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 32). Additional details regarding the compensation and remuneration 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. The information on compensation granted to Corporate Executive Board members also includes variable cash compensation (the cash bonus and the new deferred compensation in cash introduced on 1 January 2012), which was determined by the Board of Directors at the beginning of 2012 and is published on an accrual basis as compensation for the 2011 financial year. As a matter of new policy, the members of the Board of Directors are granted exclusively fixed compensation, payable 70% in cash and 30% in Swiss Life Holding shares, which are subject to a three-year blocking period. This replaces the previous arrangements, whereby Board of Director members received variable compensation in the form of blocked shares amounting to a maximum of 15% of the fixed compensation, depending on the business results.

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. variable compensation 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 is in line with the market environment and must be competitive. The individual overall compensation takes into account the employee’s professional skills, engagement and personal performance. It is made up of the basic salary, a variable bonus based on achievement of the annual objectives, which is generally paid in cash and possibly in shares, if applicable deferred compensation in cash and a mid- to long-term equity compensation plan, as well as 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. They are based on the achievement of annual objectives defined in advance for a period of three years as part of medium-term planning and determined on the basis of the actual performance of individuals or teams (performance-linked payment) in relation to the objectives set and on the degree of achievement of the Swiss Life Group targets as reflected in its 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), which are defined in advance for a period of three years as part of medium-term planning. The main KPIs, besides the key figures relating to annual profit, costs, business volume, investment return, return on equity and solvency, are the profitability of in-force and new business, margin performance and the share of non-traditional products in new business. In order to avoid conduct aimed at the short-term achievement of key indicators with a higher weighting, the individual KPIs are not mechanistically weighted in advance; their individual weighting is determined by the Board of Directors at the end of each financial year.

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 and behaviour, incl. the compliance regulations.

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 as a whole 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 studies by independent 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 an 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 Nomination and Compensation Committee and the Board of Directors as a whole.

Within the framework of the compensation arrangements for members of the Corporate Executive Board, “deferred compensation in cash” was introduced as a new compensation component on 1 January 2012. On the basis of the corresponding regulations, a portion of the variable cash compensation determined by the Board of Directors is not paid immediately but after a period of three years has elapsed and provided that the regulatory requirements are satisfied at that point. The allocated deferred compensation in cash represents an entitlement during the three-year deferral period. The underlying “deferred cash plan” also provides for adjustment and reclaiming mechanisms (clawback). If the employment relationship is terminated by a participant during the three-year deferral period, the entitlements expire worthless.

As a mid- to long-term compensation component linked to the performance of the Swiss Life Holding share price, an equity compensation plan has been in place since 2004 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. These subscription rights entitle the participants to receive Swiss Life Holding shares free of charge after a period of three years has elapsed and provided that the prerequisites under the plan are satisfied at that point.

Pursuant to the regulations of the 2009 and 2010 equity compensation plans, future subscription rights were allocated in the form of so-called Performance Share Units (PSUs), whereby share allocation after expiry of the three-year period was based on two performance criteria, each weighted at 50%. The allocation mechanism is set out in detail in the 2010 Annual Report and in this Annual Report in the Notes to the Swiss Life Holding Financial Statements. 65 members of Swiss Life Group senior management, including members of the Corporate Executive Board, participated in the 2009 equity compensation plan. A total of 53 216 PSUs were allocated; 22 200 to the Corporate Executive Board, including 6500 to Bruno Pfister as Group CEO. In 2010, 69 members of the Swiss Life Group senior management took part in the plan, in which a total of 68 510 PSUs were allocated; 24 700 to the Corporate Executive Board, of which 6500 to Bruno Pfister in his capacity as Group CEO.

In the period under review, participants in the 2011 equity compensation plan were 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 leverage effect. The attribution of shares after the expiry of the three-year deferral period is effected on a 1:1 basis (1 RSU = 1 share). The plan is therefore very simple, transparent throughout the whole term and directly linked to the performance of the Swiss Life share. The value of RSUs during the three-year term develops linear with the Swiss Life Holding share price and thus symmetrically corresponds with shareholder interests. During the period under review, a total of 62 members of Swiss Life Group senior management participated in the 2011 equity compensation plan, which came into effect on 1 April 2011. A total of 68 730 RSUs were allocated; 23 630 in total to the members of the Corporate Executive Board, of which 6350 RSUs to Bruno Pfister as Group CEO.

The attribution of mid- to long-term compensation components (RSU plan) is deferred for a period of three years from the date of allocation in the same way as the deferred compensation in cash. Likewise, the RSU plan provides for adjustment and reclaiming mechanisms (clawback). If the employment relationship is terminated by a participant during the three-year term of the RSU plan, the future entitlements expire worthless.

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
2011 2010
Board of Directors
2 091 334 1 979 503
Corporate Executive Board
9 792 9781 9 600 9952
1 Incl. cash bonus of CHF 4 340 500 for the 2011 financial year, determined and paid out at the beginning of 2012.
2 Incl. cash bonus of CHF 4 475 000 for the 2010 financial year, determined and paid out at the beginning of 2011.


