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Condensed Notes to the Consolidated Financial Statements (unaudited)

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1 General Information

The Swiss Life Group is one of Europe’s leading comprehensive life and pensions and financial solutions providers. In its core markets of Switzerland, France and Germany, Swiss Life offers individuals and corporations comprehensive and individual advice plus a broad range of own and partner products through its sales force and distribution partners such as brokers and banks.

Swiss Life Select, tecis, Horbach, Proventus and Chase de Vere advisors choose suitable products for customers from the market according to the Best Select approach. Swiss Life Asset Managers offers institutional and private investors access to investment and asset management solutions. Swiss Life provides multinational corporations with employee benefits solutions and high net worth individuals with structured life and pensions products.


Distribution out of capital contribution reserve

For the 2016 financial year, a distribution was made to the shareholders of Swiss Life Holding Ltd (hereinafter referred to as “Swiss Life Holding”) from the capital contribution reserve instead of a dividend payment from profit. This amounted to CHF 356 million (CHF 11.00 per registered share) and was paid in the first half of 2017.

2 Summary of Significant Accounting Policies

The half-year financial statements are prepared in accordance with IAS 34 Interim Financial Reporting. The accounting policies used in the preparation of the interim financial statements are consistent with those used in the financial statements for the year ended 31 December 2016, except for the changes in accounting policies as described below.

These interim financial statements should be read in conjunction with the 2016 annual financial statements.

Figures may not add up exactly due to rounding.


Changes in accounting policies

The Swiss Life Group adopted the amendments to IAS 7 Statement of Cash Flows as at 1 January 2017. The amendments improve the information provided to users of financial statements about an entity’s financing activities. A reconciliation between the opening and closing balances of liabilities arising from financing activities is provided in Note 13 Borrowings.

Other new or amended standards and interpretations did not have an impact on the consolidated financial statements.


Reclassifications in the consolidated statement of income

Costs of CHF 47 million relating to inventory property was reclassified from other income to other expenses in order to achieve gross presentation. The consolidated statement of income for the 6 months ended 30 June 2016 was adjusted accordingly.


Related party transactions

Transactions with subsidiaries were eliminated on consolidation. No major transactions with other related parties were entered into in the period under review.


Functional and presentation currency

Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the Group’s entities operate (the “functional currency”). The consolidated financial statements are presented in millions of Swiss francs (CHF), which is the Group’s presentation currency.

Foreign currency exchange rates

30.06.201731.12.2016Average 2017 HYAverage 2016 HY
1 British pound (GBP)1.24751.25571.25221.4075
1 Czech koruna (CZK)0.04190.03970.04020.0405
1 Euro (EUR)1.09461.07281.07701.0962
1 Singapore dollar (SGD)0.69670.70310.70820.7115
1 US dollar (USD)0.95911.01720.99440.9818

3 Segment Information

Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by management (Corporate Executive Board) in deciding how to allocate resources and in assessing performance.

The accounting policies for the segments are the same as those described in the Summary of Significant Accounting Policies section. Intersegmental services and transfers of assets and liabilities are treated as if the transactions were with third parties, i.e. at market prices applicable at the time of the transaction.

Corporate costs were not allocated to the individual segments as they consist of general administrative expenses and head office expenses that relate to the Swiss Life Group as a whole.

The reportable segments have been identified based on information about the components of the entity that management uses to make decisions about operating matters. The business is managed based on IFRS results.

The information provided to management focuses on product lines and services. The organisational and management structure within the insurance business is geographical. The reportable segments have therefore been identified as follows:

  • Switzerland
  • France
  • Germany
  • International
  • Asset Managers
  • Other

Switzerland, France, Germany and International primarily consist of life insurance operations and distribution units. The life insurance operations offer a broad range of life, pension, health, annuity and investment-type policies to both groups and individuals, including disability coverage. The Group’s strategy focuses primarily on life and pensions in Switzerland, France and Germany and on cross-border business from Liechtenstein, Luxembourg and Singapore. These segments also include a number of companies which hold investments mainly pertaining to life insurance.

“International” comprises the cross-border insurance operations in Liechtenstein, Luxembourg and Singapore, the Swiss Life Select units operating in Austria and the Czech Republic as well as Chase de Vere operating in the United Kingdom.

Non-life operations involve operations in France and mainly include property and casualty, liability and motor insurance, accident and health insurance and payment protection insurance.

“Asset Managers” refers to the management of assets for institutional clients and the Group’s insurance business, as well as the provision of expert advice for such clients.

“Other” refers principally to various finance and service companies, as well as payment protection insurance.

The statement of income and the balance sheet for the segments are provided in the following tables.

