elipsLife Business Report 2018

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elipsLife | Unternehmensbericht 2018

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Business Report


elipsLife | Unternehmensbericht 2018

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Key figures In USD

Gross premiums earned Gross claims* Profit Total assets** Equity** Full-time equivalents**

Figures based on US GAAP

* incl. change in reserves ** Total as at 31/12

31/12/2018

31/12/2017

1 115.3 m

952.7 m

–879.9 m

–789.8 m

12.2 m

0.1 m

1 859.2 m

1 603.2 m

232.8 m

173.5 m

280

230


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Contents 1

Foreword by CEO

2

elipsLife today

2.1

Business development

2.2

Investments and equity

2.3

Risks

2.4

Future development

3

International presence

3.1

Europe

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4 8 8

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3.1.1

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20 22

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3.1.3 Germany 3.1.4 Italy

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Switzerland/Liechtenstein

3.1.2 Benelux

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3.1.5 Ireland

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28

3.2

USA

4

elipsLife in the spotlight

4.1

Total-solution approach

4.2

Service differentiation

5

Corporate governance

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32

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5.1

Group structure

5.2

Organisation

5.3

Risk governance

5.4

Risk management

5.5

Compliance

5.6

Internal audit

6

Consolidated financial statements

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6.1

Consolidated balance sheet

6.2

Consolidated income statement

6.3

Notes

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37 38 38 38 40 40

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elipsLife | Business Report 2018

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Foreword by CEO

1 10 years, 1 billion and 300 employees Ten years after its establishment, elipsLife can look back on an impressive success story – and can describe itself as a billion dollar company going forward. Like the years before, 2018 was shaped by strong growth, progressive expansion and profit – in spite of large investments in IT and the expansion of the target markets. The success in Europe strengthened our determination to expand into other markets. Our choice fell on the USA because its biometric business is similar to Europe and the US is the world’s biggest market for biometric risks. elipsLife is financing its expansive growth almost entirely independently. This is why the company has not been able to report big profits to date, even though it has always achieved very good results in its core markets. By now elipsLife has grown sufficiently big to make such investments while still posting impressive profits. This is mostly made possible by excellent cost control, the associated low cost ratio and a solid underwriting process. Although the business remains subject to volatility, fluctuations are becoming smaller and profits are becoming bigger and more sustainable. elipsLife improved its premium volume from USD 952.7 million in the previous year to USD 1 115.3 million This represents an increase of 17 %, which was achieved in spite of the time and expenses incurred in building up our US business. After 2017, a year marked by high claims, the company managed to stabilise its underwriting results in Switzerland. elipsLife ended the year 2018 with a very encouraging profit of USD 12.2 million (2017: USD 0.1 million). Another positive development is the contribution made by the markets in Switzerland/Liechtenstein and Benelux to the financing of the new markets in Europe and the US. As indicated, elipsLife aims to expand its international presence. In 2017, it was decided to take the next step in this process in the US. After a hectic 2018 – with the successful acquisition of the life insurance company Mapfre Ltd., the change of name of this company to Elips Life Insurance Company and the relocation of its registered office to Missouri – the new company is now ready to underwrite business for elipsLife. The changes to the overall organisational structure of elipsLife introduced in 2017 are having an increasing effect on the day-to-day business. The change from a national to an international and now a global company also strongly challenged the entire elipsLife organisation – and specifically the employees who had to drive the challenging change management process forward while at the same


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time coping with its effects. The enlarged Executive Board played an important role in this process as many issues had to be tackled in parallel and the associated workload could be spread among a bigger number of people. For many years, elipsLife has been investing in the full digitisation of its IT platform, which it deploys worldwide in a novel manner. Our overarching target operating model is a guarantee of success because it drastically cuts the operating costs. But such a generic platform also offers big challenges. Each business concept has to be set up generically before it can be applied in different countries and legal systems. This makes high demands of the specialists who have to implement these requirements in a manner that ensures they remain generic while at the same time meet specific business requirements.

