Markets — Swiss Life is a leading life and pensions provider in Switzerland with a market share of around 27%. It is one of the top 10 European life insurance providers, with 2% of the market. In the area of international insurance solutions for high net worth individuals, Swiss Life was able to further reinforce its strong position.
Rolf Dörig tionships, and also the engagement of our workforce. The strategic cornerstones we set have proven themselves. We improved our operating results significantly in 2009 visà -vis 2008. Net profit from continuing operations stood at CHF 324 million, compared to a loss of CHF 1.1 billion the previous year. Premium volume grew by 9% to CHF 20.2 billion. The Board of Directors proposes that the Annual General Meeting of Shareholders approve a distribution of profit of CH 2.40 per share (previous year: CHF 5).
“Swiss Life set the course for profitable growth in 2009. We are not interested in maximising profit in the short term. Our goal is to improve competitiveness and boost profitability on a sustainable basis.”
in the third quarter and the trend reversal continued into the fourth quarter.
What kind of economic environment do you expect for Swiss Life in 2010? Although I’m an optimist by nature, I expect the general economic climate to remain unsettled in 2010. We at Swiss Life are also bracing ourselves for persistently challenging market conditions. However, we have survived some difficult times throughout our 150year history. I’m sure that, with our excellent workforce, sound financial strength and strong brand, we will succeed in driving Swiss Life forward during this financial year. We have strengthened our management team in recent years, especially in relation to the 100 or so key positions within the company. We have achieved this through a combination of new hires and internal transfers. I’m confident that this team and all our staff will work with great determination and discipline to translate the Group’s ambitions into reality in the years ahead.
Operating expenses increased by 20% to CHF 860 million. However, this is not representative of the actual costs situation, as last year’s expenses figure included net deferred acquisition costs. The 2009 figure was also hampered by restructuring charges of over CHF 63 million from ongoing efficiency programmes. Administrative costs from operations fell by 14%, thanks to efficiency improvements achieved from optimising processes and streamlining the project portfolio.
In 2009 Swiss Life maintained its stable technical margins in its main business operations. In line with the growth in premiums, Swiss Life improved its operating expense ratio, thanks in particular to efficiency improvements which will be continued into 2010. Swiss Life in France aims to reinforce its leading position in private life insurance, as well as in health, life and disability insurance, in particular by expanding its multi-channel distribution.
Another environmental initiative was the installation of efficient water supply fittings in the Zurich offices at the end of 2009, enabling Swiss Life to save five million litres of water per year. Saving water is also important at rental properties. As the leading real estate owner in Switzerland, Swiss Life fitted registering devices to calculate usage-based water costs in almost 10 000 of its rental properties in regions with high water costs over a period of five years. Studies show that water consumption has been reduced by an average of 20% as a result. Energy efficiency is very important in new buildings too. Two projects, the “Gerstenpark” in Rheinfelden, Canton Aargau, and the “Trio” residential and commercial development in Dietikon, Canton Zurich, were built in accordance with the MINERGIE certification standard for low-energy buildings.
The Swiss Life Group continually adapts its corporate governance practices to current developments. In doing so, it observes the regulatory requirements in terms of best practice. At the Group’s Annual General Meeting of 7 May 2009, the shareholders were given the opportunity of holding a consultative vote on the compensation report.
School (MBA) before earning his doctorate in economics in 1983 at the University of Lausanne (Dr. ès sc. écon). From 1983 to 2001 he held various positions at the Zurich Financial Services Group in Switzerland and the USA, including Head of Corporate Center and Head of the Business Division Southern Europe, Asia/Pacific, Middle East, Africa and Latin America. From 1993 he served on the Zurich Financial Services Group’s Executive Committee. From 2002 to 2007, Frank Schnewlin chaired the Baloise Group’s Corporate Executive Committee as CEO and was, at the same time, Head of the International Division.
AL Peter Quadri received his master’s degree in economics and business administration (lic. oec. publ.) in 1969 from the University of Zurich. In 1970 he joined IBM as a systems engineer and software/operating systems specialist. Following various periods in the USA, Denmark and Switzerland, he held the position of CEO of IBM Switzerland from 1998 to April 2006. He now works as a management and technology consultant.
