Swiss Life Holding Ag · SIX:SLHN
Swiss Life — H1 2002 Earnings Presentation
65 slides from Swiss Life's earnings presentation, Sep 18, 2002
Slide 1: Swiss Life Group Analysts' & Investors' Presentation
Swiss Life Group Analysts’ & Investors’ Presentation Zurich, 18 September 2002 (Restated)
Slide 2: Agenda
Agenda Introduction Andres F. Leuenberger, Chairman Half Year Results 2002 Roland Chlapowski, CEO / Bruno Pfister, CFO New Strategy Roland Chlapowski, CEO Summary and outlook Roland Chlapowski, CEO Supplementary information Contact details 2
Slide 3: Shareholders' equity has decreased substantially
Shareholders‘ equity has decreased substantially In million CHF - 700 + 204 - 578 4 982 3 908 31.12.2001 Change in un- Change Net loss 30.06.2002 realised gains / in share HY 2002 losses and premium currency and translation treasury gains / losses shares Bars in chart are not to scale and only for i
Slide 4: Operating profit has improved
Operating profit has improved In million CHF HY 2001 HY 2002 Change (restated) (in %) Premiums & policyholder deposits (gross) 11 141 11 684 4.9% n Gross written premiums 9 023 9 758 8.1% n Policyholder deposits 2 118 1 926 - 9.1% Financial result 3 010 3 274 8.8% Net benefits and claims 5 955 6 648
Slide 5: Concrete performance measures are already implemented
Concrete performance measures are already implemented n New strategic direction has been defined n Net equity exposure has been reduced significantly n From 16% (12/01) to 7% (6/02) n 3% target reached on September 13, 2002 n Swiss Group Life measures have been implemented n Adequate cost allocation
Slide 6: Agenda
Agenda 1. Profit and loss 2. Shareholders’ equity 3. Segment results 6
Slide 7: Total premiums grew by 5%
Total premiums grew by 5% Gross written premiums & policyholder deposits before eliminations In million CHF HY 2001 HY 2002 Change (restated) (in %) Life 9 926 10 354 4.3% Direct written premiums 7 808 8 428 7.9% Policyholder deposits 2 118 1 926 - 9.1% Non-Life 979 1 121 14.5% Accident & health 552
Slide 8: Premium growth strongly differs by market
Premium growth strongly differs by market Gross written premiums & policyholder deposits before eliminations In million CHF HY 2001 HY 2002 Change (restated) (in %) Switzerland 6 106 6 371 4.3% France 2 480 2 709 9.2% Germany 828 791 - 4.5% Netherlands 771 808 4.8% UK 497 471 - 5.2% Belgium 286 250
Slide 9: Financial result improved to CHF 3.2 bn
Financial result improved to CHF 3.2 bn In million CHF HY 2001 HY 2002 Change (restated) (in %) Investment income, net 2 847 2 834 - 0.5% Real. & unreal. gains/losses* 626 - 380 - Trading account income, net** - 463 820 - Financial result 3 010 3 274 8.8% * Includes foreign currency gains and losses
Slide 10: Equity exposure has been significantly reduced
Equity exposure has been significantly reduced Insurance portfolio as of June 30, 2002 In million CHF 117 828 118 431 Shares & equity funds 11.9%* 17.3%* 4.3% Alternative investments 4.3% 8.3% Mortgages 8.3% 8.7% Property 8.2% Bonds & loans 57.9% 65.8% Other invested assets 4.0% 4.3% 1.0% 4.3% YE 20
Slide 11: Bond portfolio entails 98% single-A or better risks
Bond portfolio entails 98% single-A or better risks Insurance portfolio Split by rating Split by currency* HY2002 HY2002 1% <1% 4% 3% 7% 13% 38% 55% 78% AAA and sovereign Euro AA CHF A US$ BBB Other Not rated * Before currency hedges 11
Slide 12: Real estate portfolio: Concentrated on Switzerland and residential properties
Real estate portfolio: Concentrated on Switzerland and residential properties Insurance portfolio 4.0% 1.6% 6.6% 20% 21% 59% 87.8% Switzerland Residential France Mixed Germany Commercial Others * as of 30 June 2002 12
Slide 13: Insurance cost position is improving
