24 Employee Benefits

Employee Benefit Liabilities
In CHF million  
  31.12.2012 31.12.2011
Employee benefit liabilities consist of
 
gross defined benefit liabilities
  1 123 1 173
other long-term employee benefit liabilities
  0 0
other employee benefit liabilities
  104 88
Total employee benefit liabilities
  1 227 1 261


Defined benefit plans
Employees are covered under various funded and unfunded pension plans. When a third party will reimburse some or all of the expenditure for employee benefits and the rights to reimbursement do not qualify as plan assets, they are treated as a separate asset rather than as a deduction from the obligation. In all other respects the treatment is the same as for plan assets. Participation in the various plans is based either on completion of a specific period of continuous service or on the date of hire. Benefits are based on the employee’s credited years of service and average compensation in the years preceding retirement. Annual funding requirements are determined based on actuarial methods or local requirements.

Due to the requirements of IFRS 4 Insurance Contracts in combination with IAS 19 Employee Benefits,insurance contracts issued to defined benefit plans covering own employees are eliminated. Insurance contracts issued to defined benefit plans covering own employees have been issued in Switzerland and France. Certain assets relating to these plans qualify as plan assets and are therefore not eliminated. To the extent these plans are not funded by amounts included in the plan assets, the defined benefit liabilities are backed by the investments relating to the eliminated insurance contracts. These investments are part of the investments presented in the consolidated balance sheet of the Swiss Life Group.

The net asset/liability position does not incorporate any reimbursement rights.

The major part of the defined benefit liability arises from plans covering employees in Switzerland. The primary benefit of those plans is an old-age pension paid out after reaching retirement age. There are options for early retirement (with reduction of the pension amount determined using actuarial methods) and for choosing to receive a lump-sum payment instead of a pension. Other benefits comprisesurvivors’/orphans’ pensions in case of death as well as disability pensions (if disabled before retirement age). The plans are funded by the employer through ordinary contributions determined using actuarial methods where, under Swiss law, a part (generally less than 50% of the total contribution) is deducted from the employee’s gross salary. Further funding comprises mandatory transfers of funds made by new employees from plans of former employers, discretionary contributions by employees (within plan restrictions) and the earnings on the plan assets.

In January 2011, CHF 684 million in cash was transferred from the Swiss Life Group to two major defined benefit plans in Switzerland. This amount is included in the contribution by the employer. The investment risks are now borne by the plan participants themselves whereas mortality and disability risks are still reinsured with the Swiss Life Group.

The contributions expected to be paid for the year ending 31 December 2013 are CHF 57 million. These contributions include amounts payable under insurance contracts issued to defined benefit plans covering own employees.

Amounts recognised in the consolidated balance sheet
In CHF million  
  31.12.2012 31.12.2011
Present value of defined benefit obligation
  –2 666 –2 646
Fair value of plan assets
  1 213 1 059
Unrecognised actuarial gains (–)/losses (+)
  458 547
Net defined benefit asset (+)/liability (–)
  –995 –1 040
 
The net defined benefit asset/liability consists of
 
gross defined benefit liabilities
  –1 123 –1 173
gross defined benefit assets
  128 133
 
Amount of insurance contracts not included in plan assets
  1 389 1 393


Amounts recognised in the consolidated statement of income
In CHF million  
  2012 2011
Current service cost
  82 71
Interest cost
  58 63
Expected return on plan assets
  –39 –35
Net actuarial gains (–)/losses (+)
  32 9
Employee contributions
  –23 –24
Total defined benefit expense
  110 84
 
Actual return on plan assets (gains (–)/losses (+))
  –106 –31


Defined benefit plans
In CHF million  
  2012 2011
 
Changes in the present value of the defined benefit obligation
 
Balance as at 1 January
  –2 646 –2 370
Current service cost
  –82 –71
Interest cost
  –58 –63
Contributions by plan participants
  –36 –45
Actuarial gains (+)/losses (–)
  –11 –268
Benefits paid
  167 167
Business combinations
  –3
Effect of reclassifications and other disposals
  0
Foreign currency translation differences
  1 4
Balance as at end of period
  –2 666 –2 646
 
Changes in the fair value of plan assets
 
Balance as at 1 January
  1 059 289
Expected return on plan assets
  39 35
Actuarial gains (+)/losses (–)
  67 –4
Contributions by the employer
  76 749
Contributions by plan participants
  35 44
Benefits paid
  –65 –51
Business combinations
  2
Foreign currency translation differences
  –1 –3
Balance as at end of period
  1 213 1 059
 
