18 Intangible Assets including Intangible Insurance Assets

In CHF million  
  31.12.2011 31.12.2010
Intangible insurance assets
  1 817 2 033
Other intangible assets
  1 905 1 949
Total intangible assets
  3 722 3 982


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
  2011 2010 2011 2010 2011 2010 2011 2010
Balance as at 1 January
  16 20 1 986 2 299 31 19 2 033 2 338
Additions
  2 389 441 55 29 446 470
Amortisation
  –1 –1 –461 –503 –27 –14 –489 –518
Impairment
  –2 –1 –2 –3 –2
Effect of shadow accounting
  0 0 –139 –32 –139 –32
Foreign currency translation differences
  0 –3 –31 –217 0 –3 –31 –223
Balance as at end of period
  15 16 1 743 1 986 59 31 1 817 2 033


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. It relates to contracts acquired in Switzerland, Germany and France and is amortised in proportion to gross profits over the effective life of the acquired insurance and investment contracts.

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  2011 2010 2011 2010 2011 2010 2011 2010
 
Cost
 
Balance as at 1 January
  1 745 1 947 316 370 230 261 2 291 2 578
Additions
  20 21 20 21
Additions from business combinations
29  9 2 11
Classification as assets held for sale and other disposals
  0 –8 –10 –8 –10
Foreign currency translation differences
  –27 –202 –7 –54 –6 –42 –40 –298
Balance as at end of period
  1 727 1 745 311 316 236 230 2 274 2 291
 
Accumulated amortisation and impairment
 
Balance as at 1 January
  –157 –157 –83 –63 –102 –120 –342 –340
Amortisation
  –29 –32 –6 –9 –35 –41
Impairment losses
  –2 –1 –3
Classification as assets held for sale and other disposals
  0 8 7 8 7
Foreign currency translation differences
  2 12 1 20 3 32
Balance as at end of period
  –157 –157 –112 –83 –100 –102 –369 –342
 
Total other intangible assets as at end of period
  1 570 1 588 199 233 136 128 1 905 1 949


Goodwill — Goodwill represents the excess of the fair value of the consideration transferred and the amount of any non-controlling interest recognised, if applicable, over the fair value of the assets and liabilities recognised at the date of acquisition. Goodwill includes amounts relating to both the Swiss Life Group’s interest and the non-controlling interest in the business acquired in the case where non-controlling interest is measured at fair value. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on associates is included in the carrying amount of the investment.

In 2011, the Swiss Life Group acquired a majority share of Viveris REIM, Marseilles. The goodwill relating to this transaction amounted to CHF 9 million.

Goodwill relating to Lloyd Continental has been allocated to the “Insurance France” segment. Goodwill relating to CapitalLeben has been allocated to the “Insurance International” segment. Of the goodwill relating to other acquisitions, CHF 12 million (2010: CHF 12 million) has been allocated to the “Insurance France” segment and CHF 9 million (2010: nil) to the “Investment Management” segment as at 31 December 2011.

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 five-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
  31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010
Net carrying amount of goodwill
  287 287 149 149 21 12
 
Key assumptions used for impairment tests
 
Growth rate
  1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Discount rate
  10.5% 10.7% 9.3% 9.6% 10.5% 10.7%


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
  31.12.2011 31.12.2010 31.12.2011 31.12.2010 31.12.2011 31.12.2010
Net carrying amount of goodwill
  81 81 258 265 774 794
 
Key assumptions used for impairment tests
 
Growth rate
  1.0% 1.0% 1.0% 1.0% 1.0% 1.0%
Discount rate
  9.3% 9.6% 10.5% 10.7% 9.4% 10.7%


No impairment losses were recognised in 2011 and 2010.

In 2011, the model used for the calculation of the recoverable amount of AWD has been refined and the discount rate has been adjusted to reflect lower interest rates, the current financing structure and the specific business model of AWD (i.e. 9.4%). No impairment loss of the goodwill allocated to the “AWD” segment would have been caused were the same discount rate to have been applied as for the Swiss Life insurance businesses in Germany (i.e. 10.5%). The headroom by which the recoverable amount exceeded the carrying amount of AWD amounted to approx. CHF 270 million as at 31 December 2011. If AWD were to achieve an annual growth rate on operating earnings before interest and taxes of approx. 6% over the next five years, the recoverable amount would equal the carrying amount as at 31 December 2011.

Customer relationships — As at 31 December 2011 customer relationships comprise customer relationships relating to the “AWD” segment CHF 156 million (2010: CHF 186 million), “Insurance France” segment CHF 21 million (2010: CHF 25 million), “Insurance International” segment CHF 20 million (2010: CHF 22 million) and “Investment Management” segment CHF 2 million (2010: nil).

Brands and other — Consists of brands, trademarks, computer software and other intangible assets relating to AWD CHF 98 million (2010: CHF 103 million) and other CHF 38 million (2010: CHF 25 million) as at 31 December 2011.

 

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