34 Guarantees and Commitments

In CHF million  31.12.200831.12.2007
Financial guarantees  446152
Loan commitments  118164
Capital commitments  375568
Private equity commitments  726303
Operating lease commitments  1813
Other contingent liabilities and commitments  7919
Total  1 7621 219


Future minimum lease payments under non-cancellable operating leases – lessee
In CHF million  31.12.200831.12.2007
Not later than 1 year  40
Later than 1 year and not later than 5 years  1313
Later than 5 years  1
Total  1813


Guarantees

The Group has issued financial guarantees and transaction-related guarantees and similar instruments. Financial guarantees provide for specified payments to be made to reimburse the holder for a loss incurred in the event that a client fails to make payment when due.

The German government, the German central bank, the German banking associations as well as some finance companies have attained an agreement to jointly provide liquidity in order to rescue the Hypo Real Estate Group. The German insurance companies agreed upon a re-guarantee to the German government. The guarantors are liable for 60% of the loss (after recovery of collateral), EUR 8.5 billion in total, against the overall guarantee amounting to EUR 14.2 billion. The German insurance companies’ proportion thereof is EUR 1.4 billion. The Swiss Life Group’s share amounts to EUR 19.6 million.

With the sale of the life business in the UK in 2004, representations and warranties have been agreed with the buyer which limit the exposure for the Swiss Life Group in respect of time and amount with regard to arising claims and taxes. In relation to mis-selling, it has been agreed that in case of specified events with a material financial impact on the OB Fund of the former Swiss Life UK life business, the financial consequences will be shared between the Swiss Life Group and the buyer according to a clear set of rules which limit the impact on the Swiss Life Group with regard to time (five years) and amount (GBP 31.5 million).

Loan commitments

The Group has also entered into irrevocable commitments to extend credit in the form of loans and other instruments. They represent undrawn credit lines which are available to clients to secure their liquidity needs. With respect to credit risk, these commitments are contingent upon clients maintaining certain credit standards, and the Group monitors its exposure on a regular basis.

The total amount of credit commitments includes commitments to lend at fixed rates, which expose the Group to interest rate risk. These commitments are entered into for restricted periods of time. As at 31 December 2008, committed principal amounts stood at EUR 22 million and CHF 62 million (2007: EUR 24 million and CHF 89 million). The range of committed interest rates is 3.3% to 6.1% for commitments in EUR and 2.1% to 4.1% for commitments in CHF.

Capital commitments

The Group had commitments to purchase investments of CHF 268 million (excluding private equity) as at 31 December 2008 (2007: CHF 413 million). Contractual obligations to purchase or construct investment property amounted to CHF 107 million as at 31 December 2008 (2007: CHF 155 million).

Private equity commitments

Private equity commitments represent unfunded commitments to make investments in direct private equity or private equity funds. Such commitments do not involve credit or market risk, as the Group purchases investments at market value at the time the commitments are invoked.

Operating lease commitments

The Group has entered into various operating leases as a lessee. Rental expenses relating to continuing operations recognised in income for these items totalled CHF 44 million for the year ended 31 December 2008 (2007: CHF 25 million). Minimum lease payments totalled CHF 44 million in 2008 (2007: CHF 25 million).

Other contingencies and commitments

Contractual obligations for repairs and maintenance of investment property amounted to CHF 38 million as at 31 December 2008, which are included in this line item (2007: CHF 16 million).

Legal proceedings

The Group is involved in various legal proceedings, claims and litigation generally relating to its insurance operations. The outcome of such current legal proceedings, claims and litigation could have a material effect on operating results or cash flows when resolved in a future period. However, in the opinion of the management these matters are adequately provided for as at the balance sheet date.

 
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