Annual report
Key figures
Gross premiums earned Gross claims* Profit Total assets** (in CHF) Equity** (in CHF) Full-time equivalents** (ohne Externe)
* incl. change in reserves ** total as at 31.12.2015
2015
2014
670.1 m
655.9 m
–555.3 m
–531.7 m
1.3 m
9.6 m
545.6 m
557.9 m
138.4 m
128.0 m
140
115
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 environment _______________________________________________ 18
3.2.2 Existing markets _____________________________________________________ 20
3.2.3 Expansion into new markets ________________________________________ 21
3.2.4 International presence _______________________________________________ 22
3.3
Guarantees of success ______________________________________________________ 23
3.3.1 Sustainable relationships and total solution approach ____________ 23
3.3.2 The right employees as the key to success ________________________ 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 Solvency II ____________________________________________________________ 28
3.4.5 Risk management ____________________________________________________ 28
3.4.6 Internal audit _________________________________________________________ 28
3.5
Introduction of Solvency II __________________________________________________ 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 2015
Preface
5
1 Further strengthening our customer promise in a d ifficult environment The Swiss National Bank’s decision on 15 January 2015 to decouple the Swiss franc from the euro peg had a strong impact on the financial performance of elipsLife. In addition, the reporting year was dominated by volatility of the kind faced by every fast-growing business. However, elipsLife successfully mastered all challenges and ended the past year with a small profit. On behalf of the Board of Directors I would like to thank all our employees for their great commitment to our company under these difficult circumstances. During the reporting year, elipsLife continued its transformation from a fast-growing start-up to a recognised insurance company. We made substantial investments in a number of new IT modules so that our customers can now benefit from an ultra-modern system landscape. The IT systems are still being optimised further: in future, comprehensive process support at all times will allow us to provide our customers with the best possible services. Simultaneously, the system landscape will give us the greatest possible flexibility to introduce new products and materially support our expansion into new markets. Our sole shareholder Swiss Re announced in November 2015 that elipsLife will join its new Life Capital business unit at the beginning of 2016, reaffirming its commitment and obligation to elipsLife. With this decision Swiss Re not only underlines the positive growth expectations for the employee benefits business, but also the conviction that elipsLife is well placed to participate in this development. The prospects for 2016 are very encouraging: by expanding into Germany and Italy, elipsLife has gained access to two of the biggest European markets for employee benefits insurance. The introduction of the last modules of the integrated system landscape will elevate our services for business partners and customers to a new level. And finally, I expect the synergies from the Life Capital e nvironment to further strengthen our company. Luc Albert Chairman of the Board of Directors of elipsLife
From a start-up to a 足recognised insurance company
elipsLife | Annual report 2015
8
Foreword by CEO
2 The day that changed everything Thinking back to the beginning of 2015, nobody remembers New Year’s or Twelfth Day. No, history was made on 15 January. On that morning I was on my way to a customer event when my colleague looked at his mobile phone and read out loud: “The National Bank has just announced that it is abandoning the peg between the Swiss franc and the euro.” This immediately ripped my thoughts from new business and loss ratios, and I wondered how the SMI and Swiss franc would react to this announcement. Soon we knew that the franc/euro exchange rate was 1:1 after the franc dipped below parity for a short while. And by the end of trading on 15 January, the SMI was down around 8.5 % from the previous trading day, but at times it had lost as much as 14 %. I immediately realised that this decision by the SNB would have serious consequences for elipsLife. Not only because we chose the Swiss franc as our reporting currency all those years ago, but also because by now we were earning some 80 % of our premium volume in the eurozone. In addition, just one week earlier the Executive Board had been talking about hedging, but we decided against doing so because of the minimum exchange rate fixed by the SNB. And thirdly, I was aware that elipsLife surely had more than EUR 100 million on its books, if only for asset-liability reasons. An amount that would change greatly, depending on the exchange rate at the end of 2015 – a one-time effect, sure, but still one that would have had a very painful impact of more than CHF 20 million on the balance sheet in those minutes of parity. Added to this we were also very successful in the Neth erlands, Belgium and Ireland in the past years, and those revenues and profits were cut instantly by around 20 % by the SNB’s decision. I knew then that we would have to battle to remain profitable and prevent a collapse in the 2015 financial year. A real moose test! And indeed, 2015 was dominated by the development of the Swiss franc/euro exchange rate. Technically speaking this was also an irregular financial year. In some countries we were confronted by unexpected and negative surprises in certain lines of business. At the same time, growth was consid erable better than expected in all markets and all lines of business, in spite of stronger international competition. As the Swiss franc recovered somewhat in the last quarter and we posted a better result than forecast for the last two quarters in the Netherlands in spite of an unusual loss burden in the normally profitable whole life business, elipsLife managed to post a profit of CHF 1.3 million in this difficult reporting year. I would like to take this opportunity to warmly thank all the employees of elipsLife for their outstand ing performance and enormous commitment in this turbulent year.
9
The reporting year saw elipsLife continuing to develop its process and IT landscape. At times, almost 20 % of our employees were working on these major projects. This enormous workload convinced us of the need to exactly measure whether we can actually offer our customers the quality that we promise.
