Annual report
Key figures 31.12.2014
31.12.2013
Gross premiums earned (in CHF)
655.9 m
545.7 m
Gross claims*
–531.7 m
–453.0 m
Profit (in CHF)
9.6 m
5.2 m
Total assets (in CHF)
557.9 m
498.1 m
Equity (in CHF)
128.0 m
111.4 m
115
86
A (a+)
A (a+)
Full-time equivalents (no externals) Rating A.M. Best
* incl. change in reserves
Contents 1 Preface ___________________________________________________________________ 5 2
Foreword by CEO ____________________________________________________ 8
3
Consolidated annual report ____________________________________ 12
3.1
Management report ________________________________________________________ 12
3.1.1 Business development _______________________________________________ 12
3.1.2 Investments, equity, solvency _______________________________________ 14
3.1.3 Risks ___________________________________________________________________ 14
3.1.4 Future development _________________________________________________ 16
3.2
elipsLife in the market ______________________________________________________ 18
3.2.1 Business model _______________________________________________________ 18
3.2.2 Business environment _______________________________________________ 19
3.2.3 International presence _______________________________________________ 22
3.3
Guarantees of success ______________________________________________________ 23
3.3.1 Attracting the right employees _____________________________________ 23
3.3.2 Total solution approach _____________________________________________ 24
3.4
Corporate governance ______________________________________________________ 26
3.4.1 Group structure ______________________________________________________ 26
3.4.2 Organisation __________________________________________________________ 26
3.4.3 Compliance ___________________________________________________________ 27
3.4.4 Risk management ____________________________________________________ 28
3.4.5 Internal audit _________________________________________________________ 28
3.5
Solvency II update ___________________________________________________________ 29
4
Consolidated financial statements _________________________ 32
4.1
Consolidated balance sheet ________________________________________________ 32
4.2
Consolidated income statement ___________________________________________ 34
4.3
Notes to the consolidated financial statements ___________________________ 35
4.3.1 Accounting policies __________________________________________________ 35
4.3.2 Valuation methods ___________________________________________________ 36
4.3.3 Notes to the consolidated balance sheet ___________________________ 39
4.3.4 Notes to the consolidated income statement ______________________ 43
4.3.5 Other disclosures ____________________________________________________ 45
4.4
Auditor’s report _____________________________________________________________ 46
elipsLife | Annual report 2014
Preface
5
1 Entrepreneurial thinking to exploit the opportunities offered by the market The Board of Directors and Executive Board of elipsLife are delighted to report on a challenging but successful 2014 financial year in which a record profit and a strong premium growth were again generated in spite of several large claims. I would like to take this opportunity to warmly thank everybody who contributed to this impressive success. I am at the same time very pleased that, in addition to our daily operations, we also successfully implemented a number of major challenging and time-consuming projects, mostly in IT and corporate governance. The business figures are very encouraging to Swiss Re, the sole shareholder, particularly as the parent company with its financial strength, know-how and reputation has helped to establish elipsLife in the market as a respected business partner. Swiss Re has been nurturing partnerships with promising companies in the insurance industry offering innovative solutions for more than 150 years. elipsLife – a company with extremely positive prospects – is an excellent example of its success with this policy. There are very good opportunities worldwide for private insurance companies offering pension products. In the emerging markets, ever more people are moving into the ranks of the middle class and would like to invest in pension products that will adequately secure a higher standard of living. The state social security systems in the saturated European markets are reaching their limits and innovative solutions from private insurers are needed to address the problem. elipsLife is well-positioned in this environment with its pronounced customer focus, independent business model and agile entrepreneurial approach. As a niche player in the life industry, elipsLife has an important position in the Swiss Re Group. The company is well equipped to meet the challenges of the future, both with regard to the regulatory requirements and the opportunities provided by the market. elipsLife will consistently exploit the opportunities that arise and continue to pursue its long-term growth targets. Jean-Jacques Henchoz Chairman of the Board of Directors of elipsLife
Strong market position 足thanks to pronounced 足customer focus
elipsLife | Annual report 2014
8
Foreword by CEO
2 elipsLife emerged strengthened from a difficult year 2014 – a difficult, challenging but also successful year in the still-young history of elipsLife. How do we reconcile this contradiction? An insurance company that had to cope with unexpected major claims but can still post a record profit must surely be described as successful. And if it managed at the same time to considerably improve its governance and compliance structure and successfully implement several large IT projects, it is an outstanding achievement. 2014 was a year of consolidation for elipsLife during which the company had to digest the rapid growth of the past three years. But what is really encouraging is that the core business grew noticeably once more, that large IT projects could be implemented successfully and that the consolidated profit was raised again, even though the life segment recorded several large claims. For me as CEO, 2014 was in many respects a proving ground: •• Is elipsLife strong enough already to absorb unexpected events without destroying equity? Looking back we can definitely say that elipsLife is strong enough! We generated a profit in spite of several large claims. •• Does elipsLife have the substance it needs to maintain its current pace of growth while working on several projects at the same time without harming its customers’ experience of its operational excellence? Here too the answer is yes. We successfully concluded a number of large projects, even though we sometimes underestimated the resources that we needed. And though customer satisfaction can always be improved, we really appreciated our customers’ acceptance of small mistakes in a reporting year in which we were under much pressure. This is where the elipsLife culture comes into its own, when we can tell our customers that “We are really sorry, but will do everything we can to avoid the same mistake happening in future.” Thismotivates us to do our work even better in 2015. At well below 2%, the low churn rate is evidence that it is not only our earliest customers who remain loyal to us and are satisfied with our service. •• Can elipsLife grow sustainably? The year 2014 once again gave us a positive response. The potential for further growth is found firstly in our specialisation, secondly in our ability to provide our customers with tailor-made but holistic support, and thirdly in the attractive price we can offer thanks to our low administration costs, high level of automation and exclusive B2B distribution model.
9
2014 was also a year dominated by the Solvency II preparations. The initial fears of everybody involved that we might not be able to implement this change and concerns about the impact in general and on elipsLife in the specific have given way to confident respect. We are convinced that we will also be able to meet our obligations in full and without any problems under Solvency II. Even more so as the comprehensive project work forced us to carefully analyse our risk management policies. The results are already helping us to optimally manage our risks. As part of the Solvency II prepar ations we also reviewed and adjusted our reinsurance programmes, adding excess of loss per risk plus a catastrophe excess of loss.
The potential for further growth lies in our specialisation and our ability to provide our customers with tailor-made but holistic support. In the reporting year too, all our activities focused on the human factor. I would like to take this opportunity to extend a very warm thank you to all the employees of elipsLife. It was only thanks to their commitment and know-how that we could successfully handle the balancing act between all those challenging projects and our daily business operations. elipsLife is renowned for a culture which is not only expressed in daily contact with its customers, but is also put to the test internally day after day. Only values that can be authentically applied internally can be realistically sold to the customers. Against this background, the current dynamics and the growth we are experiencing are challenges that demand the management’s full attention and constantly underline the import ance of the human factor in the success of any company in a cut-throat environment such as the insurance market. Reto Toscan CEO of elipsLife
elipsLife shows strength in spite of large claims
elipsLife | Annual report 2014
12
Consolidated annual report
3 Consolidated annual report 3.1 | Management report 3.1.1 | Business development The 2014 reporting year was marked by strong growth as well as wide-ranging projects to improve our operational excellence, governance structures and compliance. It is therefore all the more encouraging that elipsLife could add another successful chapter to its still-young history despite difficult circumstances. The figures underline this success: premium volume rose by CHF 101.2 million to CHF 665.2 million while the net profit increased by CHF 4.4 million to CHF 9.6 million. The pronounced increase in premium volume was mostly driven by core business growth of CHF 96.3 million to CHF 148.3 million. The improved loss ratio for Ireland also contributed to the good result. The Irish portfolio of insured remained more or less constant in spite of a strong increase in costs triggered by the requirement for private insured to contribute additional funding for public hospitals. Investments in automation, data warehousing and electronic data processing increased noticeably again. The consolidated profit nevertheless grew to CHF 9.6 million while the cost ratio of 4 % was mostly on a par with the previous year. The combined ratio was hit hard by a few large claims in the core business and rose to 97.9 % (previous year: 90.5 %). Despite this increase, however, elipsLife’s core business remains profitable, showing that the company has already reached the size it needs to absorb such volatility. In contrast to the previous year when the young company Elips Insurance Ltd reported a small loss, both insurance carriers, Elips Life Ltd and Elips Insurance Ltd, posted a positive result. In spite of some large claims, the life insurance company Elips Life Ltd earned a profit of more than CHF 3.7 million for the reporting year. Elips Insurance Ltd posted a profit of around CHF 5.9 million thanks to the strong performance of the Irish business. The further strengthening of the Swiss franc against the euro (from CHF 1.23 to 1.20) in the reporting year had a slight negative impact on the result. Although the health insurance business in Ireland was in a conciliatory mood in the reporting year, the future profitability of this business must be reviewed again. The stringent regulatory changes and their reach are felt every day as rising health costs force ever more private insured out of the market. Although this is a global trend the problem is particularly acute in highly developed private medical insurance (PMI) markets, where sustainable solutions are needed, both in the form of new insurance products and new care management models.
