Report on Compensation

The specifications below follow the directives on information relating to corporate governance issued by the SIX Swiss Exchange and take into consideration the transparency regulations set out in the Swiss Code of Obligations Art. 663bbis and Art. 663c as well as Circular 2010/1 of the Swiss Financial Market Supervisory Authority FINMA on minimum standards for remuneration schemes of financial institutions. Further information on compensation and benefit expenditure for the management and employees of the Swiss Life Group can be found in the Consolidated Financial Statements (Notes 24 and 31). In addition, the compensation of the members of the Board of Directors and the Corporate Executive Board, and their participation interests, are shown in the Notes to the Swiss Life Holding Financial Statements.

The information in this report is presented in the same way as the previous year. Also included in the information on compensation disclosed for the period under review is the variable compensation to Corporate Executive Board members as a cash bonus for the 2010 financial year, determined and payable at the beginning of 2011. Likewise, the variable compensation payable for the 2010 financial year in the form of blocked shares amounting to 10% of the fixed compensation, which was allocated to members of the Board of Directors at the beginning of 2011, is shown as part of the compensation for 2010.

In accordance with the transparency requirements, the compensation received by each member of the Board of Directors and the Chairman of the Corporate Executive Board (Group CEO) is disclosed individually.

COMPENSATION POLICY PRINCIPLES — The Board of Directors as a whole is responsible for establishing the guidelines on the Group’s compensation policy (incl. bonus and equity compensation plans) and on employee benefit institutions. The compensation policy underpins the performance culture required by the corporate strategy and is part of the HR policy. The aim is to retain well-qualified employees and gain new, highly skilled staff. The compensation system must be competitive and in line with the market environment. The individual overall compensation takes into account the employee’s professional skills, engagement and personal performance. It is made up of a basic salary, a variable bonus based on achievement of the annual objectives, which is generally paid in cash and possibly in shares, as well as a deferred mid- to long-term salary component (equity compensation plan) and contributions to occupational provisions and risk insurance.

The salary is determined according to the employee’s function and skill set, and is annually re-assessed and adjusted if appropriate. Salary comparison studies and recognised job evaluation systems are used to check appropriateness and to ensure internal and external comparability.

The variable compensation components are linked to the strategic objectives of the Group and the individual divisions, and the associated financial and HR-related targets. The variable bonus in cash and possibly in shares is based on achievement of the annual objectives. It is determined on the basis of the actual performance of individuals or teams (performance-linked payment) in relation to the objectives set and the Swiss Life Group’s annual result (share in the company’s success). Quantitative and qualitative performance is also always assessed on the basis of the competencies required for the function held, such as professional expertise, entrepreneurship, task fulfilment, cooperation and leadership. The percentage weighting between the individual and/or team performance and the share in the company’s success depends on the position and responsibilities of the function holder.

The share in the company’s success is measured using quantitative Group objectives (Key Performance Indicators, KPIs). The main KPIs, besides the key figures relating to annual profit, costs, business volume, return on equity and solvency, are the profitability of in-force and new business and margin development.

Personal performance based on the specified quantitative and qualitative objectives is assessed annually in the employee appraisal procedure implemented throughout the Group (Group Performance System, GPS). Two assessment elements/models are used for determining objectives and evaluating performance: The Group Objectives Model (GOM) relating to qualitative and quantitative objectives and the Group Competency Model (GCM) for measuring and assessing individual competencies.

For persons responsible for risk management and risk control, the quantitative objectives are set in such a way that performance is not linked to the result of the monitored business unit, specific products or transactions.

In order to be eligible for any variable compensation, a GPS target achievement of at least 80% is required.

Permanent employment contracts in Switzerland contain notice periods of between three and twelve months, depending on position and seniority. All current employment contracts with members of the Corporate Executive Board in Switzerland specify a notice period of twelve months. Contracts abroad are adapted to local circumstances.

PRACTICE AND PROCEDURE — Pursuant to the Organisational Regulations, the Board of Directors as a whole is responsible for determining the level and make-up of compensation for its members, whereas the Nomination and Compensation Committee is responsible for putting forward appropriate proposals. The Board of Directors also establishes the guidelines for the company’s compensation policy. In doing so, it takes into consideration the compensation policies of other companies in the financial services industry, drawing its findings from publicly available information and, as necessary, studies by external experts. Comparable companies in the insurance sector in Switzerland used for the purposes of providing relevant information for the current compensation policy included Allianz, AXA, Baloise Insurance, Swiss Re and Zurich Financial Services.