In the difficult financial year 2015, elipsLife proved that it can stay on course and weather even big storms. We established that the absolute number of complaints was higher – understandably, because elipsLife posted more than 20 % growth in its core business year-on-year. The number of complaints in relation to the size of the business, however, was on a par with the previous year. The annual renewal round also confirmed that our customers are as satisfied as ever: happily we received very few termination notices, even though in Switzerland some daily sickness allowance contracts had to be readjusted. In summary it can be said that a difficult year could be ended on a conciliatory note, which shows that elipsLife is stable enough by now to stay on course and weather even big storms. Or to put it another way: elipsLife has passed the moose test in 2015! Reto Toscan CEO of elipsLife
Considerably better growth than expected in spite of strong competition
elipsLife | Annual report 2015
12
Consolidated annual report
3 Consolidated annual report 3.1 | Management report 3.1.1 | Business development As mentioned before in the foreword by the Chairman of the Board of Directors and the CEO’s com ments, the 2015 financial year was dominated by the currency tumult unleashed by the removal of the Swiss franc/euro peg. The persistently strong growth experienced in all markets relevant for elipsLife and the noticeable recession in Europe – and in particular in Switzerland following the Swiss franc shock – also left a mark. Internally, the ongoing projects to improve the application and process landscape and the final preparations for Solvency II, the new solvency regime for the insurance industry from 1 January 2016, absorbed a great deal of capacity. The figures reflect these developments rather well. Premiums earned rose by CHF 14.2 million in the reporting year to CHF 670.1 million. In contrast to the previous year, however, the profit did not increase but dropped to CHF 1.3 million because of the scrapping of the euro peg of CHF 1.20. To achieve a positive result under these difficult circumstances, however, is already a success. elipsLife improved its premium volumes in its core business to CHF 190.6 million. The Irish health insurance business did very well again in the reporting year and made an excellent contribution to the overall result. Although this has not always been the case, a good result was even more import ant than usual in 2015. It is also worth mentioning that the number of insured in Ireland rose sharply as a result of the lifetime community rating. As in the previous year, substantial investments were made in the IT infrastructure and in particular in IT software to enable us to achieve our ambitious plans for future growth without losing sight of the required quality, efficiency and governance. elipsLife reached the most important milestone in the new core life system in the reporting year with the complete rollout of the premium system for all countries and lines of business. This makes elipsLife one of very few international life insurance providers, if not the only one, with a multi-currency, multi-national and multi-language solution. This means that the company can operate in all countries with the same administrative system, making it possible to offer cross-border solutions for international customers and guaranteeing an efficient and lean IT system using considerably fewer core systems than any country-specific approach. This in turn has a positive effect on the administrative costs. In spite of these big investments and the corresponding increase in depreciation and amortisation, the cost ratio for the reporting year was 5 %.
13
Cost and combined ratios, consolidated
Premiums and claims, consolidated
555.3
531.7
242 %
194 %
149 %
140 %
2012
2013
2014
2015
2009*
Gross premiums earned Gross loss (incl. change in reserves)
2010*
2011
Cost ratio
4 %
2012
2013
in CHF million
in CHF million
4 %
2014
5 %
2015
Combined ratio
Premiums and equity, consolidated
Profit before income tax, consolidated
99 %
58 %
91 %
9 %
2011
96 %
655.9
10.8
139.8 2010*
97 %
7.5
1.4
2.2
3.2
3.6
2009*
105.7
97 %
545.7
12.3
670.1
453.0
545.7
655.9
670.1
in CHF million
7.4
2012
2013
2014
2015
2009*
2010*
2011
Gross premiums earned Equity
* 2009 and 2010 only Elips Life Ltd, from 2011 consolidated figures
2012
2013
2014
138.4
128.0
59.2
19.4
2011
10.8
2010*
9.3
2009*
2.2
–3.5 12.2
–2.9
3.6
–3.3
139.8
3.2
1,5
111.4
4.0
2015
elipsLife | Annual report 2015
14
Consolidated annual report
Together, the two insurance carriers Elips Life Ltd and Elips Insurance Ltd reported a profit for the reporting year, albeit one that is relatively small because of the impact of the above external factors. Elips Life Ltd posted a loss of CHF 1.42 million, while Elips Insurance Ltd reported a profit of CHF 2.76 million. To calculate the consolidated result, a Swiss franc/euro exchange rate of 1.0682 was used for the income statement and 1.0874 for the balance sheet items. It was clear once again in the re porting year that geographic diversification is important for elipsLife, helping it to better compensate for local differences, particularly when it comes to incapacity for work and disability insurance. Thanks to consistent cost management and constant price increases, the Irish health insurance busi ness once again returned a disproportionately high profit in the reporting year. However, our busi ness partner Laya Healthcare was taken over by AIG, and the coming months will show the effects of this change in ownership for Elips Insurance Ltd as the underwriter.
3.1.2 | Investments, equity, solvency Investments As elipsLife mainly focuses on insurance business that is binding in the short term such as whole life or health insurance, the investment strategy could not be changed materially in the reporting year. The yield was very modest and at 0.275 % was lower in 2015 than ever before as a result of the in vestments in time deposits and bonds as well as the negative interest rates. It should be said that this investment strategy has been selected specifically to make the risk capital available to the insurance business, which is seeing strong growth. Equity and solvency The reporting year was a special year as regards the capital adequacy requirements as it was the last year under the old Solvency I regime and the impact of the upcoming introduction of Solvency II could already be felt. As elipsLife continued to grow strongly in 2015, its equity was strengthened again for the umpteenth time. Naturally this capital increase also took into consideration the Solvency II requirements. In the reporting year, the sole shareholder Swiss Re paid in CHF 9.0 million to increase the equity of Elips Insurance Ltd.
3.1.3 | Risks As is the annual practice, elipsLife’s strategy was reviewed and adjusted where necessary in spring 2015. The strategy was mostly left the same, except for a stronger focus on additional growth. As the strategy remains focused on running the risk business on biometric lines, elipsLife’s risk landscape is more or less unchanged. Volatilities triggered by recession, market developments and anti-selection are the greatest risk, which elipsLife tries to cushion or reduce with a sophisticated reinsurance pro gramme and measures such as portfolio diversification.