Today, elipsLife can make big investments as well as post impressive profits In the reporting year we introduced a new client relationship management (CRM) system based on Microsoft Dynamics and replaced our old document management system (DMS) by IBM’s Filenet solution. The successful implementation of these two central systems within just six and nine months respectively is further testimony to our efficiency. The automatic reserving tool was also improved, and reserves are now automatically raised for almost all lines of business. And last but not least, we migrated the first operating systems such as the new CRM and all Skype functionalities to the cloud. It is our objective to migrate all services to the cloud in the coming years. After ten years of elipsLife, I am delighted to look back on a success story that hardly has its equal in the more recent history of the insurance sector. With some 1.8 million insured and a premium volume of more than USD 1.1 billion, elipsLife is already one of the bigger companies in the European insurance market. I would like to take this opportunity to warmly thank all our customers, partners and employees who made this success possible. Reto Toscan CEO elipsLife Group


elipsLife | Unternehmensbericht 2018

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Contents


elipsLife | Unternehmensbericht 2018

Contents

Massive improvement in gifÓk [\jg`k\ Y`^ `em\jkd\ekj

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elipsLife | Business Report 2018

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elipsLife today

2 elipsLife today 2.1 | Business development In business terms, 2018 was the most successful year for elipsLife since its establishment. In the reporting year this is all the more remarkable if one remembers that the company made what can be considered to be the biggest investments in its history in digitisation and its expansion plans. In times of strong portfolio growth and expansion, costs are key. With a cost ratio for its core business of 17.7 % compared to 17.3 % in the previous year, elipsLife has proved in the reporting year that it has its costs under control, even in phases of expansion and further development. The increase in premium income from USD 952.7 million in 2017 to USD 1 115.3 million in the reporting year is mainly due to the strong growth posted in Switzerland and the Netherlands. Italy and Ireland also contributed to the fact that elipsLife can describe itself as a billion dollar company going forward. In the core business, premium volume rose from USD 323.0 million last year to USD 411.7 million, which represents an increase of 27 %. The Irish Medex business (health insurance) also did very well in the reporting year and improved from USD 629.7 million to USD 703.6 million. At the same time, total assets increased from USD 1 603.2 million to USD 1 859.2 million. The profit jumped from USD 0.1 million in 2017 to USD 12.2 million in the reporting year. This is explained by the excellent performance posted for Ireland and the core business and the fact that costs only increased moderately in spite of huge investments. IT and processes The focus once again fell on elipsLife’s systems and IT platform in the reporting year. The customer relationship management (CRM) and document management (DMS) systems were replaced by Microsoft Dynamics (CRM) and IBM Filenet (DMS). Both systems are state of the art and will contribute to the achievement of the company’s ambitious cost targets in future. elipsLife also evaluated a new accounting system that will be implemented from 2019 and further extended its enterprise resource planning (ERP) system. The biggest step in IT was taken in business intelligence by linking the first operating systems to the new data warehouse. This will enable even better underwriting decisions based on excellent and highly available data going forward. For the US market, further investments were made in front-end digitisation which will enormously simplify life for customers and brokers and move the self-service concept forward. The solution will be rolled out in the US market in 2019, and will also be offered in Europe thereafter.


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Cost ratio, consolidated

Premiums and claims, consolidated

149 %

879.9

789.8

799.3 689.1

696.6 577.3

582.9

587.6 487.8

719.0

952.7

1 115.3

in USD million

91 %

2009* 2010*

9%

12.2 8.5

2.1 1.3

3.3 2.9

148.8 112.5

58 %

2011

2012

2013

2014

2015

2016

2017

2018

2009* 2010*

2011

2012

4%

4%

5%

5%

6%

7%

2013

2014

2015

2016

2017

2018

Gross premiums earned Gross loss (incl. change in reserves)

Premiums and equity, consolidated

in USD million

in USD million 1 115.3

Profit before income tax, consolidated

587.6

799.3

13.5

696.6

719.0

952.7

21.1

8.0

2015

2016

2017

2018

2009* 2010*

2011

2012

2013

2014

2015

2016

2017

Gross premiums earned Equity

* 2009 and 2010 only Elips Life Ltd, from 2011 consolidated figures. Stated in accordance with Liechtenstein law until 2016, from 2017 according to US GAAP.