The Board of Directors as a whole sets the level and distribution of the variable compensation pool for all employees on the basis of its compensation policy guidelines upon a proposal by the Nomination and Compensation Committee. When determining the level of the allocation to the compensation pool, it takes into consideration the annual result, as well as the degree of achievement of medium-term planning targets. The Board of Directors as a whole is also responsible for determining the individual compensation of members of the Corporate Executive Board. It carries out a semi-annual performance assessment of all members of the Corporate Executive Board, based on preparatory work by the Nomination and Compensation Committee. In addition, current aspects of HR policy and in particular succession planning are regularly discussed at meetings of the Board of Directors.

An equity compensation plan exists as a mid- to long-term salary component within the framework of the compensation arrangements for members of the Corporate Executive Board and other key performers within the Swiss Life Group, who are determined by the Corporate Executive Board with the approval of the Nomination and Compensation Committee. Based on this plan, participants are granted future subscription rights to Swiss Life Holding shares in the form of Performance Share Units (PSUs). These subscription rights entitle them to receive Swiss Life Holding shares free of charge after a period of three years has elapsed, provided that the prerequisites under the plan have been satisfied at that point. The granting of this compensation component is in any case deferred for three years from the date of allocation and thus takes into consideration development in the meantime (deferred compensation).

Pursuant to the regulations of the 2008, 2009 and 2010 equity compensation plans, two objective performance criteria have been defined, each weighted at 50%. The first criterion is the Total Shareholder Return on the Swiss Life Holding share (TSR Swiss Life Holding), requiring a performance of over 20% for a subscription right to shares to arise after three years. The second criterion involves a comparison of the Swiss Life Holding share’s TSR with the TSRs of the shares of the companies included in the Dow Jones STOXX 600 Insurance Index (TSR Outperformance). A subscription right arises if the performance on expiry of the three-year term is above the first quartile in comparison with the companies in question. Depending on the fulfilment of the two performance criteria within the three-year period, the number of PSUs can increase by up to a factor of 1.5 and 2.0 respectively, or drop to zero. Performance requirements for the 2010 equity compensation plan have been increased over the 2008 and 2009 plans to the extent that 35% performance (previously 30%) is required in the TSR Swiss Life Holding for factor 1 and at least 50% performance (previously 40%) for the maximum factor. The maximum factor has in turn been increased from 1.5 or 150% to 2 or 200%.

47 members of the Swiss Life Group senior management, including members of the Corporate Executive Board, participated in the 2008 equity compensation plan. A total of 52 618 PSUs were allocated, 23 695 to the Corporate Executive Board, of which 5924 to Bruno Pfister as Group CEO. In 2009, 65 members of the Swiss Life Group senior management took part in the plan, in which a total of 53 216 PSUs were allocated; 22 200 to the Corporate Executive Board, of which 6500 to Bruno Pfister in his capacity as Group CEO. In the period under review, 69 members of the Swiss Life Group senior management participated in the 2010 equity compensation plan, which came into effect on 1 April 2010. A total of 68 510 PSUs were allocated; 24 700 to the Corporate Executive Board, of which 6500 to Group CEO, Bruno Pfister.

From 2011, participants in the equity compensation plan will be allocated Restricted Share Units (RSUs) instead of PSUs. As with PSUs, RSUs grant the holder future subscription rights, entitling them to receive Swiss Life Holding shares free of charge after a three-year period has elapsed, but without any additional performance leverage. The attribution of shares after the expiry of the three-year deferral period will be effected in future on a 1:1 basis (1 RSU = 1 share); the plan is therefore very simple and the process transparent throughout the whole term. The value of RSUs during the three-year term develops linear with the Swiss Life Holding share price and thus systematically corresponds with shareholder interests. The plan also provides for adjustment and reclaiming mechanisms (clawback).

COMPENSATION PAID TO ACTING MEMBERS OF GOVERNING BODIES — The following compensation in cash was received by acting members of the Board of Directors and the Corporate Executive Board during the period under review:

In CHF
2010 2009
Board of Directors
1 979 503 2 426 217
Corporate Executive Board
9 600 9951 9 573 3422
1 Incl. cash bonus of CHF 4 475 000 for the 2010 financial year, determined at the beginning
of 2011.
2 Incl. cash bonus of CHF 3 550 000 for the 2009 financial year, determined at the beginning
of 2010.