Insurance cost position is improving In million CHF 11.5% 10.5% 10% Cost Ratio 5% 0% HY 2001 HY 2002 Gross premium Life(1) + Non life 11‘141 11‘684 + 4.9% Operating Expenses (2) Life + Non Life 1‘282 1‘232 (3) - 3.9% (1) Incl. policyholder deposits (2) Before intercompany eliminations (3) Life exclu
Slide 14: Agenda
Agenda 1. Profit and loss 2. Shareholders’ equity 3. Segment results 14
Slide 15: Shareholders' equity drops by CHF 1.1 bn
Shareholders’ equity drops by CHF 1.1 bn In million CHF 31/12/01 Change 30/06/02 (restated) Common shares 587 - 587 Share premium 1 780 - 251 1 529 Treasury shares - 540 455 - 85 Unrealised gains/losses 283 - 700 - 417 Retained earnings 2 872 - 578 2 294 Total shareholders‘ equity 4 982 - 1 074 3 90
Slide 16: 2001 results have been restated
2001 results have been restated 1. Adjustments already disclosed in financial report 2001 (page 44) 2. Improper translation of figures from local GAAP to IAS in 2001 n First time half-year reported under IAS n Shift from revaluation reserves to result of the period n Total equity remains unchanged a
Slide 17: Agenda
Agenda 1. Profit and loss 2. Shareholders’ equity 3. Segment results 17
Slide 18: Life insurance: Overview of key financials
Life insurance: Overview of key financials In million CHF HY 2001 HY 2002 Change (restated) HY(in2002 %) * Premiums, policy fees, other fee income 7 623 8 242 8.1% Financial result 2 645 2 953 11.6% Other income 63 108 71.4% Total Revenues 10 331 11 303 9.4% Interest credited to clients & borrowings
Slide 19: Non-Life Insurance: Overview of key financials
Non-Life Insurance: Overview of key financials In million CHF HY 2001 HY 2002 Change (restated) (in %) Revenues from Insurance 1 024 1 155 12.8% Provisions for ins. reserves + benefits paid - 750 - 918 22.4% PH dividends and participation in profit - 10 30 - Operating expenses - 312 - 319 2.2% Total
Slide 20: Private Banking: Overview of key financials
Private Banking: Overview of key financials In million CHF HY 2001 HY 2002 Change (in %) (restated) Financial result 293 232 - 20.8% Inv. management, banking, other income 253 227 - 10.3% Total Revenues 546 459 - 15.9% Interest credited to clients & borrowings - 203 - 115 - 42.9% Operating expenses
Slide 21: Investment Management: Overview of key financials
Investment Management: Overview of key financials In million CHF HY 2001 HY 2002 Change (restated) (in %) Inv. management, other income 112 105 - 6.3% Financial results 33 87 - Total Revenues 145 192 32.4% Total Expenses - 94 - 73 - 22.3% Operating profit* 51 119 133.3% * Profit before amortisation
Slide 22: Agenda
Agenda Introduction Andres F. Leuenberger, Chairman Half Year Results 2002 Roland Chlapowski, CEO / Bruno Pfister, CFO New Strategy Roland Chlapowski, CEO Summary and outlook Roland Chlapowski, CEO Supplementary information Contact details 22
Slide 23: The environment has changed dramatically
The environment has changed dramatically Annual Swiss government bonds (10 years) performance (%) Stock market (SMIC) 70% 8.0% 61% 7.0% 50% 6.0% 28% 30% 21% Guaranteed return 16% 5.0% in Swiss group 7% 9% life business 10% 4.0% -10% 3.0% -20% -17% 2.0% -30% (1) 91 92 93 94 95 96 97 98 99 00 01 02 95
Slide 24: We have addressed fundamental questions
We have addressed fundamental questions n What are our competitive advantages and sustainable market positions? n How do we leverage core competencies within the group? n How do we balance investment risks and policyholder promises? n How do we improve efficiency and reduce costs? n How do we achiev
Slide 25: New strategy is based on five cornerstones
New strategy is based on five cornerstones n "Life & Pensions" 1. Business Focus n Switzerland and selected countries n Managed across countries 2. Streamlined Structure n Uniform governance along core functions n Lower investment risks 3. Operational Excellence n Efficient processes n Adequate pric
Slide 26: 1. Business Focus
1. Business Focus Rentenanstalt ‘+ SwissLife (+ 26
