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3 Information by Market Unit

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3.1 Market units

Swiss Life’s covered business is subdivided according to market units as follows:

  • Life, pension and assumed external reinsurance business in Switzerland
  • All businesses in France, mainly life, health and pension business
  • Life and pension business in Germany
  • Life and pension business in Luxembourg, Liechtenstein and Singapore (together referred to as International)

This breakdown by market unit essentially coincides with the IFRS insurance segments in the annual report. There are some differences since the MCEV classification generally follows the legal structure. A divergence from the IFRS segment reporting is the treatment of distribution units such as Swiss Life Select, which are reported for MCEV purposes under non-covered business, and Swiss Life Asset Management in France, which is reported for MCEV purposes under France.

Switzerland

Swiss Life’s main business in the Swiss market is group life business with a full range of offerings. The individual new business includes modern savings and retirement products with flexible and lower guarantees, risk and annuity products. Swiss Life’s own sales force plays the major role in distribution, followed by brokers and Swiss Life Select. The business for assumed external reinsurance is included here.

France

Swiss Life offers savings, annuity and risk products, as well as health insurance. New business for life insurance focuses on multi-support products, combining unit-linked and traditional savings components. The main distribution channels are brokers, tied agents and own sales force. Additionally, Swiss Life in France has developed strong relations with independent financial advisors and private banks.

Germany

Swiss Life focuses its offering on comprehensive disability insurance and modern products with flexible and lower guarantees in individual and group life business. The main distribution channels are independent brokers, followed by financial advisors such as Swiss Life Select.

International

Swiss Life International offers a broad range of insurance solutions for wealthy individuals (Global Private Wealth) with insurance carriers in Luxembourg, Liechtenstein and Singapore, and for international companies (Global Employee Benefits) out of Luxembourg.

3.2 Results by market unit

MCEV by market unit for the year 2016

In CHF millionSwitzerlandFrance1GermanyInternationalTotal
NET ASSET VALUE1 5801 4373651603 542
Free surplus1 056232–30421 299
Required capital5241 2053951182 242
VALUE OF IN-FORCE BUSINESS5 3911 7774432407 851
Certainty equivalent value6 4932 5515993309 973
Time value of financial options and guarantees–387–455–107–25–974
Cost of residual non-hedgeable risks–456–271–39–53–819
Frictional costs of required capital–259–48–10–12–329
MCEV6 9713 21480840011 393

MCEV by market unit for the year 2015

In CHF millionSwitzerlandFrance1GermanyInternationalTotal
NET ASSET VALUE1 6401 3793531433 514
Free surplus1 158223–45311 367
Required capital4821 1553971122 147
VALUE OF IN-FORCE BUSINESS5 0591 4152992787 050
Certainty equivalent value5 4012 1785353728 487
Time value of financial options and guarantees251–441–154–18–363
Cost of residual non-hedgeable risks–373–247–70–57–746
Frictional costs of required capital–221–75–11–20–327
MCEV6 6982 79365242010 564
Switzerland

The MCEV increased by CHF 273 million due to positive operating earnings including a value of new business of CHF 154 million.

The slight reduction of the net asset value is explained by increased dividend payments, financing of new business and reserve strengthening. The value of the in-force business increased due to the aforementioned new business and reserve strengthening, true-up effects related to operating experience, as well as overall positive economic variances. The change in time value of options and guarantees is the result of various effects such as the lower capital market interest rates, the reassessment of the interest rate model and other elements, as well as higher cost of credit risk, while the business-inherent shareholder options contribute positively.

France

The MCEV increased by CHF 420 million driven by the strong new business value, operating earnings on the in-force business and the French tax reform in 2016, which implies lower tax rates for 2020 and beyond.

Swiss Life in France is subject to a tax of 3% applied to dividends paid to the parent company in Switzerland. This tax is considered for the actual payment.

Germany

The MCEV increased by CHF 156 million. The substantially higher value of the in-force business results mostly from the move to the Solvency II valuation curve and the refined interest rate model as well as from a substantially increased value of new business.

International

The MCEV decreased by CHF 20 million, driven by a refinement of the fund projection in Global Private Wealth and higher future tax rates following the tax reform in Luxembourg. The good annual profit contributed to the increase of the net asset value and more than offset the dividend payment.


Value of new business by market unit – premiums and margins for the year 2016

Amounts in CHF millionSwitzerlandFranceGermanyInternationalTotal
VALUE OF NEW BUSINESS154943018296
New business strain1–66–57–2–7–131
Value of new business before new business strain2201513125428
Annual premiums305344619719
Single premiums1 5481 888491 4124 897
PRESENT VALUE OF NEW BUSINESS PREMIUMS (PVNBP)6 8154 4631 0771 48713 842
Average annual premium multiplier17.37.516.88.612.4
New business annual premium equivalent (APE)460533661501 209
NEW BUSINESS MARGIN (% PVNBP)2.3%2.1%2.7%1.2%2.1%
New business margin (% APE)33.5%17.7%44.7%12.3%24.5%

