Swiss Life Holding AG · SIX:SLHN
Swiss Life — H1 2003 Earnings Presentation
74 slides from Swiss Life's earnings presentation, Sep 10, 2003
Slide 1: Swiss Life Group 2003 Half Year Results Investors' Presentation
Swiss Life Group 2003 Half Year Results Investors' Presentation Zurich, 10 September 2003
Slide 2: Agenda
Agenda 1. Overview Rolf Dörig 2. Financial Results Bruno Pfister 3. Embedded Value Michael Koller 4. Summary and Outlook Rolf Dörig 2
Slide 3: Strategy implementation progressing well
Strategy implementation progressing well Return to profitability Restructuring ahead of plan Balance sheet strengthened 3
Slide 4: Review of half-year results 2003
Review of half-year results 2003 IFRS basis Return to profitability l Net profit: CHF 66 million Restructuring ahead of plan l Cost reduction: CHF - 107 million; Headcount reduction: - 488 FTE l Divestments of STG, Swiss Life UK and Swiss Life Spain l Repricing of Swiss group life business l Strengt
Slide 5: Key financials
Key financials In million CHF (IFRS basis) HY 2003 HY 2002 Change Gross written premiums and PH deposits 11 836 11 684 1.3% Gross written premiums 9 943 9 759 1.9% Financial result 2 916 3 274 - 10.9% Operating result 207 243 - 14.8% Net result 66 - 587 Earnings per share (EPS) (in CHF) 3.07 - 37.54
Slide 6: Agenda
Agenda 1. Overview Rolf Dörig 2. Financial Results Bruno Pfister 3. Embedded Value Michael Koller 4. Summary and Outlook Rolf Dörig 6
Slide 7: Profit and loss highlights
Profit and loss highlights In million CHF (IFRS basis) HY 2003 HY 2002 Change Premiums and policyholder deposits (gross) 11 836 11 684 1.3% l Gross written premiums 9 943 9 759 1.9% l Policyholder deposits 1 893 1 925 - 1.7% Financial result 2 916 3 274 - 10.9% Benefits paid and changes in insurance
Slide 8: Segment results
Segment results In million CHF (IFRS basis) HY 2003 H2 2002 H1 2002 Life Core 93 - 654 93 Life Non-Core 80 - 160 3 Non-Life 17 - 79 - 16 Private Banking - 66(1) - 183 74 Investment Management 60 - 15 120 Other 23 47 - 31 Operating result(2) 207 - 1 044 243 (1) Including realised loss on sale of STG
Slide 9: Adjusted operating expenses
Adjusted operating expenses In million CHF (IFRS basis) HY 2003 HY 2002 Change Operating expenses 1 447 1 643 - 196 Commissions and DAC amortisation - 348 - 438 + 90 Loss adjustment expenses + 83 + 70 + 13 Currency effects 0 +3 -3 Restructuring cost -9 0 -9 Change in reserves for employee benefits(1
Slide 10: Cost reduction target exceeded
Cost reduction target exceeded In million CHF (IFRS basis) Cost savings accumulated Incremental savings Actual 107 2004 Switzerland 31 Target 515 France 2 Germany 4 Actual 212 107 319 Belgium/Luxembourg 15 Netherlands 1 Incremental savings Non-Core 22 HY03 Invest. Management 5 Private Banking 27 62%
Slide 11: Headcount reduction target exceeded
Headcount reduction target exceeded Headcount reduction accumulated(1) Incremental headcount(1) reduction Actual 488 2004 Switzerland 258 Target 1 500 France 26 Germany 21 Actual 724 488 1 212 Belgium/Luxembourg 82 Incremental reduction Netherlands 31 HY03 Non-Core 12 Invest. Management 37 Private B
Slide 12: Life Core: Premiums and policyholder deposits
Life Core: Premiums and policyholder deposits In million CHF (IFRS basis) 4 902 (- 12.7%) Switzerland 5 614 Belgium/Luxembourg 3% 2 437 (+ 5.2%) Netherlands France 2 316 17% Switzerland Germany 818 (+ 3.4%) 48% 791 Germany 1 701 (+ 110%) 8% Netherlands 810 Belgium/Lux 275 (- 0.7%) 277 France Total 1
Slide 13: Balance sheet highlights