13
Premiums and claims, consolidated
242 %
531.7
453.0
545.7
655.9
in CHF million
Cost and combined ratios, consolidated
194 %
149 %
140 %
58 %
91 %
105.7
96 %
9 %
4 %
4 %
7.5
2011
2012
2013
2014
2009*
Gross premiums earned Gross claims (incl. change in reserves)
2010*
2011
Cost ratio
2012
2013
2014
Combined ratio
Gross premiums and equity, consolidated
Result before income tax, consolidated
in CHF million
in CHF million
665.2
10.8
1.4
2010*
97 %
563.4
2009*
2.2
3.2
3.6
139.8
97 %
12.3
336.5
7.4
2012
2013
2014
2009*
2010*
Equity Gross premiums
* 2009 and 2010 only Elips Life Ltd, from 2011 consolidated figures
2011
2012
111.4
59.2
2011
19.4
2010*
10.8
2009*
9.3
–3.5 2.2
–2.9
12.2
–3.3
3.6
1,5
2013
128.0
4.0
2014
elipsLife | Annual report 2014
14
Consolidated annual report
3.1.2 | Investments, equity, solvency Investments elipsLife’s investment income of CHF 0.7 million at the end of 2014 was mostly influenced by two factors: •• The company is mainly active in the short-term life and health insurance segments. This business requires highly liquid short-term investments which, however, only provides a small return in the current interest rate environment. •• Currently, the asset allocation is focused on fixed-term deposits and bonds. This defensiveinvestment strategy has been selected specifically to make the risk capital available to the insurance business, which is seeing very strong growth. Equity and solvency As persistent premium growth made it necessary to strengthen our equity again in the reporting year, Swiss Re as the sole shareholder paid in additional equity of CHF 7.0 million to increase the share capital of Elips Life Ltd. 2014 was also marked by the preparations for Solvency II. elipsLife invested much time in expanding its reporting systems and improving its risk management procedures in its determination to use the introduction of Solvency II to improve the quality of its risk management practices and promote a culture that handles risk in a mindful manner.
3.1.3 | Risks The strategy of elipsLife remains unchanged. The focus is on running its risk business on biometric lines. This means that the actuarial risks (profitability of the individual insurance lines) are the biggest risks as elipsLife’s result largely depends on these risks. Fluctuations on the capital markets are less important to elipsLife than for life insurance companies, who mostly have to protect their savings income. The dependence on exchange rates is worth mentioning, however. As around 90 % of the premium volume was earned in euro, elipsLife was exposed to an exchange rate risk. This effect was exacerbated by the fact that most costs are incurred in Swiss francs and only a small part is paid in euro. However, elipsLife managed to reduce the risk to the balance sheet with its mostly currency-congruent asset and liability strategy. Due to its strong focus on pure biometric products, elipsLife is exposed to some diversification risks that are countered by geographic diversification as well as diversification in the areas of mortality and disability. elipsLife responds to its resulting partial dependence on economic trends and the associated risks by designing customised reinsurance programmes and the most diversified poss ible products for its customers.
15
Premiums and claims, core business
in CHF million
in CHF million 148.3
Gross premiums, consolidated
665.2
96.3
113.0
563.4
2010*
2011
2012
2013
2014
Switzerland/Liechtenstein Benelux Ireland Other
2010*
10.8
2011
2012
2013
2014
Gross premiums earned Gross claims (incl. change in reserves)
Gross premiums, core business 2014 Share by market
5 %
2009*
7.5
2009*
2.2
10.8
1.4
2.2
3.6
3.6
3.2
31.9
52.2
64.5
336.5
Full-time equivalents at end of financial year
2 % 2 %
115 86 55
48 %
43 %
9 10 2009*
Switzerland The Netherlands Belgium Liechtenstein Other
* 2009 and 2010 only Elips Life Ltd, from 2011 consolidated figures
2010*
27 2011
2012
2013
2014
elipsLife | Annual report 2014
16
Consolidated annual report
In the reporting year elipsLife made enormous progress with the management of operational risks. More attention was paid to the consistent capture and monitoring of risks, and the internal controlling of all processes was greatly improved. This resulted in better internal audits. As elipsLife is a young company which is still exposed to considerable operational risk, the investment strategy is purposely conservative. Events after the reporting date On 15 January 2015 the Swiss National Bank decided to abandon the peg of CHF 1.20 to the euro. Given its exposure to the European business sector, elipsLife is affected by this decision at different levels. The value of the net assets relating to the euro business of CHF 60 million as at 31 December 2014 has to be adjusted to the new euro exchange rate. The eurozone’s contribution to the profit will decline in 2015, while the resulting contraction in interest rates is reason enough to expect a further reduction in profits. This not only concerns the expected return on investments, but will also potentially affect the calculation of the technical reserves.
3.1.4 | Future development In 2015, elipsLife will grow substantially again in its core markets in Switzerland/Liechtenstein and Benelux. Even though part of this growth will be neutralised by the weaker euro, growth in the double-digit CHF million range is expected. In the medium term this will help to build up a portfolio that can also absorb large loss volatility. At the same time an effort is made to keep the cost ratio down in spite of major investments in the IT infrastructure. The plans for the medium term thus focus on further reducing the cost ratio for the core business as this will give elipsLife a price advantage in the market and support its future growth. Further investment in elipsLife’s modern IT infrastructure will increase the productivity and also ensure that elipsLife can generate the long-term return on capital expected by its shareholder. Against this background the company’s priority is to generate sustainable growth rather than the fastest possible growth.
For the third time running: A.M. Best rating A (a+)
elipsLife | Annual report 2014
18
Consolidated annual report
3.2 | elipsLife in the market 3.2.1 | Business model It has been made clear repeatedly over the past few years that elipsLife’s business model meets the demands of today and tomorrow. Two factors are important here: focus and the total solution approach. The c ompany’s focus on the “business” customer segment, the European economic area and pure biometric products for employees and employers coupled with its portfolio of total solution products covering all non-state insurance needs designed to dovetail with each country’s specific social insurance system provide elipsLife’s customers with big advantages. elipsLife analysed the insurance market a few years ago and found that insurance customers mostly complained about their insurance company’s performance with regard to five factors: the lack of flexibility, the slow pace of daily operations, the lack of customer focus, the lack of innovation, and the fact that insurance companies may promise a lot but deliver much less and tend to focus more on their own benefit than on creating win-win situations. The strategy and positioning of elipsLife were formulated in response to these findings, with the main objective being to establish itself with customers as the long-term leader in these areas. Growing globalisation means that companies are increasingly faced by cross-border challenges when it comes to their employees. Thanks to its roots in Liechtenstein in the heart of Europe and its international know-how, elipsLife is perfectly equipped to cope with such issues. The business model of elipsLife differs from those of its competitors in one area in particular: elipsLife coordinates all its insurance products with the different regional social insurance systems and operates as a one-stop shop with continuous IT systems for all products. This approach has huge advantages: short-term accident and sickness solutions are optimally coordinated, from the first consultation to the payment of benefits, and customers benefit from a continuous process, which means that they do not have to submit the same data more than once. This makes it easy to see if a customer has too much or too little insurance cover. Customers also benefit from elipsLife’s internal case management process, which ensures the optimal reintegration of disabled employees. elipsLife offers its customers services related to the prevention of burn-out, training in discussions about an employee’s return to work or courses on bullying at the workplace. The company also invests in the continued development of paperless data transmission technology, from the submission of the absence form to the virtual patient file. This allows the best possible coordination of the different benefit claims of customers. Only a customer relationship that has been built on a sustainable foundation promises success to both parties. Transparency and elipsLife’s corporate values (flexibility, speed, customer orientation, partnership and innovation) therefore serve as the foundation for each successful customer relationship. elipsLife is not only committed to these values, but is also determined to be a living example of them also in difficult and fast-changing times.