232.8

173.5

2014

156.1

2013

138.3

2012

128.9

2011

125.3

2009* 2010*

12.2 20.7

–4.0 2.1 10.0

–2.7

2.6

3.3 11.8

–3.1

3.3

148.8 64.6

6.0 4.2

2018


elipsLife | Business Report 2018

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elipsLife today

2.2 | Investments and equity elipsLife’s investment strategy was mostly the same in the reporting year, although the low interest rate environment made it necessary to switch to credit bonds and corporate bonds. High equity market volatility had a severe impact on the net yield, which was low at -0.20 % for the past financial year.

2.3 | Risks In the reporting year, elipsLife further strengthened its risk management by setting up an independent unit headed by Christina Müller, an experienced risk manager. In addition, the risk management framework was refined by incorporating the know-how of the Swiss Re Group. Today, elipsLife has a state-of-the-art risk-based framework. Although elipsLife’s strategic risks remained stable, the spotlight moved to specific areas. As a provider of biometric solutions, elipsLife is less exposed to typical financial market risks than to economic crises and pandemic risks. elipsLife also bears longevity risks, albeit for a few products only. As the portfolio mix is very important for longevity risks in particular, elipsLife tries to diversify as much as possible by products, customer segments, distribution channels and geographic exposure. The operational risks increase every year because ever more processes are automated and handled by systems. Although this drastically reduces the error rate compared to manual processes, any error that occurs “automatically” affects many more customers or partners. This means that process control is growing more important. This trend is accelerated by the tightening of laws such as the General Data Protection Regulation (GDPR) which applies higher fines for errors made in the processing of sensitive data. elipsLife attaches great importance to control and risk minimisation in the IT sector. This is meant to prevent progress and efficiency gains from being destroyed by errors and operational risks. elipsLife is less exposed to financial risks than life insurance companies that also offer savings solutions. In the reporting year, elipsLife’s attention was mostly taken up by the instability of the euro compared to the Swiss franc and US dollar. This led to risks that are difficult to hedge, but luckily these only affected 1 % to 5 % of premium volume at most. The underwriting measures implemented in the previous year paid off in the reporting year. The technical result improved enormously for almost all lines of business once the predictive underwriting models started to take effect and the cost models were refined further. In addition, many contracts with unfavourable loss rates could be renewed at a higher price level.


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Cost ratio, core business

Premiums and claims, core business

411.7

in USD million

246.4

247.6 194.6

198.2 165.6

162.5 123.9

91.2 %

58.2 %

69.4

103.7 2011

55.6 33.9

12.2 8.5

2.1 1.3

3.3 2.9

2009* 2010*

303.8

323.0

149.2 %

21.6 %

18.5 % 16.2 % 16.1 % 15.9 % 17.3 % 17.7 %

2012

2013

2014

2015

2016

2017

2018

2009* 2010*

2011

2012

2013

2014

2015

2016

2017

2018

Gross premiums earned Gross loss (incl. change in reserves)

Premiums, core business

Full-time equivalents at end of ďŹ nancial year

Share by market

2%

280

51 %

115

140

182

230

86 47 %

9

10

27

55

2009* 2010* 2011 2012 2013 2014

Switzerland/Liechtenstein The Netherlands Italy

* 2009 and 2010 only Elips Life Ltd, from 2011 consolidated figures. Stated in accordance with Liechtenstein law until 2016, from 2017 according to US GAAP.

2015

2016

2017

2018


elipsLife | Business Report 2018

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elipsLife today

2.4 | Future development elipsLife pursues a growth and expansion strategy that cannot just be moved forward as fast as desired. But the bigger elipsLife grows, the more resources can be applied to promote further growth. The company has also only experienced organic growth to date, but with its increasing size it aims to grow inorganically, too. What is important here is to remain true to its strategy and to try and limit the complexity as much as possible – in spite of its geographic expansion and extension of the product range. It is well known that complexity is one of the biggest drivers of cost. The central element for elipsLife’s expansion is the generic IT landscape. As this is applied globally, it has to be constantly adapted to new needs and the latest trends in digitisation. elipsLife will continue to invest heavily in IT going forward to ensure that it is equipped to meet all future challenges.


