18 Intangible Assets including Intangible Insurance Assets

In CHF million  
  31.12.2010 31.12.2009
Intangible insurance assets
  2 033 2 338
Other intangible assets
  1 949 2 238
Total intangible assets
  3 982 4 576


Intangible insurance assets
In CHF million  
  Present value of future profits from acquired insurance portfolios (PVP) Deferred acquisition costs (DAC) Deferred origination costs (DOC) Total
  2010 2009 2010 2009 2010 2009 2010 2009
Balance as at 1 January
  20 21 2 299 2 417 19 8 2 338 2 446
Additions
  441 481 29 18 470 499
Amortisation
  –1 –1 –503 –533 –14 –7 –518 –541
Impairment
  –2 –2
Effect of shadow accounting
  0 0 –32 –59 –32 –59
Classification as assets held for sale and other disposals
  –1 –1
Foreign currency translation differences
  –3 0 –217 –6 –3 0 –223 –6
Balance as at end of period
  16 20 1 986 2 299 31 19 2 033 2 338


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.

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

Deferred origination costs (DOC) — These costs are recoverable and are directly attributable to securing the right for investment management services within investment contract policies. They relate to contracts in Luxembourg and Switzerland.

Other intangible assets
In CHF million  
  Goodwill Customer relationships Brands and other Total
Notes  2010 2009 2010 2009 2010 2009 2010 2009
 
Cost
 
Balance as at 1 January
  1 947 1 890 370 368 261 253 2 578 2 511
Additions
  60 21 14 21 74
Additions from business combinations
29  11 4 0 15
Classification as assets held for sale and other disposals
  –6 0 –10 –4 –10 –10
Foreign currency translation differences
  –202 –8 –54 –2 –42 –2 –298 –12
Balance as at end of period
  1 745 1 947 316 370 230 261 2 291 2 578
 
Accumulated amortisation and impairment
 
Balance as at 1 January
  –157 –163 –63 –29 –120 –114 –340 –306
Amortisation
  –32 –35 –9 –10 –41 –45
Impairment losses
  0 0
Classification as assets held for sale and other disposals
  6 0 7 4 7 10
Foreign currency translation differences
  12 1 20 0 32 1
Balance as at end of period
  –157 –157 –83 –63 –102 –120 –342 –340
 
Total other intangible assets as at end of period
  1 588 1 790 233 307 128 141 1 949 2 238


Goodwill — Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of 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.

In November 2009, the squeeze-out of the remaining AWD Holding shareholders representing 3.3% of the shares was completed. The purchase price of the shares amounted to CHF 58 million and led to additional goodwill of CHF 55 million.

Goodwill of CHF 11 million was recognised in 2009 on the acquisition of a financial advisory business in France.

Also in 2009, the remaining 49.4% of the non-controlling interests of CEGEMA, France, were acquired, which led to additional goodwill of CHF 5 million.

Goodwill relating to Lloyd Continental and goodwill relating to “Other” have been allocated to the “Insurance France” segment. Goodwill relating to CapitalLeben has been allocated to the “Insurance Other” segment.

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 six-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 were as follows:

In CHF million  
  Lloyd Continental CapitalLeben Other
  31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009
Net carrying amount of goodwill
  287 287 149 149 12 15
 
Key assumptions used for impairment tests
 
Growth rate
  1.0% 1.0% 1.0% 1.5% 1.0% 1.0%
Discount rate
  10.7% 9.0% 9.6% 10.5% 10.7% 9.0%


Goodwill relating to the acquisitions of AWD Holding AG and Deutsche Proventus AG has been allocated to the “Insurance Switzerland”, “Insurance Germany” and “AWD” segments.

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 three-year period for Insurance Switzerland and Insurance Germany and a five-year period for AWD. 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  
  Insurance Switzerland Insurance Germany AWD
  31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009
Net carrying amount of goodwill
  81 81 265 314 794 944
 
Key assumptions used for impairment tests
 
Growth rate
  1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Discount rate
  9.6% 10.5% 10.7% 12.0% 10.7% 12.0%


No impairment losses were recognised in 2010 and 2009. A reasonably possible change in the key assumptions would not cause an impairment loss of the goodwill allocated to the “AWD” segment.

Customer relationships — As at 31 December 2010 customer relationships comprise customer relationships relating to AWD CHF 186 million (2009: CHF 248 million), France CHF 25 million (2009: CHF 34 million) and CapitalLeben CHF 22 million (2009: CHF 25 million).

A customer relationship asset of CHF 4 million was recognised on the acquisition of a financial advisory business in France in 2009.

Brands and other — Consists of brands, trademarks, computer software and other intangible assets relating to AWD CHF 103 million (2009: CHF 124 million) and other CHF 24 million (2009: CHF 17 million).

 
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