19
3.2.2 | Business environment The environment in which elipsLife does business is currently being shaped by different factors: •• In a situation where persistently low interest rates have a substantial financial impact on insurance products with interest guarantees, European life insurers are increasingly turning their attention to the profitable biometric business. •• The resulting competitive battle and higher risk premiums (because of low interest rates) are putting enormous pressure on premium levels and production costs. •• This is juxtaposed by a slight economic upswing that is promising more job security and modestly lower unemployment. But in spite of the improved situation on the labour market, the claims burden is increasing for insurance products that cover loss of earnings due to illness. This seems to be a rebound effect of the recent years of crisis. In the reporting year, however, elipsLife successfully continued on its path of growth and improved its profit in spite of this challenging environment. The market environment Growing competition and a sharper focus on biometric solutions can also be found in the core markets in Switzerland/Liechtenstein and Benelux. The liquidation and consolidation of pension funds is also proceeding apace. In Switzerland and Liechtenstein, the consolidation and liquidation of pension funds is promoting the development of high quality collective foundations and increased biometric risk capacity. Large, semi-autonomous collective foundations are increasingly opting for full autonomy, as a result of which the total accessible market is shrinking. Fierce competition means that medium-sized collect ive foundations and pension funds can currently obtain reinsurance cover at very good conditions. Medium-sized companies without their own pension fund are increasingly turning to collective foundations offering independent pension plans following an independent investment strategy and calculating their own funding ratio. In this climate, cooperation with collective foundations structured along modular lines must be intensified in order to offer comprehensive and flexible solutions for SMEs. This will make it possible in future to increase reinsurance volumes on a profitable basis. In Switzerland, the revision of the disability insurance law (IV) has led to a general reduction in dis ability cases. The same is true for Liechtenstein, albeit to a lesser extent. In the Netherlands elipsLife successfully expanded its good position with the Premium Pension Institutions (PPI). Thanks to its focus on biometric solutions, elipsLife is the ideal partner for these PPI specialising in administration and asset management. Both the PPI and elipsLife are benefiting from the liquidation of pension funds and the shift from defined benefits to defined contribution schemes. The affected companies usually prefer a PPI solution, as the administrative services and biometric insurance solutions are transparent and can be offered at an attractive price.
elipsLife | Annual report 2014
20
Consolidated annual report
Following an amendment to the law on 1 January 2015, pension contributions on salary components above EUR 100 000 are no longer tax-exempt for all types of cover in the Netherlands. Service providers are challenged to find new solutions to this problem. The social environment The demographic greying of the population as a result of low birth rates and improved mortality rates is continuing inexorably. According to leading longevity researchers, life expectancy in our core markets is increasing at a pace of three months per year – and this has been going on for more than 100 years. At present, this trend seems to be quite unstoppable in spite of the rise in ailments such as obesity and excess weight. If the current retirement age is maintained, this trend will of necessity lead to a reduction in the number of employees per pensioner. And finally, the social penetration of information technology, social networks, etc. is constantly growing. The consequences of these developments are of great importance to the insurance industry: •• If the current retirement age is maintained, the demographic greying of the population will make it extremely difficult to fund the retirement benefits. Employees are also ever less willing and able to cross-subsidise retirement pensions with their contributions. In Switzerland, several renowned insurance companies have been – at least partly – distancing themselves from full- value insurance models. Price pressure means that insurance at full value is no longer a profitable solution, particularly for large companies. •• Insurance companies have to consider the habits of their customers. This includes using social media to market their products and apps to provide targeted advisory services and establishing portals for efficient information processing. •• But the growing information density also has a downside, and nowadays we can almost talk of information pollution, an overload of information that can easily lead to high levels of stress, especially for employees. Companies are therefore challenged to introduce the concept of information hygiene for their employees. Because of its focus on biometric solutions, elipsLife’s exposure to these demographic trends is small. With its modern IT infrastructure the company is also well equipped to meet the challenges derived from the information needs of its customers and provide support and advice in the area of information hygiene with its well developed care management approach. The macroeconomic environment in Europe Although the European economy is still burdened by low interest rates, a slight economic upswing and resulting reduction in unemployment figures mean improved job security. First and second pillar social insurance systems remain under pressure to deliver on their benefit promises – specifically also in the face of current longevity trends. On the other hand, the measures reflecting a more restrictive attitude that were implemented to modernise the social insurance systems with regard to incapacity for work and disability are bearing the first fruit.
21
In an environment where insurance solutions are mostly in demand during times of rising and established affluence, these developments have the following consequences: •• In many European markets, the social insurance systems will probably have to be relieved of part of their burden. As a result, the shift of biometric insurance needs from the state system to the employee benefits insurance and individual retirement provision will intensify. In the Netherlands this has already happened for certain disability products. In other markets there is enormous pressure on the state system and private insurers must be ready to respond to a shift in responsibility with rapid solutions if they wish to fully exploit the resulting opportunities. •• In the insurance environment, persistently low interest rates are accelerating the decoupling of the savings and insurance processes. With its fast reaction times elipsLife is well-positioned to exploit all opportunities that may arise from the macroeconomic environment. The regulatory environment The regulatory environment is dominated by intensive preparations for the introduction of Solvency II in 2016. Calculations of the capital needs of the first pillar have shown that high local concentrations of risk are particularly capital-intensive. Selective underwriting and optimised reinsurance play a central role in ensuring the best possible use of the available capital and the mitigation of risk concentrations. With regard to the second and third pillars, insurance com panies are challenged to prepare and implement detailed road maps for the management of the company, the management of risks and a transparent reporting system. In addition to Solvency II, a trend towards increasing regulation can be observed, across the board from brokerage fees to data protection. These changes to the regulatory environment have the following consequences for the insurance industry: •• Although these time-consuming regulatory requirements do in fact add more quality, they also trigger considerably higher administration costs. •• With the introduction of Solvency II, the capital required to operate an insurance business will increase, as will the production costs. •• The growing regulatory complexity and presumably also the greater capital requirements will cause further consolidation in the insurance industry. elipsLife’s current strategy already takes account of these factors. In the next few years, elipsLife will be able to safeguard and expand its cost advantage over its competitors by consistently and successfully implementing its strategy and IT systems.
elipsLife | Annual report 2014
22
Consolidated annual report
3.2.3 | International presence
Headquarters Liechtenstein (Triesen) Core markets Branch office in Zurich, Switzerland Branch office in Amsterdam, the Netherlands Markets Belgium Germany Ireland (Cork) Luxembourg Malta Netherlands Antilles Norway Austria Poland UK (England, Scotland, Wales) Cyprus
23
3.3 | Guarantees of success In 2014, elipsLife once again posted an outstanding result. A large number of factors contributed to this good performance: our successful B2B business model centring on cooperation with professional distribution partners, our sustainable organisational structure ensuring efficient and first-class processes for our customers, and also our customer commitment, which is reflected in the constant improvement in customer satisfaction. elipsLife’s employees also played a central role, as qualified and committed employees are and always will be crucial to our success. Another central success factor were the new solutions launched in the market by elipsLife in the reporting year, such as the total solution approach offering customers the option of getting “daily sickness benefits cover, accident insurance and employee benefits insurance from a single provider”.
