Notes to the Financial Statements
Accounting Rules
Assets and liabilities are stated in the balance sheet in accordance with the provisions of the Swiss Code of Obligations (OR).
Explanations on the Balance Sheet and Statement of Income
Participations
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| Banca del Gottardo, Lugano | | CHF | | 70 000 | | 100.0% | | CHF | | 70 000 | | 100.0% | |
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| Pulse SA, Luxembourg | | EUR | | 31 | | 100.0% | | – | | – | | – | |
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| Swiss Life Beteiligungs GmbH, München | | EUR | | 25 | | 100.0% | | – | | – | | – | |
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| Swiss Life Intellectual Property Management AG, Zürich | | CHF | | 250 | | 100.0% | | CHF | | 250 | | 100.0% | |
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| Swiss Life International Holding AG, Zürich | | CHF | | 1 000 | | 100.0% | | CHF | | 1 000 | | 100.0% | |
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| Swiss Life Investment Management Holding, Zürich | | CHF | | 50 000 | | 100.0% | | CHF | | 50 000 | | 100.0% | |
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| Swiss Life (Liechtenstein), Vaduz | | – | | – | | – | | CHF | | 5 000 | | 100.0% | |
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| Swiss Life/Rentenanstalt, Zürich | | CHF | | 587 350 | | 100.0% | | CHF | | 587 350 | | 100.0% | |
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LOANS TO GROUP COMPANIES | CHF 182 million of the loans to Group companies is classified as subordinated.
Major shareholders | At the time of writing there are no individual shareholders or groups of shareholders who own more than 5% of Swiss Life Holding’s share capital and who are known to us.
Share capital | As at 31 December 2007, the share capital of Swiss Life Holding (SLH) consisted of 34 960 439 fully-paid shares with a par value of CHF 34 each. In exercising voting rights, no shareholder can collect more than 10% of the total share capital directly or indirectly in respect of their own shares and those they represent. As at 31 December 2006, SLH had 33 776 269 registered shares with a par value of CHF 41 per share. Conditional share capital was CHF 84 439 034 as at 31 December 2007 (2006: CHF 150 374 511).
Legal reserves | Legal reserves comprise the general reserves (additional paid-in capital in excess of the par value, net of transaction costs) and reserve for own shares (equivalent in value to SLH shares held by the Swiss Life Group).
Free reserves and retained earnings | Free reserves and retained earnings contain accumulated retained earnings which have not been distributed to the shareholders, or which have been allocated to the reserve for own shares.
Issuance of convertible debt in 2004 | On 10 June 2004, SLH issued CHF 317 million in 0.625% convertible bonds (2004–2010) convertible into SLH registered shares. The conversion price was set at CHF 209.625.
In 2007, convertible bonds of CHF 248 235 000 were converted into 1 184 170 SLH shares with a corresponding increase of share capital and share premium.
Own shares | In the year under review the companies in the Swiss Life Group purchased a total of 4 233 778 Swiss Life Holding shares at an average price of CHF 309.88. In the same period, they sold 2 415 493 shares at an average price of CHF 312.36. As at 31 December 2007, the Swiss Life Group held 2 153 802 own shares.
Personnel expenses | No direct staff costs are included under operating expenses.
Contingencies | Swiss Life Holding acts as warrantor for all Swiss Life/Rentenanstalt liabilities with regard to the various tranches of the subordinated perpetual step-up loan (hybrid debt), which amounted to an equivalent value of CHF 2532 million at the balance sheet date.
In 2006, SLH further gave a capital guarantee for a maximum net asset value of CHF 300 million to Swiss Life Funds.
