18 Intangible Assets including Intangible Insurance Assets

In CHF million  
  31.12.2012 31.12.2011
Intangible insurance assets
  1 605 1 817
Other intangible assets
  1 288 1 905
Total intangible assets
  2 893 3 722


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
  2012 2011 2012 2011 2012 2011 2012 2011
Balance as at 1 January
  15 16 1 743 1 986 59 31 1 817 2 033
Additions
  1 2 391 389 31 55 422 446
Amortisation
  –1 –1 –565 –461 –53 –27 –619 –489
Impairment
  –2 –2 –1 –2 –3
Effect of shadow accounting
  0 0 –4 –139 –4 –139
Foreign currency translation differences
  0 0 –9 –31 0 0 –10 –31
Balance as at end of period
  15 15 1 554 1 743 36 59 1 605 1 817


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 Germany and France and is amortised in proportion to gross profits or margins 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  2012 2011 2012 2011 2012 2011 2012 2011
 
Cost
 
Balance as at 1 January
  1 727 1 745 311 316 236 230 2 274 2 291
Additions
  22 20 22 20
Additions from business combinations
29  7 9 2 1 7 11
Additions from internal software development
  6 6
Classification as assets held for sale and other disposals
  0 –3 –8 –3 –8
Foreign currency translation differences
  –8 –27 –2 –7 –2 –6 –12 –40
Balance as at end of period
  1 726 1 727 309 311 258 236 2 293 2 274
 
Accumulated amortisation and impairment
 
Balance as at 1 January
  –157 –157 –112 –83 –100 –102 –369 –342
Amortisation
  –28 –29 –11 –6 –39 –35
Impairment losses
  –393 –115 –2 –94 –1 –601 –3
Classification as assets held for sale and other disposals
  3 8 3 8
Foreign currency translation differences
  0 1 2 1 1 1 3
Balance as at end of period
  –550 –157 –255 –112 –200 –100 –1 005 –369
 
Total other intangible assets as at end of period
  1 176 1 570 54 199 58 136 1 288 1 905


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.

Goodwill relating to the acquisition of aXenta AG, Baden, in May 2012 amounted to CHF 7 million.

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 (2011: CHF 12 million) has been allocated to the “Insurance France” segment and CHF 9 million (2011: CHF 9 million) to the “Investment Management” as at 31 December 2012. The goodwill on the acquisition of aXenta AG, Baden, was fully impaired in 2012.

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.

No impairment loss would arise on the goodwill relating to Lloyd Continental if the eternal growth rate were reduced to 1% or the discount rate were increased by 1%.

No impairment loss would arise on the goodwill relating to CapitalLeben if the eternal growth rate were set to nil (instead of 1%) or operating costs were to remain flat starting from 2013 (i.e. no further cost reductions achieved).

The key assumptions used for the impairment testing on the carrying amount of goodwill were as follows:

In CHF million  
  Lloyd Continental CapitalLeben Other
  31.12.2012 31.12.2011 31.12.2012 31.12.2011 31.12.2012 31.12.2011
Net carrying amount of goodwill
  287 287 149 149 21 21
Impairment losses
  7
 
Key assumptions used for impairment tests
 
Growth rate
  2.0% 1.0% 1.0% 1.0% 1-2% 1.0%
Discount rate
  11.8% 10.5% 8.6% 9.3% 9.4-11.8% 10.5%


The growth rates were adjusted in 2012 to reflect the long-term inflation expectations of the International Monetary Fund for the respective markets.

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 reportable segments in these financial statements reflect the management structure that was in place until the end of 2012. For the purpose of impairment testing, goodwill was allocated to the cash-generating units according to the new management structure and reportable segments in place as of 2013.

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.

For the impairment test in 2012, the financial budgets are based on the new management structure that came into effect on 1 January 2013. Under the new management structure, the legal entities of AWD have been assigned to the individual markets in which they operate. The projection covers a three-year period for Switzerland, Germany and International (AWD AT/CEE, UK). 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:

AWD Goodwill relating to “Insurance Switzerland” and “Insurance Germany” Segments
In CHF million  
  Insurance Switzerland Insurance Germany
  31.12.2012 31.12.2011 31.12.2012 31.12.2011
Net carrying amount of goodwill
  81 81 256 258
Impairment losses
 
 
Key assumptions used for impairment tests
 
Growth rate
  1.0% 1.0% 2.0% 1.0%
Discount rate
  9.4% 9.3% 10.7% 10.5%


No impairment loss would arise on the AWD goodwill relating to “Insurance Switzerland” if the eternal growth rate were reduced to nil or the discount rate were increased by 1%.

AWD Goodwill relating to “AWD” Segment
In CHF million  
 

Switzerland


Germany
Austria
Eastern Europe
UK


Total


Total
  31.12.2012 31.12.2011
Net carrying amount of goodwill
  72 230 80 382 774
Impairment losses
  218 168 386
 
Key assumptions used for impairment tests
 
Growth rate
  1.0% 2.0% 2.0% n/a 1.0%
Discount rate
  9.4% 10.7% 9.0% n/a 9.4%


In 2012, CHF 386 million impairment losses were recognised on the goodwill relating to the “AWD” segment. Therefore, any adverse movement in a key assumption would lead to a further impairment. The impairment losses under the old management structure would not have been significantly different.

On the carrying amount of goodwill, no other impairment losses were recognised in 2012, and no impairment losses were recognised in 2011.

Customer relationships
As at 31 December 2012, customer relationships comprise customer relationships relating to the “AWD” segment CHF 35 million (2011: CHF 156 million), “Insurance France” segment CHF 18 million (2011: CHF 21 million), “Insurance International” segment nil (2011: CHF 20 million) and “Investment Management” segment CHF 1 million (2011: CHF 2 million). On the customer relationships relating to AWD, CHF 98 million was recognised as an impairment loss in 2012 due to higher than originally projected fluctuation rates of financial advisers in Austria and Switzerland. On the customer relationships relating to “Insurance International” CHF 17 million was recognised as an impairment loss in 2012. The impairment loss arose due to the pursued two-carrier strategy with the strong focus on new business in Luxembourg and Singapore.

Brands and other
Consists of brands, trademarks, computer software and other intangible assets relating to AWD CHF 5 million (2011: CHF 98 million) and other CHF 53 million (2011: CHF 38 million) as at 31 December 2012. Due to the rebranding strategy relating to the AWD brand CHF 94 million was recognised in 2012 as an impairment loss on the carrying amount of brands and other.

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