Market Consistent Embedded Value (MCEV) - Swiss Life - Online ...

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Market Consistent Embedded Value45ments, which are derived from results based on localstatutory accounting rather than on IFRS. Thereforelocal balance sheets and profit and loss accounts are thestarting point for the projections. The net asset value (ofassets not backing liabilities) is based on the local balancesheet, but adjusted at market value.For the other parts of the Swiss Life Group, i.e., the noncoveredbusiness, the shareholder value is derived from itscontribution to the Group’s IFRS net asset value.Reconciliation of IFRS Net Asset Value to Group MCEVCHF million7 404–302–2 0903 0327 595–4494 563IFRS netassetsReserves andinvestmentvaluationdifferencesDAC / DOCand otherintangibleassetsGoodwillNet assetvalueValue of inforcebusinessGroupMCEVRECONCILIATION OF IFRS NET ASSETS TO GROUP MCEV AS AT 31 DECEMBER 2010In CHF million2010IFRS NET ASSETS 7 404Adjustments –2 841Reserves and investments valuation differences –302DAC / DOC and other intangible assets –2 090Goodwill 1 – 449Net asset value 4 563Value of in-force business 3 032GROUP MCEV 2 7 5951 Goodwill adjustments correspond to goodwill of covered business with the exception of CHF 72 million from French operations (see section 3.2).2 Group MCEV includes CHF 1 443 million of goodwill and intangible assets as part of the unadjusted IFRS net assets for non-covered business.Starting with the total IFRS net assets, there are valuationdifferences between IFRS and MCEV regarding the netasset value for the covered business. In the reconciliationthese valuation differences are shown under “adjustments”.The main elements that have been adjusted aredeferred acquisition costs (DAC), goodwill and otherintangible assets, differences between statutory and IFRSbalance sheet items reflecting different reserving bases,and different treatment of the investments and unrealisedgains (that form part of the IFRS net assets but areprojected on MCEV as part of the value of in-force businessin the MCEV calculations).The adjusted IFRS net asset value corresponds to theMCEV net asset value of the Swiss Life Group. Adding thevalue of in-force business leads to the Group MCEV.Swiss Life — Financial Statements 2010
46 Market Consistent Embedded Value3 Information by Market Unit3.1 MARKET UNITSSwiss Life’s covered business is subdivided according tomarket units as follows:– Life, pension and assumed external reinsurance businessin Switzerland– All businesses in France, mainly life, health and pensionbusiness– Life and pension business in Germany– Life and pension business in Luxembourg, Liechtenstein,and Singapore (together referred to as InsuranceOther)well as modern savings and retirement products with flexibleguarantees. Swiss Life’s own sales force plays themajor role in distribution, followed by AWD. The businessfor assumed external reinsurance is included in thecovered business as of this year.FRANCE — Insurance products include savings, annuity,and risk products as well as health insurance products.New business for life insurance focuses on multi-supportproducts, combining traditional savings and unit-linkedcomponents. The main distribution channels are independentfinancial advisors and private banking.This breakdown by market unit essentially coincides withthe IFRS insurance segments in the annual report. Thereare minor differences since the MCEV classification followsthe legal structure in order to ensure a correct modellingof the profit sharing. A divergence from the IFRSinsurance segment reporting is the treatment of Swiss LifeAsset Management in France, which is reported for MCEVpurposes under France.SWITZERLAND — Swiss Life’s main business in the Swissmarket is group life business. The individual businessincludes traditional savings, risk and annuity products, asGERMANY — Swiss Life sells traditional and modernproducts within individual and group life business. Disabilityinsurance plays an important role. The main distributionchannel is independent brokers, followed byfinancial advisors such as AWD.INSURANCE OTHER — Swiss Life offers private placementlife insurance (PPLI) through Liechtenstein, Singaporeand Luxembourg. In Luxembourg, Swiss Life alsoprovides group insurance solutions for international andlocal corporate clients through Corporate Solutions.3.2 RESULTS BY MARKET UNITMCEV BY MARKET UNIT FOR THE YEAR 2010In CHF millionSwitzerland France 1 Germany Insurance Other TotalNET ASSET VALUE 557 1 056 335 –20 1 928Free surplus 103 43 –43 –68 35Required capital 454 1 013 378 48 1 892VALUE OF IN-FORCE BUSINESS 1 655 824 271 282 3 032Certainty equivalent value 3 485 1 431 536 346 5 797Time value of financial options and guarantees –1 407 –315 –180 –10 –1 912Cost of residual non-hedgeable risks –234 –195 –38 –40 –507Frictional costs of required capital –188 –97 –47 –14 –346MCEV 2 212 1 879 606 262 4 9591 The value for France includes CHF 72 million in goodwill and intangible assets orginating from the non-life and non-health insurance operations.
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Market Consistent Embedded Value (MCEV) - Swiss Life - Online ...

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