consolidated result | The Swiss Life Group posted a net profit of CHF 345 million for 2008. After allowing for minority interests, the profit attributable to shareholders came to CHF 350 million. This translates into (diluted) earnings per share of CHF 10.88 and a return on equity of 5.0%. The stated profit includes extraordinary gains after taxes on the sales of the Dutch and Belgian business as well as of Banca del Gottardo amounting to CHF 1488 million. Continuing operations resulted in a loss of CHF 1143 million, compared with a profit of CHF 726 million in the previous year. This disappointing outcome is attributable to the negative trend in the financial markets and its impact on the financial result. This declined steeply from the previous year’s CHF 4.9 billion and stood at CHF 0.5 billion, due to the impairments which became necessary on investments and the losses realised in the course of minimising risks. The profit also includes an impairment of CHF 159 million (EUR 100 million) on the stake in MLP.

RESULT FROM OPERATIONS HIT BY DEVELOPMENTS ON THE FINANCIAL MARKETS | Continuing operations produced a segment loss of CHF 842 million. The insurance business in Switzerland was hit the hardest by the distortions on the financial markets. Swiss Life recorded a loss of CHF 748 million for this segment. The previous year still saw a profit of CHF 650 million for this figure. The operating results from the insurance business in France and Germany also recorded a significant decline against the previous year due to the impact of the financial market crisis on the financial result. A segment profit of CHF 40 million was generated in France and of CHF 29 million in Germany. The loss of CHF 36 million in the Insurance Other business segment, which comprises the companies in Luxembourg and Liechtenstein, is mainly attributable to the investments in building up the new product platform in Luxembourg and the geographical expansion of business with high net worth individuals. At CHF 94 million, the Investment Management segment achieved a result in line with the previous year’s figure, despite the adverse market environment.

The AWD Group has been consolidated in the figures reported by the Swiss Life Group since the end of March 2008 and is published as a segment. This segment turned in a loss of CHF 41 million. AWD’s operating results were down significantly due to developments in the United Kingdom and Austria caused by the financial market crisis. The segment result also includes restructuring costs amounting to CHF 40 million for the refocusing of business in the United Kingdom and amortisation expenditure of CHF 21 million for client relationship assets taken on in the acquisition. The result for the Other segment, which mainly comprises financing and holding companies, dropped from CHF 62 million to CHF 9 million due to currency effects. Unallocated corporate costs increased from CHF 73 million in the previous year to CHF 116 million. The rise was primarily caused by one-off expenses for projects relating to the implementation of the strategy.

GROWTH MOMENTUM SLOWED | The Swiss Life Group posted gross premiums, policy fees and deposits received under insurance and investment contracts totalling CHF 18.5 billion in 2008. When making comparisons with the previous year, it must be noted that the figures for the first half of 2007 contain the French ERISA companies’ premium volume, which came to some CHF 1.9 billion. These companies have since been sold. Without ERISA’s contribution the decline in premiums came to 4%. Above all, the downturn is due to the lower income from deposits under insurance and investment contracts. At CHF 13.3 billion, net earned premiums were held at the previous year’s level. In Switzerland, Swiss Life registered gross premiums of CHF 8.2 billion, which represents 44% of total premium volume. In France, Swiss Life grew premium income on a comparable basis by 4% to CHF 5.8 billion, with French operations contributing 31% to total volume for 2008. In Germany, premium income receded by 8% to CHF 2.0 billion owing primarily to the market-driven collapse of the single premiums business. German insurance operations made up 11% of total premium volume. The companies in Liechtenstein and Luxembourg, which mainly conduct cross-border business, posted gross premiums amounting to CHF 2.6 billion in 2008. This represents a 20% decline on the prior-year figure and primarily reflects the focus of high net worth individuals on liquidity as a result of the financial market crisis. This segment contributed 14% to total premium volume.

Fee income from asset management and other commission income increased due to the first-time consolidation of AWD from CHF 196 million to CHF 950 million.

