18 Intangible Assets including Intangible Insurance Assets

In CHF million  31.12.200831.12.2007
Intangible insurance assets  2 4462 644
Other intangible assets  2 205507
Total intangible assets  4 6513 151


Intangible insurance assets
In CHF millionNotes  20082007200820072008200720082007
  Present
value of
future
profits from
acquired
insurance
portfolios
(PVP)
Present
value of
future
profits from
acquired
insurance
portfolios
(PVP)




Deferred
acquisition
costs
(DAC)




Deferred
acquisition
costs
(DAC)




Deferred
origination
costs
(DOC)




Deferred
origination
costs
(DOC)







Total







Total
Balance as at 1 January  24172 6122 52682462 6442 789
Additions  53445235537457
Additions from business combinations29  88
Amortisation8  –1–1–425–388–2–2–428–391
Impairment due to liability adequacy test  –1–1
Effect of gains/losses recognised directly in equity27  00–151326–151326
Changes from discontinued operations  27–1116
Classification as assets held for sale and other disposals   – – – –372 – –231 – –603
Foreign currency translation differences  –20–15342–11–15643
Balance as at 31 December  21242 4172 612882 4462 644


Present value of future profits (PVP) | The present value of future profits relates to portfolios of insurance contracts and investment contracts with discretionary participation acquired in a business combination or transfer of portfolios. These amounts, representing the present value of future profits amortised in proportion to gross profits over the effective life of the acquired insurance and investment contracts, relate to contracts acquired in Germany and France.

On the acquisition of Meeschaert Assurances, Paris, in November 2007, the present value of future profits amounting to CHF 8 million was recognised.

Annual amortisation charges on the present value of future profits relating to acquired insurance portfolios totalling CHF 21 million as at 31 December 2008 are estimated at CHF 1 million for the years 2009 to 2011.

Deferred acquisition costs (DAC) | Certain acquisition costs relating to new and renewed insurance contracts and investment contracts with discretionary participation features are deferred.

Deferred origination costs (DOC) | These costs are recoverable and are directly attributable to securing investment management contracts. They primarily relate to contracts in Luxembourg.

Intangible insurance assets of CHF 600 million relating to the insurance operations in the Netherlands and Belgium were reclassified to assets held for sale in 2007.

Other intangible assets
In CHF millionNotes  20082007200820072008200720082007
 

Goodwill


Goodwill
Customer
relation-
ships
Customer
relation-
ships

Brands
and other

Brands
and other


Total


Total
 
Cost 
Balance as at 1 January  5991 43060181341757931 623
Additions  103103
Additions from business combinations29  1 3821653346013901 855225
Additions from internal development  00
Classification as assets held for sale and other disposals   – –996 – –19 –7 –52 –7 –1 067
Changes from discontinued operations  033
Foreign currency translation differences  –91–261–235–1406
Balance as at 31 December  1 890599368602531342 511793
 
Accumulated amortisation and impairment 
Balance as at 1 January  –163–738–2–11–121–156–286–905
Amortisation8  –27–4–13–7–40–11
Classification as assets held for sale and other disposals   – 575 – 16 6 48 6 639
Changes from discontinued operations  –3–2–5
Foreign currency translation differences  0014–414–4
Balance as at 31 December  –163–163–29–2–114–121–306–286
 
Total other intangible assets as at 31 December  1 72743633958139132 205507


Goodwill | Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities, if applicable, at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on associates is included in the carrying amount of the investment.

Goodwill totalling CHF 79 million was recognised in 2008 on the acquisition of Deutsche Proventus AG, Bremen.

Goodwill totalling CHF 1303 million on the acquisition of AWD Holding AG, Hanover, was recognised in the period under review. The cost that led to the recognition of goodwill relates to the anticipated future business of AWD.

Goodwill totalling CHF 149 million on the acquisition of CapitalLeben Versicherung AG, Schaan, was recognised in 2007. The cost that led to the recognition of goodwill related to the anticipated future business of the Liechtenstein operation. Goodwill on the acquisition of CapitalLeben Versicherung AG, Schaan, has been allocated to the segment “Insurance Other”.