Slide 27: Swiss Life (re)focuses on Life and Pensions
Swiss Life (re)focuses on Life and Pensions Promising market outlook n Ageing population n Privatisation of pension systems n Fewer, more focussed companies We have distinct competitive advantages n Strong brand n Broad set of skills n Established distribution networks n Number 9 in European Life ma
Slide 28: Switzerland and selected countries are core markets
Switzerland and selected countries are core markets n "Core market" criteria n Strong local position n Synergies within group UK n Sustainable returns and growth NL Germany B/Lux France CH n Attractive core markets Italy n Market size: CHF 322 bn Spain n Expected growth: 8% p.a. n Swiss Life market
Slide 29: Strong competitive position in core markets
Strong competitive position in core markets Swiss Life Core market premium (1) Swiss Life’s competitive position Switzerland (2) 8’438 • Market leader in individual and group life • Strong network of tied agents France 2’959 • Strong network of tied agents • Brokers and banks Germany 1’641 • Ranked
Slide 30: Overview of core and non-core units
Overview of core and non-core units Core Non-core Private Life Non Life Banking Units • Switzerland • UK • France • Banca del • France • Spain • Belgium Gottardo • Germany • Italy • La Suisse • STG • Netherlands • La Suisse • Belgium/ Lux. Premium(1) (CHF m) • 2001 15’164 2’264 2‘038 n.m.(2) • 2002
Slide 31: Value of non-core businesses will be realised over time
Value of non-core businesses will be realised over time Logic for "Non-core" Contribution of “Non-core” n Insufficient synergies with core n Profitable business n Significant value n Significant capital tied-up but: n Disproportional investments required for critical mass n Value impossible to reali
Slide 32: 2. Streamlined Structure
Streamlined Struct Rentenanstalt ‘+ SwissLife ‘+ 32
Slide 33: Core units will be managed along four functions
Core units will be managed along four functions From "Autonomous Financial … to an “Integrated Life Group” Service Companies" … Swiss Life Swiss Life Distribu Pro- Opera- Invest- Swiss Life CH La Suisse -tion duct tions/IT ments F D NL B Lux. UK E I ID CH F Fund SLAM PEP REP LIVIT Master D Banca del
Slide 34: Swiss Life Group will be reorganized
Swiss Life Group will be reorganized as of 19.9.02 Group CEO R. Chlapowski International Division CRO Division CFO Division Swiss Division H.R. Strickler M. Koller B. Pfister R.Chlapowski Distribution Product Operations/IT Investments SL Network Actuarial Services Group Finance Swiss Insurance activ
Slide 35: 3. Operational Excellence
3. Operational Excellence 35
Slide 36: Operational excellence
Operational excellence Lower investment risks n Adjust strategic asset allocation n Reduce exposure to volatile assets Efficient processes n Reduce complexity n Set standards Economic product pricing n Balance investment returns and policyholder promises n Set price according to cost and benefits Co
Slide 37: Investment risks have been reduced
Investment risks have been reduced Volatile assets as percent Targeted strategic of investment asset allocation 21.6% Alternative investments Alternative 4.3% Equity 0-5% 16.2% 0-5% investments 4.3% 10.3% Property and mortgage 17.3% 4.3% 7.2% 10-30% Shares & 11.9% 4.3% equity funds 6.0% 2.9% .01 .02
Slide 38: Efficient processes
Efficient processes Initiated cost reductions based on 2001 costs (CHF mn) tbd tbd tbd 75 200 125 30 515 Target Implementation 70 2002: 33% 2003: 85% 315 2004: fully realized 215 CH EU Non- Sub- CH EU Non- Sub- Total core core core total core core core total April 02 cost program (1) New efficiency
Slide 39: Additional reduction in headcount
Additional reduction in headcount Impact of new efficiency program Swiss 500 FTE core market European 200 FTE core markets Total core markets 700 FTE • Share of total staff 10% 39