Statement of income for the 6 months ended 30 June 2017

In CHF millionSwitzerlandFranceGermanyInternationalAsset ManagersOtherTotal before eliminationsEliminationsTotal
INCOME
Premiums earned on insurance contracts5 3361 2475502407 158–97 148
Premiums earned on investment contracts with discretionary participation438438438
Premiums ceded to reinsurers–6–60–12–4–819–72
Net earned premiums5 7691 1875392007 51507 515
Policy fees earned on insurance contracts233099
Policy fees earned on investment and unit-linked contracts19782411400140
Net earned policy fees21815411490149
Commission income9453177712954694–167527
Investment income1 547302301160182 184–12 182
Net gains/losses on financial assets–480–333322–1–27–486–486
Net gains/losses on financial instruments at fair value through profit or loss13125136–320232830283
Net gains/losses on investment property283650348348
Share of profit or loss of associates02022
Other income31029100014112153
TOTAL INCOME7 3961 6821 1931473941810 830–15610 674
of which intersegment–11–4–21575156–156
EXPENSES
Benefits and claims under insurance contracts–5 953–985–593–100–7 5413–7 539
Benefits and claims under investment contracts with discretionary participation–448–448–448
Benefits and claims recovered from reinsurers32081032–330
Net insurance benefits and claims–6 398–965–585–100–7 9580–7 958
Policyholder participation–122–71–251–8–4520–452
Interest expense–14–45–6–7–10–733–70
Commission expense–193–191–131–50–26–1–592151–441
Employee benefits expense–135–93–68–27–1130–4360–436
Depreciation and amortisation expense–30–104–52–3–60–195–195
Impairment of property and equipment and intangible assets
Other expenses–77–69–30–18–125–11–3302–328
TOTAL EXPENSES–6 971–1 538–1 123–122–271–13–10 037156–9 881
of which intersegment–93–6–230–30–4–156156
       
SEGMENT RESULT42514570251235793793
Unallocated corporate costs–33
PROFIT FROM OPERATIONS760
Borrowing costs–84
Income tax expense–152
NET PROFIT524

Statement of income for the 6 months ended 30 June 2016

In CHF millionSwitzerlandFranceGermanyInternationalAsset ManagersOtherTotal before eliminationsEliminationsTotal
INCOME
Premiums earned on insurance contracts5 9371 2305722407 763–117 751
Premiums earned on investment contracts with discretionary participation561561561
Premiums ceded to reinsurers–6–65–10–60–8711–76
Net earned premiums6 4921 1655621808 23708 237
Policy fees earned on insurance contracts44201010
Policy fees earned on investment and unit-linked contracts1667338124124
Net earned policy fees2071538134134
Commission income9741177702792666–149517
Investment income1 565326305160132 226–12 224
Net gains/losses on financial assets–502–2630–250–9–532–532
Net gains/losses on financial instruments at fair value through profit or loss3795444200–1496496
Net gains/losses on investment property2316860305305
Share of profit or loss of associates12144
Other income5301626188–186
TOTAL INCOME8 3361 7021 130143306611 623–15211 472
of which intersegment161–4–41403152–152
EXPENSES
Benefits and claims under insurance contracts–6 757–1 174–628–100–8 5695–8 564
Benefits and claims under investment contracts with discretionary participation–573–573–573
Benefits and claims recovered from reinsurers43771049–445
Net insurance benefits and claims–7 327–1 137–621–90–9 0930–9 093
Policyholder participation–14068–181–7–2610–261
Interest expense–23–48–6–700–853–82
Commission expense–199–176–128–47–240–574147–427
Employee benefits expense–126–86–68–28–102–4–4130–412
Depreciation and amortisation expense–22–110–35–2–50–174–174
Impairment of property and equipment and intangible assets000
Other expenses–79–76–29–18–60–3–2651–265
TOTAL EXPENSES–7 915–1 564–1 068–119–191–810 865152–10 713
of which intersegment–106–4–200–16–4–152152
          
SEGMENT RESULT4201376325115–1758758
Unallocated corporate costs–30
PROFIT FROM OPERATIONS729
Borrowing costs–85
Income tax expense–143
NET PROFIT500

Balance sheet as at 30 June 2017

In CHF millionSwitzerlandFranceGermanyInternationalAsset ManagersOtherTotal before eliminationsEliminationsTotal
ASSETS
Cash and cash equivalents2 8941 0103992 644149777 1737 173
Derivatives1 895257166202 338–332 305
Assets held for sale121212
Financial assets at fair value through profit or loss6 02012 3941 39916 152035 96635 966
Financial assets available for sale72 43117 5368 6921 385231 562101 630101 630
Loans and receivables13 4352 2517 1271081931 84824 9623 07821 885
Financial assets pledged as collateral1 8861 2693 1553 155
Investment property21 1422 5232 24225 90725 907
Investments in associates992103105105
Reinsurance assets3427992118522–6516
Property and equipment21143129550392392
Intangible assets including intangible insurance assets6403751 32423420002 7732 773
Other assets647431142831989–114875
SEGMENT ASSETS121 24438 07121 57220 6608563 520205 9243 231202 692
Income tax assets82
TOTAL ASSETS202 774
LIABILITIES AND EQUITY
LIABILITIES
Derivatives1 3134750381 448–331 415
Investment and unit-linked contracts6 66810 91784619 62138 052038 052
Other financial liabilities8 5375 3301 01517727420415 539–96514 574
Insurance liabilities81 71916 12216 0042140114 059–35114 024
Policyholder participation liabilities6 8103 0211 9642511 819011 819
Employee benefit liabilities1 605741899801 9571 957
Provisions28121319707979
Other liabilities143137391471340–1339
SEGMENT LIABILITIES106 82235 65920 12020 079368244183 2921 034182 259
Borrowings4 327
Income tax liabilities2 209
EQUITY13 980
TOTAL LIABILITIES AND EQUITY202 774

