Annual Report 2012 - Swiss Life

76 Market Consistent Embedded Value (MCEV)
EXPERIENCE VARIANCES
Experience variances aggregate the impact of actual development versus expectations regarding noneconomic
assumptions such as mortality, expenses, lapses, as well as the deviations in handling of
additional reserves. In total the effect is small with CHF 5 million. A variety of effects including
reserve strengthening had overall almost opposite impacts on the net asset value and the value of inforce
business. The largest contributions originate from the Swiss business.
ASSUMPTION CHANGES
Assumption changes refer to the impact of the change on assumptions such as future expense,
surrender, mortality, morbidity, longevity rates. The positive contribution is driven by an overall very
favourable persistency experience and a further reduced expense base while a minor negative contribution
stems from updated demographic assumptions.
OTHER OPERATING VARIANCE
Other operating variance includes the effects from the issuance of new and restructuring of existing
hybrid debt and PPLI’s revised outlook on future new business.
ECONOMIC VARIANCES
Economic variances represent the change in embedded value by replacing the starting economic scenarios
by the closing ones. Effects from deviations between actual and expected investment returns
are included here. Lower swaption implied volatilities and lower credit spreads had a positive impact
on MCEV overall as had the inclusion of British pound and Canadian dollar in economic scenarios
(see 4.4) in Switzerland. On the other hand, lower reference rates including lower liquidity premiums
had a negative effect.
OTHER NON-OPERATING VARIANCES
Other non-operating variances encompass effects relating to government-set parameters, such as
taxes.
CLOSING ADJUSTMENTS
Closing adjustments represent the transfer of funds into the covered business and currency exchange
rate translation effects resulting from the consolidation in Swiss francs.
Swiss Life – Annual Report 2012