elipsLife | Unternehmensbericht 2018

Contents

27 % increase in premium volume for core business

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elipsLife | Business Report 2018

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International presence

3 International presence

USA Headquarters

Schaumburg, Illinois


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elipsLife operates in Europe and the USA. In Europe, it has a market presence in Switzerland (Zurich), Liechtenstein (Triesen), Benelux (Amstelveen), Germany (Cologne), Italy (Milan) and Ireland (Dublin). The US market is served out of Schaumburg, Illinois.

Europe Headquarters Branch ofďŹ ces

Triesen, Liechtenstein Zurich, Switzerland Amstelveen, the Netherlands Cologne, Germany Milan, Italy Dublin, Ireland


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International presence

3.1 | Europe The political environment Europe experienced a stormy 2018. The European Union was preparing the exit of the United Kingdom, a development which until recently would have been inconceivable. The Brexit debate entered the final round with London and Brussels negotiating the exit conditions. What seemed on paper to be a fair deal between two partners failed to receive approval by the British parliament, even among the prime minister’s own party members, and is threatening to further divide the country. Germany was also confronted by a veritable government crisis when the grand coalition threatened to collapse. Although voters punished the governing CDU and SPD parties in Bavaria and Hesse, the election of a new CDU leader in December paved the way for continuity. A Germany with a weaker balance of power was faced with an equally lame France and Italy. While the “yellow vests” stopped the President’s reform zeal in France, the Italians elected a government united only by populism. The European Union’s third-largest national economy stoked fears on the international financial markets because an insolvent Italy would hardly improve the financial stability of the EU. The situation is very different in the Netherlands where the economy is booming. Driven by very strong domestic demand, GDP rose by 3.16 % compared to 2017 and the national debt was reduced further. Ireland also recovered quickly from the 2008 financial crisis, with this surprising upswing mostly supported by its strong exports. The export sector is dominated by large multinationals attracted to Ireland by the lowest corporate taxes in Europe. And Switzerland? The politicians in Bern also talked about isolation and protectionism. The bilateral agreements with Brussels did not find a majority in parliament, which endangers Switzerland’s prosperity. There seemed to be no real willingness to compromise – an important keystone of consociational democracy – but the election of two new female Federal Councillors in December fed hopes of a return to pragmatism and a solution-based approach. The economy lost momentum in the eurozone, too. A ray of hope is provided by the falling unemployment rate, which has been trending positively in Europe for years and hovered around an all-time low of 7 % in 2018. Private insurance companies, of course, are delighted about the higher number of workers requiring insurance cover in the entire economic area. In these times of political turbulence, elipsLife held its own in five European markets in 2018. The pattern of growth in the two established regions of Switzerland/Liechtenstein and Benelux could be continued in 2018. Net growth reached a new record of around USD 85 million. The three young markets of Germany, Italy and Ireland can also look back on a successful financial year. If the Irish health insurance business is included, elipsLife for the first time in its ten-year history exceeded the billion-dollar mark in premium volume in the reporting year. This sustainable growth made it possible to further reduce the administrative cost ratio and increase the profit. Annually rising productivity provides the foundation for elipsLife’s own-funded international expansion and the scaling of its business model. The strong focus on costs has proved itself, which is why the young markets also pursue the motto of ”people follow business” to create the basis for future returns on investment.


