CONSOLIDATED RESULT | Due to the sale of its Dutch and Belgian operations and of Banca del Gottardo announced in November 2007, Swiss Life adjusted the presentation of its annual accounts in accordance with the relevant regulations, gearing them to the continuing operations. Insurance operations are broken down by country. The units sold are fully consolidated up to the completion of the transaction in question, but only their net contribution to the net profit is included in the Consolidated Statement of Income. The segment reports on the other hand contain the full results of the units sold also for 2007. The previous year’s figures have been adjusted accordingly to enhance comparability. In the Balance Sheet, too, the assets and liabilities of the units sold are stated separately.
TARGETS ACHIEVED | In its 150th year of operation, the Swiss Life Group generated a net profit of CHF 1368 million, the highest in its history. After allowing for CHF 23 million for minority interests, CHF 1345 million is available for the shareholders of Swiss Life Holding. This translates into (diluted) earnings per share of CHF 39.60 and a return on equity of 18.1%. Adjusted for the profit contribution from a reserve release of around CHF 300 million due to a change in Dutch law, the profit amounted to CHF 1064 million and the return on equity to 14.3%. The overall premium volume came to CHF 24.2 billion. This means that, already in 2007, Swiss Life achieved the financial targets originally set for 2008.
PROFIT FROM OPERATIONS UP 11% | The profit from operations from continuing operations was raised by 11% to CHF 1013 million, to which the Swiss insurance segment contributed the largest share amounting to CHF 650 million. Despite a distinctly lower financial result, the Swiss segment managed to maintain the profit level of the previous year. Insurance operations in France generated a segment result of CHF 324 million, an increase of 54% against the year before. Comparability with the previous year was, however, influenced by the sale of the ERISA companies. Without this one-off effect, the French segment reported a 32% profit increase to CHF 187 million. For insurance operations in Germany, Swiss Life posted a segment result of CHF 65 million. As two special effects burdened the 2007 figures to the amount of roughly CHF 40 million, the segment result receded by CHF 19 million despite the operational advances achieved. The Insurance Other segment, which comprises the Liechtenstein and Luxembourg locations, generated a segment result of CHF 8 million, in contrast to the loss of CHF 3 million posted in 2006 due to the losses incurred on the sale of the Italian business. In the Investment Management segment, Swiss Life boosted its result from CHF 50 million to CHF 93 million thanks to higher returns and the transfer from the insurance sector of the investment company in Germany responsible for asset management. The result of the segment Other, comprising primarily financing and holding companies, and the eliminations offset one another. Overall, continuing operations achieved a net profit of CHF 726 million, up 26% against the previous year.
The profit contribution by discontinued operations amounted to CHF 642 million. The increase compared to 2006 was due to the significantly higher result from the discontinued insurance segment. This result rose from CHF 144 million to CHF 471 million owing to the above-mentioned release of a reserve position of around CHF 300 million. The segment profit of the sold banking business came to CHF 168 million.
MAINTAINING GROWTH MOMENTUM | In continuing operations, the gross premiums, policy fees and deposits received under insurance and investment contracts amounted to CHF 21.2 billion, which represents an increase of 9% year on year. Swiss operations contributed a significant portion, registering a premium volume of CHF 8.4 billion. This translates into an above-average growth of 11%, enabling Swiss Life to further consolidate its leading market position. The largest contribution to the rise in premium volume, however, stemmed from Liechtenstein. The advance in its premium volume by over CHF 2 billion originated from the acquisition of CapitalLeben and from ongoing strong organic growth. In France, the reported premium income receded by 10% to CHF 7.4 billion owing to the sale of the ERISA companies. In the first half of 2007, these companies still contributed premium income totalling CHF 1.9 billion. Disregarding the ERISA companies, the growth in France amounted to 6%. In Germany, premium income rose by 2% to CHF 2.2 billion, whereas in Luxembourg, it declined temporarily from CHF 841 million to CHF 508 million owing to the location’s strategic realignment.
At CHF 389 million, policy fees from insurance and investment contracts remained in line with the previous year’s result. The rise in Liechtenstein and Germany was neutralised by the drop in France resulting from the sale of the ERISA companies. Fee income from asset management and other commission income came to CHF 196 million, remaining on a par with the previous year.