Two members of the Board of Directors resigned in the 2009 financial year. Bruno Gehrig resigned from his position as Chairman of the Board of Directors of Swiss Life Holding after the General Meeting of Shareholders on 7 May 2009 due to his election to the Board of Directors of UBS AG in October 2008. After serving for six years, Pierfranco Riva stepped down from the Board of Directors at the 2009 General Meeting of Shareholders after reaching the statutory age limit. Two new members were appointed: Frank Schnewlin and Carsten Maschmeyer. Rolf Dörig ceded the position of Delegate of the Board of Directors with effect from 7 May 2009 to take over from Bruno Gehrig as Chairman of the Board of Directors.

There was one resignation from the Board of Directors in the period under review. After serving for seven years on the Swiss Life Board of Directors, Rudolf Kellenberger announced his resignation with effect from the General Meeting of Shareholders of 6 May 2010.

In the 2009 financial year, the composition of the Corporate Executive Board changed as follows: Reto Himmel, Group Chief Technology & Operations Officer (Group CTO), left the Corporate Executive Board with effect from 31 March 2009 due to the discontinuation of the Group CTO function. Thomas Buess joined the Board as of 1 August 2009 as Group Chief Financial Officer (Group CFO), replacing Thomas Müller who resigned from the Corporate Executive Board with effect from 30 June 2009.

There were no personnel changes on the Corporate Executive Board during the year under review.

Compensation remitted to members of the Board of Directors comprises the basic compensation, additional compensation in cash and possibly variable compensation in the form of blocked shares. The basic compensation, which is paid 80% in cash and 20% in blocked Swiss Life Holding shares, takes into account membership of the Board of Directors of Swiss Life Holding and its subsidiary Swiss Life Ltd as well as membership of the individual Board Committees. The additional compensation in cash is commensurate to the function and workload and is determined annually by the Board of Directors. If Swiss Life Group’s business operations have proved successful, a further, variable compensation component of up to a maximum of 15% of the fixed compensation may be remitted in the form of blocked Swiss Life Holding shares; this is decided by the Board of Directors, taking into consideration the business results.

The acting members of the Board of Directors of Swiss Life Holding on the balance sheet date received the following compensation for the period under review:

Compen-
sation in cash in CHF
Shares with three-year blocking period





Part of basic
compen-
sation
Part of variable
compen-
sation
for the 2010
financial year
1



Total
Rolf Dörig
960 000 1 970 761 2 731
Gerold Bührer
254 000 297 184 481
Frank Schnewlin
174 000 297 134 431
Volker Bremkamp
126 000 198 96 294
Paul Embrechts
82 000 149 64 213
Carsten Maschmeyer
72 668 131 56 187
Henry Peter
82 000 149 64 213
Peter Quadri
82 000 149 64 213
Franziska Tschudi
92 668 169 72 241
1 Allocated at the beginning of 2011 with value of 04.03.2011


Until leaving the Board of Directors at the General Meeting of Shareholders of 6 May 2010, Rudolf Kellenberger was paid compensation in cash to the amount of CHF 54 167 and, as part of the basic compensation, 110 shares, which were subject to a three-year blocking period.

As Chairman of the Board, Rolf Dörig is affiliated to the employee benefits institutions of Swiss Life for the purpose of occupational provisions. No such affiliation exists for other members of the Board of Directors and no contributions have been made on their behalf.

Compensation remitted to members of the Corporate Executive Board comprises the basic salary, a variable bonus in cash, other compensation (child allowances, allowance for years of service, company cars, premium contributions to 3rd pillar pension plans), as well as possible variable compensation in the form of shares. The members of the Corporate Executive Board also take part in a mid- to long-term equity compensation plan which, as mentioned above, entitles them to Swiss Life Holding shares after a period of three years has elapsed, provided that the relevant requirements have been satisfied at that point.

Salary is determined annually by the Board of Directors, on the basis of a proposal by the Nomination and Compensation Committee, taking into account the individual member’s function-related responsibility.

The cash bonus is determined by the Board of Directors in accordance with the described compensation policy principles and based on the company result and the achievement of personal goals assessed in the employee appraisal procedure implemented throughout the Group (Group Performance System, GPS). The bonus is set at a maximum of 35% of total compensation (“bonus cap”) and requires that all objectives have been considerably exceeded.