3.3.1 | Attracting the right employees In a commodity business such as the insurance industry, the employees are the factor that distinguishes a company from its competitors and ensures its success. It is therefore crucial for the company to be able to attract the right employees. It is not only the academic qualifications that count, but also the willingness and ability of the employees to identify with the corporate values and practice them in everyday life. elipsLife therefore attaches great importance to the selection of the right employees. It constantly optimised its hiring process in the past few years until it reached the current standard, which does not have to shun any comparison. Or as said by an applicant: “The recruitment process at elipsLife is faster, more intensive and clearly much more comprehensive than the benchmark.” Using all recruitment channels All available recruitment channels, active as well as passive, are used consistently in order to reach the greatest possible number of candidates. For the passive channels, job advertisements are placed on the elipsLife website, all the relevant job portals and on the social networks LinkedIn, Xing, Facebook and Twitter. For the active channels, a search is run for suitable candidates by selectively scanning the social networks LinkedIn and Xing and tapping into the personal networks of elipsLife’s line managers. The company mandates professional headhunters to search for candidates for senior management and other key positions. Such executive searches are done on either a performance or a mandate basis. The deciding factor is that the recruitment process is executed quickly and efficiently but still with the necessary attention to detail. This is achieved with a tightly organised process. The company is represented in the selection process by a heterogeneous group of participants to ensure the broadest possible impression of all candidates. Management participation is generally very high, and members of the Executive Board play an active role in many recruitment processes. The goal is to define the expectations and requirements of both parties, candidates and company as clearly as possible. Key words in this regard include corporate culture, corporate values, job descriptions, qualifications and also organisational elements.
elipsLife | Annual report 2014
24
Consolidated annual report
A somewhat different job interview Job interviews are clearly structured and are carried out by experts with many years of experience. Out-of-the-box questions are often used to gain a reliable insight into the mindset and personality of a candidate, also with the definite intention to wake up any “sleeping dogs” during the interview. The Human Resources department at elipsLife regularly receives very positive feedback to these interviews as they also unearth new facets for the candidates themselves. An efficient, open and comprehensive recruitment process promotes the best interests of the company as well as the job applicants: the objective is to clarify the expectations of both parties and bring them into line with the facts.
1 336
142
45
Applicants
First-round interviews
Vacant positions
3.2 first-round interviews per vacant position
As elipsLife’s job interviews are always transparent and honest, few mistakes are made in appointing employees and the outflow of employees is very low. By making things very clear during the job interview, the possibility of disappointment at a later stage is mostly eliminated. elipsLife is aming at using the best possible recruitment process to attract the right employees. The high number of qualified and proven managerial and specialist staff members and young employees with high potential who joined the company is positive proof that this has been done with success in the past few years.
3.3.2 | Total solution approach elipsLife provides its customers with colligated solutions to the financial consequences of sickness and accident, with the focus on biometric solutions enabling the company to offer customised products. The total solution approach brings customers advantages all along the value chain. Regardless of the social insurance system in the relevant target market, elipsLife can offer a cohesive and coordinated solution that does not leave any space for gaps in cover or overinsurance. This approach makes it possible to offer target customers a tailor-made solution at the best possible price-benefit ratio. Contract and benefits processing are done by a single provider. For example, an insured person who is first incapable of working and then disabled always has the same contact person, both with regard to case management and the payment of benefits.
25
The processes and IT systems have been designed to support all contract and benefits data. This brings efficiency gains for the customers as well as for elipsLife. The constant support over time offered by the same person also ensures a better understanding of every claim, particularly as no information is lost, for example when a person who is incapable of working is classified as dis abled. In this regard, elipsLife is unique among life insurance companies. To enable the company to offer its colligated solutions at competitive prices, elipsLife focuses on companies, pension funds and affinity groups. The target customers thus include a group of persons with
similar risk profiles and similar needs. The practice of B2B distribution through brokers keeps the marketing costs low while making it possible to multiply and produce the insurance products at an attractive price by bundling the different customer segments. As elipsLife already insures customers in Switzerland against all risks associated with sickness and accident under the daily sickness benefits insurance, the accident insurance and the employee benefits insurance, some distribution partners have also started focusing their own advisory and value added services on colligated solutions. Such a comprehensive advisory approach makes sense for both customers and brokers and often allows the broker to exploit cross-selling opportunities by offering this added value to his existing customers. As a focused niche player, elipsLife will in future continue to concentrate its efforts on expanding its services to its customers. For example, customers’ demand for information should be met with modern IT platforms. True to its corporate culture, elipsLife also wants to support its customers with flexible and tailor-made solutions in response to any changes in its core markets. This is a recurring need, for example, in the Netherlands. Living up to the promise of its claim “your insurance”, elipsLife focuses on the human factor in all its markets, offers needs-focused and attractively priced colligated solutions and is committed to creating a win-win situation for everybody involved. The total solution approach plays a key role here as it makes it possible to meet the needs of the customers to the greatest extent possible. In this way elipsLife creates sustainable added value for its customers. And this provides the foundation for the continued success of elipsLife in Europe.
elipsLife | Annual report 2014
26
Consolidated annual report
3.4 | Corporate governance The structures and processes defined by elipsLife will ensure management of the company in line with the principles of good corporate governance and facilitate efficient cooperation between the Board of Directors and the Executive Board. Elips Life Ltd and Elips Insurance Ltd are subject to supervision by the Financial Market Authority (FMA) of Liechstenstein and have to meet the FMA’s supervisory requirements for corporate governance.
3.4.1 | Group structure The sole shareholder of Elips Life Ltd is Swiss Reinsurance Company Ltd in Zurich. Elips Insurance Ltd is a wholly owned subsidiary of Elips Life Ltd. The latter has branches in Switzerland (Zurich), the Netherlands (Amstelveen) and the Netherlands Antilles (Curaçao).
3.4.2 | Organisation Board of Directors According to the articles of incorporation, the Board of Directors consists of at least three members. The term of office is one year, and re-election is possible. The former members of the Board of Directors, Jean-Jacques Henchoz, Jos Cobben, Bruce Hodkinson, Claudia Cordioli and Julien Descombes, were all re-elected by the Annual General Meeting (AGM). Jean-Jacques Henchoz is still the Chairman of the Board of Directors. Jos Cobben serves as the Vice-Chairman. The current members of the Board of Directors cover a broad spectrum of competence and international experience. All the members of the Board of Directors work for Swiss Re and are therefore totally familiar with the business of elipsLife. For reasons of efficiency, the Board members of the parent company Elips Life Ltd also sit on the Board of Directors of Elips Insurance Ltd. Given its manageable size, the Board of Directors did not establish any committees. As none of the Board members are entrusted with the management of elipsLife, the separation of powers between the Board of Directors and the Executive Board and the independence of the Board of Directors are guaranteed. The Board of Directors passes its resolutions with a simple majority of the votes cast. In compliance with the supervisory requirements, the Board of Directors has delegated the management of the company to the Executive Board. The Board of Directors remains responsible for the following tasks in particular: •• Supervising the company and issuing the necessary directives •• Structuring the accounting system, financial control, and financial planning •• Appointing and dismissing the members of the Executive Board •• Determining the business strategy
27
•• Determining the organisational structure •• Determining the variable remuneration of the members of the Executive Board •• Supervising the persons entrusted with the management of business operations, in particular with regard to compliance with the laws, articles of incorporation, by-laws and directives The Board of Directors held five ordinary meetings in the reporting year. The members of the Executive Board usually attend the Board meetings for agenda items that concern the ordinary course of business but they do not have any right to vote. Executive Board In the reporting year the Executive Board consisted of the following persons: •• Reto Toscan, CEO •• Christian Jaggy, CSO •• Ralf Hardegger, COO •• Kaspar Weiss, CIO •• Alberto Franceschetti, CFO (from 1 June 2014) The Executive Board usually meets every two weeks. Its meetings are also attended by the Head of HR & Central Services. Auditor The external auditor carries out all the audits required under the law and the articles of incorporation. The auditor is appointed by the Annual General Meeting for one year. At the AGM of 15 April 2014, the shareholders again elected PricewaterhouseCoopers Ltd, Zurich (PwC) as the auditor. Although PwC carried out an additional audit for elipsLife, this audit had no impact on the independence of the auditor, neither in terms of its content nor in terms of its scope. PwC was not mandated to provide advisory services to either Elips Life Ltd or Elips Insurance Ltd.