Statement of changes in equitY for the years ended 31 December
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| Share capital | | | | | |
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| Balance as at 1 January | | 1 385 | | 1 554 | |
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| Reduction in par value | | –245 | | –169 | |
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| Converted Swiss Life Holding shares | | 49 | | 0 | |
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| Total share capital | | 1 189 | | 1 385 | |
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| Legal reserves | | | | | |
| General reserves | | | | | |
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| Balance as at 1 January | | 918 | | 918 | |
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| Converted Swiss Life Holding shares | | 199 | | 0 | |
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| Total general reserves | | 1 117 | | 918 | |
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| Reserve for treasury shares | | | | | |
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| Balance as at 1 January | | 66 | | 42 | |
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| Reserve for treasury shares | | 552 | | 24 | |
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| Total reserve for treasury shares | | 618 | | 66 | |
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| Total legal reserves | | 1 735 | | 984 | |
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| Free reserves | | | | | |
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| Balance as at 1 January | | 508 | | 361 | |
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| Allocation to free reserves | | 250 | | 170 | |
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| Reserve for treasury shares (incl. reduction in par value) | | –542 | | –23 | |
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| Total free reserves | | 216 | | 508 | |
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| Profit shown in the balance sheet | | | | | |
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| Balance as at 1 January | | 253 | | 174 | |
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| Allocation to free reserves | | –250 | | –170 | |
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| Net profit | | 335 | | 249 | |
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| Total profit shown in the balance sheet | | 338 | | 253 | |
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| Total equity | | 3 478 | | 3 130 | |
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Events after the balance sheet date | The transaction to dispose of Banca del Gottardo, Lugano, for a total consideration of CHF 1875 million (subject to adjustment) was completed on 7 March 2008.
In December 2007, the Swiss Life Group announced that it will make a voluntary public takeover bid at EUR 30 per share to the shareholders of AWD Holding AG, Hanover, in January 2008. On 19 March 2008, the Swiss Life Group held 96.7% of the AWD Holding shares (including 10.5% shares under option).
Disclosure of compensation to the Board of Directors and the Corporate Executive Board in accordance with the Swiss Code of Obligations Art. 663bbis and Art. 663c
COMPENSATION IN 2007 | The specifications below take into consideration the new transparency regulations on compensation set out in the Swiss Code of Obligations Art. 663bbis and Art. 663c. Further information on compensation and benefit expenditure can be found in Swiss Life Group’s Annual Report 2007 (Corporate Governance and Notes 24 and 31 to the Financial Statements).
COMPENSATION POLICY PRINCIPLES | Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for establishing the guidelines on the Group’s compensation policy (incl. bonuses, equity compensation plans and share option plans) and with regard to employee benefit institutions. The compensation policy underpins the performance culture required by the corporate strategy and forms part of the HR policy. The aim is to retain well-qualified employees and gain new, highly skilled staff. The compensation system is to be competitive and in line with the market environment. The overall compensation takes into account the employees’ professional skills, commitment and personal performance. Individual compensation is made up of a basic salary and variable short-, medium- and long-term salary components as well as contributions to occupational provisions and risk insurance. The basic salary is determined according to the employee’s function and skill-set, and is annually re-assessed and adjusted if appropriate. The variable salary components are linked to the strategic objectives of the Group and the individual divisions and the associated financial and HR-related targets. Personal performance and target achievement are assessed annually in the employee appraisal procedure implemented throughout the Group (Group Performance System) and taken into consideration when applying the defined compensation policy.
PRACTICE AND PROCEDURE | Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for determining the level and make-up of compensation for its members, whereas the Chairman’s Committee, in its capacity as a Compensation Committee, is responsible for putting forward corresponding proposals. The Board of Directors also establishes the guidelines for the company’s compensation policy. In doing so, it takes into consideration the compensation policies of other organisations of comparable size and in comparable industries, drawing its findings from publicly available information and, as necessary, studies by external experts. Based on these guidelines, the Chairman’s Committee determines the compensation for the individual members of the Corporate Executive Board and informs the entire Board of Directors accordingly.