At Corporate Executive Board level, the amount of the bonus depends 60% directly on the company’s success. As mentioned above, the following key figures are included in the Key Performance Indicators (KPIs) used to assess company success: The annual profit, costs, business volume, return on equity and solvency, as well as the profitability of in-force and new business and margin performance. The weighting of the individual KPIs is determined by the Board of Directors. 40% of the bonus is based on Corporate Executive Board members’ achievement of specified personal goals. On the one hand, these personal goals are linked back to the company’s success, in that each Corporate Executive Board member has to meet personal quantitative objectives contributing to the company’s success in relation to his division. On the other hand, the personal goals cover qualitative factors, namely project targets, risk management and compliance goals, as well as requirements relating to leadership and to supporting and further developing corporate culture.

COMPENSATION PAID TO FORMER MEMBERS OF GOVERNING BODIES — None.

SHARE ALLOTMENT IN THE YEAR UNDER REVIEW — Some of the shares allotted to the members of the Board of Directors in the period under review form part of their basic compensation, 80% of which was granted in cash and 20% in blocked Swiss Life Holding shares. The remaining shares were allotted at the beginning of 2011 as variable compensation amounting to 10% of the fixed compensation based on the good business results in the 2010 financial year. All shares are subject to a three-year blocking period.

No variable compensation in shares was granted to the members of the Corporate Executive Board for the 2010 financial year. As described, they are participating in the current equity compensation plan.

For the 2010 financial year, the members of the Board of Directors were allotted the following shares, subject to a three-year blocking period:

Board of Directors
5114 shares,
allocated at values of CHF 95.464, CHF 110.242 and
CHF 132.4921. The shares are subject to a three-year blocking period.
Corporate Executive Board
none
1 Economic value equal to the tax value, taking the blocking period into account. The share prices (closing prices) on the days of allocation of 18.06.2010, 15.12.2010 and 04.03.2011 were CHF 113.70, CHF 131.30 and CHF 157.80 respectively.


No shares were allocated to closely linked parties2 within the meaning of the law.

2 “Closely linked parties” are natural persons and legal entities pursuant to Art. 678 of the Swiss Code of Obligations that have close personal, economic, legal or de facto ties with members of the governing body. This typically includes spouses, minor children, companies controlled by members of the governing body, and natural or legal persons serving the members of the governing body in a fiduciary capacity.

SHARE OWNERSHIP — On the balance sheet date of 31 December 2010, acting members of the Board of Directors and the Corporate Executive Board (including closely linked parties) held the following number of Swiss Life Holding registered shares:

SLH shares
31.12.2010
Rolf Dörig
35 247
Gerold Bührer
2 782
Frank Schnewlin
485
Volker Bremkamp
1 465
Paul Embrechts
1 094
Carsten Maschmeyer
1 620 861
Henry Peter
2 174
Peter Quadri
1 874
Franziska Tschudi
1 114
Total Board of Directors
1 667 096


SLH shares
31.12.2010
Bruno Pfister
9 068
Ivo Furrer
0
Klaus G. Leyh
53
Charles Relecom
0
Thomas Buess
2 500
Patrick Frost
4 013
Manfred Behrens
698
Total Corporate Executive Board
16 332


The number of future subscription rights to Swiss Life Holding shares allocated in the context of the above- mentioned equity compensation plan to members of the Corporate Executive Board in the form of Performance Share Units (PSUs), the exercise of which depends on the fulfilment of specific performance criteria, is shown in table form in the Notes to the Swiss Life Holding Financial Statements.

OPTIONS — No share options have been granted in the Swiss Life Group since 2003 and no options are outstanding.

ADDITIONAL HONORARIUMS AND REMUNERATIONS — In the period under review no additional honorarium or remuneration payments were made to the members of the Board of Directors or the Corporate Executive Board.

AWD Holding AG and its subsidiaries paid a total of EUR 44 625 in consulting fees for services provided to the AWD Group to a company in which the Board of Directors member Carsten Maschmeyer has an important shareholding.

LOANS — On the balance sheet date, there were no loans outstanding to members of the Board of Directors or the Corporate Executive Board:

31.12.2010
Board of Directors
none
Corporate Executive Board
none


EXPENDITURE FOR OCCUPATIONAL PROVISIONS — Details on the company’s benefit expenditure can be found in the Consolidated Financial Statements (Notes 24 and 31) and the Notes to the Swiss Life Holding Financial Statements. For reasons of transparency, information on the following benefits is provided here.

As Chairman of the Board of Directors, Rolf Dörig is affiliated to the employee benefits institutions of Swiss Life for the purpose of occupational provisions. The regular annual employer contribution in the period under review amounted to CHF 195 656.

No such affiliation to employee benefits institutions of Swiss Life exists for other members of the Board of Directors and no contributions have been made on their behalf.