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Switzerland/Liechtenstein With GDP growth of 2.6 %, the Swiss economy did well in an international comparison in the reporting year. This shows how healthy the Swiss economy is. It is also encouraging that the unemployment rate at 2.6 % has dropped to its lowest level in ten years. The weak year on the stock exchanges in 2018 had a direct impact on pension funds. Many of them posted negative returns on investment. If this trend should continue, calls for adjustments will become louder and pressure on politicians for comprehensive reforms will increase quickly. Since the rejection of the AV 2020 reform by voters in September 2017, the political realm has been unable to develop the issues central to sustainable pension provision in a way that will ensure their acceptance by the majority of the electorate. The insurance market continued to gain momentum in the reporting year, among other things also because of the move away from full insurance to semi-autonomous solutions. Stronger competitive pressure is increasingly countered by offering additional services and improving the customer focus. Benelux In 2018, the Dutch economy turned in its best performance since 2007: gross domestic product grew by 3.2 % year-on-year. At 3.9 %, unemployment reached its lowest level since the last recession, while inflation remained moderate. This situation benefited elipsLife’s business because many companies chose to rely on first-class employee retention tools in the battle for the best talent. The biggest regulatory change was the introduction of the EU’s General Data Protection Regulation (GDPR). As most of the provisions were already in effect, the law had a modest impact only. In the legislative sector, the further reduction of government benefits played into the hands of elipsLife. To close the resulting gaps in cover, many employers put their faith in the pension concepts of private insurers. Germany As second-pillar risk pension solutions are not inscribed in law in Germany, large gaps in cover are the order of the day. Because biometric group insurance solutions are rare in Germany, elipsLife as the first provider of such solutions is not only responsible for developing this market, but can also help shape the market. Product offers and prices were streamlined in 2018. The strong focus on comprehensive and informative marketing documents, the subject and social expertise of the elipsLife employees and the sharing of know-how led to close and trusting relationships with around a dozen distribution partners, including three large international brokers. Submission volumes tripled in the reporting year and more customers were acquired.


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International presence

Italy The Italian economy grew only marginally in 2018: after a slightly positive performance in the first half, a sharp collapse in the second half of the year pushed Italy into a recession. Political discussions were dominated by the debate concerning the retirement age and the conflict with the EU Commission about the state budget. Unemployment declined very slightly to 10.3 %. In spite of the generally difficult economic conditions, the life insurance market in Italy was relatively stable in 2018. In the regulatory context, the focus fell on the introduction of the EU’s General Data Protection Regulation (GDPR), the EU’s Insurance Distribution Directive (IDD) and the EU’s fourth Anti-Money Laundering Directive. Ireland The Irish economy grew by 8.9 % in the reporting year. Unemployment fell to below 6 %. This growth was supported by positive consumer sentiment and a strong construction sector as well as an inflow of funds from foreign companies, also due to Brexit. This economic growth drove demand for elipsLife’s group biometric and health insurance solutions. Both solutions are seen as an effective means for improving a company’s attractiveness as employer. In the regulatory context the focus was on the introduction of the EU’s General Data Protection Regulation (GDPR), while the political debate mostly centered around the impact of Brexit. On the right track In 2018, elipsLife operated in Europe quite unfazed by external factors, continued to post impressive growth and benefited from its agility in forecasting new customer needs and statutory changes. Even though the political reality gives rise to very basic questions concerning Europe’s future prosperity, these doubts did not yet negatively affect the relevant economic indicators in the reporting year. By focusing on cost discipline and customer service, elipsLife again created unique selling propositions in Europe in 2018 that not only support its international expansion, but will also serve as the future foundation for its successful business model. In 2019, the established markets will contribute to profit once again and help to finance the development of the new markets. In line with the motto “copy with pride”, knowledge and experience are consistently shared throughout the European organisation. Concepts that were successful in the established markets are passed on directly to Germany, Italy and Ireland. As a result, the momentum is very strong in the Italian market unit in particular, and it can be expected to be the third market unit to break even in 2019. This will confirm that elipsLife is on the right track with its strategy of progressively developing into a leading expert for group employee benefits solutions in Europe.


elipsLife | Unternehmensbericht 2018

Contents

Focus on customer service in all markets

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elipsLife | Business Report 2018