3.4.3 | Compliance Integrity in business operations elipsLife is committed to total integrity and compliance with all laws and internal regulations. elipsLife expects its employees to assume responsibility for their actions, to show consideration for people, society and the environment, to follow the rules and to report breaches. The principles governing integrity in business operations are outlined in the Code of Conduct.
elipsLife | Annual report 2014
28
Consolidated annual report
Internal directives and compliance process The Compliance unit issues guidelines and regulations, trains the employees and monitors compliance with the requirements of the compliance charter. The sphere of activity as well as the specific tasks of the Compliance unit are defined on the basis of a regular review of the compliance risks. All new employees receive comprehensive training on the applicable internal guidelines and regulations. The Compliance unit was strengthened in the reporting year by the appointment of a new compliance officer who is only responsible for the branch in the Netherlands. Money laundering As a financial intermediary, Elips Life Ltd is subject to the regulations on money laundering of the Principality of Liechtenstein. These regulations do not apply to the branches in Zurich, Amstelveen and Curaçao, which are subject to local law. However, the risk that elipsLife’s products may be misused for money laundering is very small, as pure risk products are not suited to this purpose. Fight against corruption elipsLife does not tolerate corruption and has issued internal guidelines in this respect for all its employees.
3.4.4 | Risk management Relevant risks are identified and assessed as part of a structured process. The Board of Directors is regularly informed of the risks, the results of the risk assessment and models and the measures derived from this assessment. The document setting out the risk policy principles was thoroughly revised in the reporting year. Risk monitoring is now the remit of the Risk Management Committee, which consists of the Risk Officer, all members of the Executive Board and the Head Legal & Compliance.
3.4.5 | Internal audit The internal audit function is carried out by Group Internal Audit of Swiss Re. In this regard elipsLife benefits from the enormous know-how and professionalism of the Swiss Re Group. The organisational and physical separation between the auditors and the company also strengthens the independence of the internal audit unit. Audit reports are submitted directly to the Board of Directors of elipsLife.
29
3.5 | Solvency II update From a regulatory perspective, the reporting year was characterised by the preparations for Solvency II. As the new European regulations on insurance supervision will enter into force on 1 January 2016 (some provisions already on 1 September 2015), supervisory authorities and insurance companies now have to focus all their energies on their preparations for Solvency II. The government of the Principality of Liechtenstein submitted the draft of a totally revised insurance supervision law (and the amendments to all relevant ordinances) to the consultation process on 16 September 2014. Parliament will discuss and adopt the law in the first half of 2015. From the point of view of elipsLife, the law does not contain any unexpected amendments and closely adheres to the provisions of its European counterpart. The national implementation law is supplemented by a large number of European directives and technical standards. This complex body of rules allows the national supervisory authorities very little leeway in the implementation of S olvency II. It remains to be seen to what extent it will still be possible to describe Solvency II as applied in practice as a principle-based system, as was the original intention. As in the previous year, elipsLife reviewed its governance system in the reporting year and adjusted it to the Solvency II requirements. The Board of Directors approved the addition of chapters on the responsibility for the Own Risk and Solvency Assessment Report (ORSA), the Solvency and Financial Condition Report (SFCR) and the Regulatory Supervisory Report (RSR) to the by-laws of elipsLife. The 2014 ORSA report was submitted to the Board of Directors and to the FMA in the reporting year. The Board of Directors adopted a revised risk policy and new risk management standards to strengthen the risk management process and also established a Risk Management Committee. In the quantitative business (Pillar 1), elipsLife also continued its preparations for Solvency II. Supported by an external consultant, elipsLife will introduce a mathematical programme for the calculation of the standard formulas needed to report and document the solvency capital requirement. This programme will be implemented to match the actuarial modules for the life, health and disability insurance. The reporting processes required to prepare the quantitative reporting templates (QRT) and the supporting narrative reports and submit them to the supervisory authority are being developed at the same time. The Solvency II project team is coordinating all preparations. Clear milestones were defined to make sure that the time schedule is met. The Board of Directors and the FMA are constantly kept abreast of the status of the preparations.
The quality of elipsLife's 足employees as the foundation for its success足
elipsLife | Annual report 2014
32
Consolidated f inancial statements
4 Consolidated financial statements
4.1 | Consolidated balance sheet Assets (in CHF) A. Intangible assets
I. Costs for establishing and expanding business operations
IV. Other intangible assets
B. Investments
2. Bonds and other fixed-interest securities
6. Deposits with banks
D. Other receivables
328 322
322 331
9 933 632
3 936 362
157 934 029
139 104 260
127 336 902
97 557 564
30 597 127
41 546 696
308 334 761
273 872 186
27 899 913
12 231 598
279 880 878
260 791 288
I. Receivables from own insurance business
1.
Due from policyholders c) Due from other policyholders
2. Due from insurance brokers
31.12.2013 4 258 693
III. Other investments
31.12.2014 10 261 954
c) Due from other insurance brokers
III. Other receivables
3. Due from other debtors
E. Other assets
I. Tangible assets (excluding land and buildings) and inventories
II. Current deposits with banks, post office deposits, checks and cash on hand
IV. Other assets
F. Deferrals
I. Deferred interest and rent
III. Other deferrals
Total assets
553 970
849 300
79 605 655
79 363 318
2 009 641
1 737 627
77 595 014
77 624 691
1 000
1 000
1 781 877
1 508 043
1 277 628
1 188 992
504 249
319 051
557 918 277
498 106 499
33
Liabilities and equity (in CHF)