Balance sheet as at 31 December 2016

In CHF millionSwitzerlandFranceGermanyInternationalAsset ManagersOtherTotal before eliminationsEliminationsTotal
ASSETS         
Cash and cash equivalents2 6271 5632522 5811881237 3337 333
Derivatives1 6132554271 917–321 885
Assets held for sale121212
Financial assets at fair value through profit or loss5 99011 8731 38915 67834 93134 931
Financial assets available for sale72 31817 3327 8491 318491 388100 256100 256
Loans and receivables14 6902 2837 970852441 71426 986–3 03123 955
Financial assets pledged as collateral1 4281 5152 9422 942
Investment property19 8962 1621 74323 80123 801
Investments in associates6810509393
Reinsurance assets33278841120506–6500
Property and equipment21335129340383383
Intangible assets including intangible insurance assets6213721 29223120202 7172 717
Other assets64146142842979–135844
SEGMENT ASSETS120 07637 79620 75020 0119773 246202 855–3 204199 652
Income tax assets80
TOTAL ASSETS199 731
LIABILITIES AND EQUITY
LIABILITIES
Derivatives1 47452105491 680–321 648
Investment and unit-linked contracts6 49110 61879519 01736 921036 920
Other financial liabilities8 2266 46787618229720616 2551 05615 200
Insurance liabilities80 22914 93915 6001980110 966–32110 935
Policyholder participation liabilities6 9793 1551 8892112 044012 043
Employee benefit liabilities1 6947119412962 0682 068
Provisions15112020817575
Other liabilities17912241763357–3355
SEGMENT LIABILITIES105 28635 43619 52119 457407260180 3671 123179 244
Borrowings4 627
Income tax liabilities2 120
EQUITY13 739
TOTAL LIABILITIES AND EQUITY199 731

Premiums and policy fees from external customers

In CHF millionNet earned premiumsNet earned policy fees
2017 HY2016 HY2017 HY2016 HY
LIFE
Individual life1 5311 571143129
Group life5 8126 50455
TOTAL LIFE7 3438 075149134
NON-LIFE
Accident and health56
Property, casualty and other166156
TOTAL NON-LIFE172162
TOTAL7 5158 237149134

4 Contracts for the Account and Risk of the Swiss Life Group’s Customers

Assets relating to certain life insurance and investment contracts are managed for the account and risk of the Swiss Life Group’s customers (separate account/unit-linked contracts, private placement life insurance). They are segregated and managed to meet specific investment objectives of the policyholders. The assets back the insurance liabilities and the financial liabilities arising from these contracts. The fair values of the liabilities reflect the fair values of the assets. Certain contracts with unit-linking features contain financial and insurance guarantees. The liabilities relating to these guarantees are included in financial liabilities and insurance liabilities, respectively.

Assets for the account and risk of the Swiss Life Group’s customers

In CHF million30.06.201731.12.2016
Cash and cash equivalents2 5772 489
Derivatives00
Financial assets at fair value
through profit or loss
Debt securities5 8935 738
Equity securities4 6924 113
Investment funds18 59417 626
Other22
TOTAL ASSETS FOR THE
ACCOUNT AND RISK OF THE
SWISS LIFE GROUP'S CUSTOMERS
31 75829 968

Liabilities linked to assets for the account and risk of the Swiss Life Group’s customers

In CHF millionNotes30.06.201731.12.2016
Unit-linked contracts1222 70321 948
Investment contracts124 3924 192
Insurance liabilities144 4833 692
TOTAL LIABILITIES LINKED TO ASSETS
FOR THE ACCOUNT AND RISK OF THE
SWISS LIFE GROUP'S CUSTOMERS
31 57829 833

Financial result for the 6 months ended 30 June

In CHF millionAssets and liabilities
for the account
and risk of the
Swiss Life Group
Assets and
liabilities
for the account
and risk of the
Swiss Life Group's
customers
Total
Notes2017 HY2016 HY2017 HY2016 HY2017 HY2016 HY
Investment income62 1822 2242 1822 224
Net gains/losses on financial assets6–518–51332–19–486–532
Net gains/losses
on financial instruments at fair value
through profit or loss
6324471–4125283496
Net gains/losses
on investment property
348305348305
Share of profit or loss of associates2424
FINANCIAL RESULT2 3392 492–962 3302 498