Balance sheet highlights In million CHF (IFRS basis) HY 2003 FY 2002 Change Mathematical reserves 137 584 130 028 5.8% • Insurance reserves 105 789 100 638 • Policyholder deposits 22 451 20 652 • Separate accounts 9 344 8 738 Shareholders’ equity 4 620 4 170 10.8% • Shareholders’ equity(1) 3 880 3 8
Slide 14: Shareholders' equity increased by 10.8%
Shareholders' equity increased by 10.8% In million CHF (IFRS basis) 4 620 66 63 7 314 CHF + 450 m (+ 10.8%) 4 170 31.12.2002 Change in Change in Change in Net profit 30.06.2003 unrealised foreign share premium half-year gains/losses currency and treasury 2003 translation shares differences 14
Slide 15: Operating improvements are also reflected in shareholders' equity
Operating improvements are also reflected in shareholders' equity In million CHF (IFRS basis); 01.01.-30.06.2003 52 - 99 405 450 92 Operating Impact of bond Impact of Private banking Change in improvement markets other assets loss , regular (1) shareholders' goodwill amorti- equity as stated sation
Slide 16: Breakdown of unrealised gains on bonds
Breakdown of unrealised gains on bonds In million CHF (IFRS basis); per 30.06.03 4 041 2 072 326 416 95 1 132 Unrealised Deferred Shadow Deferred Minority Allocated to gains on policyholder DAC taxes interests shareholders’ bonds dividends adjustment equity 16
Slide 17: Asset allocation insurance portfolio
Asset allocation insurance portfolio Insurance portfolio, in billion CHF (IFRS basis) 132 124 Equities & equity funds 6.0% 5.7% 0.3% 0.4% Private equity 2.8% Hedge funds 2.8% 8.1% 8.5% Real estate 7.6% 7.9% Mortgages Loans 7.5% 8.4% Bonds 60.3% 58.0% Cash 4.2% 1.9% Other invested assets 3.1% 6.5% HY
Slide 18: Investment return on insurance portfolio
Investment return on insurance portfolio In million CHF (IFRS basis); 01.01.-30.06.2003; returns not annualised Direct return of 2.1% Total return of 3.2%(1) Bonds 1 695 2.2% 3 231 4.3% Equities 111 1.5% 263 3.5% Private Equity 1 0.0% -5 - 1.1% Hedge Funds 36 1.0% 229 6.4% Real Estate 341 3.2% 361 3
Slide 19: ALM takes an economic view to mitigate the impact of interest rate movements
ALM takes an economic view to mitigate the impact of interest rate movements (Illustration only; parallel upward shift in interest rates) Asset and liability cash flows Asset and liability cash flows not aligned fully aligned Equity Liabilities Equity Liabilities securities (long-term) securities (l
Slide 20: Duration gap narrowed
Duration gap narrowed RA/SL Duration gap narrowed by 2.4 years Release of around CHF 1 billion in risk capital Credit rating position in Switzerland improved 20
Slide 21: Goodwill further reduced
Goodwill further reduced 2 427 - 823 - 102 - 149 1 353 - 22 - 208 - 22 1 101 Goodwill BdG STG Other Goodwill BdG STG Other Goodwill 31.12.01 31.12.02 30.06.03 Goodwill in % of: SH equity: 48.7% 32.4% 23.8% Core capital: 31.3% 17.9% 12.2% 21
Slide 22: Improved solvency
Improved solvency Rentenanstalt solvency(1) EU Group solvency(2) 222% 199% 180% 138% 147% 111% 31.12.01 31.12.02 30.06.03 31.12.01 31.12.02 30.06.03 (1) Rentenanstalt represents 90% of total mathematical reserves (2) According to methodology applied by the French regulator; approved by the Swiss reg
Slide 23: Agenda
Agenda 1. Overview Rolf Dörig 2. Financial Results Bruno Pfister 3. Embedded Value Michael Koller 4. Summary and Outlook Rolf Dörig 23
Slide 24: Key assumptions for embedded value calculation
Key assumptions for embedded value calculation HY 2003 FY 2002 • Weighted new money return based on CH EU CH EU asset allocation Risk discount rate 7.0% 7.9% 7.0% 7.9% • Weighted returns are lower due to reduced future assumed Equity return 5.0% 6.0% 7.0% 8.0% investment returns • Long-term bond Bon