Categories of plan assets
 
Equity instruments
  305 237
Debt instruments
  666 474
Property
  7 188
Other assets
  235 160
Total plan assets
  1 213 1 059
 
Plan assets include
 
own equity instruments
  9 6


Defined benefit plans
In CHF million  
  2012 2011 2010 2009 2008
 
Historical information
 
Present value of defined benefit obligation
  –2 666 –2 646 –2 370 –2 385 –2 292
Fair value of plan assets
  1 213 1 059 289 296 268
Difference
  –1 454 –1 587 –2 081 –2 089 –2 024
 
Experience adjustments on plan liabilities
  6 –30 33 –23 5
Experience adjustments on plan assets
  67 –1 –8 26 –108


Principal actuarial assumptions (weighted averages)
 
  2012 2011
Discount rate
  2.1% 2.7%
Expected rate of return on plan assets
  3.6% 3.6%
Future salary increases
  1.6% 1.6%
Future pension increases
  0.2% 0.8%


Defined contribution plans
Certain subsidiaries sponsor various defined contribution plans. Participation in the various plans is based either on completion of a specific period of continuous service or on the date of hire. The plans stipulate contributions by both employers and employees. The expenses under these plans amounted to CHF 1 million in 2012 (2011: CHF 1 million).

Equity compensation plans
For 2009 and 2010, a share-based payment programme was established which gives the members of the Corporate Executive Board and other senior management members of the Swiss Life Group the right to receive a certain number of Swiss Life Holding shares (performance share units, PSUs) after three years of service if certain conditions are fulfilled. The number of the shares allocated depends on two criteria. One criterion is the performance of the share price of the Swiss Life Holding share during the vesting period of three years. The other criterion is the performance of the share price of the Swiss Life Holding share during the vesting period of three years compared to the performance of the Dow Jones STOXX 600 Insurance Index. For the PSUs issued in 2010, a maximum possible factor of 2.0 applies. For the PSUs issued in 2009, the maximum possible factor is 1.5. No minimum possible factor is applied in 2009 and 2010 so that the number of PSUs could drop to zero after three years.

For 2012 and 2011, participants in the share-based payment programme are allocated restricted share units (RSUs) instead of PSUs. As with PSUs, RSUs grant the holder future subscription rights, entitling him to receive Swiss Life Holding shares free of charge after a three-year period has elapsed and if certain conditions are fulfilled, but without additional performance leverage. The attribution of shares after the expiry of the three-year deferral period will be effected on a 1:1 basis (1 RSU = 1 share). The value of the RSUs during the three-year term develops linearly with the Swiss Life Holding share price and systematically corresponds with shareholder interests. The plan also provides for adjustment and reclaiming mechanisms (clawback).

In 2009, the number of PSUs granted under this programme amounted to 53 216. The fair value at the mea­surement date amounted to CHF 51.22. The date of grant was 1 April 2009.

In 2010, the number of PSUs granted under this programme amounted to 68 510. The fair value at the mea­surement date amounted to CHF 149.98. The date of grant was 1 April 2010.

In 2011, the number of RSUs granted under this programme amounted to 68 730. The fair value at the mea­surement date amounted to CHF 140.05. The date of grant was 1 April 2011.

In 2012, the number of RSUs granted under this programme amounted to 94 040. The fair value at the mea­surement date amounted to CHF 93.77. The date of grant was 1 April 2012.

The fair value of the PSUs and RSUs granted for each programme is determined at the grant date. The fair value was determined by an independent consulting company using the Black-Scholes formula and Monte Carlo simulations. The associated expense during the vesting period is recognised under employee benefits expense with a corresponding increase in share premium.

The expense recognised for share-based payment amounted to CHF 10 million in 2012 (2011: CHF 7 million).

Share-based payment programmes (restricted share units)
Number of restricted share units  
  Balance as at
1 January

Issued
Employee
departures

Vested
Balance as at
end of period
 
2012
 
Granted in 2011
  68 070 –1 300 66 770
Granted in 2012
  94 040 94 040


2011
 
Granted in 2011
  68 730 –660 68 070


Share-based payment programmes (performance share units)
Number of performance share units  
  Balance as at
1 January

Issued
Employee
departures

Vested
Balance as at
end of period
 
2012
 
Granted in 2009
  43 528 –253 –43 275
Granted in 2010
  61 030 –1 545 59 485


2011
 
Granted in 2009
  48 339 –4 811 43 528
Granted in 2010
  68 510 –7 480 61 030
 
2010
 
Granted in 2009
  51 301 –2 962 48 339
Granted in 2010
  68 510 68 510
 
2009
 
Granted in 2009
  53 216 –1 915 51 301


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