There were no resignations from the Board of Directors during the 2008 financial year. Within the context of succession planning at Board of Director and Corporate Executive Board level, Rolf Dörig was elected to the Board of Directors of Swiss Life Holding as an additional member on 8 May 2008.
Compensation to the members of the Corporate Executive Board comprises a salary, a variable bonus in cash, other compensation (child allowances, allowances for years of service, company cars, premium contributions to 3rd-pillar pension plans) and, possibly, a variable compensation component in shares. The salary is determined annually by the Board of Directors at the request of the Nomination and Compensation Committee, taking into account the function-related responsibility and workload. If the Swiss Life Group’s business operations have proven successful, a variable cash bonus and, possibly, variable compensation in shares are also granted. This is decided on by the Board of Directors, taking into consideration both the business results and the personal achievement of objectives by the members of the Corporate Executive Board. They are also insured for occupational provisions.
Swiss Life — Business Review 2009 shares, entitling them to receive the shares free of charge after a period of three years has elapsed, if the relevant conditions have been fulfilled.
In the period under review, 65 members of the Swiss Life Group senior management participated in the 2009 equity compensation programme which came into effect on 1 April 2009. A total of 53 216 PSUs were allocated; 22 200 to the Corporate Executive Board, of which 6500 to Group CEO, Bruno Pfister.
In addition to its comprehensive Annual Report and Financial Statements, Swiss Life Holding also publishes its half-year results. All Swiss Life’s annual and half-year reports since 1997 can be accessed on its website. Twice a year, a report detailing the key facts and figures on business operations is sent to all the shareholders listed in the share register. For the last six years, the company has been holding an Investor’s Day annually; the most recent was held on 15 December 2009.
Key elements of the Consolidated Financial Statements are presented on the following pages. The full Consolidated Financial Statements are included in the separate Financial Statements (www.swisslife.com/report).
Dodge & Cox, 555 California Street, 40th Floor, San Francisco, CA 94104, USA, informed 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.
Bahnhofstrasse 17, 6300 Zug, Credit Suisse Life (Bermuda) Ltd., Argyle House, 41 A, Cedar Avenue, Hamilton HM 12, Credit Suisse, Paradeplatz 8, P.O. Box, 8070 Zurich, and Credit Suisse International, One Cabot Square, London E14 4QJ, a total of 5.382% purchase positions (1 364 934 of which were registered shares of Swiss Life Holding, corresponding to 3.89% of the voting rights) and 2.124% sales positions. In a publication of 1 April 2009 the group informed that its holding had fallen below the 3% reportable threshold.
Swiss Life Holding is not aware of any other shareholders whose stake on the balance sheet date (31 December 2009) either directly or indirectly exceeded the reportable threshold of 3% of the registered shares issued.
STAGGERED TERMS OF OFFICE — Due to the staggered terms of office, it is ensured that, in so far as possible, an equal number of members will come up for re-election every year. If a member resigns during his or her term of office, the successor will serve only for the rest of that term. Thus, with respect to the annual re-elections, an important prerequisite has been established for ensuring continuity on the Board of Directors.
Catholic University of Leuven (Belgium) in 1979. Between 1975 and 1983 he held a post as Research Assistant at the Catholic University of Leuven. From 1983 to 1985 he was a Lecturer in Statistics at the Imperial College, University of London, before taking up a position as Lecturer at the University of Limburg (Belgium) from 1985 to 1989. Since 1989 he has held the position of Professor of Mathematics at the Swiss Federal Institute of Technology (ETH) in Zurich.
After serving on the Swiss Life Board of Directors for seven years, Rudolf Kellenberger will not be standing for re-election at the Annual General Meeting in May 2010.
AUDIT COMMITTEE — The Audit Committee assists the Board of Directors in its supervision of the accounting function and financial reporting activities, as well as compliance with the legal framework. It reviews the appropriateness of the internal control structures and processes used to comply with the legal requirements. It monitors the activities of Corporate Internal Audit and the external audit services, and takes due note of their reports and recommendations. The Committee is empowered to make decisions with respect to defining the terms and conditions for mandates to external auditors and keeps the Board of Directors appropriately informed. Moreover, the Audit Committee issues the regulations of the Corporate Internal Audit and sets the annual programme of activities for the internal audit units.