Slide 25: Embedded value impacted by lower economic assumptions
Embedded value impacted by lower economic assumptions RA/SL, in million CHF (statutory basis) Switzerland Europe Total Decrease due to + 6.5% - 6.5% • Lower interest rates and - 15% lower expected equity 5 252 5 616 returns But partially offset by 3 379 2 869 4 731 5 185 • Reduced expenses 2 383 2 2
Slide 26: Embedded value for Swiss Life Holding
Embedded value for Swiss Life Holding RA/SL, in million CHF (statutory basis) RA/SL embedded value HY 2003 5 252 SL Holding owns 92.52% SL Holding share of embedded value 4 859 Free capital 881 Total 5 740 EV per share(1) CHF 265 EV per share (fully diluted)(2) CHF 245 (1) Based on 21 679 408 shares
Slide 27: ANAV improved from CHF 1.7 to 1.9 billion
ANAV improved from CHF 1.7 to 1.9 billion RA/SL, in million CHF (statutory basis) HY 2003 FY 2002 Change Statutory equity of RA/SL 1 409 1 327 6.2% Unrealised capital gains after tax & + 1 084 + 1 019 6.4% policyholder participation Statutory book value of life subsidiaries - 898 - 854 5.2% Net asse
Slide 28: Embedded value decreased by CHF 364 million
Embedded value decreased by CHF 364 million RA/SL, in million CHF (statutory basis) RA/SL EV FY 2002 5 616 Unwind 2003 + 202 Actual investment return 2003 +126 Future investment return - 978 Cost savings + 270 Methodology and model changes - 112 Strengthening of reserves - 124 Value of new business
Slide 29: Embedded value decreased by 6.5%
Embedded value decreased by 6.5% RA/SL, in million CHF (statutory basis) RA/SL EV FY 2002 5 616 100% Unwind 2003 202 + 4% Investment returns - 852 - 15% • Actual 2003 126 • Future - 978 Cost savings 270 + 5% Methodology and model changes - 112 - 2% Jan-Jun 03: - 364 (- 6.5%) Strengthening of reserve
Slide 30: Value of new business increased by 3%
Value of new business increased by 3% RA/SL, in million CHF (statutory basis) Value of new business of Switzerland Europe Total CHF 37 million due to + 42% - 14% + 3% (-) Lower interest rates in bonds (-) Lower expected equity returns Switzerland 50 43 (+) Lower expenses 37 36 (-) Reduced volumes EU
Slide 31: Sensitivities of embedded value
Sensitivities of embedded value RA/SL, in million CHF (statutory basis) Switzerland Europe Total RA/SL EV HY 2003 (base case) 2 869 2 383 5 252 • D Risk discount rate - 50bps + 194 + 86 + 280 • D Investment returns + 50bps + 527 + 276 + 803 • D Investment returns - 50bps - 1 756 - 303 - 2 059 • D Eq
Slide 32: Average Swiss technical interest rate of 3.11%
Average Swiss technical interest rate of 3.11% RA/SL and La Suisse Vie, in million CHF (statutory basis) Technical interest rate HY 2003 FY 2002 0% - < 2% 2 658 (0.00%) 1 998 (0.00%) 2% - < 3% 3 416 (2.49%) 3 037 (2.50%) 3% - < 4% 53 975 (3.26%) 32 725 (3.25%) 4% - < 5% 2 532 (4.05%) 24 340 (4.00%)
Slide 33: Agenda
Agenda 1. Overview Rolf Dörig 2. Financial Results Bruno Pfister 3. Embedded Value Michael Koller 4. Summary and Outlook Rolf Dörig 33
Slide 34: Summary of half-year results 2003
Summary of half-year results 2003 Return to profitability Restructuring ahead of plan Balance sheet strengthened 34
Slide 35: Outlook: Switzerland
Outlook: Switzerland Swiss Life is committed to providing guarantees in group life business if regulatory conditions permit Continue to base pricing on economic principles Further improve efficiency and lower operating expenses Improve service quality 35