15
Premiums and claims, core business
in CHF million
in CHF million
31.9
52.2
64.5
96.3
113.0
545.7
2012
2013
2014
Switzerland/Liechtenstein Benelux Ireland Other
2015
2009*
2010*
7.5
2011
10.8
2010*
1.4
2009*
2.2
10.8
3.2
2.2
3.6
139.8
3.6
159.3
670.1 148.3
655.9
190.6
Premiums, consolidated
2011
2012
2013
2014
2015
Gross premiums earned Gross loss (incl. change in reserves)
Premiums, core business
Full-time equivalents at end of financial year
Share by market
140 4 %
2 % 1 %
115 86 55
52 %
41 %
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
2015
elipsLife | Annual report 2015
16
Consolidated annual report
Because it focuses on the biometric risk business, elipsLife was again not overly exposed to the cap ital markets in the reporting year, which is a great relief in the current situation. The currency risks, however, were at the top of the watch list as the removal of the minimum interest rate meant that there was a risk that the euro could weaken even more against the Swiss franc. Developments were watched closely and measures were formulated to diminish the risks. As elipsLife continues to grow, the operational risks increase. Measures were formulated and imple mented at a very early stage to monitor these risks with automated processes and thus to improve the efficiency and quality of the control processes. The regulatory risks at elipsLife are negligible, as we offer only insurance coverage and solutions that comply with the applicable social insurance systems in elipsLife’s target markets. Events after the reporting date The competent supervisory authorities issued the licences needed to start business operations in Germany (branch in Cologne) and in Italy (branch in Rome) after the reporting date.
3.1.4 | Future development elipsLife, which is owned by the Swiss Re Group, has been part of the new Life Capital business unit since 1 January 2016. Life Capital is the umbrella unit for all of Swiss Re’s primary life insurance activities. This new organisational structure does not directly affect the customers, business model or future strategy of elipsLife, but elipsLife will certainly be able to benefit from the synergies created by Life Capital, in particular with regard to growth. The expansion of its business activities in Europe to include Germany and Italy will help elipsLife to consistently implement its plans for growth and reach its ambitious growth targets. A consistent approach to cost management has also given elipsLife price advantages in the market which now have to be protected in spite of the important investments. The company will therefore continue to pay close attention to cost manage ment. In the medium term, elipsLife also wants to continue to optimise costs and to improve the cost ratio by investing in its IT infrastructure. For 2016, elipsLife is expecting strong premium growth and the continuation of its success story.
Price advantages in Âmarket thanks to efficient cost management
elipsLife | Annual report 2015
18
Consolidated annual report
3.2 | elipsLife in the market 3.2.1 | Business environment Target markets elipsLife focuses its business activities on European countries where the people earn a high and stable income. In the reporting year, these included Switzerland, the Netherlands, Belgium and Liechtenstein. elipsLife’s solutions build upon the historic social insurance systems and are designed to comprehensively eliminate all gaps in insurance cover. Social environment In 2015, Europe was flooded by refugees as a result of poverty, the turmoil of war and terrorism. The stream of refugees and many terrorist attacks pose serious challenges to Europe as regards integra tion and safety. The insurance industry also has to face up to these problems. Centres with a high insurance density and increased risk of terrorism should be investigated more closely when it comes to insurability. Although the waves of migration will likely slow down the demographic greying of the population in Europe, they will hardly put a brake on this process. The ongoing decline in birth rates and continu ing improvement in mortality rates mean that people can enjoy many more years of life after their retirement, but this also puts enormous financial pressure on retirement provision systems. The macroeconomic environment in Europe For elipsLife, the 2015 financial year was overshadowed by the scrapping of the euro floor, the expansionary monetary policy of central banks and the persistently low interest rates. The SNB’s decision brutally demonstrated the dangers of exchange rate dependency to many export-oriented Swiss companies. The jump in production costs compared to the euro zone caused enormous price pressure, and many companies had no choice but to move parts of their production abroad or even discontinue some of their activities, all of which had a predictable impact on economic growth and the insurance industry, where the growing pressure on employees most notably affected the disability business. The macroeconomic environment is also still dominated by low interest rates, as these increase the price of technical liabilities and pose huge challenges to the ability of insurance companies to man age their assets and liabilities and optimise their use of capital. Insurance solutions offering too high guaranteed interest rates are particularly capital-intensive. As elipsLife focuses on pure biometric products, it benefits from not having to provide a guaranteed income on savings premiums. It is only the pension products that are affected by the low interest rates by way of higher risk premiums.
19
Regulatory environment The regulatory environment is dominated by the introduction of Solvency II. The rules of Solvency II pose huge challenges to all insurance companies with regard to capital adequacy, risk management, corporate management and transparency in reporting. In many respects, Solvency II without a doubt takes better account of the ultimate value proposition for insurance companies – security – than previous solvency systems, but ironically, the complexity of the new rules creates a new and hardly insignificant risk for insurance companies. The actual need for capital is also likely to fluctuate more in future, which makes it essential to have a solid capital base. As a Swiss Re subsidiary, elipsLife benefits from the financial stability and strength of its parent company. elipsLife is well equipped to meet the Solvency II guidelines. Market environment Social change, macroeconomic uncertainties and growing regulatory complexity have worsened the business environment for life insurers in Europe. Because of the low interest rates and greying of the population, life insurers face great challenges when it comes to retirement provision, particularly in those markets where politicians are insisting on too high interest rate guarantees for retirement pensions. High yields can only be earned with a higher investment risk, which in turn requires more capital. For historic reasons most life insurers are exposed to the pension business and thus experience challenges with their product strategy. If they wish to remain competitive in the long run, they have to reduce their production costs per insurance unit. This moves the spotlight to the administrative and capital costs. In order to reduce the administrative costs, internal processes have to be optimised in those areas where bulk processes can be IT-supported and media breaks can be largely avoided. To reduce the capital costs, optimised reinsurance models should be applied. As there is a strong natural link between capital requirements and product portfolios, the restructuring of product portfolios is very likely. In summary then, success will be determined by three things: putting the focus on the right solutions, designing these solutions to be cost-effective, and selling these products in the commodity insur ance environment by offering a personalised and customised service that rewards the customer with an overwhelmingly positive experience. elipsLife has a sustainable vision and strategy of joining forces with its distribution partners to offer tailor-made biometric solutions with a good price-benefit ratio to its customers.