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International presence

3.1.1 | Switzerland/Liechtenstein In its tenth year, elipsLife substantially expanded its position in its home market. Of particular note is the above-average and sustainable growth reported for the Corporate Life & Health business (BVG and reinsurance) with double-digit growth rates for the employee benefits insurance and the accident and daily sickness benefits business (Corporate Accident & Health). Supported by this encouraging development, elipsLife posted its highest growth ever in the life business in celebration of its tenth birthday. Growth also thanks to expanded cooperation with pension actuaries The pleasing growth in the life business is also due, among other things, to the expansion of elipsLife’s cooperation with pension actuaries and companies by acquiring new partners and strengthening the cooperation with collective foundations. This made it possible to consistently expand the BVG white labelling strategy. Cooperation with strategic brokers was also intensified and extended. Thanks to these measures, the submission volume for the group life business could be increased substantially by one-fifth, resulting in an acquisition rate of more than 20 %. In parallel to this enormous growth, process optimisation and system automation helped to reduce the cost ratio. Successful total-solution strategy The systematic implementation of the total-solution strategy, i.e. the ambition to offer insurance cover for all short- and long-term risks and all related processes and services from a single source and via a single IT platform, led to a notable increase in the number of total-solution customers in 2018. This refers to those customers who take out insurance cover for short absences, daily sickness benefits and accident insurance as well as employee benefits from elipsLife. This success results from a focused cross-selling strategy targeting existing customers. Not least because of the success of these activities, opportunities regularly arose in the areas of claims and case management to accompany brokers on customer visits to explain the comprehensive cover provided for short- and long-term biometric risks by elipsLife – offering clearly defined advantages to customers when it comes to the advisory process, administrative matters, benefit management and costs. Improved profitability of Corporate Accident & Health business In its home market of Switzerland/Liechtenstein, elipsLife successfully moved forward with its plans to sustainably improve the profitability of the accident and daily sickness benefits business. Portfolios that needed rationalisation were discussed with the distribution partners in spring. This ensured that customers could be informed about the measures at an early stage and left enough time to find or develop a good solution for all parties. This early approach and the intensive dialogue that followed helped elipsLife to achieve an above-average rationalisation rate with its strategic brokers. elipsLife will continue to pursue a sustainable strategy for this business in the coming years while working very closely with its distribution partners and customers.


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Premiums based on customer segments 2018

2017 1.1 %

1.3 %

23.8 %

21.5 %

75.1 %

77.2 %

Corporate Accident & Health Corporate Life & Health Group Voluntary Life & Health

Market challenges The market for group life business (employee benefits insurance/reinsurance) in Switzerland/Liechtenstein remained fiercely competitive in 2018. This put pressure on prices. Some of elipsLife’s competitors clearly have their sights set on achieving enormous growth in this business segment, and this trend will continue in 2019. Thanks to its service strategy and consistent cost leadership approach, elipsLife not only generated high and sustainable growth in 2018, but also achieved an above-average renewal rate of more than 95 % in the life business. This provides a strong springboard for our efforts in the current year. New regulatory provisions Life insurance companies must submit their rates for the employee benefits insurance to the competent supervisory authority for approval. The Swiss Financial Market Supervisory Authority (FINMA) issued a circular on the rates that will apply from 1 January 2020. This circular states that preventive rate control also applies to companies domiciled in Liechtenstein who operate in Switzerland, even though such companies are subject to supervision by the Financial Market Authority Liechtenstein (FMA). For the first time, elipsLife thus has to submit its BVG and reinsurance rates for approval before these rates may be applied to new business and contract renewals from 1 January 2020. Audit items include the management of the individual claims experience, the approach to commercial decisions and the rules for the technical interest rate level that are applied to rate calculations and the assumption of survivors’ pensions.