Slide 40: Measures to improve our Swiss group life business
Measures to improve our Swiss group life business Measures Status Reduction of administrative costs In implementation Adequate cost billing Approved and being implemented Risk adjusted pricing Approved and being implemented for the non mandatory part(1) Reduction of minimum interest rate by Under di
Slide 41: 4. Financial Strength
. Financial Strengt Rentenanstalt ‘+ SwissLife ‘+ 41
Slide 42: Drivers of our capital requirements
Drivers of our capital requirements • Fulfill statutory capital requirements • Maintain single A rating even in stress scenarios Solvency and rating • Keep regulatory solvency (excluding double gearing) between 125% and 150% • Financing of restructuring program Strategic Flexibility • Supporting ord
Slide 43: We intend to raise CHF 0.9 to 1.2 bn new capital
We intend to raise CHF 0.9 to 1.2 bn new capital n Rights offering will be centerpiece of capital increase n Exact terms will be announced in late October n We expect rights offering to be underwritten n Expected timing: November n Capital raising may include convertible debt element Extraordinary E
Slide 44: New holding structure will enhance transparency
New holding structure will enhance transparency Advantages Process n Improved transparency of n Exchange offer launched prior to shareholder and policyholder EGM interests n Implementation subject to n Flexibility in capital allocation shareholder approval at EGM n Improved tax efficiency n One for
Slide 45: 5. Performance Culture
Performance Cultu Rentenanstalt ‘+ SwissLife ‘+ 45
Slide 46: Clear timetable for transformation
Clear timetable for transformation 2002 2003 2004 Divest non-core businesses 1. Business Focus Foster growth Anchor governance 2. Streamlined Structure Core functions: Transparency/priorities, groupwide targets Adapt asset allocation 3. Operational Excellence • Switzerland Improve efficiency • Europ
Slide 47: Agenda
Agenda Introduction Andres F. Leuenberger, Chairman Half Year Results 2002 Roland Chlapowski, CEO / Bruno Pfister, CFO New Strategy Roland Chlapowski, CEO Summary and outlook Roland Chlapowski, CEO Supplementary information Contact details 47
Slide 48: Agenda
Agenda Introduction Andres F. Leuenberger, Chairman Half Year Results 2002 Roland Chlapowski, CEO / Bruno Pfister, CFO New Strategy Roland Chlapowski, CEO Summary and outlook Roland Chlapowski, CEO Supplementary information Contact details 48
Slide 49: Supplementary information
Supplementary information n Swiss Life Group n Insurance and Private Banking 49
Slide 50: Balance sheet impacted by weak economic environment
Balance sheet impacted by weak economic environment In million CHF FY 2001 HY 2002 Change (restated) (in %) Insurance policy and claim reserves 98 827 100 956 2.2% Shareholders’ equity 4 982 3 908 - 21.6% n Shareholders’ equity (excl. rev. res.) 4 699 4 325 - n Revaluation reserves 283 - 417 - Asset
Slide 51: Assets under Management
Assets under Management In million CHF Off-balance sheet On-balance sheet (including unit-linked & separate accounts) 205 944 203 334 198 138 189 345 53 893 53 930 47 474 45 355 116 109 97 088 143 990 152 051 149 404 150 664 116 109 97 088 1997 1998 1999 2000 2001 HY 2002 based on Swiss GAAP based o
Slide 52: Investment performance insurance portfolio by asset class
Investment performance insurance portfolio by asset class Return 1 Return 4 Shares and equity funds 1.3% - 7.5% Bonds and loans 2.5% 2.5% Alternative investments 1.6% - 6.3% Property 3.2% 3.2% Total investments 2.2% 1.5% Return 1: direct investment income Return 4: total return Returns not annualise
Slide 53: Shareholders' equity by year end 2001 is not affected by restatement