elipsLife | Annual report 2015
20
Consolidated annual report
3.2.2 | Existing markets In the existing markets, the 2015 financial year was dominated by the common factors described in section 3.2.1 ‘Business environment’, which on balance resulted in fiercer competition and a difficult price situation. In addition to these common factors, there were also specific issues affecting each of the different target markets, the most important of which are briefly described below. Developments in Switzerland/Liechtenstein The consolidation of pension funds and collective foundations continued in Switzerland and Liechten stein, increasing the risk capacity of the remaining pension schemes. This has the potential to reduce the volumes ceded to insurance companies and intensify price competition. Medium-sized employers increasingly abandoned the idea of managing their own pension funds and looked for modular administration, asset management and biometric solutions. Smaller companies without their own pension funds also showed interest in this modular approach. elipsLife met these needs by developing the elipsLife BVG solutions. This approach will be expanded in the coming years in order to achieve sustainable growth in the L&H business, paired whenever possible with accident and daily sickness benefits solutions that offer comprehensive support to customers. Another important factor in the Swiss and Liechtenstein markets was the almost without exception weak figures for the daily sickness benefits insurance. As a result, the premiums for daily sickness benefits insurance had to be increased substantially for the first time in many years in an effort to reduce the loss ratios for this segment to a sustainable level again, which is absolutely essential for a healthy and well-functioning insurance market. Against this background, elipsLife’s prospects in Switzerland and Liechtenstein are good. The company has a very good chance of establishing a good mix of insurance lines and generating positive technical results for each of these lines. Developments in the Netherlands In the Netherlands, elipsLife further expanded its market position with the Premium Pension Institu tions (PPI), and all important PPI now work with elipsLife. elipsLife is an attractive partner for PPI as they share similar interests – administration, asset management (banks) and biometric solutions. The PPI business is very attractive for elipsLife because of the low administrative costs, but the lack of opportunities for interaction makes it more difficult to maintain customer relationships. Developments in the Dutch market were also shaped by the successful introduction of a new product for salary components in excess of EUR 100,000, which have been taxed differently since 1 January 2015. elipsLife and an important international distribution partner were the first to come up with a solution. In the first year, elipsLife already signed up over 100 new companies with more than 9,000 affiliates offering interesting down-selling opportunities. Another successful cooperation project with a distribution partner involving an innovative disability product generated additional growth. This innovation was the successful reaction of the distribution partner and elipsLife to a change to the law.
21
elipsLife aims to further adjust its products to the needs of its customers and to complete its product range in the Netherlands. The above examples clearly demonstrate that certain elements of the elipsLife culture such as speed and flexibility can successfully promote growth. They also show that legal, regulatory or fiscal changes always also offer an opportunity to outpace the competition. The culture and positioning of elipsLife are thus key elements ensuring the success of the next growth phase in its existing and new markets.
3.2.3 | Expansion into new markets elipsLife still has potential for sustainable and profitable growth in its current core markets in Switzerland/Liechtenstein and the Netherlands/Belgium. Its holistic advisory and service concept for biometric personal insurance solutions plays a key role here. This approach is not only the ‘recipe for success’ in the current core markets, but also serves as the basis for a successful expansion strategy in Europe. Now that elipsLife has established an excellent position in its core markets in a short time, the company will further expand its strategic position in Europe in 2016. A new branch office for Germany will therefore be opened in Cologne in the first quarter of 2016, and in Italy a new branch office will be opened in Rome. As an innovative insurance company offering biometric life insurance products, elipsLife wanted first to identify and understand the needs in the new target markets before designing a customised so lution concept together with the right strategic partner. The goal was and still is to sustainably meet the needs of the market, the brokers and the customers and to close the identified gaps in insurance cover in the best way possible. elipsLife will offer a novel solution in Germany. The ‘income protection pension’ covers the income that is lost as a result of a reduced ability to work, regardless of the profession, and provides customised cover for the gaps left by the German social insurance system. This innovative product is, compared to the existing disability insurance product (BU) offered in the German market, a very at tractive and affordable insurance solution for all professional groups. In Italy, elipsLife entered into a strategic cooperation project with RBM Salute S.P.A., an Italian third-party administrator and market leader in the health insurance and pension fund business. The new ‘welfare’ insurance solutions consist of customised combinations of insurance benefits for death, disability and long-term nursing care. Thanks to the strategic cooperation with RBM Salute S.P.A., elipsLife can gain a foothold in a profitable market. In addition to a competitive product, competitive rates and a sustainable sales and advisory strat egy, a strong network with reliable partners is needed for a successful market entry. elipsLife has everything it needs to confidently expand into Germany and Italy.
elipsLife | Annual report 2015
22
Consolidated annual report
3.2.4 | International presence
Head office Liechtenstein (Triesen) Core markets Switzerland, branch in Zurich The Netherlands, branch in Amstelveen Germany, branch in Cologne Italy, branch in Rome Other markets Belgium Ireland
23
3.3 | Guarantees of success For elipsLife, 2015 was a financial year filled with challenges such as the development of the Swiss franc, the noticeable recession in Europe and intensified global competition. In such difficult situations it is even more important to be able to rely on proven strengths. In the reporting year, these in particular included elipsLife’s sustainable distribution network of brokers, pension fund advisors, banks and associations. And once again the employees, who could provide the customers with a noticeably better service than our competitors.
3.3.1 | Sustainable relationships and total solution approach Strong strategic distribution partners are the foundation for every successful distribution model. elipsLife therefore relies on a sustainable distribution network of brokers, pension fund advisors, banks and associations in all markets. This network was constantly expanded in the past few years. For good cooperation, the partners have to actively listen to one another. This is the best way to identify individual needs. The needs analysis must be based on a correct interpretation of the topics that were identified. In this way elipsLife can optimally gear its holistic advisory, service and product package to the needs of its distribution partners and customers and lay the foundation for strategic cooperation. Cooperation is not a static process. A needs analysis is regularly drawn up for all strategic distribution partners. In a market environment where the parameters, participants and broker and customer needs change constantly, regular contact and review of these needs are an essential part of a sus tainable relationship. elipsLife therefore schedules annual meetings with each strategic distribution partner in the first and second quarters. The key topics include a review of the renewal round, the potential for improvement, broker and customer satisfaction, market changes and the joint objectives for the current and following years. Broker and customer satisfaction plays a central role in the annual review. elipsLife can only estab lish and expand sustainable broker and customer relationships if all parties are totally familiar with the joint objectives. It should also be possible to openly and constructively address difficult topics as long-term, promising cooperation is only possible if all parties are willing to discuss critical issues. This makes it possible to identify the areas where the parties can cooperate better and more successfully. Because: what was good last year is not always good enough for the following year.