31.12.2014
31.12.2013
128 018 898
111 384 713
1. Subscribed capital
12 400 000
12 400 000
II. Organisation fund
10 100 000
10 100 000
III. Capital reserve
96 800 000
89 800 000
IV. Retained earnings
A. Equity
I. Called-up capital
1. Legal reserve
V. Loss carryforward
VI. Annual profit
D. Technical reserves
2. Of which: reinsurers’ share
2. Of which: reinsurers’ share
5 207 286 221 330 798
201 092 616
195 906 122
—100 798 066
—97 953 061
33 365 056
7 279 357
—16 246 468
—3 544 452
III. Reserve for outstanding claims
1. Gross amount
9 634 185 259 688 892
II. Actuarial reserve
1. Gross amount
14 875 —6 137 448
I. Unearned premium reserve
1. Gross amount
24 391 —939 679
2. Of which: reinsurers’ share
248 511 179
222 596 779
—120 287 076
—109 457 692
IV. Provision for premium refunds
1. Gross amount
2. Of which: reinsurers’ share
V. Claims equalisation reserve
VI. Other technical reserves
1. Gross amount
2. Of which: reinsurers’ share
F. Other provisions
26 770 960
12 246 335
—13 385 480
—6 123 168
201 897
74 419
928 548
612 315
—464 274
—306 157
4 702 183
5 112 157
II. Provision for taxes
1 240 501
2 111 304
III. Other provisions
3 461 682
3 000 853
163 553 758
159 326 489
9 688 156
30 651 908
97 514 927
127 436 151
55 199 847
17 197
H. Other liabilities
I. Liabilities from own insurance business
3. Due to other creditors
II. Accounts payable on reinsurance business 1.
Due to affiliates
V. Other liabilities
1. Tax liabilities
2. Social security liabilities
5. Other liabilities to other creditors
I. Deferrals Total liabilities and equity
As the appointed actuary for elipsLife I herewith confirm that the technical reserves reported in the balance sheet as at 31 December 2014 were raised in accordance with the applicable statutory provisions and acknowledged actuarial principles. Peter Ziswiler | Lead Actuary | Triesen, 2 April 2015
404 084
——
746 744
1 221 233
1 954 545
952 342
557 918 277
498 106 499
elipsLife | Annual report 2014
34
Consolidated f inancial statements
4.2 | Consolidated income statement Income statement (in CHF)
2014
2013
II. Technical account 1. Net premiums earned
327 397 479
272 831 603
a) Gross premiums written
665 246 582
563 387 426
b) Reinsurance premiums ceded
—333 419 256
—281 697 381
c) Change in unearned premium reserve, gross
—9 363 210
—17 716 883
d) Change in reinsurers’ share in unearned premium reserve, gross
4 933 363
8 858 441
762 192
340 332
716 967
339 717
2. Investment income
c) Current income from other investments
e) Gain on disposal of investments
45 225
615
16 609 438
12 697 046
—258 626 575
—227 170 736
aa) Gross amount
—473 686 381
—297 684 480
bb) Reinsurers’ share
232 005 040
146 722 765
—29 561 859
—150 521 645
4. Other technical income, net 5. Net claims incurred
a) Claims incurred
b) Change in reserve for outstanding claims
aa) Gross amount bb) Reinsurers’ share 6. Change in other technical reserves, net
74 312 624
—13 806 975
—2 446 240
—26 348 970
—4 372 592
12 830 992
2 149 481
a) Change in actuarial reserve
aa) Gross amount bb) Reinsurers’ share
12 616 625
b) Change in other technical reserves
7. Expenses for premium refunds 8. Expenses for own insurance business
a) Acquisition costs
b) Administration expenses
9. Investment expenses
a) Asset management and interest expenses
c) Loss on disposal of investments
11. Other technical expenses, net 14. Result of technical account
—288 997
—223 130
—10 770 796
—5 465 743
—40 207 738
—36 037 246
—38 832 205
—34 541 905
—1 375 533
—1 495 342
—204 441
—135 395
—203 768
—135 219
—673
—176
——
—497 514
21 152 583
14 116 107
21 152 583
14 116 107
III. Non-technical account 2. Result of technical account for non-life and life insurance 7. Other income from ordinary activities 8. Other expenses from ordinary activities 9. Result from ordinary activities 13. Income taxes 14. Other taxes 15. Annual profit
2 555
——
—8 653 294
—6 613 773
12 501 844
7 502 333
—2 679 649
—2 185 624
—188 009
—109 423
9 634 185
5 207 286
35
4.3 | Notes to the consolidated financial statements 4.3.1 | Accounting policies Accounting policies elipsLife prepares its consolidated financial statements in accordance with the provisions of the Liechtenstein Law on Persons and Companies (PGR) of 20 January 1926 in the version that is valid on the relevant reporting date as well as the provisions of the Act of 6 December 1995 on the Supervision of Insurance Undertakings (Insurance Supervision Act; VersAG) and the Ordinance of 17 December 1996 to the Act on the Supervision of Insurance Undertakings (Insurance Supervision Ordinance; VersAV). Scope of consolidation The reporting date for the consolidated financial statements of elipsLife is 31 December. This date is also the reporting date for all companies included in the consolidated financial statements. The consolidated financial statements of elipsLife comprise all assets, liabilities, income and expenses of Elips Life Ltd and its subsidiary Elips Insurance Ltd, whereby all business relationships between the consolidated companies are eliminated in the balance sheet and the income statement. elipsLife offers personal and life insurance products. To ensure a uniform presentation, the consolidated income statement follows the chart of accounts of the life insurance company. The carrying amount of the share in affiliates is set off against the equity of the subsidiary. INVESTMENTS IN AFFILIATES
2014
2013
Company
Elips Insurance Ltd
Elips Insurance Ltd
Activities
Insurance
Insurance
100 %
100 %
Capital share
elipsLife is part of the Swiss Re Group and is included in the consolidated financial statements of Swiss Reinsurance Company Ltd in Zurich (SRZ). The consolidated financial statements of the SRZ Group can be obtained from: Swiss Reinsurance Company Ltd | Mythenquai 50 / 60 | P.O. Box | 8022 Zurich | Switzerland www.swissre.com
elipsLife | Annual report 2014
36
Consolidated f inancial statements
Translation to Swiss francs Foreign currency items in the balance sheet are translated to Swiss francs at the closing rate on the reporting date, while foreign currency items in the income statement are translated to Swiss francs at the average annual exchange rate. Realised foreign exchange gains and losses are netted and reported in the income statement under ‘Other income’ and ‘Other expenses’ respectively. Provisions are raised for unrealised foreign exchange gains. The following rates were used for translation to CHF: Balance sheet
Income statement
31.12.2014
31.12.2013
2014
2013
EUR / CHF
1.2023
1.2254
1.2152
1.2308
USD / CHF
0.9935
0.8892
0.9122
0.9286
GBP / CHF
1.5491
1.4725
1.5057
1.4492
As amounts are rounded to full Swiss franc amounts, the tables in the notes may have rounding differences.
4.3.2 | Valuation methods Intangible assets The intangible assets comprise capitalised costs for establishing and expanding business operations as well as other intangible assets. The former comprise formation costs, stamp duty and costs related to the establishment of the elipsLife brand (in particular image rights and licences) while the latter refer to purchased and proprietary software. They are measured at cost less accumulated depreciation. The cost to develop company-specific software is capitalised if it is realisable, future economic benefits are likely, and the costs can be reliably estimated. They include the salaries and non-wage costs for the employees directly involved in the development of the software and related administrative overhead costs. The following depreciation rates apply: Useful life
Depreciation rate
Costs for establishing and expanding business operations
5 years
20 %
Acquisition costs for insurance portfolios
5 years
20 %
Other intangible assets
4 years
25 %
A test for impairment is performed annually and if needed, additional depreciation or write-downs are recognised in the income statement. Other investments Bonds and other fixed-interest securities are measured at amortised cost. The difference between cost and repayment value is amortised over the remaining life of the security in accordance with the effective interest method. Additional depreciation or write-downs are recognised if a permanent impairment is expected.
37
Other receivables Receivables from own insurance business, accounts receivable from reinsurance business and other receivables are recognised at par value less specific valuation allowance. Other assets Property, plant and equipment are measured at historical cost and depreciated using the straight-line method over the expected useful life. The following depreciation rates apply: Useful life Furniture
Depreciation rate
10 years
10 %
Hardware / equipment
4 years
25 %
Interior finishing
5 years
20 %
Current deposits with banks, post office deposits and cash on hand are recognised in the balance sheet at par value. Deferrals Deferrals are recognised at par value. Technical reserves The technical reserves comprise the liabilities from insurance contracts on the reporting date. They are set up in accordance with actuarial principles to ensure that elipsLife can meet all its liabilities from its insurance contracts. Life insurance: The actuarial reserve comprises the actuarial value of the liabilities of elipsLife, including policyholder d ividends already allocated less the aggregate present value of the premiums due after the reporting date. The c alculation is done individually per contract in accordance with accepted actuarial methods. As a rule, elipsLife uses the BVG 2010 actuarial tables with a technical interest rate of 1 % for calculating the actuarial reserves for contracts in Switzerland and Liechtenstein. For contracts in Belgium, the Netherlands, Luxembourg and the Netherlands Antilles, the KAZO model (for disability) and the GBM/V 2010-60 life tables (for whole life insurance) are used. The benefits are measured using risk-free yield curves. The reserve for outstanding claims is calculated individually for each insurance claim. The amount to be set aside for each insurance claim consists of the amount owed to the beneficiaries plus the claim settlement costs. Amounts already paid out before the reporting date are deducted. Claims that were incurred but not yet reported by the reporting date are included in the calculation using estimates based on past experience and the observed delays in reporting a claim. elipsLife applies two categories of reserves for outstanding claims: •• Reserve for claims that have been reported but not yet settled (RBNS reserve) •• Reserve for claims that have been incurred but not yet reported (IBNR reserve)
elipsLife | Annual report 2014
38
Consolidated f inancial statements
Non-life insurance: The unearned premium reserve comprises the portion of the premiums written relating to the period after the reporting date. The unearned premium reserve is calculated individually for each insurance contract. Exercising the option under VersAV Annex IV par. 8, deferred acquisition costs are deducted from the gross unearned premium reserve. The reserve for outstanding claims is calculated individually for each insurance claim, based on the expected ultimate costs to be borne after the reporting date, including all claim settlement costs. Insurance claims incurred but not yet reported by the reporting date are covered by a separate reserve, the calculation of which takes account of past experience regarding the number of insurance claims that occurred before the reporting date but are only reported after this date and the amounts that usually have to be spent on these claims (IBNR reserve). Reserves for insurance claims that have to be settled in the form of an annuity are calculated in accordance with accepted actuarial methods. Provisions for premium refunds are based on the actual claims experience and the terms of the relevant insurance contracts. Other provisions Other provisions are raised for obligations that are probable but uncertain (either in amount or timing) on the reporting date. The amount is based on a best estimate of the future cash outflow. Provisions are tested for adequacy on every reporting date. Other liabilities Liabilities from own insurance business, accounts payable on reinsurance business and other liabilities are stated at par value. Accounts payable on reinsurance business are set off from accounts receivable from reinsurance business if the conditions for offsetting are met. Gross premiums written Gross premiums written comprise all premiums that fell due during the reporting year, regardless whether they relate in whole or in part to periods after the reporting date. These premiums also include the pipeline premiums (if they can only be calculated at the end of the financial year), single premiums, instalment charges in the case of semi-annual, quarterly and monthly premium payments and additional payments from policyholders for expenses borne by the insurance company. Taxes and parafiscal charges levied with or on the premiums are not reported as gross premiums written. Cancellation expenses relating to the reporting year are deducted from the gross premiums.