For Group CEO Bruno Pfister, the regular employer contribution in the period under review totalled CHF 234 220. This amount comprises the annual contribution of CHF 185 239 and a supplementary payment of CHF 48 990 in accordance with the pension fund regulations due to an increase in insured salary.

Expenditure for occupational provisions on behalf of the remaining members of the Corporate Executive Board totalled CHF 976 910 (regular annual contributions of CHF 848 645 and supplementary payments of CHF 128 265 in accordance with the pension fund regulations due to an increase in insured salary).

HIGHEST TOTAL COMPENSATION, BOARD OF DIRECTORS — As Chairman of the Board of Directors, Rolf Dörig received the highest total compensation for a member of the Board of Directors of Swiss Life Holding in 2010.

The basic compensation of members of the Board of Directors is paid 80% in cash and 20% in blocked Swiss Life Holding shares. As a result of the good business results, variable compensation for the 2010 financial year was paid to members of the Board of Directors at the beginning of 2011 in the form of blocked shares amounting to 10% of the fixed compensation. No variable compensation components in shares had been allocated to members of the Board of Directors for the 2009 financial year.

The compensation granted to Rolf Dörig in the period under review in the form of cash, shares and contributions to occupational provisions was as follows:

In CHF
Compensation in cash
960 000
Shares 1
302 399 2731 SLH shares with three-year blocking period1
Share options
none
Total compensation 2010
in cash and shares
1 262 399
including annual contribution to occupational provisions of CHF 195 656
1 458 054
Total compensation 2009
in cash and shares
1 238 690
including annual contribution to occupational provisions of CHF 195 656
1 434 346
1 On the one hand as part of the basic compensation and, on the other, as variable compensation in blocked shares for the 2010 financial year allocated at the beginning of 2011. The allocation was effected on 18.06.2010, 15.12.2010 and 04.03.2011 at an economic value of CHF 95.454, CHF 110.242 and CHF 132.492, which is equal to the tax value, taking into account the blocking period of three years. The share prices on the days of allocation were CHF 113.70, CHF 131.30 and CHF 157.80 respectively.


HIGHEST TOTAL COMPENSATION, CORPORATE EXECUTIVE BOARD — As Group CEO, Bruno Pfister received the highest total compensation for a member of the Corporate Executive Board in the period under review.

The compensation granted in 2010 to Bruno Pfister in the form of cash, shares and contributions to occupational provisions was as follows:

In CHF
Compensation in cash 1
2 485 435
Shares
none
Share options
none
Total compensation 2010 2
in cash and shares
2 485 435
including regular contribution to occupational provisions of CHF 234 220 3
2 719 655
Total compensation 2009 4
in cash and shares
2 178 553
including annual contribution to occupational provisions of CHF 175 801
2 354 354
1 Including cash bonus of CHF 1 200 000 for the 2010 financial year, determined at the beginning of 2011, and other compensation in cash (child allowances, company car,
premium contribution).
2 Excluding the mathematical value of the PSUs allocated in 2010; incl. the mathematical value of CHF 974 870, total compensation amounted to CHF 3 694 525.
3 Annual contribution of CHF 185 230 and a supplementary payment of CHF 48 990 due to an increase in insured salary.
4 Excluding the mathematical value of the PSUs allocated in 2009; incl. the mathematical value of CHF 332 930, total compensation amounted to CHF 2 687 284.


In addition to compensation in the form of cash, shares and contributions to occupational provisions, Bruno Pfister was allocated 6500 future subscription rights in the form of Performance Share Units (PSUs) as part of the three-year equity compensation plan. These entitle him to Swiss Life Holding shares as at 1 April 2013, provided that the relevant requirements have been satisfied at that point (deferred compensation). Depending on how the two defined performance criteria develop, the number of PSUs can increase by a factor of 2 or drop to zero. On the allocation date of 1 April 2010, the fair value of one PSU was CHF 149.98.

Taking into consideration the mathematical value of the PSUs allocated in 2010, which came to CHF 974 870, Bruno Pfister’s total compensation for 2010 amounted to CHF 3 694 525.

In 2009 Bruno Pfister was allocated 6500 future subscription rights in the form of Performance Share Units (PSUs). On the allocation date of 1 April 2009, the fair value of one PSU was CHF 51.22. Taking into consideration the mathematical value of the PSUs allocated in 2009, which came to CHF 332 930, Bruno Pfister’s total compensation for 2009 amounted to CHF 2 687 284.