elipsLife | Annual report 2015
24
Consolidated annual report
In addition to the annual review, elipsLife and the competent distribution partner also schedule follow-up meetings with all strategic customers. At these meetings the customer’s needs and strategic objectives as identified in previous meetings with the distribution manager are reviewed and adjusted, if necessary. elipsLife offers its customers holistic biometric insurance solutions to the financial consequences of sickness and accident. This makes it possible for a single provider to offer a customised solution for each market that does not leave any space for gaps in cover or overinsurance. This total solution approach is a key element of differentiation from our competitors and is an essential factor in our success, along with processes and IT systems designed to support all contract and benefits data. With this approach elipsLife can also create and enable the expansion of added value for the distribution partner who can offer holistic customer advice and engage in strategic cross-selling activities with customers. All of these factors have a positive and sustainable impact on the customer relationship. Thanks to these needs-oriented and competitive solutions and focused cooperation with distribution partners and customers, elipsLife creates a real win-win situation for all parties.
3.3.2 | The right employees as the key to success The aim of elipsLife’s service strategy is to provide a noticeably better service to customers than its competitors. The deciding factor is whether customers believe their needs have been met or exceeded. For elipsLife, ‘better service’ already starts with the distribution partners who advise the mutual cus tomers. In its interaction with its partners and end customers – mostly institutional customers but also natural persons – elipsLife adheres to and actively lives its core values of flexibility, speed, customer orientation, added value and innovation. The employees of elipsLife are a key factor in its success. The recruitment process already determines whether elipsLife has the right people on board to offer services to its customers and partners in a way that visibly portrays its values. Recruitment at elipsLife is done through different channels. In addition to the traditional channels, the company also uses new communication channels such as XING and LinkedIn, aiming to find potential employees in the places where elipsLife is heading. If current employees recommend elipsLife as a n employer, the company has come an important step closer to its goal of finding the right new employees.
25
Once a new employee has been found, much time is spent internally to make him or her an integral member of the elipsLife family. To this end, the members of senior management are initially very involved in the training of new employees. It is considered very important to familiarise all new employees with the company’s values, vision and strategy. This ‘alignment’ needs time, but also makes it easier to see elipsLife as a unit, something which is often confirmed by the customers. New employees get to know all the company’s departments, and this helps them find their feet in a new environment. An important part of the employee relationship is the annual performance assessment. At elipsLife, the annual review measures not only the quantitative and qualitative results, but also the employee’s conduct with regard to all values. In this way the company makes sure that the focus always falls on the corporate values, also when employees are groomed to take over management positions. The company’s own, customised development programme for management levels 1 and 2 also guarantees that the top managers all share and live the same values. It goes without saying that the elipsLife values play a central role when appointing successors to the most important positions. The objective is to uphold, constantly develop and cement the values that are central to the company. Unfortunately, it is sometimes necessary to dismiss employees, but even the termination of em ployment relationships is done in compliance with the values. Even in difficult situations it should be possible to find a solution that is acceptable to both parties. This is not always easy, as employment relationships often have to be terminated because of subjective experiences or the incompatibility between the self-image and the perception by others. But even though the limitations of such value systems are sometimes laid bare, the goal is still to terminate employment relationships in such a way that the parties can be courteous and look one another in the eyes if they should meet again. In summary then, the search for the best employees is a key assignment for service providers. This search, though, is seldom connected quite so closely with the strategy and DNA of the company as at elipsLife. The focus until now has fallen mostly on finding and recruiting the right people, but in future this will increasingly shift to the retention and development of the best employees.
elipsLife | Annual report 2015
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 Liechtenstein 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. Elips Life Ltd has branches in Switzerland (Zurich), the Netherlands (Amstelveen) and 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. Luc Albert was elected as the Chairman of the Board of Directors to replace Jean-Jacques Henchoz who resigned at the Annual General Meeting in April. The other members of the Board of Directors, Jos Cobben, Bruce Hodkinson, Claudia Cordioli and Julien Descombes, were all re-elected. 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 effi ciency, 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 is 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 manage ment 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 • Determining the business strategy • Determining the organisational structure
27
• Appointing and dismissing the members of the Executive Board • Determining the remuneration of the members of the Executive Board • Structuring the accounting system, financial control, and financial planning • Structuring the risk management and approving the ORSA report • 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 and six extraordinary meetings in the reporting year. The members of the Executive Board usually attend the Board meetings, also for agenda items that concern the ordinary course of business, but they do not have any right to vote. Executive Board The Sales department was split into Sales and Products on 1 May 2015. When Mario Lampert joined the company, Christian Jaggy took over as Chief Product Officer. In the reporting year the Executive Board therefore consisted of the following persons: • Reto Toscan, CEO • Christian Jaggy, CPO • Alberto Franceschetti, CFO • Ralf Hardegger, COO • Mario Lampert, CSO (joined on 1 May 2015) • Kaspar Weiss, CIO 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 incorpo ration. The auditor is appointed by the Annual General Meeting for one year. At the AGM of 14 April 2015, 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 independ ence 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 2015
28
Consolidated annual report
Internal directives and compliance process The Compliance unit issues internal guidelines, trains the employees and monitors compliance with the regulatory 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. Money laundering As a financial intermediary, Elips Life Ltd is subject to the regulations on money laundering of the Principality of Liechtenstein. Local law applies to the branches in Zurich, Amstelveen and Curaçao. As pure risk products are not suited to money laundering, elipsLife is exposed to little risk in this area. Anti-corruption elipsLife does not tolerate corruption and has issued internal guidelines in this respect for all its employees.
3.4.4 | Solvency II The completely revised Insurance Supervision Act was approved by the Liechtenstein parliament in June 2015 and entered into force on 1 January 2016. The new Supervision Act is based on the directive of the European Parliament on the taking up and pursuit of the business of insurance and reinsurance (Solvency II) and will fundamentally change the insurance supervision law in Liechten stein. In addition to new rules for calculating the capital adequacy requirements, stricter regulations for the organisation of an insurance company and its operational risk management structures will apply in future. elipsLife finalised its preparations for Solvency II in the reporting year and is ready for the new supervision regime.
