire 209 195 100 f Reassure Life Limited, London 23 22 100 f Reassure Limited, Shropshire 409 382 100 f Reassure UK Life Assurance Company Limited, London 43 40 100 f SR Delta Investments (UK) Limited, London 6 5 100 f Swiss Re BHI Limited, London 0 0 100 e Swiss Re Capital Markets Limited, London 60 56 100 f Swiss Re Frankona LM Limited, London 11 10 100 e Swiss Re GB Limited, London 0 0 100 f Swiss Re Services Limited, London 4 3 100 f Swiss Re Specialty Insurance (UK) Limited, London 28 26 100 f The Mercantile & General Reinsurance Company Limited, Glasgow 0 0 100 f The Palatine Insurance Company Limited, London 12 11 100 f
Whenever facts and circumstances change, a review is undertaken of the impact these changes could have on the consolidation assessment previously performed. When the assessment might be impacted, a reassessment to determine the primary beneficiary is performed.
Modified coinsurance agreement The Group assumes insurance risk via a modified coinsurance agreement from a direct insurer which qualifies as a VIE. The Group assumes the majority of the mortality and investment risk in the VIE. In addition, the Group has the power over the investment management and policyholder administration. As these are the activities that most significantly impact the entity’s economic performance, the Group qualifies as the primary beneficiary and consolidates the entity. The Group will incur losses if mortality risk or the investment returns of the entity develop unfavourably.
The Group Chief Risk Officer, who is a member of the Group EC, reports directly to the Group CEO as well as to the Board’s Finance and Risk Committee. The Group Chief Risk Officer participates in the four committees described above and chairs both the Group Risk and Capital Committee and the Group Regulatory Committee. In addition, the Group Chief Risk Officer leads the global Risk Management function, which is responsible for risk oversight and control across the Group.
The Compliance function is principally responsible for overseeing Swiss Re’s compliance with applicable laws, regulations, rules and the Code of Conduct, as well as management of Compliance Risk. It serves to assist the Board of Directors, the Executive Committee and Management in discharging their respective duties to effectively identify, mitigate and manage Compliance Risks.
Claims and claim adjustment expenses increased significantly from CHF 7.8 billion in 2010 to CHF 10.0 billion in 2011. Without the effect of foreign exchange movements, total claims and claim adjustment expenses amounted to CHF 11.6 billion in 2011. This financial year was driven by extraordinary natural catastrophe losses including floods and cyclones in Australia, earthquakes in New Zealand, earthquakes and tsunami in Japan, tornados and hurricane Irene in the US, and floods in Thailand. Nevertheless, claims and claim adjustment expenses for property and casualty decreased during 2011 by CHF 1.0 billion to CHF 3.1 billion benefiting from more retrocession coverage, positive claims experience as well as the deterioration of most currencies against the Swiss franc with an impact of CHF 0.5 billion.
Expenses from derivative financial instruments – –13 Investment management expenses –300 –268 Valuation adjustments on investments –1 527 –6 082 Realised losses on sale of investments –324 –285 Investment expenses –2 151 –6 648
In addition, a financial lease of IT hardware is recognised on the balance sheet. The corresponding asset and liability of CHF 10 million (2010: CHF 16 million) are included in tangible assets and other liabilities, respectively.