5 Premiums, Policy Fees and Deposits Received

Written premiums

In CHF million2017 HY2016 HY
Direct7 4748 210
Assumed161152
GROSS WRITTEN PREMIUMS7 6358 362
Ceded–77–80
NET WRITTEN PREMIUMS7 5588 283

Earned premiums

In CHF million2017 HY2016 HY
Direct7 4268 160
Assumed160152
GROSS EARNED PREMIUMS7 5868 312
Ceded–72–76
NET EARNED PREMIUMS7 5158 237

Written policy fees

In CHF million2017 HY2016 HY
Direct158142
GROSS WRITTEN POLICY FEES158142
Ceded
NET WRITTEN POLICY FEES158142

Earned policy fees

In CHF million2017 HY2016 HY
Direct149134
GROSS EARNED POLICY FEES149134
Ceded
NET EARNED POLICY FEES149134

Under the accounting principles adopted, deposits received under insurance and investment contracts for which deposit accounting is used are not recognised as income:

In CHF million2017 HY2016 HY
Gross written premiums and policy fees7 7938 504
Deposits received under insurance
and investment contracts
2 1891 634
GROSS WRITTEN PREMIUMS,
POLICY FEES AND
DEPOSITS RECEIVED
9 98210 138

6 Details of Certain Items in the Consolidated Statement of Income

Commission income

In CHF million2017 HY2016 HY
Brokerage commissions254264
Asset management commissions170159
Other commissions and fees10394
TOTAL COMMISSION INCOME527517

Investment income

In CHF million2017 HY2016 HY
Interest income on financial assets available for sale1 2371 261
Interest income on loans and receivables298340
Other interest income200
Dividend income on financial assets available for sale231265
Net income on investment property397358
TOTAL INVESTMENT INCOME2 1822 224

Net gains/losses on financial assets

In CHF million2017 HY2016 HY
Sale of
financial assets available for sale432229
loans16454
Net gains/losses from sales596284
Impairment losses on
debt instruments available for sale0–3
equity instruments available for sale–6–34
loans and receivables0–4
Impairment losses on financial assets–6–41
Foreign currency gains/losses–1 075–775
TOTAL NET GAINS/LOSSES ON FINANCIAL ASSETS–486–532

Net gains/losses on financial instruments at fair value through profit or loss

In CHF million2017 HY2016 HY
Currency derivatives758472
Interest rate derivatives–73–66
Equity derivatives–43071
Other derivatives–309
Financial assets designated as at fair value through profit or loss10974
Associates at fair value through profit or loss–1
Investment contracts without discretionary participation23–57
Non-controlling interests in investment funds–31–32
Other financial liabilities0
Assets for the account and risk of the Swiss Life Group’s customers679–524
Liabilities linked to assets for the account and risk of the Swiss Life Group’s customers–720549
TOTAL NET GAINS/LOSSES ON FINANCIAL INSTRUMENTS
AT FAIR VALUE THROUGH PROFIT OR LOSS
283496

Other income

In CHF million2017 HY2016 HY
Realised gains/losses on sales of subsidiaries and other assets301
Revenue from sale of inventory property13159
Other foreign currency gains/losses–2220
Other137
TOTAL OTHER INCOME15386

Net insurance benefits and claims

In CHF million2017 HY2016 HY
Benefits and claims under insurance contracts
Life benefits and claims paid, gross5 6855 555
Change in liability for future life policyholder benefits, gross1 7522 903
Non-life claims paid, gross114121
Change in reserve for non-life claims, gross–12–15
Benefits and claims recovered from reinsurers–30–45
Net benefits and claims under insurance contracts7 5098 520
Benefits and claims under investment contracts with discretionary participation
Life benefits and claims paid, gross381341
Change in liability for future life policyholder benefits, gross67232
Net benefits and claims under investment contracts with discretionary participation448573
TOTAL NET INSURANCE BENEFITS AND CLAIMS7 9589 093

Interest expense

In CHF million2017 HY2016 HY
Interest expense on deposits34
Interest expense on investment contracts3837
Interest expense on deposits under insurance contracts2327
Other interest expense614
TOTAL INTEREST EXPENSE7082

Commission expense

In CHF million2017 HY2016 HY
Insurance agent and broker commissions368369
Asset management and banking commissions3635
Other commissions and fees3722
TOTAL COMMISSION EXPENSE441427

Employee benefits expense

In CHF million2017 HY2016 HY
Wages and salaries324300
Social security6464
Defined benefit plans4648
Defined contribution plans11
Other employee benefits2222
TOTAL EMPLOYEE BENEFITS EXPENSE457433