3.4.5 | Risk management elipsLife is exposed to many different risks that are constantly analysed and assessed. Relevant risks are identified and assessed as part of a structured process. The Board of Directors is regular ly 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 revised in the reporting year. Risk monitoring is the remit of the Risk Management Committee, which consists of the Chief Risk Officer, all members of the Executive Board and the Head of Legal & Compliance.
3.4.6 | 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 | Introduction of Solvency II All major insurance companies in Europe have been subject to the new Solvency II guidelines since 1 January 2016. The new guidelines have forced the insurance industry to upgrade their internal risk management procedures and invest in systems and processes. Companies are obliged much more than before to precisely identify, quantify and actively manage their risks and sufficiently cover these by equity capital. This will ensure that insurance companies have sufficient equity capital to fulfil their obligations, even in the case of severe events such as epidemics, natural disasters, a large number of major claims, currency distortions or stock exchange turbulence. elipsLife started its preparations for Solvency II in 2013 by expanding its risk management system and adapting its risk management processes to the requirements of Solvency II. Risk guidelines were implemented for all relevant business processes to ensure that the company only accepts risks that can be covered by its own capital. The calculation of the risk capital required for business operations is an important component of Solvency II. elipsLife prepared an actuarial model that quantifies all risks deemed to be relevant under the European insurance supervision guidelines. This makes it possible to calculate the required capital for each risk item. This model not only enables elipsLife to provide the supervisory authority with information on the company’s capital situation at any time, but can also be used by the com pany to actively plan and manage its future risk exposure and resulting capital requirements. To ensure that the system is effective and coherent and meets all regulatory requirements, Solv ency II requires companies to carry out an annual Own Risk and Solvency Assessment (ORSA). elipsLife already carried out this process in 2014 and 2015 and voluntarily reported the results of these ‘dry runs’ to the supervisory authority. As a result the company gained valuable experience and could make some final adjustments to the process. For elipsLife, Solvency II is more than just a new regulatory provision that has to be observed. It is a comprehensive risk philosophy that encompasses all management processes from product design to the best organisational structure and risk-adequate reinsurance cover. Combining the Solvency II processes with the business and financial planning processes also allows the company to optimise the planning and management of all processes. Thanks to its far-reaching preparations, a strong par ent company that finances its above-average growth with regular injections of equity and a balanced reinsurance structure, elipsLife successfully mastered the introduction of Solvency II on 1 January 2016 and can look forward with confidence to its first financial year under the new solvency regime.
elipsLife’s DNA plays a central role in the recruitment of employees
elipsLife | Annual report 2015
32
Consolidated financial 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
260 487
328 322
13 934 862
9 933 632
194 683 671
157 934 029
123 537 261
127 336 902
71 146 410
30 597 127
267 645 713
308 334 761
12 042 206
27 899 913
255 020 057
279 880 878
I. Receivables from own insurance business
1.
Due from policyholders c) Due from other policyholders
2. Due from insurance brokers
31.12.2014 10 261 954
III. Other investments
31.12.2015 14 195 349
c) Due from other insurance brokers
III. Other receivables
3. Due from other debtors
E. Other assets
583 450
553 970
67 306 418
79 605 655
I. Tangible assets (excluding land and buildings) and inventories
2 090 527
2 009 641
II. Current deposits with banks, post office deposits, checks and cash on hand
65 215 891
77 595 014
IV. Other assets
F. Deferrals
I. Deferred interest and rent
III. Other deferrals
Total assets
——
1 000
1 794 197
1 781 877
1 289 543
1 277 628
504 654
504 249
545 625 348
557 918 277
33
Liabilities and equity (in CHF)
31.12.2015
31.12.2014
138 355 972
128 018 898
1. Subscribed capital
12 400 000
12 400 000
II. Organisation fund
10 100 000
10 100 000
III. Capital reserve
105 800 000
96 800 000
IV. Retained earnings
A. Equity
I. Called-up capital
1. Legal reserve
V. Profit/loss carryforward
VI. Annual profit
D. Technical reserves
450 076
24 391
8 268 822
—939 679
1 337 074
9 634 185
271 639 292
259 688 892
I. Unearned premium reserve
1. Gross amount
190 895 005
201 092 616
—95 523 958
—100 798 066
2. Of which: reinsurers' share
II. Actuarial reserve
1. Gross amount
2. Of which: reinsurers' share
33 365 056 —16 246 468
III. Reserve for outstanding claims
1. Gross amount
74 714 531 —36 822 017
2. Of which: reinsurers' share
233 839 996
248 511 179
—112 134 870
—120 287 076
IV. Provision for premium refunds
1. Gross amount
2. Of which: reinsurers' share
V. Claims equalisation reserve
VI. Other technical reserves
31 455 264
26 770 960
—15 727 632
—13 385 480
375 253
201 897
1. Gross amount
1 135 440
928 548
—567 720
—464 274
6 060 477
4 702 183
2. Of which: reinsurers' share
F. Other provisions
II. Provision for taxes
III. Other provisions
H. Other liabilities
3 461 682
127 223 499
163 553 758
3. Due to other creditors
19 380 401
9 688 156
58 825 200
97 514 927
47 548 411
55 199 847
642 969
404 084
II. Accounts payable on reinsurance business
1 240 501
5 251 487
I. Liabilities from own insurance business
808 991
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
826 518
746 744
2 346 108
1 954 545
545 625 348
557 918 277
As the appointed actuary for elipsLife I herewith confirm that the technical reserves reported in the balance sheet as at 31 December 2015 were raised in accordance with the applicable statutory provisions and acknowledged actuarial principles. Tigran Kalberer | Appointed Actuary for Elips Life Ltd | Milliman AG | Zurich, 11 April 2016 Bernhard König | Appointed Actuary for Elips Insurance Ltd | Milliman AG | Zurich, 11 April 2016
elipsLife | Annual report 2015
34
Consolidated financial statements
4.2 | Consolidated income statement Income statement (in CHF)
2015
2014
333 766 942
327 397 479
II. Technical account 1. Net premiums earned
a) Gross premiums written
b) Reinsurance premiums ceded
c) Change in unearned premium reserve, gross
d) Change in reinsurers' share in unearned premium reserve, gross
2. Investment income
c) Current income from other investments
e) Gain on disposal of investments
4. Other technical income, net 5. Net claims incurred
