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

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Market Consistent Embedded Value35Contents36 1 Introduction36 1.1 Basis of Preparation36 1.2 Covered Business and Non-Covered Business36 1.3 Definitions38 2 Summary of MCEV Results38 2.1 Group MCEV38 2.2 MCEV of Covered Business39 2.3 Value of New Business41 2.4 Group MCEV – Analysis of Earnings42 2.5 Covered Business – Analysis of Earnings44 2.6 Sensitivities44 2.7 Reconciliation of IFRS Net Asset Value to Group MCEV46 3 Information by Market Unit46 3.1 Market Units46 3.2 Results by Market Unit51 4 Methodology51 4.1 MCEV Components for Covered Business53 4.2 New Business53 4.3 Asset and Liability Data54 4.4 Economic Scenario Generator54 4.5 Dynamic Management Actions and Policyholder Behaviour54 4.6 Look-Through Principle54 4.7 Consolidation55 4.8 Employee Pension Schemes and Share-Based Payment Programmes56 5 Assumptions56 5.1 Economic Assumptions58 5.2 Taxation and Legislation59 5.3 Operating Assumptions60 6 External Auditors’ Statement61 7 Glossary and List of AbbreviationsSwiss Life — Financial Statements 2010
36 Market Consistent Embedded Value1 Introduction1.1 BASIS OF PREPARATIONMarket consistent embedded value (MCEV) is a measureof the consolidated value of shareholders’ interests in thein-force covered business of the Swiss Life Group. Coveredbusiness includes life, health and pension business of thecompany. The Group MCEV is a measure of the consolidatedvalue of shareholders’ interest in the covered andnon-covered business in force of the company. Business inforce includes business written as at 31 December 2010;future new business is not included. The notion of marketconsistent embedded value (MCEV) will alternativelyrefer within the course of this report to the MCEV ofSwiss Life’s covered business, of one of its market units, orto Swiss Life’s Group MCEV.1.2 COVERED BUSINESS AND NON-COVEREDBUSINESSCovered business includes all of Swiss Life’s life, healthand pension business as well as assumed external reinsurance,with the exception of Swiss Life Insurance SolutionsAG and Swiss Life Products (Luxembourg) S.A.,which are not yet material for MCEV purposes. MCEV(and Group MCEV) are net of ceded external reinsurance.Included are namely operations in Switzerland, France,Germany, Luxembourg, Liechtenstein and Singapore. Allother businesses such as investment management andAWD are generally included in the non-covered businessat their IFRS net asset values, with the exception ofFrance, where they are included in the covered business.Swiss Life’s market consistent embedded value reportingfollows the European Insurance CFO Forum MarketConsistent Embedded Value Principles ©1 . The cost ofcredit risk relating to bonds is calculated and disclosed inaddition to the Principles’ mandatory requirements.Further details on the MCEV methodology are given insection 4.PricewaterhouseCoopers have audited this market consistentembedded value report. Their opinion is part of thisreport and can be found in section 6.1.3 DEFINITIONSSwiss Life’s Group MCEV consists of the MCEV for coveredbusiness and the IFRS net asset value for non-coveredbusiness.According to MCEV Principle 3, the MCEV represents thepresent value of shareholders’ interests in the earningsdistributable from assets allocated to the covered businessafter sufficient allowance for the aggregate risks inthe covered business. It is calculated on a post-tax basistaking into account current legislation and known futurechanges.Components of Group MCEVCovered businessCEVTVOGCNHRFCVIFMCEVFSRCNAVGroup MCEVNon-covered businessIFRSNAVIFRS Equity1 Copyright © Stichting CFO Forum Foundation 2008
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