One member of the Board of Directors resigned in the 2010 financial year. 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.

Two members of the Board of Directors resigned in the 2011 financial year. After serving for eight years on the Board of Directors of Swiss Life Holding, Paul Embrechts did not stand for re-election at the General Meeting of Shareholders in 2011 and no longer serves on the Board of Directors. Carsten Maschmeyer, who was elected to the Board of Directors of Swiss Life Holding at the 2009 General Meeting of Shareholders, resigned as a member of the Board of Directors on 7 December 2011.

There were no personnel changes on the Corporate Executive Board during 2010 and 2011.

As a matter of new policy, the members of the Board of Directors are granted exclusively fixed compensation. The previous arrangements, according to which members of the Board of Directors were allocated variable compensation in the form of blocked Swiss Life Holding shares of up to a maximum of 15% of the fixed compensation, depending on the business results, no longer apply. The total compensation is now paid 70% in cash and 30% in Swiss Life Holding shares with a three-year blocking period. The proportion of shares has thus been increased in comparison with the previous arrangements, under which 20% of the basic compensation was granted in the form of blocked Swiss Life Holding shares.

The compensation 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, and is commensurate with the individual’s function and workload. The compensation is determined annually by the Board of Directors. The amount of compensation granted to members of the Board of Directors has been adjusted in the 2011 financial year in connection with the new compensation arrangements (transition to exclusively fixed compensation, payable 70% in cash and 30% in blocked shares), taking into consideration compensation paid to board members in comparable companies within the insurance sector.

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:

Compensation
in cash in CHF
Shares with
three-year
blocking period
Rolf Dörig
1 008 000 4 478
Gerold Bührer
244 300 1 129
Frank Schnewlin
244 300 1 129
Volker Bremkamp
129 500 589
Damir Filipovic 1
60 667 298
Henry Peter
91 000 413
Peter Quadri
91 000 413
Franziska Tschudi
106 400 480
1 Joined 05.05.2011.


Until leaving the Board of Directors at the General Meeting of Shareholders of 5 May 2011, Paul Embrechts was paid compensation in cash to the amount of CHF 34 167 and 57 shares with a three-year blocking period. Carsten Maschmeyer was paid compensation in cash to the amount of CHF 82 000 and 172 shares with a three-year blocking period until he stepped down from the Board of Directors on 7 December 2011.

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, variable compensation in cash and other compensation (child allowances, company cars, premium contributions to 3rd pillar pension plans). The variable compensation in cash is allocated as a bonus and, if applicable, as deferred compensation in cash. The deferred compensation in cash, which was introduced on 1 January 2012, is paid out after a period of three years has elapsed and provided that the regulatory requirements have been satisfied. In addition, a mid- to long-term compensation component is in place in the form of an equity compensation plan linked to the performance of the Swiss Life Holding share price. As mentioned above, it gives an entitlement to Swiss Life Holding shares after a period of three years has elapsed and provided that the relevant requirements are satisfied at the time of allocation.

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 and the current market conditions.

The variable compensation components are 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 variable compensation in cash (cash bonus and, if applicable, deferred compensation in cash) is set at a maximum of 117% of the fixed basic salary (“bonus cap”) and requires that all objectives have been considerably exceeded. The allocation of subscription rights to Swiss Life Holding shares (equity compensation plan, RSU plan) is also limited in value to 117% of the fixed basic salary; if deferred compensation in cash, which on its part is subject to the bonus cap mentioned above, is simultaneously allocated, the maximum limit is 64% of the fixed basic salary.

At Corporate Executive Board level, variable compensation 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, investment return, return on equity and solvency, as well as the profitability of in-force and new business, margin performance and the share of non-traditional products in new business.

40% of the variable compensation 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 Allocation IN THE YEAR UNDER REVIEW — The shares allocated to the members of the Board of Directors in the period under review form part of the compensation, which was granted 70% in cash and 30% in blocked Swiss Life Holding shares.

No variable compensation in shares was granted to the members of the Corporate Executive Board for the 2011 financial year. As described, they are participating in the current equity compensation plan.

For the 2011 financial year, the members of the Board of Directors were allocated the following shares, subject to a three-year blocking period:

Board of Directors
9158 shares,
allocated at values1 of CHF 111.0817 and CHF 73.3828. 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 23.06.2011 and 15.12.2011 were
CHF 132.30 and CHF 87.40 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 2011, 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
31.12.2011
Rolf Dörig, Chairman of the Board of Directors
40 486
Gerold Bührer
4 095
Frank Schnewlin
1 748
Volker Bremkamp
2 150
Damir Filipovic
298
Henry Peter
3 651
Peter Quadri
2 351
Franziska Tschudi
1 666
Total Board of Directors
56 445


SLH shares
31.12.2011
Bruno Pfister, Group CEO
3 068
Manfred Behrens
0
Thomas Buess
4 500
Patrick Frost
2 000
Ivo Furrer
0
Klaus Leyh
53
Charles Relecom
0
Total Corporate Executive Board
9 621


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 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.