Shareholders’ equity by year end 2001 is not affected by restatement In million CHF 30 June 30 June 31 Dec 31 Dec 30 June 2001 2001 2001 2001 2002 restated restated Common shares 587 587 587 587 587 Retained earnings 2 906 2 973 2 987 2 987 2 872 Share premium 1 815 1 757 1 780 1 780 1 529 Treasury
Slide 54: Development of shareholders' equity
Development of shareholders‘ equity In million CHF 8 161 7 665 6 901 6 891 4 571 3 294 4 982 3 660 3'294 4 490 3 908 44 3 026 4 938 4 325 4 371 2 436 3 231 3 590 2 411 5'141 590 4'371 Revaluation reserves - 417 Equity (excl. reval. res.) 1996 1997 1998 1999 2000 2001 HY 2002 based on Swiss GAAP base
Slide 55: Development of core capital
Development of core capital In million CHF - 1 074 +6 +1 -7 - 938 7 744* 5 733 YE2001 30.06.2002 Change in Change in Change in Change in Change in share- minority hybrid sub- deferred holder’s interest capital ordinated insurance equity instruments debt funds * restated 55
Slide 56: Breakdown of core capital
Breakdown of core capital In million CHF 18'000 15 692 13 258 7 744 5 733 16'000 Def. insur. rel. funds & def. taxes 14'000 rel. to unreal. gains/losses recorded in equity 5 905 12'000 subordinated debt 4 037 10'000 Hybrid capital instruments 1 331 1 279 8'000 946 8 Minority interest 6'000 1 402 1 4
Slide 57: Supplementary information
Supplementary information n Swiss Life Group n Insurance and Private Banking 57
Slide 58: Insurance: Clearly a life play
Insurance: Clearly a life play Life insurance Non-Life insurance 11 684* Assumed Fee income 1 285 premiums 19‘318 (unit-linked) 10% 2‘183 Policyholder 11% Other 14% 10 399 non-life deposits 90% 6% Accident 2% Periodical 51% 19% premiums 17‘134 12% & health 89% Fire and property 17% 43% 36% Motor veh
Slide 59: Growth in individual life premiums compensating for further decrease in policyholder deposits
Growth in individual life premiums compensating for further decrease in policyholder deposits HY2001 HY2002 Growth in gross life premiums Total: CHF 9 926 million Total: CHF 10 399 million by line of business 22% 19% Group + 4.8% 57% Individual + 16.6% 58% 21% 23% Policyholder deposits - 9.1% 2% 2%
Slide 60: Extraordinary DAC amortisation
Extraordinary DAC amortisation n Acquisition costs are capitalised and amortised over the lifetime of a contract. n The amortisation is based on the present value (PV) of the estimated gross margin amounts expected to be realised over the life of the book of contracts. n The estimate of gross margin
Slide 61: Non-Life Insurance Ratios
Non-Life Insurance Ratios HY 2001 HY 2002 (earned) (earned) Claims ratio (in % of net earned premiums) 81.2% Non-Life 73.5% Expense ratio (in % of net earned premiums) 30.0% 27.6% Combined ratio 103.5% 108.8% 61
Slide 62: Total banking income (net) by type
Total banking income* (net) by type HY2001 HY2002 5% 4% 4% 9% 40% 49% 42% 47% Interest income Income from commissions Income from trading Other income * Income before intersegment eliminations and other consolidation effects 62
Slide 63: Agenda
Agenda Introduction Andres F. Leuenberger, Chairman Half Year Results 2002 Roland Chlapowski, CEO / Bruno Pfister, CFO New Strategy Roland Chlapowski, CEO / Summary and outlook Roland Chlapowski, CEO Supplementary information Contact details 63
Slide 64: Contact the Investor Relations Team
Contact the Investor Relations Team Christoph Braschler Tel. +41 (1) 284 47 12 Head Investor Relations E-Mail: christoph.braschler@swisslife.ch Peter Huber Tel. +41 (1) 284 41 99 Deputy Head Investor Relations E-Mail: peter.huber@swisslife.ch Karin Schack Tel. +41 (1) 284 49 19 Investor Relations Ma
Slide 65: Disclaimer
Disclaimer This presentation is made by Swiss Life/Rentenanstalt and may not be copied, altered, offered, sold or otherwise distributed to any other person by any recipient without the consent of Swiss Life/Rentenanstalt. Although all reasonable effort has been made to ensure the facts stated herein