Slide 36: Outlook: EU
Outlook: EU France l Further streamlining of sales network l Find a solution for non-life business Germany l Maintain premium growth despite cost savings and IT migration l Further improve position and interaction with brokers Netherlands l Further reduce costs and complexity l Improve service quali
Slide 37: Outlook: others
Outlook: others La Suisse l September 2002 decision confirmed – La Suisse does not form part of core business Banca del Gottardo l On track to achieve net profit(1) of over CHF 80 million for FY 2003 Delisting of RAN VX l Last trading day 17 September 2003 l Off-market trading at Banca del Gottardo
Slide 38: We reiterate our targets
We reiterate our targets Return to profitability Cost reduction targets will be achieved by 2004 ROE of 10% remains the mid-term goal 38
Slide 39: Swiss Life Group 2003 Half Year Results Appendix
Swiss Life Group 2003 Half Year Results Appendix 39
Slide 40: Appendix
Appendix Profit and Loss Balance Sheet Embedded Value Contact Details 40
Slide 41: Foreign currency exchange rates and interest rates
Foreign currency exchange rates and interest rates Foreign exchange rates 30.06.03 31.12.02 1.1.-30.06.03 1.1.-30.06.02 1 EUR 1.55 1.46 1.49 1.47 1 GBP 2.24 2.23 2.18 2.36 1 USD 1.36 1.39 1.35 1.64 Interest rates 30.06.03 31.12.02 CHF(1) 2.432 2.192 EUR(1) 3.800 4.204 USD(1) 3.513 3.814 (1) 10-year
Slide 42: Life Core: Overview of key financials
Life Core: Overview of key financials In million CHF (IFRS basis) HY 2003 HY 2002 Change Insurance premiums and policy fees(1) 8 213 7 872 4.3% Financial result 2 532 2 728 - 7.2% Other income 32 97 - 67.0% Total revenue 10 777 10 697 0.7% Interest expenses - 436 - 595 - 26.7% Benefits paid and chan
Slide 43: Life Core: Premiums and policyholder deposits
Life Core: Premiums and policyholder deposits In million CHF (IFRS basis) Growth in life core HY 2003: 10 133 HY 2002: 9 808 premiums by line of business 19% 21% Group + 18.8% Individual - 19.7% Policyholder deposits, - 4.9% 52% assumed premiums 21% 60% 27% 2% 4% 18% 19% Periodic + 4.6% Single + 7.1
Slide 44: Premiums overview: Switzerland
Premiums overview: Switzerland In million CHF (statutory basis) HY 2003 HY 2002 Change Individual life • single premiums 379 912 - 58.5% • periodic premiums 475 491 - 3.3% Subtotal 854 1 403 - 39.1% Group life • single premiums 1 714 1 939 - 11.6% • periodic premiums 2 298 2 216 3.7% Subtotal 4 012
Slide 45: Life Non-Core: Overview of key financials
Life Non-Core: Overview of key financials In million CHF (IFRS basis) HY 2003 HY 2002 Change Insurance premiums and policy fees(1) 828 973 - 14.9% Financial result 238 190 25.3% Other income 9 12 - 25.0% Total revenue 1 075 1 175 - 8.5% Interest expenses - 25 - 22 13.6% Benefits paid and changes in
Slide 46: Life Non-Core: Premiums and policyholder deposits
Life Non-Core: Premiums and policyholder deposits In million CHF (IFRS basis) Growth in life non-core HY 2003: 1 052 HY 2002: 1 219 premiums by line of business 8% 9% 18% 15% Group - 15.7% Individual + 1.9% Policyholder deposits,- 22.5% assumed premiums 74% 76% 8% 1% 9% 1% Periodic - 1.3% 28% Single
Slide 47: Non-Life: Overview of key financials
Non-Life: Overview of key financials In million CHF (IFRS basis) HY 2003 HY 2002 Change Revenues from insurance 504 531 - 5.1% Benefits paid and changes in insurance res. - 392 - 462 - 15.2% PH bonuses and participation in surplus -9 33 Operating expenses - 156 - 168 - 7.1% Total expenses from insur
Slide 48: Banca del Gottardo: Overview of key financials