Depreciation and amortisation expense

In CHF millionNotes2017 HY2016 HY
Depreciation of property and equipment1112
Amortisation of present value of future profits (PVP)1100
Amortisation of deferred acquisition costs (DAC)11165142
Amortisation of deferred origination costs (DOC)1145
Amortisation of other intangible assets111414
TOTAL DEPRECIATION AND AMORTISATION EXPENSE195174

Other expenses

In CHF million2017 HY2016 HY
Marketing and advertising2421
Information technology and systems4240
Rental, maintenance and repair3332
Professional services7367
Cost of inventory property sold10646
Premium taxes and other non-income taxes2826
Other3542
TOTAL OTHER EXPENSES340274

7 Income Taxes

Income tax expense

In CHF million2017 HY2016 HY
Current income tax expense12099
Deferred income tax expense3244
TOTAL INCOME TAX EXPENSE152143

8 Financial Assets at Fair Value through Profit or Loss

In CHF millionNotes30.06.201731.12.2016
Debt securities552581
Equity securities99
Investment funds - debt2 6233 214
Investment funds - equity685683
Investment funds - balanced310266
Real estate funds1 3071 514
Infrastructure investments1 2941 179
Private equity and hedge funds 56
Financial assets for the account and risk of the Swiss Life Group's customers429 18127 479
TOTAL FINANCIAL ASSETS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS35 96634 931

9 Financial Assets Available for Sale

In CHF millionCost/amortised costNet unrealised
gains/losses
Fair value (carrying amount)
30.06.201731.12.201630.06.201731.12.201630.06.201731.12.2016
Debt securities76 91875 4889 63310 40786 55185 895
Senior secured loans2 2332 0335252 2372 058
Equity securities5 6694 6579577276 6265 384
Investment funds - debt3 3963 570661093 4633 679
Investment funds - equity1 6031 5752851751 8881 751
Investment funds - balanced1417001416
Real estate funds279814436283850
Private equity342376157173499550
Hedge funds454823266974
TOTAL FINANCIAL ASSETS AVAILABLE FOR SALE90 50088 57811 13011 677101 630100 256

10 Loans and Receivables

In CHF millionGross amountAllowance for impairment lossesCost/amortised cost (carrying amount)
Notes30.06.201731.12.201630.06.201731.12.201630.06.201731.12.2016
LOANS
Mortgages7 8017 587–15–147 7877 573
Corporate and other loans1 5902 124–4–41 5862 120
Note loans5 8396 4615 8396 461
Debt securities previously classified as available for sale2 2693 0082 2693 008
Other debt securities classified as loans343435343435
TOTAL LOANS1617 84219 615–19–1817 82319 597
RECEIVABLES
Insurance receivables1 5481 362–16–211 5321 341
Reinsurance receivables304297304297
Accrued income1 2351 4811 2351 481
Settlement accounts372743372743
Other receivables620499–3–2618496
TOTAL RECEIVABLES164 0804 382–19–244 0614 358
TOTAL LOANS AND RECEIVABLES21 92223 997–38–4221 88523 955

11 Intangible Assets including Intangible Insurance Assets

In CHF million30.06.201731.12.2016
Intangible insurance assets1 3931 343
Other intangible assets1 3801 374
TOTAL INTANGIBLE ASSETS2 7732 717

Intangible insurance assets

In CHF millionPresent value of future profits from acquired insurance portfolios (PVP)Deferred acquisition costs (DAC)Deferred origination costs (DOC)Total
2017 HY2016 YE2017 HY2016 YE2017 HY2016 YE2017 HY2016 YE
Balance as at 1 January9121 3191 43115211 3431 464
Additions18740055192405
Amortisation0–3–165–437–4–10–170–451
Effect of shadow accounting0011–6511–65
Disposals00
Foreign currency translation differences0017–110018–11
BALANCE AS AT END OF PERIOD991 3691 31916151 3931 343
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 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 to investment management services within investment contract policies. They relate to contracts in Switzerland, Luxembourg and Singapore.

Other intangible assets for the 6 months ended June 2017

In CHF millionGoodwillCustomer relationshipsComputer softwareBrands and otherTotal
COST
Balance as at 1 January1 754147188222 110
Additions0505
Disposals 1–2–2
Foreign currency translation differences1924025
BALANCE AS AT END OF PERIOD1 773149195232 139
ACCUMULATED AMORTISATION AND IMPAIRMENT
Balance as at 1 January–516–76–1430–736
Amortisation–6–70–14
Disposals 111
Foreign currency translation differences–7–1–30–11
BALANCE AS AT END OF PERIOD–523–84–1520–759
TOTAL OTHER INTANGIBLE ASSETS AS AT END OF PERIOD1 2506543221 380