In 2007, goodwill amounting to CHF 16 million was recognised on the purchase of additional shares of Banca del Gottardo Italia, Bergamo. The proportion of ownership interest increased by 19% to 90%.

Goodwill relating to Lloyd Continental has been allocated to the segment “Insurance France”.

The calculations relating to the recoverable amounts, which have been determined on a value-in-use basis, use cash flow projections based on financial budgets approved by management. The projection covers a four-year period for Lloyd Continental. Due to the duration of the insurance and investment contracts a 13-year period was used for CapitalLeben. The calculations for Lloyd Continental and CapitalLeben are based on present values that traditionally use a single set of estimated cash flows and a single discount rate. The key assumptions used for the impairment testing on the carrying amount of goodwill relating to Lloyd Continental and CapitalLeben were as follows:

In CHF million  31.12.200831.12.200731.12.200831.12.2007
  Lloyd
Continental
Lloyd
Continental

CapitalLeben

CapitalLeben
Net carrying amount of goodwill  287287149149
 
Key assumptions used for impairment tests 
Growth rate  1.0%11.0%11.5%1.5%
Discount rate  8.0%8.0%12.8%10.1%
1  1% in 2012 and 2011 respectively, reduced by 0.25% in each subsequent year


Goodwill relating to the acquisition of AWD Holding AG, Hanover, has been allocated to the segments as detailed below. Goodwill relating to the acquisition of Deutsche Proventus AG, Bremen, is included in the segment “AWD” only.

The calculations relating to the recoverable amounts which have been determined on a value-in-use basis use cash flow projections based on financial budgets approved by management. The projection covers a five-year period. The calculations are based on present values that traditionally use a single set of estimated cash flows and a single discount rate. The key assumptions used for the impairment testing on the carrying amount of goodwill relating to AWD were as follows:

In CHF million  31.12.0831.12.0731.12.0831.12.0731.12.0831.12.07
  Insurance
Switzerland
Insurance
Switzerland
Insurance
Germany
Insurance
Germany

AWD

AWD
Net carrying amount of goodwill  81316894
 
Key assumptions used for impairment tests 
Growth rate  1.0%1.0%1.0%
Discount rate  10.9%12.2%12.2%


These key assumptions have been derived from analyses in the specific markets. Investment returns reflect projected returns based on the specific investment portfolios and the investment strategy. The discount rates used are pre-tax rates and reflect specific risks relating to the business concerned. The growth rate was used for cash flow projections beyond the budgeted period.

Goodwill amounting to CHF 421 million relating to Banca del Gottardo (including CHF 16 million relating to the purchase of additional shares of Banca del Gottardo Italia, Bergamo) has been reclassified to assets held for sale in 2007.

Customer relationships | On the acquisition of Deutsche Proventus AG, Bremen, a customer relationship asset amounting to CHF 8 million was recognised. On the acquisition of Fonds de Commerce Arpège, a customer relationship asset of CHF 9 million was recognised. The acquisition of AWD Holding AG, Hanover, led to the recognition of a customer relationship asset of CHF 312 million. The acquisition of Placement Direct, France, led to a customer relationship asset amounting to CHF 5 million.

On the acquisition of CapitalLeben Versicherung AG, Schaan, a customer relationship asset of CHF 33 million was recognised in 2007. In August 2007, the Swiss Life Group acquired the banking activities of Fideuram Wargny, France, which led to the recognition of a customer relationship asset of CHF 12 million. In November 2007, Meeschaert Assurances, Paris, was acquired and a customer relationship asset amounting to CHF 15 million was recognised.

Brands and other | Consist of brands, trademarks, computer software and other intangible assets. On the acquisition of Deutsche Proventus AG, Bremen, the brand name of “Proventus” amounting to CHF 6 million was recognised. The acquisition of AWD Holding AG, Hanover, led to the recognition of the brand name of “AWD” of CHF 120 million, which has an indefinite useful life, and computer software of CHF 13 million. The brand names of “Proventus” and “AWD” are expected to generate cash inflows without legal or similar limits on an indefinite basis. The key assumptions used for the calculations relating to the recoverable amounts are indicated above.

 
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