Banca del Gottardo: Overview of key financials In million CHF (statutory basis) HY 2003 HY 2002 Change Results from interest activities 74.6 79.4 - 6.1% Results from commission and service act. 114.7 134.4 - 14.7% Results from trading operations 45.4 32.0 + 41.9% Other 4.6 -5.5 Net revenues 239.3 24
Slide 49: Banca del Gottardo: Key ratios
Banca del Gottardo: Key ratios In billion CHF (statutory basis) HY 2003 FY 2002 Change Net new money inflow 1.0 - 4.9 Cost/income ratio 60.2% 66.5% - 630bps BIS ratio (Tier 1) 11.1% 10.0% + 102bps BIS ratio (Tier 2) 12.4% 11.3% + 110bps Assets under management 37.8 36.8 + 2.7% 49
Slide 50: Investment Management: Overview of key financials
Investment Management: Overview of key financials In million CHF (IFRS basis) HY 2003 HY 2002 Change Investment management and other income 106 118 - 10.2% Financial result 28 86 - 67.4% Total revenues 134 204 - 34.3% Total expenses - 74 - 84 - 11.9% Operating result(1) 60 120 - 50.0% Third party as
Slide 51: Financial result
Financial result In million CHF (IFRS basis) HY 2003 HY 2002 Change Investment income, net 2 690 2 834 - 5.1% Realised and unrealised gains/losses(1) 505 - 380 Trading income, net(2) - 279 820 Financial result 2 916 3 274 - 10.9% (1) Includes foreign currency gains and losses on investments recorded
Slide 52: Appendix
Appendix Profit and Loss Balance Sheet Embedded Value Contact Details 52
Slide 53: Life Core: Technical reserves
Life Core: Technical reserves In million CHF (IFRS basis) Switzerland 62 989 (- 0.3%) 63 175 Belgium/Luxembourg 3% 25 837 (+ 12.3%) France 22 998 Netherlands 12% Germany 17 250 (+ 10.2%) 15 651 Germany Netherlands 14 566 (+ 18.8%) 14% 12 262 3 660 (+ 10.0%) Belgium/Lux 3 328 France Switzerland 21% 5
Slide 54: Assets under management
Assets under management In billion CHF (IFRS basis) HY 2003 FY 2002 Change Total on-B/S-assets(1) 153.7 146.2 5.1% minus externally managed on-B/S-assets • Assets of unit-linked business - 3.4 - 4.0 - 15.0% • Ext. managed alternative investments - 6.6 - 5.8 13.8% and other assets Total on-B/S-assets
Slide 55: Bond portfolio
Bond portfolio Insurance portfolio (IFRS basis) Breakdown by rating BBB Not rated 2% 2% A 9% Government AA 33% 18% 58% AAA 36% 55
Slide 56: Bond portfolio: currency exposure
Bond portfolio: currency exposure Insurance portfolio (IFRS basis) Before hedges After hedges GBP USD Other 3% 2% 2% CHF 40% CHF 32% EUR 63% EUR 58% 56
Slide 57: Bond portfolio: duration
Bond portfolio: duration Insurance portfolio (IFRS basis) Modified duration(1) CHF 31.8% 7.4 EUR 63.0% 6.0 GBP 3.0% 14.7 USD 2.1% 6.2 Other 0.1% 2.8 Average 100.0% 6.7 (1) After currency hedges 57
Slide 58: Equity portfolio
Equity portfolio Insurance portfolio (IFRS basis) Breakdown by country Others USA 5% CH 7% 20% EU 68% 58
Slide 59: Loan portfolio
Loan portfolio Insurance portfolio (IFRS basis) Breakdown by type Money Markets Policyholder Loans 6% 7% Other Loans 39% Mortgages 48% 59
Slide 60: Real estate portfolio
Real estate portfolio Insurance portfolio (IFRS basis) Breakdown by country Breakdown by type France Germany 4% 4% Centers Other 11% 2% Residential Commercial 51% 19% Switzerland Mixed 90% 19% 60
Slide 61: Hedge funds portfolio
Hedge funds portfolio Insurance portfolio Breakdown by style Leveraged Finance Equity Hedged Manager 20% 22% Managed Futures Relative Value 8% 20% Global Macro 15% Event Driven 15% 61
Slide 62: Private equity portfolio
Private equity portfolio Insurance portfolio Investments: CHF 547 million Direct investments 6% Venture 20% Fund of funds 41% Buyout 24% Balanced 9% Open commitments: CHF 525 million 62