COMPENSATION TO MEMBERS OF THE BOARD OF DIRECTORS | Compensation remitted to members of the Board of Directors in the year under review comprised the basic compensation, additional compensation in cash and a variable compensation component in shares. The basic compensation covers membership of the Board of Directors of Swiss Life Holding and its subsidiary Swiss Life/Rentenanstalt as well as membership of the individual Board Committees. The additional compensation in cash is commensurate to the function and workload and is determined annually by the Board of Directors. If Swiss Life Group’s business operations have proved successful, a further, variable compensation component is remitted in the form of Swiss Life Holding shares, decided upon by the Board of Directors taking into consideration the business result. The shares are allocated at economic value, which is equal to the tax value, taking a vesting period of three years into account.
As Chairman of the Board, Bruno Gehrig is affiliated to the employee benefits institutions of Swiss Life for the purpose of occupational provisions. No such affiliation exists for other members of the Board of Directors; no contributions have been made on their behalf.
COMPENSATION TO MEMBERS OF THE CORPORATE EXECUTIVE BOARD | In the year under review, the compensation remitted to members of the Corporate Executive Board comprised the salary, a variable bonus in cash, other compensation (child allowances, allowance for years of service, company cars, premium contributions to 3rd-pillar pension plans) and variable compensation in the form of shares. The salary is determined annually by the Chairman’s Committee, in its capacity as Compensation Committee, taking into account the individual member’s function-related responsibility and workload. If Swiss Life Group’s business operations have proved successful, a variable cash bonus and variable compensation in the form of shares is added, decided upon by the Chairman’s Committee under consideration of the business results and the personal target achievement of the members of the Corporate Executive Board. In the year under review, the shares were allocated at economic value, which is equal to the tax value, taking a vesting period of one year into account.
As part of the compensation policy, a long-term equity compensation plan was introduced in 2004 for members of the Corporate Executive Board and other senior management members of the Swiss Life Group. Under this programme, participants have been granted future subscription rights to Swiss Life Holding shares in the form of Performance Share Units (PSUs) since 2005. These subscription rights entitle them to receive Swiss Life Holding shares free of charge after a period of three years insofar as the relevant conditions have been satisfied.
Pursuant to the regulations of the 2007 equity compensation plan, two objective performance criteria have been defined, each weighted at 50%. Depending on the fulfilment of the two performance criteria within the three-year period, the number of PSUs can increase by no more than a factor of 1.5 or drop to zero. 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 share allocation 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 listed 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.
The number of PSUs entitling the participant to receive shares after the three-year term is determined in accordance with the table above as follows: One half of the PSUs allocated is multiplied by the factor resulting from the TSR Swiss Life Holding target achievement, and the other half by the factor resulting from the TSR Outperformance target achievement. The factor equals 1, i.e. 100%, if a performance of 30% is attained for the first performance criterion, the TSR Swiss Life Holding. Interim values are determined by linear interpolation. In the case of TSR Outperformance, the second performance criterion, the factor is 1, i.e. 100%, if the TSR Swiss Life Holding is equal to the median of the benchmark index (Dow Jones STOXX 600 Insurance Index). Here, too, interim values are determined by linear interpolation. The results (factor TSR Swiss Life Holding multiplied by one half of the PSUs and the factor TSR Outperformance multiplied by the other half) are added up. The sum is the number of PSUs, which translates into an entitlement to an equal number of Swiss Life Holding shares.
The value of the PSUs allocated equals the fair value as at 1 April of the year of allocation. It is determined by an independent consultancy company.