39
Claims incurred Claims incurred comprise all payments made in the reporting year, including pension payments and policy surrender payments as well as external and internal claim settlement costs. The item ‘Change in reserve for outstanding claims’ equals the difference between the reserve for outstanding claims at the end and the beginning of the financial year, less the difference between the claims under recourse at the end and the beginning of the financial year in accordance with par. 14(e) VersAV. When the difference is calculated, the reserves for claims that were incurred but not yet reported in the financial year and for non-life insurance claims that have to be settled in the form of a pension are also taken into account. Expenses for insurance business The acquisition costs include the costs that can be charged to individual insurance contracts immediately upon acquisition, in particular the acquisition and renewal commission and advertising costs as well as the costs for processing the application, issuing a policy and recording the contract in the portfolio. The administration expenses primarily include the expenses for premium collection, portfolio management, premium refund administration and reinsurance processing. This item also includes the commission for collection and portfolio management commission.
4.3.3 | Notes to the consolidated balance sheet Intangible assets In 2014, the intangible assets changed as follows:
IN CHF Costs for establishing and expanding business operations Other intangible assets Total
Balance at 01.01.
Additions
Disposals Write-downs
Balance at 31.12.
322 331
140 000
——
—134 009
328 322
3 936 362
8 253 297
—1 615
—2 254 412
9 933 632
4 258 693
8 393 297
—1 615 —2 388 421
10 261 954
The increase in other intangible assets mostly derives from investments in software and includes capitalised expenses of CHF 2 844 875 for internally produced assets (previous year: CHF 1 554 816).
elipsLife | Annual report 2014
40
Consolidated f inancial statements
Bonds and other fixed-interest securities Bonds and other fixed-interest securities mainly comprise government bonds with a rating of AA or better. Deposits with banks include fixed deposits with terms of 4 to 12 months for CHF 29 579 475 (previous year: CHF 27 927 901) and cash not yet invested of CHF 1 017 652 (previous year: CHF 13 618 795).
IN CHF
Balance at 01.01.
Bonds and other fixed-interest securities
97 557 564
Deposits with banks
41 546 696
Disposal
Redemption
Foreign currency effect
Balance at 31.12.
75 619 628
—43 469 381
—2 173 292
—197 618
127 336 902
80 530 567
—90 752 757
23 998
—751 377
30 597 127
Additions
BONDS AND OTHER FIXED-INTEREST SECURITIES IN CHF Historical cost
31.12.2014
31.12.2013
130 307 422
99 689 733
Amortisation
—2 970 520
—2 132 169
Carrying amount at 31.12.
127 336 902
97 557 564
Market value
130 698 613
97 331 082
Other receivables Receivables due from policyholders mainly consist of receivables from the reinsurance and broker business in the Netherlands where final statements for the second half-year 2014 are only prepared in Q1 2015. Receivables due from insurance brokers mainly include receivables from the Irish health insurance business where the main renewal season is November and December. Other receivables include rent deposits for the rented offices. Property, plant and equipment In 2014, amounts for property, plant and equipment changed as follows:
IN CHF Furniture
Balance at 01.01.
Additions
Disposals Write-downs
Balance at 31.12.
647 030
288 594
——
—103 545
Hardware / equipment
776 198
350 418
—623
—331 839
794 155
Interior finishing
314 399
202 957
—11 995
—121 953
383 407
1 737 627
841 970
—12 618
—557 338
2 009 641
Total
The fire insurance value of the business inventory is CHF 2.8 million (previous year: CHF 1.8 million).
832 079
41
Equity The share capital of elipsLife is CHF 12 400 000, divided into 124 000 registered shares with a par value of CHF 100 each. In the 2014 financial year, contributions of CHF 7 000 000 were made to the capital reserve (previous year: CHF 47 000 000).
STATEMENT OF CHANGES IN EQUITY Balance at 01.01.2013
Called-up Organisation capital fund 12 400 000
Contributions 2013
Capital reserve
10 100 000 42 800 000
Retained earnings
Loss carryforward
14 875 —6 137 448
47 000 000 5 207 286
5 207 286
5 207 286
111 384 713
10 100 000 89 800 000
14 875 —6 137 448 9 516
5 197 770
—5 207 286
——
12 400 000
10 100 000 89 800 000
24 391
—939 679
——
111 384 713
Contributions 2014
7 000 000
7 000 000
Profit 2014 Balance at 31.12.2014
59 177 427
12 400 000
Appropriation of earnings 2013 Balance at 01.01.2014
——
47 000 000
Profit 2013 Balance at 31.12.2013
Profit for the period Total equity
9 634 185 12 400 000
10 100 000 96 800 000
24 391
—939 679
9 634 185
9 634 185 128 018 898
Technical reserves The technical reserves totalled CHF 259 688 892 on the reporting date (previous year: CHF 221 330 798). As in the previous year, the increase in the technical reserves is directly related to the growth experienced by elipsLife’s insurance business. Unearned premium reserves are only set up for the non-life business of Elips Insurance Ltd in Ireland. Exercising the option under VersAV Annex IV par. 8c, the unearned premium reserve is reduced by deducting the deferred acquisition costs. Deferred acquisition costs of CHF 21 775 759 were deducted from the gross unearned premium reserve (previous year: CHF 21 802 461). UNEARNED PREMIUM RESERVE IN CHF 1. Gross amount Unearned premium reserve Deferred acquisition costs 2. Of which: reinsurers’ share Unearned premium reserve Deferred acquisition costs
31.12.2014
31.12.2013
201 092 616
195 906 122
222 868 375
217 708 583
—21 775 759
—21 802 461
—100 798 066
—97 953 061
—111 685 945
—108 854 291
10 887 879
10 901 230
Both the actuarial reserve and the reserve for outstanding claims contain provisions for claim handling and settlement costs. The claims equalisation reserve includes the statutory reserve for the accident insurance business in Liechtenstein and Switzerland pursuant to Art. 81e of the Liechtenstein Ordinance on Accident Insurance (UVersV) and Art. 111.1 of the Swiss Ordinance on Accident Insurance (UVV). The provision for premium refunds includes provisions for policyholder dividends and for policies with profit participation.
elipsLife | Annual report 2014
42
Consolidated f inancial statements
Other provisions The other provisions mainly include provisions for employee bonuses and a provision for unused vacation. Liabilities from own insurance business The liabilities from own insurance business due to other creditors comprise the following: IN CHF
2014
2013
Prepaid premiums for 2015
8 174 739
4 321 404
Payments to policyholders
726 587
212 580
——
25 788 784
Insurance contributions Ireland Payments to insurance brokers* Total
786 829
329 140
9 688 156
30 651 908
* Payments to insurance brokers include commission paid to agents and brokers and insurance benefits that are paid out to policy holders via agents and brokers.