Other intangible assets for the year 2016

In CHF millionGoodwillCustomer relationshipsComputer softwareBrands and otherTotal
COST
Balance as at 1 January1 754136181212 092
Additions013014
Additions from business combinations1713131
Additions from internal software development00
Disposals 1–2–4–6
Foreign currency translation differences–17–1–30–21
BALANCE AS AT END OF PERIOD1 754147188222 110
ACCUMULATED AMORTISATION AND IMPAIRMENT
Balance as at 1 January–520–66–1300–716
Amortisation–13–150–28
Impairment losses–4–4
Disposals 1245
Foreign currency translation differences41207
BALANCE AS AT END OF PERIOD–516–76–1430–736
TOTAL OTHER INTANGIBLE ASSETS AS AT END OF PERIOD1 2387044221 374
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 acquisition of subsidiaries is included in intangible assets. Goodwill on associates is included in the carrying amount of the investment.

The acquisition of MAYFAIR CAPITAL INVESTMENT MANAGEMENT LIMITED, London, in November 2016 led to the recognition of goodwill of CHF 17 million. The goodwill has been allocated to the “Asset Managers” segment.

Goodwill relating to Lloyd Continental has been allocated to the “France” segment. Goodwill relating to CapitalLeben has been allocated to the “International” segment. Goodwill relating to Corpus Sireo has been allocated to the “Asset Managers” segment. Of the goodwill relating to other acquisitions, CHF 19 million (31.12.2016: CHF 18 million) have been allocated to the “France” segment and CHF 25 million (31.12.2016: CHF 25 million) to the “Asset Managers” segment as at 30 June 2017.

In CHF millionLloyd ContinentalCapitalLebenCorpus SireoOther
30.06.201731.12.201630.06.201731.12.201630.06.201731.12.201630.06.201731.12.2016
Net carrying amount of goodwill2872871491491061044443

Goodwill relating to “Swiss Life Select” (acquisitions of AWD Holding AG and Deutsche Proventus AG) has been allocated to the “Switzerland”, “Germany” and “International” segments.

Goodwill relating to Swiss Life Select

In CHF millionSwitzerlandGermanyInternationalTotal
30.06.201731.12.201630.06.201731.12.201630.06.201731.12.201630.06.201731.12.2016
Net carrying amount of goodwill1521524424337070664655
Customer relationships

The acquisition of MAYFAIR CAPITAL INVESTMENT MANAGEMENT LIMITED, London, in November 2016 led to the recognition of customer relationships of CHF 13 million.

As at 30 June 2017, customer relationships comprise customer relationships relating to Swiss Life Select: CHF 4 million (31.12.2016: CHF 4 million), which were allocated to the “Switzerland” segment. The “France” segment comprises customer relationships of CHF 14 million (31.12.2016: CHF 15 million) and the “Asset Managers” segment of CHF 47 million (31.12.2016: CHF 51 million). Customer relationships were included in the impairment test of the respective cash-generating unit.

Brands and other

Comprises the brands Corpus Sireo and Mayfair.

12 Investment and Unit-Linked Contracts

In CHF millionGrossCededNet
Notes30.06.201731.12.201630.06.201731.12.201630.06.201731.12.2016
Unit-linked contracts1622 70321 94822 70321 948
Investment contracts with discretionary participation features (DPF)15 00714 64211210514 89514 537
Investment contracts without DPF at fair value through profit or loss16342330342330
Investment contracts without DPF at amortised cost160000
TOTAL INVESTMENT AND UNIT-LINKED CONTRACTS38 05236 92011210537 94036 815
of which for the account and risk of the Swiss Life Group's customers
unit-linked contracts422 70321 94822 70321 948
investment contracts44 3924 1924 3924 192

13 Borrowings

In CHF millionNotes30.06.201731.12.2016
Hybrid debt3 0353 633
Convertible debt379467
Senior bonds424423
Mortgage loans489103
Other11
TOTAL BORROWINGS164 3274 627

Reconciliation of liabilities arising from financing activities for the 6 months ended 30 June 2017

In CHF millionHybrid debtConvertible debtSenior bondsMortgage loansOtherTotal
Balance as at 1 January3 63346742310314 627
Cash flows
Issues385
Redemptions–6310–5-636
Non-cash changes
Premium/discount amortisation240006
Conversions and other changes–92-92
Foreign currency translation differences316037
BALANCE AS AT END OF PERIOD3 03537942448914 327

Hybrid debt

EUR 590 million in fixed to floating rate subordinated perpetual notes issued in 2007 were redeemed on the first call date on 12 April 2017.


Convertible debt

19 680 bonds were converted into 415 530 Swiss Life Holding shares which led to an increase in share capital of CHF 2 million and share premium of CHF 90 million.