COMPENSATION TO THE BOARD OF DIRECTORS IN 2007
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| Bruno Gehrig, Chairman of Board of Directors | | 555 000 | | 100 000 | | 655 000 | | 312 | | 79 898 | | 734 898 | | 197 992 | | 652 961 | | 1 585 851 | |
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| Gerold Bührer | | 128 000 | | 110 000 | | 238 000 | | 235 | | 60 187 | | 298 187 | | | | | | | |
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| Volker Bremkamp | | 96 000 | | 30 000 | | 126 000 | | 152 | | 38 937 | | 164 937 | | | | | | | |
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| Paul Embrechts | | 72 000 | | 10 000 | | 82 000 | | 108 | | 27 653 | | 109 653 | | | | | | | |
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| Rudolf Kellenberger | | 104 000 | | 10 000 | | 114 000 | | 153 | | 39 199 | | 153 199 | | | | | | | |
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| Henry Peter | | 72 000 | | 10 000 | | 82 000 | | 108 | | 27 653 | | 109 653 | | | | | | | |
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| Peter Quadri | | 72 000 | | 10 000 | | 82 000 | | 108 | | 27 653 | | 109 653 | | | | | | | |
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| Pierfranco Riva | | 72 000 | | 10 000 | | 82 000 | | 108 | | 27 653 | | 109 653 | | | | | | | |
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| Franziska Tschudi | | 72 000 | | 10 000 | | 82 000 | | 108 | | 27 653 | | 109 653 | | | | | | | |
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| Total Board of Directors | | 1 243 000 | | 300 000 | | 1 543 000 | | 1 392 | | 356 486 | | 1 899 486 | | 197 992 | | 652 961 | | 2 750 439 | |
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COMPENSATION TO THE CORPORATE EXECUTIVE BOARD IN 2007
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| Rolf Dörig, CEO | | 1 980 000 | | 1 450 000 | | 80 001 | | 3 510 001 | | 1 554 | | 447 143 | | 3 957 144 | |
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| Other members of Corporate Executive Board | | 2 588 400 | | 3 350 000 | | 123 842 | | 6 062 242 | | 4 671 | | 1 344 020 | | 7 406 262 | |
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| Total Corporate Executive Board | | 4 568 400 | | 4 800 000 | | 203 843 | | 9 572 243 | | 6 225 | | 1 791 163 | | 11 363 406 | |
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| Rolf Dörig, CEO | | 238 856 | | | | 4 196 000 | |
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| Other members of Corporate Executive Board | | 587 089 | | | | 7 993 351 | |
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| Total Corporate Executive Board | | 825 945 | | | | 12 189 351 | |
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| Rolf Dörig, CEO | | 6 717 | | 1 270 991 | | 5 466 991 | |
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| Other members of Corporate Executive Board | | 17 727 | | 3 354 303 | | 11 347 654 | |
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| Total Corporate Executive Board | | 24 444 | | 4 625 294 | | 16 814 645 | |
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SHARE OWNERSHIP/PARTICIPATION RIGHTS AS AT 31 DECEMBER 2007 | As at the balance sheet date, current members of the Board of Directors and Corporate Executive Board (including closely-linked parties) held the following number of registered Swiss Life Holding shares and future subscription rights to Swiss Life Holding shares in the form of Performance Share Units (PSUs).
Board of directors
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| Bruno Gehrig, Chairman of Board of Directors | | 1 636 |
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| Gerold Bührer | | 1 725 |
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| Volker Bremkamp | | 742 |
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| Paul Embrechts | | 558 |
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| Rudolf Kellenberger | | 710 |
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| Henry Peter | | 1 638 |
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| Peter Quadri | | 1 338 |
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| Pierfranco Riva | | 2 963 |
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| Franziska Tschudi | | 558 |
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| Total Board of Directors | | 11 868 |
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Corporate Executive board
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| Rolf Dörig, CEO | | 12 245 |
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| Bruno Pfister | | 6 723 |
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| Paul Müller | | 6 290 |
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| Reto Himmel | | 903 |
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| Thomas Müller | | 557 |
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| Patrick Frost | | 557 |
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| Total Corporate Executive Board | | 27 275 |
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| Rolf Dörig, CEO | | 23 508 | |
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| Bruno Pfister | | 19 913 | |
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| Paul Müller | | 12 847 | |
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| Reto Himmel | | 11 808 | |
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| Thomas Müller | | 3 594 | |
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| Patrick Frost | | 2 661 | |
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| Total Corporate Executive Board | | 74 331 | |
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