In the year under review, Swiss Life Ltd, AWD Holding AG and their subsidiaries paid a total of EUR 341 800 in fees for consultancy services to a company in which Carsten Maschmeyer, who was a member of the Board of Directors of Swiss Life Holding until his resignation on 7 December 2011, 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:

31.12.2011
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 32) and the Notes to the Swiss Life Holding Financial Statements. Ordinary contributions have been adjusted following the switch by the employee benefits institutions from defined benefit to defined contribution plan on 1 January 2011. 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 for Rolf Dörig in the period under review amounted to CHF 225 504.

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 annual employer contribution in the period under review totalled CHF 225 504.

Expenditure for occupational provisions on behalf of the remaining members of the Corporate Executive Board totalled CHF 1 052 844 during the period under review.

HIGHEST TOTAL COMPENSATION, BOARD OF DIRECTORS — Rolf Dörig, as Chairman of the Board of Directors, received the highest total compensation for a member of the Board of Directors of Swiss Life Holding in 2011.

The compensation of members of the Board of Directors is paid 70% in cash and 30% in Swiss Life Holding shares, which are subject to a three-year blocking period.

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
1 008 000
Compensation in blocked shares
362 839 4478 SLH shares with three-year blocking period1
Share options
none
Total compensation 2011
in cash and shares
1 370 839
including regular contribution to occupational provisions of CHF 225 504
1 596 343
Total compensation 2010
in cash and shares
1 262 399
including regular contribution to occupational provisions of CHF 195 656
1 458 054
1 Allocation and valuation was effected on 23.06.2011 and 15.12.2011 at an economic value of CHF 111.0817 and CHF 73.3828, 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 132.30 and CHF 87.40 respectively.


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

In the 2011 financial year, Bruno Pfister was allocated the following amounts in the form of salary, cash bonus, contributions to occupational provisions, deferred compensation in cash and deferred compensation in shares (RSU plan):

In CHF
Compensation in cash 1
2 685 506                                                                             
Shares
none
Share options
none
Total compensation 2011
in cash
2 685 506
including regular contribution to occupational provisions of CHF 225 504
2 911 010
including deferred compensation in cash 2
3 271 010
including deferred compensation in shares 3
4 160 328
Total compensation 2010
in cash
2 485 435
including regular contribution to occupational provisions of CHF 234 220
2 719 655
including deferred compensation 4
3 694 525
1 Including cash bonus of CHF 1 200 000 for the 2011 financial year, determined and paid at the beginning of 2012, and other compensation (child allowances, premium contribution) totalling CHF 47 996.
2 Deferred compensation in cash of CHF 360 000; this compensation component was introduced on 1 January 2012 and will be paid out on 1 April 2015, provided the regulatory requirements are satisfied at that point.
3 6350 future subscription rights in the form of RSUs entitling the holder to receive Swiss Life Holding shares on 1 April 2014, provided the requirements are satisfied at that point. On the allocation date of 1 April 2011 the fair value of an RSU was CHF 140.05.
4 6500 future subscription rights in the form of PSUs entitling the holder to receive Swiss Life Holding shares on 1 April 2013, provided the requirements are satisfied at that point. On the allocation date of 1 April 2010 the fair value of a PSU was CHF 149.98.


FURTHER INFORMATION — In the form of an overview, the following additional information is provided on the Swiss Life Group compensation systems for the 2011 financial year:

In CHF (unless otherwise indicated)
Total compensation 1
790 186 302
of which total variable compensation (total pool) 2
121 093 022
Number of persons who received variable compensation
5 592
Total outstanding deferred compensation
7 611 521
of which cash payment
1 591 642
of which shares
0
of which options
0
of which others (Restricted Share Units, RSUs / Performance Share Units, PSUs)
6 019 879
Charges and credits in the financial year from compensation for previous financial years 3
–7 296 882
Board of Directors, Executive Board and persons whose activities have a significant influence on the risk profile:
Total sign-on payments made in the financial year 4
0
Total severance payments made in the financial year 5
0
1 The totality of any monetary value which the company distributes to a person directly or indirectly for the work performed for the company, e.g. in the form of cash payments, non-cash benefits, expenditure which establishes or increases entitlements to occupational provisions, pensions, shares or other allocation of shareholding rights as well as the forgiving, extinguishing or renunciation of any claims or debts.
2 Part of the total compensation, the granting or the amount of which is at the discretion of the company or which is contingent on fulfilment of predefined conditions. This includes compensation contingent on performance or meeting certain targets. Sign-on payments and severance payments also fall within the scope of the definition of variable compensation.
3 In particular release of provisions affecting net income due to the expiration of entitlements under equity compensation plans.
4 Compensation which is agreed on the conclusion of an employment agreement to be paid or be due once. Also deemed to constitute a sign-on payment shall be compensation for benefits foregone vis-à-vis a previous employer.
5 Compensation which is agreed in connection with the termination of an employment relationship.


 

The future starts here.