| Key figures for the Swiss Life Group |
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| | | | | | |
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| Gross written premiums, policy fees and deposits received | | 24 170 | | 22 064 | | 9.5% | |
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| Net earned premiums and policy fees | | 13 705 | | 12 673 | | 8.1% | |
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| Asset management and other commission income | | 196 | | 198 | | –1.0% | |
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| Financial result (without share of results of associates) | | 4 923 | | 5 364 | | –8.2% | |
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| Other income | | 147 | | –16 | | n.a. | |
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| Total income | | 18 971 | | 18 219 | | 4.1% | |
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| Net insurance benefits and claims | | –13 268 | | –12 012 | | 10.5% | |
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| Policyholder participation | | –1 746 | | –2 143 | | –18.5% | |
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| Interest expense | | –455 | | –722 | | –37.0% | |
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| Operating expenses | | –2 489 | | –2 432 | | 2.3% | |
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| Total expenses | | –17 958 | | –17 309 | | 3.7% | |
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| Profit from operations | | 1 013 | | 910 | | 11.3% | |
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| Net profit | | 1 368 | | 954 | | 43.4% | |
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| Equity | | 7 334 | | 7 851 | | –6.6% | |
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| Insurance reserves | | 121 829 | | 153 800 | | –20.8% | |
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| Assets under management | | 121 167 | | 205 490 | | –41.0% | |
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| Assets under control | | 138 946 | | 214 041 | | –35.1% | |
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| Return on equity (in %) | | 18.1 | | 12.2 | | 48.4% | |
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| Number of employees (full-time equivalents) | | 8 556 | | 8 693 | | –1.6% | |
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SATISFACTORY FINANCIAL RESULT | The financial result from investments held at own risk in continuing insurance business receded by 3% to CHF 4.2 billion. In terms of direct income, Swiss Life benefited from rising interest rates and higher hedge fund and dividend distribution. The direct investment return was 4.1% (2006: 3.3%). Taking into account asset changes relevant to the income statement and asset management costs, the net investment return came to 3.7% (2006: 3.9%). Whereas in 2006 Swiss Life had realised net capital gains of CHF 783 million, it posted a net capital loss of CHF 218 million for 2007. This was attributable to the negative trend on the international financial markets since the middle of 2007. Swiss Life is not directly affected by the crisis on the US mortgage market. However, for the 2007 accounts, it decided to completely write off positions vulnerable to a further aggravation of the liquidity situation brought on by all the market turbulence. The total investment return of 1.0% also includes the asset changes directly reflected in equity. The rise in interest rates had a negative impact on the investment return.
EFFICIENCY AGAIN ENHANCED | Insurance benefits and changes in the mathematical reserve rose by 10% to CHF 13.3 billion, mirroring the business growth. Owing to the lower financial result, policyholder bonuses declined by 19% to CHF 1.7 billion. Interest expense (excl. borrowing costs) decreased by 37% to CHF 455 million, mainly as a consequence of the sale of the ERISA companies.
Operating costs were reduced by a further 2% in spite of the vigorous growth. In Switzerland, they were pushed back by a full 7%. This welcome development, which also strengthens the company’s competitiveness in its home market, is primarily due to the efficiency gains achieved from the successful integration of «La Suisse» and the simplification of the systems landscape in individual insurance. At Group level, the operating expenses climbed to CHF 2.5 billion, a 2% increase against the previous year. This increase is due primarily to overall growth and the effect of the rising euro. Tax expenses totalled CHF 122 million, down CHF 104 million on 2006 because of tax rate cuts in Germany and Switzerland and changes with regard to tax-privileged financial gains.
SOLID CAPITAL BASE | On a comparable basis, liabilities from insurance operations advanced in line with growth and the course of business by 11% to CHF 121.8 billion. In 2007, shareholders’ equity decreased by 4% to CHF 7.3 billion. The hike in interest rates led to a reduction in the revaluation reserves for bonds. For the same reason, the core capital declined by 21% to CHF 11.6 billion. Owing to the sale of the ERISA companies, the overall balance sheet total fell from CHF 187.0 billion to CHF 179.8 billion. The solvency ratio, calculated according to the new regulations issued by the Federal Office of Private Insurance, came to 162% (2006: 194%). Total assets controlled by the Swiss Life Group from continuing business amounted to CHF 138.9 billion.
| Asset allocation as at 31 December (insurance portfolio) |
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| | | | | | | |
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| Shares | | | 9 417 | | 8.3% | | 7 221 | | 6.5% | |
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| Alternative investments | | | 6 025 | | 5.3% | | 4 832 | | 4.4% | |
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| Real estate | | | 12 252 | | 10.8% | | 11 567 | | 10.4% | |
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| Mortgages | | | 5 927 | | 5.2% | | 6 355 | | 5.7% | |
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| Loans | | | 15 113 | | 13.3% | | 16 587 | | 15.0% | |
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| Bonds | | | 61 930 | | 54.5% | | 57 933 | | 52.3% | |
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| Cash and cash equivalents | | | 2 955 | | 2.6% | | 6 362 | | 5.7% | |
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| Total | | | 113 619 | | | | 110 857 | | | |
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| Net equity exposure | | | | | 7.5% | | | | 7.0% | |
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| Duration of bonds | | | | | 8.7 years | | | | 8.4 years | |
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