In the previous year, the insurance contributions in Ireland of CHF 49 144 515 were reported net together with the claims payments of CHF 23 355 731 as per the actuarial report. This year, the insurance contributions in Ireland of CHF 55 080 333 are included in the tax liabilities. Claims payments as per the actuarial report of CHF 23 410 750 are now included in the reserves for outstanding claims. Accounts payable on reinsurance business On the reporting date, net payments of CHF 97 514 927 were due under reinsurance contracts with companies of the Swiss Re Group (previous year: CHF 127 436 151). elipsLife has the contractual right to set off the outstanding accounts payable and receivable for each reinsurer. Other liabilities The insurance contributions in Ireland of CHF 55 080 333 (previous year: CHF 49 144 515) were reported as tax liabilities on 31 December 2014 (previous year: liabilities from own insurance business).
43
4.3.4 | Notes to the consolidated income statement Net premiums earned In the 2014 financial year, elipsLife earned premiums of CHF 327 397 479 (previous year: CHF 272 831 603). These are assigned to the life and non-life business of elipsLife as follows: 2014 IN CHF Gross premiums written Reinsurance premiums ceded
Non-life insurance
Life insurance
95 003 615
570 242 967
71 181 148
492 206 278
—47 904 808
—285 514 448
—35 590 924
—246 106 457
47 098 807
280 298 673
35 590 224
237 241 380
Unearned premium reserve, net Total net premiums earned
2013
Life insurance
Non-life insurance
—4 429 846
—8 858 441
The gross premiums written derive from the following markets: IN CHF Liechtenstein The Netherlands, Belgium, Luxembourg
2014
2013
3 592 230
3 349 949
72 295 375
50 017 016
Ireland
516 984 159
467 060 459
Switzerland
71 090 309
41 826 655
Other Total gross premiums written
1 284 509
1 133 347
665 246 582
563 387 426
The life insurance premiums are comprised as follows: IN CHF Premiums for group contracts: of which recurring premiums of which single premiums
2014
2013
95 003 615
71 181 148
95 003 615
71 181 148
——
——
Premiums for policies without profit participation
68 501 952
50 639 314
Premiums for policies with profit participation
26 501 663
20 541 834
Other technical income, net This is mostly commission income on reinsurance business ceded to companies of the Swiss Re Group. Commission is determined at arm’s length. Claims incurred Claims incurred (gross) include cost allocations under VersAV Annex IV par. 24 of CHF 9 418 256 (previous year: CHF 4 090 879).
elipsLife | Annual report 2014
44
Consolidated f inancial statements
Expenses for premium refunds, net This item includes expenses for performance related premium refunds. The profit participation models are based on the performance of individual contracts or contract groups (pools). Expenses for own insurance business In the 2014 financial year, commission payments (acquisition, renewal and portfolio commission) amounted to CHF 28 953 138 (previous year: CHF 24 700 633). In accordance with VersAV Annex IV par. 24, personnel and operating expenses are split between the items ‘Claims incurred (gross)’, ‘Acquisition costs’, ‘Administration expenses’, ’Asset management expenses and interest expenses’ and ‘Other expenses from ordinary activities’. The expenses are split according to the number of employees in each function. Investment income and expenses IN CHF
2014
2013
Investment income
2 869 324
1 973 011
Redemption of bonds and other fixed-interest securities
—2 152 357
—1 633 294
716 967
339 717
Total current income from other investments Profit/loss from disposal of investments Asset management expenses Profit/loss from investments
44 552
439
—203 768
—135 219
557 751
204 937
Taxes In the 2014 financial year, elipsLife paid income taxes of CHF 2 679 649 (previous year: CHF 2 185 624).
45
4.3.5 | Other disclosures Personnel expenses and remuneration for the Board of Directors and Executive Board In the 2014 financial year, elipsLife employed 106.1 people on average (previous year: 75.3). Personnel expenses (before the capitalisation of expenses for internally created assets) totalled CHF 20 293 574 in the reporting year (previous year: CHF 15 192 906). This amount includes salaries and wages of CHF 15 547 395 (previous year: CHF 11 543 485), social insurance contributions and contributions to retirement benefit plans of CHF 2 825 779 (previous year: CHF 2 303 684), and other personnel expenses of CHF 1 920 400 (previous year: CHF 1 345 737). In the reporting year, the total remuneration paid to the Executive Board amounted to CHF 2 546 482 (previous year: CHF 1 915 341). All the members of the Board of Directors represent the parent company and are paid for their activities by the parent company. elipsLife does not make any additional payments to the Board of Directors. Auditor’s fees The auditor’s fees for the audit of the 2014 annual financial statements amounted to CHF 310 882. This includes the audit of the FMA report and the annual report. CHF 35 750 was invoiced in the reporting year for other auditing and attestation services. Disposal restrictions For the branches in Zurich and Amstelveen and the office in Basel, rent deposits have been pledged as security of CHF 553 935 (previous year: CHF 378 930). According to the regulatory provisions for insurance business in the Netherlands Antilles, an amount of CHF 217 446 has been deposited with a local bank as a guarantee fund. Events after the reporting date On 15 January 2015 the Swiss National Bank decided to abandon the peg of CHF 1.20 to the euro. Given its exposure to the European business sector, elipsLife is affected by this decision at different levels. The value of the net assets relating to the euro business of CHF 60 million as at 31 December 2014 has to be adjusted to the new euro exchange rate. The eurozone’s contribution to the profit will decline in 2015, while the resulting contraction in interest rates is reason enough to expect a further reduction in profits. This not only concerns the expected return on investments, but will also potentially affect the calculation of the technical reserves.
elipsLife | Annual report 2014
46
Consolidated f inancial statements
4.4 | Auditor’s report The English translation of the auditor’s report is for information purposes only. As elipsLife’s official audited Annual Report is in German, please refer to the German version for the signed auditor’s report.
Report of the statutory auditor to the general meeting of Elips Life AG Triesen
As statutory auditor, we have audited the accounting records and the consolidated financial statements (balance sheet, income statement and notes) and the consolidated management report of Elips Life AG for the year ended 31 December 2014. These consolidated financial statements and the consolidated management report are the responsibility of the board of directors. Our responsibility is to express an opinion on these financial statements based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence. Our audit was conducted in accordance with auditing standards promulgated by the profession in Liechtenstein, which require that an audit be planned and performed to obtain reasonable assurance about whether the consolidated financial statements and the consolidated management report are free from material misstatement. We have examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the accounting principles used, significant estimates made and the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the accounting records and consolidated financial statements, and the consolidated management report and the proposed appropriation of available earnings comply with Liechtenstein law and the company's articles of incorporation. The consolidated management report is in accordance with the consolidated financial statements. We recommend that the consolidated financial statements submitted to you be approved.
PricewaterhouseCoopers Ltd
Enrico Strozzi
Michael Stämpfli
Auditor in charge
Zurich, 8 April 2015
PricewaterhouseCoopers Ltd, Birchstrasse 160, Postfach, 8050 Zürich Telephone: +41 58 792 44 00, Facsimile: +41 58 792 44 10, www.pwc.ch PricewaterhouseCoopers Ltd is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
2
About elipsLife
Internet More information on the figures and performance of the company, also during the course of the year, is available on our website www.elipsLife.com
Contact addresses elipsLife Landstrasse 40, LI-9495 Triesen, T +42 3 239 95 55, F +42 3 239 95 54, contact@elipslife.com elipsLife branch office in Zurich, Switzerland Thurgauerstrasse 54, P.O. Box, CH-8050 Zurich, T +41 44 215 45 45, F +41 44 215 45 44, contact@elipslife.com elipsLife branch office in Amsterdam, the Netherlands Startbaan 8, P.O. Box 191, NL-1180 AD Amstelveen, T +31 20 7 55 98 00, F +31 20 7 55 98 99, contact.nl@elipslife.com
Publishing details The English translation is provided for information only. The original German version is the official version of the audited document. Š elipsLife 2015
www.elipsLife.com
elipsLife Landstrasse 40 9495 Triesen Liechtenstein T +423 239 95 55 F +423 239 95 54 contact@elipslife.com