Value of new business by market unit – premiums and margins for the year 2015

Amounts in CHF millionSwitzerlandFranceGermanyInternationalTotal
VALUE OF NEW BUSINESS144761533268
New business strain1–100–51–6–8–165
Value of new business before new business strain2441272141433
Annual premiums360285547706
Single premiums2 6222 0561212 2287 026
PRESENT VALUE OF NEW BUSINESS PREMIUMS (PVNBP)8 4084 0069362 29315 643
Average annual premium multiplier16.16.815.29.212.2
New business annual premium equivalent (APE)622491662301 408
NEW BUSINESS MARGIN (% PVNBP)1.7%1.9%1.6%1.4%1.7%
New business margin (% APE)23.2%15.4%23.2%14.3%19.0%
Switzerland

New business consists of new contracts and new coverages on existing contracts. Within group life business, replacements and newly insured persons entering existing group life contracts are not accounted for as new business.

The new business value and margin increased as a result of active new business steering across all lines of business. In particular, the substantially improved business mix in group life, repricings and product discontinuations in individual life as well as the good performance of the assumed reinsurance business offset the negative effects from the related volume decrease and lower capital market interest rates.

France

The increased volume, driven by pension products as well as health and protection business, and the ongoing margin management led to higher new business value and margin.

Both the new business margin and value in life improved substantially, benefitting from reduced guarantees, the French tax reform and the move to the Solvency II valuation curve. These effects more than offset the impact of decreasing capital market interest rates.

In health and protection, the new business value increased significantly due to higher volumes with a larger share of protection business. On the other hand, the new business margin was reduced due to efficiency losses in relation to the ANI reform and lower interest rates.

Germany

New business margin and value increased strongly as a result of the active shift towards products with flexible and lower guarantees and increased volumes with an ongoing high share of risk business. Together with the move to the Solvency II curve and favourable persistency experience, this more than offset the effects of lower interest rates.

International

Lower volumes in business with Global Private Wealth, related efficiency losses, and a reduced share of risk business in Global Employee Benefits led to a decrease of new business value and margin. Furthermore, the higher projected tax rate in Luxembourg and a refinement of the fund projection in Global Private Wealth had negative impacts. This was mitigated by higher fee levels and lower administration expenses in the Global Private Wealth business.

Analysis of earnings by market unit for the year 2016

In CHF millionSwitzerlandFranceGermanyInternationalTotal
OPENING MCEV6 6982 79365242010 564
Opening adjustments–253–75–8–335
ADJUSTED OPENING MCEV6 4452 71965241310 228
New business value154943018296
Expected existing business contribution (reference rate)–43–17–4–2–67
Expected existing business contribution (in excess of reference rate)241145112400
Experience variances30–243–27
Assumption changes97–359–368
Other operating variance–61160130–19209
OPERATING MCEV EARNINGS4183241684913
Economic variances13058–7–2179
Other non-operating variances–30132–1191
TOTAL MCEV EARNINGS518514161–101 182
Closing adjustments8–19–5–3–18
CLOSING MCEV6 9713 21480840011 393

All market units contributed positively to the value creation with their operating earnings.

Switzerland

Opening adjustments reflect the dividend payment to Swiss Life Holding net of dividends received.

Operating earnings of CHF 418 million correspond to a return of 6% on MCEV. The positive experience variances relate to improved persistency and continued reserve strengthening. Assumption changes mostly concern group life and are driven by a favourable experience of lapse and capital option rates, as well as lower expenses. The negative other operating variances mainly relate to the reassessment of the interest rate model and of other elements, the issuance of hybrid debt and an updated strategic asset allocation.

Economic variances are positive, mainly influenced by the strong real estate performance and lower credit spreads, which more than compensated for the negative interest rate effect.

Closing adjustments reflect a reclassification from non-covered to covered business.

France

Opening adjustments reflect a dividend payment of CHF 75 million.

Operating earnings of CHF 324 million correspond to a return of 12% on MCEV. In addition to the expected business contribution and the new business value, this is supported by other operating variances which include the effects of the move to the Solvency II valuation curve, as well as refinements of the interest rate model and the reserve projections. Similar to experience variances, assumption changes show the aggregated effect of demographic, persistency and expense developments.

Economic variances relate mainly to the narrowed credit spreads and positive real estate performance more than offsetting the effects of lower interest rates.

Other non-operating variances reflect positive tax variances.

Closing adjustments relate to foreign currency translation effects.

Germany

Operating earnings of CHF 168 million correspond to a return of 26% on MCEV. Besides new business this is due to the positive operating variances driven by the move to the Solvency II valuation curve, the refinement of the interest rate model and other elements. Assumption changes are driven by positive persistency experience and efficiency gains.

Economic variances reflect decreasing interest rates which are almost offset by tighter credit spreads and positive real estate performance.

Closing adjustments relate to foreign currency translation effects.

International

Opening adjustments reflect a dividend payment of CHF 8 million.

Operating earnings of CHF 4 million include the value of new business and the expected business contribution, whereby other operating variances were negative, driven by the refinement of the fund projection in Global Private Wealth business.

The negative economic variances mainly result from lower interest rates.

Other non-operating variances reflect the revised tax rate in Luxembourg.

Closing adjustments relate to foreign currency translation effects.

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