14 Insurance Liabilities


In CHF millionGrossCededNet
30.06.201731.12.201630.06.201731.12.201630.06.201731.12.2016
Claims under non-life insurance contracts856851165164691687
Unearned premiums non-life6953016952
Claims under life insurance contracts6 0126 07891975 9215 981
Future life policyholder benefits99 23296 93214113199 09196 800
Unearned premiums life7037506637
Deposits under insurance contracts7 7856 9847 7856 984
TOTAL INSURANCE LIABILITIES114 024110 935402393113 622110 542
of which for the account and risk of the Swiss Life Group's customers4 4833 6924 4833 692

Unearned premiums

Unearned premiums represent the portion of the premiums written relating to the unexpired terms of coverage.


Claims under life insurance contracts

Claims under life insurance contracts represent the liability for unpaid portions of claims incurred. It includes an estimate of the liability for claims incurred but not reported (IBNR). The measurement at reporting date is a best estimate of ultimate future claim payments.


Claims under non-life insurance contracts

Claims under non-life insurance contracts represent the liability needed to provide for the estimated ultimate cost of settling claims relating to insured events that have occurred on or before the financial reporting date. The estimated liability includes the amount that will be required for future payments on both claims that have been reported to the insurer and claims relating to insured events that have occurred but have not been reported to the insurer as at the date the liability is estimated. Loss development tables are generally used to make these estimates.


Future life policyholder benefits and claims

For participating contracts where the contribution principle applies to the allocation of the policyholder bonus, future life policy benefit liabilities are determined by using the net-level-premium method on the basis of appropriate mortality and interest rate assumptions.

The valuation of other long-duration contracts is also based on the net-level-premium method with actuarial assumptions as to mortality, persistency, expenses and investment returns including provisions for adverse deviation.


Deposits under insurance contracts

For investment-type contracts with significant insurance risk, savings premiums collected are reported as deposits (deposit accounting).

15 Employee Benefits

Employee benefit liabilities

In CHF million30.06.201731.12.2016
Employee benefit liabilities consist of
gross defined benefit liabilities1 8401 912
other employee benefit liabilities116155
TOTAL EMPLOYEE BENEFIT LIABILITIES1 9572 068

Amounts recognised as defined benefit assets/liabilities

In CHF million30.06.201731.12.2016
Present value of defined benefit obligation–3 564–3 537
Fair value of plan assets1 7851 684
NET DEFINED BENEFIT LIABILITY–1 779–1 853
Insurance contracts not eligible as plan assets under IFRS1 4501 477
NET DEFINED BENEFIT SURPLUS (+)/DEFICIT(-) (ECONOMIC VIEW)–328–376
The net defined benefit liability consists of
gross defined benefit liabilities–1 840–1 912
gross defined benefit assets6159

To assess the funding situation of the defined benefit plans in total, plan assets as well as insurance contracts not eligible as plan assets under IFRS must be set off against the present value of the defined benefit obligation. The total deficit taking into consideration insurance contracts not eligible as plan assets under IFRS amounted to CHF 328 million as at 30 June 2017 (31.12.2016: deficit of CHF 376 million).

16 Fair Value of Financial Instruments

For reporting purposes, a fair value hierarchy is established that categorises the inputs to valuation techniques used to measure fair value into level 1, 2 or 3. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1 inputs) and the lowest priority to unobservable inputs (level 3 inputs).

The fair value of assets or liabilities included in level 1 is based on unadjusted quoted prices in active markets for identical assets or liabilities. The fair value of assets or liabilities that are not traded in an active market is determined using valuation techniques. If all significant inputs to these valuation techniques are observable (directly and indirectly) in the market, the assets or liabilities are included in level 2.

If one or more significant inputs to these valuation techniques are not observable in the market, the assets or liabilities are included in level 3. Such inputs may include information that is derived through extrapolation not substantiated by observable market data or that reflects own assumptions about what market participants would use in pricing the asset or liability.


Financial instruments measured at fair value on a recurring basis

As a general rule, fair values of financial instruments are based on quoted prices sourced from well-known independent price providers such as Bloomberg. Model-based level 2 and level 3 valuations of financial instruments are applied to a minority of the assets.

Fair value hierarchy

In CHF millionQuoted prices
(level 1)
Valuation technique -
observable inputs
(level 2)
Valuation technique -
unobservable inputs
(level 3)
Total
30.06.201731.12.201630.06.201731.12.201630.06.201731.12.201630.06.201731.12.2016
FINANCIAL ASSETS
Derivatives
Currency111754342765342
Interest rate101 2401 4131 2411 413
Equity2581134117299130
Total derivatives2701132 0351 7712 3051 885
Debt instruments
Government and supranational47 74447 95430226648 04648 219
Corporates43 58642 415587713601344 23343 141
Other194108237216116
Total debt instruments91 52390 477912986601392 49591 476
Equity instruments
Equity securities6 3145 07121213003016 6355 393
Investment funds7 6838 6711 7741 6651 1161 63810 57311 973
Alternative investments676256641 7431 6831 8671 809
Total equity instruments14 06413 8041 8511 7493 1593 62119 07419 174
Assets for the account and risk of the Swiss Life Group's customers25 46423 8401 2591 3232 4582 31629 18127 479
TOTAL FINANCIAL ASSETS131 322128 2336 0575 8305 6775 950143 056140 013
INVESTMENTS IN ASSOCIATES
Associates at fair value through profit or loss1030223023
FINANCIAL LIABILITIES
Derivatives
Currency00336792336792
Interest rate0737711737711
Equity2047757126178
Other80668066
Total derivatives204781 2101 5701 4151 648
Investment contracts without discretionary participation342330342330
Unit-linked contracts22 55821 79814515022 70321 948
Non-controlling interests in investment funds2 2922 4188178773 1093 295
TOTAL FINANCIAL LIABILITIES2047826 40326 1169621 02727 56927 221