Key figures for the Swiss Life Group 
In CHF million20082007+/–
Gross written premiums, policy fees and deposits received18 51521 213–12.7%
Net earned premiums and policy fees13 51413 705–1.4%
Asset management and other commission income950196n.a.
Financial result4514 935–90.9%
Other income29214798.6%
Total income15 20718 983–19.9%
Net insurance benefits and claims–12 915–13 268–2.7%
Policyholder participation429–1 746n.a.
Interest expense–393–455–13.6%
Operating expense–3 319–2 48933.3%
Total expense–16 198–17 958–9.8%
Profit from operations– 9911 025n.a.
Net profit3451 368–74.8%
Equity6 6527 334–9.3%
Insurance reserves113 308121 829–7.0%
Assets under management120 364121 167–0.7%
Assets under control134 326138 946–3.3%
Return on equity (in %)5.018.1n.a.
Number of employees (full-time equivalents)8 1848 556–4.3%

FINANCIAL RESULT IMPACTED BY HIGH IMPAIRMENTS | The crisis on the US real estate market, by which Swiss Life was in no way directly affected, negatively impacted almost all asset classes in 2008. The necessary impairments on investments and the realisation of losses to reduce balance sheet risks resulted in a huge reduction in the financial result from investments held at own risk in insurance business for this extraordinary year from CHF 4.2 billion to CHF 0.3 billion. Direct investment income matched the previous year’s level, however, and a direct return on investment of 4.1% was achieved. Taking into account asset changes relevant to the income statement, losses realised in connection with the reduction of balance sheet risks, and asset management costs, the net investment return came to 0.3% (2007: 3.8%). The total investment return of 0.5% (2007: 1.0%) also includes the asset changes directly reflected in equity. When the fair value of investments not reported at market value on the balance sheet is factored in, the overall performance was –0.7%. Swiss Life significantly reduced the risks carried on the balance sheet in the wake of the dramatic developments on the financial markets in the second half of 2008. The adjusted asset allocation is geared to generate earnings exceeding the benefits guaranteed to clients, even under persistently difficult market conditions and at today’s low interest levels. These measures proved effective in recent months.

FURTHER EFFICIENCY GAINS TARGETED | Insurance benefits and the change in the mathematical reserve showed a net reduction of 3% to CHF 12.9 billion. The significantly lower financial result and the special situation in several countries due to valuation differences between local valuation guidelines and IFRS guidelines resulted in policyholder participation income of CHF 429 million for Swiss Life. Operating costs climbed 8% on a comparable basis as a result of investments in new business areas and growth initiatives. In Switzerland, on the other hand, operating costs were reduced by a further 3% on a comparable basis.

Strict cost management continues to be a high priority for Swiss Life. In this connection Swiss Life announced plans in November 2008 to streamline its Corporate Center in Zurich, leading to further cost savings of CHF 90 million. Primarily as a result of the first-time consolidation of the AWD Group, operating expenses increased from CHF 2.5 billion to CHF 3.3 billion overall. Because of the dissolution of tax provisions no longer required and current losses which could only be partially deferred, the company posted a tax income of CHF 29 million. Tax expenses totalled CHF 122 million in 2007.

SOLID CAPITAL BASE | Liabilities from insurance operations declined by 7% to CHF 113.3 billion. More than half of this reduction is due to currency effects. Contract terminations in Switzerland and the negative developments of assets in the business with high net worth individuals also contributed to the decline. Despite the severity of the financial market crisis in the second half of 2008, the capital base is still solid. Swiss Life significantly reduced its balance sheet risks at the right time in the second half of 2008 to shield its equity from further negative repercussions of the financial market crisis. Shareholders’ equity for the Swiss Life Group stood at CHF 6.6 billion on 31 December 2008, representing a decline of less than 10% on the prior-year figure. The Group solvency ratio on an IFRS basis came to 159% at the end of the year. The core capital declined from CHF 11.6 billion to CHF 10.0 billion. Assets controlled by the Swiss Life Group totalled CHF 120.4 billion (–1%).

Asset allocation on fair value basis as at 31 December (insurance portfolio) 
In CHF million20082007
Equity securities and equity funds2 3352.2%8 9678.0%
Alternative investments3 2723.1%6 0255.3%
Real estate12 66211.9%12 25210.9%
Mortgages5 6445.3%5 7845.1%
Loans13 35512.6%14 51812.9%
Bonds62 35058.6%61 84954.9%
Cash and cash equivalents and other6 7096.3%3 2632.9%
Total106 327112 658
Net equity exposure0.8%7.5%
Duration of bonds9.2 years8.7 years