bb) Reinsurers' share
bb) Reinsurers' share 6. Change in other technical reserves, net
—10 877 270
—9 363 210
5 263 332
4 933 363
765 622
762 192
764 664
716 967
958
45 225
22 726 263
16 609 438
—266 516 074
—258 626 575
—539 213 827
—473 686 381
263 246 131
232 005 040
21 036 918
—29 561 859
—11 585 296
12 616 625
—17 870 504
—13 806 975
—34 891 640
—26 348 970
17 323 429
12 830 992
a) Change in actuarial reserve
aa) Gross amount bb) Reinsurers' share
—333 419 256
b) Change in reserve for outstanding claims
aa) Gross amount
665 246 582
—341 568 238
a) Claims incurred
aa) Gross amount
680 949 118
b) Change in other technical reserves
—302 293
—288 997
7. Expenses for premium refunds, net
—13 475 893
—10 770 796
—44 702 744
—40 207 738
—41 821 425
—38 832 205
—2 881 319
—1 375 533
—280 148
—204 441
—280 148
—203 768
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
14. Result of technical account
——
—673
14 413 463
21 152 583
14 413 463
21 152 583
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
1 143 451
2 555
—12 311 191
—8 653 294
3 245 723
12 501 844
—1 822 738
—2 679 649
—85 911
—188 009
1 337 074
9 634 185
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 consolidated financial statements 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
2015
2014
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 2015
36
Consolidated financial 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
31.12.2015
31.12.2014
2015
2014
EUR / CHF
1.0874
1.2023
1.0682
1.2152
USD / CHF
1.0006
0.9935
0.9619
0.9122
GBP / CHF
1.4750
1.5491
1.4714
1.5057
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 for developing company-specific software is capitalised if it is realisable, future economic benefits are likely, and the cost can be reliably estimated. It includes 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 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. The actuarial reserve comprises the actuarial value of the liabilities of elipsLife, including policyholder dividends already allocated less the aggregate present value of the premiums due after the reporting date. The calculation 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 regarding the observed delays in reporting a claim.
elipsLife | Annual report 2015
38
Consolidated financial statements
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) 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 pipeline premiums (if they can only be calculated at the end of the financial year), single premiums and payments for annuities, 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.
39
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. 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 own 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 capturing 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 2015, the intangible assets changed as follows:
IN CHF Start-up and business expansion costs Other intangible assets Total
Balance at 01.01.
Additions
Disposals Write-downs
Balance at 31.12
328 322
70 000
——
—137 834
260 487
9 933 632
8 294 336
—12 960
—4 280 146
13 934 862
10 261 954
8 364 336
—12 960 —4 417 980
14 195 349
The increase in other intangible assets mostly derives from investments in software and includes capitalised expenses of CHF 3 351 213 for internally produced assets (previous year: CHF 2 844 875).
elipsLife | Annual report 2015
40
Consolidated financial 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 one to 12 months for CHF 49 918 055 (previous year: CHF 29 579 475) and cash not yet invested of CHF 21 228 355 (previous year: CHF 1 017 652).
IN CHF Bonds and other fixed-interest securities Deposits with banks
Balance at 01.01.
Additions
127 336 902
25 244 093
—22 977 323
—2 109 435
—3 956 977
123 537 261
30 597 127
81 940 790
—38 544 997
——
—2 846 511
71 146 410
Disposals
Foreign Redemption currency effect
BONDS AND OTHER FIXED-INTEREST SECURITIES IN CHF
Balance at 31.12.
31.12.2015
31.12.2014
Historical cost
127 862 827
130 307 422
Amortisation
—4 325 566
—2 970 520
Carrying amount at 31.12.
123 537 261
127 336 902
127 375 895
130 698 613
Market value
Other receivables Receivables due from policyholders mainly consist of receivables from the reinsurance and broker business in the Netherlands. 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 2015, property, plant and equipment changed as follows:
IN CHF Furniture Hardware / equipment Interior finishing Total
Balance at 01.01.
Additions
Disposals
Value adjustments Write-downs
832 079
187 514
—7 077
—1 198
—128 399
882 919
794 155
306 036
——
—19 601
—380 064
700 526
383 407
290 060
——
—6 694
—159 691
507 082
2 009 641
783 610
—7 077
—27 493
—668 154
2 090 527
The fire insurance value of the business inventory is CHF 2.8 million (previous year: CHF 2.8 million).
As at 31.12
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 CHF
31.12.2015
31.12.2014
I. Called-up capital
12 400 000
12 400 000
II. Organisation fund III. Capital reserve
10 100 000
10 100 000
105 800 000
96 800 000
IV. Retained earnings V. Profit/loss carryforward VI. Annual profit Total equity
450 076
24 391
8 268 822
–939 679
1 337 074
9 634 185
138 355 972
128 018 898
In the 2015 financial year, contributions of CHF 9 000 000 were made to the capital reserve. The 2014 annual profit was appropriated as follows: IN CHF Allocation to retained earnings
425 685
To be carried forward
9 208 500
Annual profit for 2014
9 634 185
Technical reserves The technical reserves totalled CHF 271 639 292 on the reporting date (previous year: CHF 259 688 892). 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 mainly 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 21 735 707 were deducted from the gross unearned premium reserve (previous year: CHF 21 775 759). UNEARNED PREMIUM RESERVE IN CHF
31.12.2015
31.12.2014
190 895 005
201 092 616
Unearned premium reserve
212 630 712
222 868 375
Deferred acquisition costs
—21 735 707
—21 775 759
—95 523 958
—100 798 066
—106 391 811
—111 685 945
10 867 853
10 887 879
1. Gross amount
2. Of which: reinsurers' share Unearned premium reserve Deferred acquisiton costs
Both the actuarial reserve and the reserve for outstanding claims contain provisions for claim handling and settlement costs. The actuarial reserves at the end of the year included loss reserves of CHF 7 721 507, which were recognised upon takeover without affecting the income statement.
elipsLife | Annual report 2015
42
Consolidated financial statements
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. 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
2015
2014
Prepaid premiums for 2016
6 129 254
8 174 739
Other accounts payable due to policyholders
1 809 956
726 587
Accounts payable due to insurance brokers*
11 441 191
786 829
19 380 401
9 688 156
Total
*P ayments to insurance brokers include commission paid to agents and brokers and insurance benefits that are paid out to policyholders via agents and brokers.