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 Committee, 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.
As Chairman of the Board, Bruno Gehrig was affiliated to the employee benefits institutions of Swiss Life for the purpose of occupational provisions and obtains the corresponding pension benefits under the pension fund regulations. Rolf Dörig, in his former role as Delegate of the Board of Directors and current position as Chairman of the Board, is also insured for occupational provisions with the employee benefits institutions of Swiss Life. No such affiliation exists for other members of the Board of Directors; no contributions have been made on their behalf.
The number of future subscription rights to Swiss Life Holding shares allocated in the context of the above-mentioned equity compensation programme to members of the Corporate Executive Board in the form of so-called performance share units (PSUs), and whose exercise depends on the fulfilment of specific performance criteria, is shown in the notes to the Swiss Life Holding Financial Statements.
– dissolve the company (liquidation) – dismiss more than one third of the members of the
The opening adjustments represent dividend payments from the covered and non-covered business, resulting in the reduction of par value of CHF 5 per share as shown in the Consolidated Financial Statements (Note 1).
For the French health insurance business, the methodology of the market consistent embedded value has been applied in 2009, whereas in 2008 the traditional embedded value methodology was used. The difference in value resulting from the transition from traditional embedded value as at the beginning of 2009 is CHF –5 million. While the traditional embedded value accounted for risk by means of a spread in the discount rate, the market consistent embedded value of the French health insurance business accounts for risk through the cost of non-hedgeable risk. As this business does not contain any financial options and guarantees, it does not contribute to the time value of financial options and guarantees.
VALUE OF NEW BUSINESS BY MARKET UNIT FOR THE YEAR 2009
The assumption changes are dominated by group life persistency variances and individual life expense assumption variances.
The main drivers behind experience variances were higher taxes and higher than anticipated bonuses to the policyholders due to competition.
The value of new business of a period represents the effect on the MCEV at the end of the period from writing new business, i.e., it is the difference between the actual closing MCEV and the closing MCEV which would result if no new business had been written during the period. This is known as the “marginal” approach to value of new business. It applies to every MCEV component: certainty equivalent value, TVOG, CNHR and FC. Legal constraints – e.g. “legal quotes” – or management rules often apply to books of contracts as a whole instead of individual contracts. That is why the value of new business can be dependent on the business in force before the writing of new business.
COVERED BUSINESS — The business to which the MCEV methodology has been applied, in line with the MCEV Principles. Covered business includes all of Swiss Life’s major life, health and pension business.
In March 2009, the International Accounting Standards Board clarified the accounting treatment for embedded derivatives when reclassifying financial instruments. The amendments to IFRIC 9 Reassessment of Embedded Derivatives and IAS 39 Financial Instruments: Recognition and Measurement require the assessment of all embedded derivatives on reclassification of a financial asset out of the “at fair value through profit or loss” category. If necessary, the embedded derivatives are accounted for separately. The amendments apply retrospectively for annual periods ending on or after 30 June 2009. As the Swiss Life Group has not reclassified any financial assets out of the “at fair value through profit or loss” category, the amendments are not currently relevant.
As the liabilities to policyholders arising from the insurance business are fully recognised, no further liabilities relating to the rights arising from DPF have been set up.
VATE PLACEMENT LIFE INSURANCE — Separate account contracts represent life insurance contracts with a separated part that is invested in assets managed for the account and risk of the Swiss Life Group’s customers according to their specific investment objectives. Separate account liabilities are included in insurance liabilities. Separate account liabilities include the right of the policyholder to participate in the performance of the underlying assets.
A discontinued operation is a component of the Group that either has been disposed of or is classified as held for sale and represents a major line of business or geographical area of operations or is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations. A discontinued operation is classified as such upon disposal or when it meets the criteria for the classification as held for sale. The consolidated statement of income is represented for prior periods as if the operation had been discontinued from the start of the earliest period presented.