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International presence

3.1.2 | Benelux elipsLife can look back on a very successful 2018 in Benelux where it could further strengthen its market position. The product range was expanded once again and now includes solutions for all biometric death and disability risks. elipsLife posted growth of 28 % and achieved a market share of 4.5 % for the Dutch and Belgian market in the reporting year. It also built up a fruitful cooperation programme with 90 distribution partners in the industry. At the end of the year, the employees numbered 49.4 full-time equivalents. elipsLife solutions as a component of first-rate social benefits As the ongoing changes to the legal situation in the Netherlands mean that government support benefits are being reduced, elipsLife’s products are increasingly seen as a valuable HR tool. In a tight labour market it is crucial for employers to offer attractive social benefits. elipsLife supports them in this area by offering products that form an integral component of first-rate social benefits. Via a broad-based but selective network of industry partners, elipsLife also helps its customers with the reintegration into the workforce of sick and disabled employees, which saves customers money and increases their productivity. Successful market presence In 2018, elipsLife once again worked closely with various Premiepensioeninstellingen (premium pension institutions (PPI), multi-employer pension plans). The number of PPIs in the Dutch market dropped from nine to seven after two PPIs merged with another PPI. These mergers had no impact on their cooperation with elipsLife Benelux, however. As PPIs are not legally permitted to cover biometric risks, they are dependent on an insurance provider for these risks. Together with the PPIs, elipsLife developed solutions for death and disability risks at a competitive price, thereby creating a modern and competitive total pension solution. elipsLife helps its partners to reach the growth required to guarantee the sustainability of the PPI business model. It will continue to do so going forward, for example with a supplementary survivors’ insurance product allowing the PPIs to offer their customers variable pensions. The active introduction of this product is planned for 2019. elipsLife also further expanded its business relationships with various Algemene Pensioen Fondsen (APF, general pension funds) and offers reinsurance cover for their portfolios. Gross premiums earned amounted to USD 211.6 million in 2018, which corresponds to an increase of more than 20 %. The continued profitable growth of the Benelux portfolio once again made a contribution to the fast-growing elipsLife Group. Although the Dutch market is fiercely competitive, the selective underwriting of insurance risks guarantees profitable growth. elipsLife constantly invests in its know-how in order to ensure competitive prices and professional support for customers and business partners. It also builds on the market and customer expertise of its business partners, because together they can better serve their customers’ needs. elipsLife has been focusing on the pension fund market since its entry into the Belgian market. This market has also grown more competitive. elipsLife nevertheless successfully defended its market share of around 7 %. It serves the Belgian market with four local actuaries specialising in pension fund and reinsurance solutions.


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Premiums based on customer segments 2018

2017 6.3 %

7.5 %

93.7 %

92.5 %

Corporate Life & Health Group Voluntary Life & Health

Knowing the customers Customer satisfaction is entirely based on the quality of the business processes. elipsLife therefore invested in optimising the internal processes that are not customer-related. This substantially improved the quality and efficiency of automated internal processes. In contrast, direct customer contact across all activities and products is handled by a team of advisors. This is how elipsLife knows its customers – and the customers know elipsLife. To assess its customers’ satisfaction with regard to cooperation and services, elipsLife carried out a net promoter score survey among its distribution partners for the first time in 2018. The result was positive and the objective is to further improve this score by constantly refining our services. For insurance companies, the moment of truth comes when a customer files a claim. To process these claims quickly and carefully, elipsLife Benelux once again invested much time in the optimisation of its infrastructure and processes and in its teams in the reporting year. This ensures that the core values of speed and customer orientation come into play when it comes to the point. Raising awareness about important topics Employers are growing increasingly aware of the importance and significance of a sustainable workforce. As elipsLife is a trailblazer with its expertise in this field, it published a number of articles in the Benelux media in 2018 to raise the awareness about this topic in particular among its distribution partners and big corporate customers. The growing battle for talent in the labour market gave rise to these articles. With its products, elipsLife can make a substantial contribution to enhancing the labour market attractiveness of an employer – another reason for elipsLife to provide platforms for discussing this topic and present solutions in the Benelux market.