Slide 63: Currency exposure
Currency exposure Insurance portfolio Net: 2.7% of total insurance portfolio assets Other 97 million USD 3% 635 million 18% EUR GBP 2 450 million 378 million 68% 11% Net currency exposure CHF 3 560 million Hedged CHF 12 158 million Gross exposure CHF 15 718 million 63
Slide 64: Currency hedging ratios
Currency hedging ratios Group; not consolidated 7 18 Net currency 41 47 exposure 97 93 82 Currency 59 53 hedged No curr. No curr. risk risk 3 Equities & Private Hedge Loans Real Estate Bonds Other equity funds Equity Funds Invested assets 64
Slide 65: Statutory solvency improved to 199%
Statutory solvency improved to 199% In billion CHF (statutory basis); per 30 June 2003 Solvency capital(1) Statutory solvency(1) Rentenanstalt stat.equity capital 1.41 7.73 199% Intangibles - 0.08 Hybrid capital + 1.30 3.87 Additional Zillmerisation + 0.44 Unrealised capital gains + 4.02 Unattribute
Slide 66: Appendix
Appendix Profit and Loss Balance Sheet Embedded Value Contact Details 66
Slide 67: Components of the embedded value
Components of the embedded value ANAV: Adjusted Net Asset Value: ANAV = Equity + Adjustments PVFP: Present Value of Future Profits: Cash flow projection model • Calculation of the yearly statutory profits and losses • Long-term perspective Lock-in: Cost of solvency capital Value of the existing port
Slide 68: Implementation of embedded value at Swiss Life
Implementation of embedded value at Swiss Life ANAV and PVFP have been calculated for Swiss Life more than 95% of the mathematical UK reserves Swiss Life BE, Zelia (life only) Swiss Life NL For other life insurance entities only the NAV has been included Swiss Life DE The banking and non-life insura
Slide 69: Asset allocation by region
Asset allocation by region Assumptions HY 2003 FY 2002 CH EU CH EU Cash and cash-equivalents 1% 1% 1% 3% Bonds and loans 61% 73% 61% 75% Mortgages 10% 10% 10% 5% Real estate 14% 4% 14% 3% Equities 3% 8% 3% 8% Participation 4% 3% 4% 6% Alternative investments 7% 1% 7% 0% 69
Slide 70: Analysis of change (for Swiss Life Holding)
Analysis of change (for Swiss Life Holding) In million CHF (statutory basis) SLH EV FY 2002 6 060 Unwind 2003 + 218 Actual investment return 2003 + 117 Future investment return - 906 Cost savings 2003 + 250 Methodology and model changes - 104 Strengthening of reserves - 115 Value of new business 200
Slide 71: Annual premium equivalents
Annual premium equivalents In million CHF (statutory basis) Switzerland(1) France(2) Germany Netherlands Belgium(3) - 46% + 31% + 133% + 186% + 54% 172 163 94 91 76 58 57 39 20 13 HY03 HY HY02 03 HY 02 HY03 HY HY02 03 HY 02 HY03 HY HY02 03 HY 02 HY03 HY HY02 03 HY 02 HY03 HY HY02 03 HY 02 VNB(4) -6
Slide 72: Cautionary statement regarding forward-looking information
Cautionary statement regarding forward-looking information This presentation is made by Swiss Life and may not be copied, altered, offered, sold or otherwise distributed to any other person by any recipient without the consent of Swiss Life. Although all reasonable effort has been made to ensure the
Slide 73: Appendix
Appendix Profit and Loss Balance Sheet Embedded Value Contact Details 73
Slide 74: Contact the Investor Relations Team
Contact the Investor Relations Team Peter Huber Tel. +41 (1) 284 41 99 Head Investor Relations E-Mail: [email protected] Karin Schack Tel. +41 (1) 284 49 19 Manager Investor Relations E-Mail: [email protected] Visit our website for up-to-date information www.swisslife.com 74