The fair value hierarchy of assets for the account and risk of the Swiss Life Group’s customers is consistent with the categorisation of assets for the account and risk of the Swiss Life Group.

For a detailed description of the valuation techniques and significant inputs used in the fair value measurement of financial instruments, refer to the Consolidated Financial Statements 2016, Note 30 Fair Value Measurements.

Reconciliation of fair value measurements categorised within level 3

The following tables show a reconciliation from the opening balances to the closing balances for fair value measurements categorised within level 3 of the fair value hierarchy.

Assets measured at fair value based on level 3 for the 6 months ended 30 June 2017

In CHF millionDerivatives Debt instruments Equity instrumentsFinancial
assets
for the
account
and risk
of the
Swiss Life
Group’s
customers
Total
At fair
value
through
profit or loss
Available
for sale
At fair
value
through
profit
or loss 1
Available
for sale
Balance as at 1 January1302 3151 3282 3165 972
Total gains/losses recognised in profit or loss0–23216147
Total gains/losses recognised in other comprehensive income0–17–17
Additions4935951114574
Disposals–538–387–7–932
Transfers into level 300
Foreign currency translation differences017123463
BALANCE AS AT END OF PERIOD13472 1861 0032 4585 707
Unrealised gains/losses recognised in profit or loss
for assets held at the end of the period
028–1228

Assets measured at fair value based on level 3 for the 6 months ended 30 June 2016

In CHF millionDerivativesDebt instrumentsEquity instrumentsFinancial
assets
for the
account
and risk
of the
Swiss Life Group's
customers
Total
At fair
value
through
profit
or loss
Available
for sale
At fair
value
through
profit
or loss1
Available
for sale
Balance as at 1 January1511 7071 2832 7505 756
Total gains/losses recognised in profit or loss02–3054–19
Total gains/losses recognised in other comprehensive income–12–12
Additions4553464553
Disposals–2–3–201–83–29–317
Transfers out of level 311
Foreign currency translation differences0–5–2–4–12
BALANCE AS AT END OF PERIOD131 9271 2252 7845 950
Unrealised gains/losses recognised in profit or loss
for assets held at the end of the period
0–33–123–42

Liabilities measured at fair value based on level 3 for the 6 months ended 30 June

In CHF million Derivatives Unit-linked contracts Non-controlling interests
in investment funds
Total
2017 HY 2016 HY 2017 HY 2016 HY2017 HY 2016 HY 2017 HY 2016 HY
Balance as at 1 January  150 124877 570 1 027 693
Total gains/losses recognised in profit or loss 0 010 5 10 5
Additions –5 0220 210 215 210
Disposals 0 –10–296 –65 –296 –75
Foreign currency translation differences  0 06 –3 6 –3
BALANCE AS AT END OF PERIOD  145 114817 717 962 831
Unrealised gains/losses recognised in profit or loss
for liabilities held at the end of the period 
0 010 5 10 5

Gains/losses recognised in profit or loss

Gains/losses on level 3 fair value measurements recognised in profit or loss are presented in the income statement as follows.

In CHF millionNet gains/losses on
financial assets
Net gains/losses on financial
instruments at fair value
through profit or loss
2017 HY2016 HY2017 HY2016 HY
ASSETS
Total gains/losses recognised in profit or loss14733–26
Unrealised gains/losses recognised in profit or loss for assets held at the end of the period–1–1230–30
LIABILITIES
Total gains/losses recognised in profit or loss–10–5
Unrealised gains/losses recognised in profit or loss for liabilities held at the end of the period–10–5

Fair value of financial instruments carried at amortised cost

The following table shows the carrying amounts and fair values of those financial assets and liabilities not measured at fair value in the Group’s balance sheet.

In CHF millionCarrying amountFair value
30.06.201731.12.201630.06.201731.12.2016
ASSETS
Loans17 82319 59720 34722 793
Receivables 14 0614 3584 0614 358
LIABILITIES
Investment contracts without discretionary participation 10000
Borrowings4 3274 6274 6814 895
Other financial liabilities 1,211 46511 90511 46511 905

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