Accounts payable on reinsurance business On the reporting date, net payments of CHF 58 825 200 were due under reinsurance contracts with companies of the Swiss Re Group (previous year: CHF 97 514 927). elipsLife has the contractual right to set off the outstanding accounts payable and receivable for the reinsurer. Other liabilities Other liabilities mainly comprise insurance taxes in Ireland of CHF 47 267 246 (previous year: CHF 55 080 333).
43
4.3.4 | Notes to the consolidated income statement Net premiums earned In the 2015 financial year, elipsLife earned premiums of CHF 333 766 942 (previous year: CHF 327 397 479). These are assigned to the life and non-life business of elipsLife as follows: 2015 IN CHF Gross premiums written Reinsurance premiums ceded
Non-life insurance
Life insurance
Non-life insurance
116 862 648
564 086 470
95 003 615
570 242 967
—59 355 498
—282 212 740
—47 904 808
—285 514 448
57 507 150
276 259 792
47 098 807
280 298 673
Unearned premium reserve, net Total net premiums earned
2014
Life insurance
—5 613 937
—4 429 846
The gross premiums written derive from the following markets: IN CHF Liechtenstein Holland, Belgium, Luxembourg Ireland Switzerland Other Total gross premiums written
2015
2014
4 182 794
3 592 230
87 161 553
72 295 375
490 154 604
516 984 159
98 376 175
71 090 309
1 073 992
1 284 509
680 949 118
665 246 582
The life insurance premiums are comprised as follows: IN CHF Premiums for group contracts: of which recurring premiums
2015
2014
116 862 648
95 003 615
116 862 648
95 003 615
of which single premiums
——
——
Premiums for policies without profit participation
97 363 076
68 501 952
Premiums for policies with profit participation
19 499 572
26 501 663
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 12 590 354 (previous year: CHF 9 418 256).
elipsLife | Annual report 2015
44
Consolidated financial 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 2015 financial year, commission payments (acquisition, renewal and portfolio commission) amounted to CHF 29 176 244 (previous year: CHF 28 953 138). In accordance with VersAV Annex IV par. 24, personnel and operating expenses are split between the items ‘Claims incurred (gross)’, ‘Acquisition costs’, ‘Administration 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
2015
2014
2 884 836
2 869 324
Redemption of bonds and other fixed-interest securities
—2 120 171
—2 152 357
Total current income from other investments
764 665
716 967
Investment income
Profit/loss from disposal of investments
958
44 552
Asset management expenses
—280 149
—203 768
Profit/loss from investments
485 474
557 751
Other expenses from ordinary activities ‘Other expenses from ordinary activities’ include foreign currency losses of CHF 5 351 810 (previous year: CHF 1 001 241). Income taxes In the 2015 financial year, elipsLife paid income taxes of CHF 1 822 738 (previous year: CHF 2 679 649).
45
4.3.5 | Other disclosures Personnel expenses and remuneration for the Board of Directors and Executive Board In the 2015 financial year, elipsLife employed 130.6 people on average (previous year: 106.1). Personnel expenses (before the capitalisation of expenses for internally created assets) totalled CHF 24 997 562 in the reporting year (previous year: CHF 20 293 574). This amount includes salaries and wages of CHF 19 484 524 (previous year: CHF 15 547 395), social insurance contributions and contributions to retirement benefit plans of CHF 3 423 102 (previous year: CHF 2 825 779), and other personnel expenses of CHF 2 089 936 (previous year: CHF 1 920 400). In the reporting year, the total remuneration paid to the Executive Board amounted to CHF 2 227 866 (previous year: CHF 2 546 482). 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. Auditors’ fees The auditors’ fees for the audit of the 2015 annual financial statements amounted to CHF 286 415. This includes the audit of the FMA report and the annual report. CHF 18 406 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 524 397 (previous year: CHF 553 935). According to the regulatory provisions for insurance business in Curaçao, an amount of CHF 217 760 has been deposited with a local bank as a guarantee fund. Events after the reporting date All events relating to this reporting period that occurred after the reporting date were evaluated until 14 April 2016.
elipsLife | Annual report 2015
46
Consolidated financial 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 2015. 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, 13 April 2016
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.
1
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, 9495 Triesen, Liechtenstein T +42 3 239 95 55, F +42 3 239 95 54, contact@elipslife.com elipsLife branch office in Switzerland Thurgauerstrasse 54, P.O. Box, 8050 Zurich, Switzerland T +41 44 215 45 45, F +41 44 215 45 44, contact@elipslife.com elipsLife branch office in the Netherlands Startbaan 8, P.O. Box 191, 1180 AD Amstelveen, The Netherlands T +31 20 7 55 98 00, F +31 20 7 55 98 99, contact.nl@elipslife.com elipsLife branch office in Germany Im Mediapark 8, 50670 Cologne, Germany T +49 221 99309800, F +49 221 99309810, contact.de@elipslife.com elipsLife branch office in Italy Via dei Giuochi Istmici 40, 00135 Rome, Italy
Publishing details The English translation is provided for information only. The original German version is the official version of the audited document. Š elipsLife 2016
www.elipsLife.com
elipsLife Landstrasse 40 9495 Triesen Liechtenstein T +423 239 95 55 F +423 239 95 54 contact@ elipslife.com