In November 2009, IFRS 9 Financial Instruments was issued by the International Accounting Standards Board. The Standard represents the first part of a three-part project to replace IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 Financial Instruments covers classification and measurement of financial assets. The classification and measurement approach in IFRS 9 Financial Instruments is based on how an entity manages its financial instruments (business model) and the contractual cash flow characteristics of the financial assets. A financial asset is measured at amortised cost or fair value. The Standard will be effective for annual periods beginning on or after 1 January 2013. The Swiss Life Group is currently analysing the impact of these changes on its financial statements.
Premiums earned on investment contracts with discretionary participation 105 13 – –
Policy fees earned on investment and unit-linked contracts 14 91 27 74
The Swiss Life Group operates in selected European countries. The Group’s income and non-current assets by geographical location are detailed below: In CHF million Total income Non-current assets
Net gains/losses on financial assets –118 –6 010 0 – –118 –6 010
Share of results of associates 6 –149 – – 6 –149
STRATEGIC ASSET ALLOCATION — Strategic asset allocation is the first major task of the ALM process and aims at achieving an efficient risk capital allocation, i.e. optimising the returns on the asset portfolio for the available risk capital defined within the risk budgeting process, taking into account all known constraints.
Financial liabilities at fair value through profit or loss 1 078 – – 1 254 – –
Financial assets held to maturity 114 674 6 318 6 485 – – 6 432 7 159
Deferred income tax assets – – 80 97 – – 80 97
At 31 December 2009, if morbidity had been 5% lower, the embedded value would have been CHF 105 million higher (2008: CHF 96 million higher).
Financial assets designated as at fair value through profit or loss 445 –973
Realised gains/losses on sales of subsidiaries and other assets 13 –6
Assets for the account and risk of the Swiss Life Group’s customers 5 16 741 11 132
Classification as assets held for sale and other disposals –524 –155
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 owneroccupied 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.
Effect of amendment to IAS 40 –96 – – – –96
On 12 April 2007, ELM B.V., a Dutch repackaging vehicle, issued EUR 700 million in fixed/floating rate subordinated perpetual notes at a price of par to finance loan
Swiss Life Holding has the option to redeem all outstanding bonds at their principal amount (together with unpaid accrued interest) at any time on or after 25 June
Later than 1 year and not later than 5 years 4 – 3 –
For participating contracts where the contribution principle applies to the allocation of the policyholder bonus, future life policy benefit liabilities are determined by using the net-level-premium method on the basis of appropriate mortality and interest rate assumptions.
Employee benefit liabilities consist of gross defined benefit liabilities –2 025 –2 003 other employee benefit liabilities –96 –82
Amount of insurance contracts not included in plan assets 2 047 2 019
Additional provisions made during the reporting period 72 97 169 28
Financial assets available for sale 28 19 721 683 – 20 404
Other financial liabilities –2 –1 698 –11 336 –5 –13 039
Banca del Gottardo, Lugano, as well as the insurance operations in the Netherlands and in Belgium are presented as discontinued operations in the consolidated statement of income.
Later than 1 year and not later than 5 years 489 550
Interest income 877 690 37 Reclassifications in the Consolidated Balance Sheet
Swiss Life Immobilier SA, Paris Ins. FR from 02.06.2009 98.3% 100.0% EUR 37
Read Independent Financial Advisers Ltd, Manchester AWD 19.03.08 – 31.03.09 – –
This considerable decrease in annual profit vis-à-vis the prior year stems from the sale of Banca del Gottardo and the Dutch and Belgian arms, which Swiss Life Holding Ltd (Swiss Life Holding) and its subsidiaries completed the previous year and which had a significant impact on the parent company’s annual financial statements.
LOANS TO GROUP COMPANIES — CHF 190 million of the loans to Group companies is classified as subordinated.
The Corporate Executive Board, including Bruno Pfister as Group CEO, thus consisted of up to nine members during the period under review (2008: ten members).
8 Regular contribution of CHF 156 648 and a subsequent contribution of CHF 598 500 in accordance with the pension fund regulations due to the increase in the insured income.