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International presence

3.1.3 | Germany Second-pillar risk pension solutions are not inscribed in law in Germany. But if the employer is not obligated to provide insurance cover, employees can suffer severe gaps in pension cover. As there is no legal compulsion in this regard, it hardly comes as a surprise that only one in four Germans were insured against the financial risks of occupational incapacity or death in 2018, with most of them paying the premiums themselves without any financial contribution by the employer. Most employees trust in – or hope for – good health and, if it comes to the worst, the state. Building up a new market Although the market has a potential of USD 29.6 billion, biometric group insurance models are still rare in Germany. As one of the first providers of such solutions, elipsLife not only shares responsibility for the development of the market, but can also help to shape this market. This requires innovative product solutions offering well-defined benefits for the policyholder, in particular as the latter is required to assume the costs. To bet on the altruism of an employer is not an effective approach. elipsLife therefore focused in 2018 on providing solutions for the problems faced by entrepreneurs and teaching them about its products. elipsLife’s care management approach in particular was met with great interest as it can sustainably reduce absences owing to illness as well as costs. This makes it possible for employers to provide a funded fringe benefit with a chance for a return on their investment. The promotion of employee health and the reintegration of sick employees also help alleviate the shortage of qualified staff as reintegrated employees do not have to be recruited again. The foundation for future success was laid in 2018. After elipsLife introduced its case management model to the German market, it entered into a long-term partnership with one of the leading providers of care management services in Germany in order to keep pace with the growth and to complete its insurance solution. The focus on comprehensive and informative marketing documents, the subject and social expertise of the elipsLife employees and the sharing of know-how led to close and trusting relationships with around a dozen distribution partners, including three large international brokers, Aon, Mercer and Willis Towers Watson. These partners described elipsLife’s insurance product not only as a marketable solution, but also as a market-shaping product. An endorsement that confirms elipsLife Germany’s confidence about the future. Positive development of business results In quantitative terms, the figures reflect the positive performance. Submission volumes tripled in the reporting year and more customers were acquired. The first claims were also received, which allowed elipsLife to prove itself in the area of operations. elipsLife’s aspiration for claims processing mainly lies in transparent, empathetic communication and speed of assessment and compensation. elipsLife Germany is confident that its submission volumes will double again and its customer base expand substantially in 2019. The focus therefore continues to lie on the strengthening of the product range, the breadth of distribution and the positioning of elipsLife and the local team as experts in their field.


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3.1.4 | Italy elipsLife made the breakthrough in the Italian market in 2018 with the first important contracts and is now targeting the profitable expansion of its group business for biometric risks. Gross premiums earned more than doubled from around USD 3.0 million in 2017 to more than USD 7.1 million in 2018. In the second year of operations in Italy, elipsLife’s portfolio already includes more than 260 employers, including some of the most important public-sector companies in Italy. The biggest new customer is a fund with approximately 22 000 insured and considerable potential for acquiring more insured persons. More than 51 000 employees in total are now insured with elipsLife Italy. In the reporting year we not only strengthened the elipsLife team in Italy, but also moved into our new offices at Via San Prospero 1 in the centre of Milan. Expansion of product range elipsLife Italy further refined its risk assessment procedures. In addition to its life insurance products, the portfolio of group insurance products and solutions now also includes private accident insurance and occupational incapacity cover for sickness. The sales and distribution focus falls on international and Italian brokers in the metropolitan areas of Northern Italy and Rome. The target customers include large and medium-sized corporations, pension and provident funds and state enterprises. Optimistic about market potential Italy is a challenging insurance market. Only a fraction of employers are required by law to take out group life insurance for their employees. Owing to cultural conditioning Italians have little interest in taking out life insurance, as a result of which the financial consequences of death and disability are underestimated enormously. elipsLife is nevertheless optimistic about the future development of its business in Italy. With a workforce of some 23 million people, the Italian market shows great potential, particularly as there is growing interest in ensuring employee well-being. The improved efficiency and effectiveness of group solutions and B2B distribution channels compared to the traditional private life insurance business also favour the business activities of elipsLife. Outlook In Italy too, elipsLife wants to establish itself as market leader for tailor-made biometric insurance solutions. The long-term objective is to acquire a share of 5 % to 10 % of the Italian group business for biometric risks. The Italian branch plans to break even in 2019. elipsLife is aiming for sustainable development, long-term profitability and high levels of customer satisfaction in Italy, too.


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International presence

3.1.5 | Ireland elipsLife is proud of being present in two business areas in Ireland: the private health insurance business through its partnership with Laya Healthcare established in 2012, and the group business for biometric risks through a recently established new branch. The private health insurance business is well established in Ireland. In 2016, annual health spending totalled USD 22.5 billion or 7.4 % of GDP, with private health insurance companies accounting for approximately USD 3.4 billion or 15 % of the total. Thanks to elipsLife’s partnership with Laya Healthcare, it is the second-largest health insurer in Ireland with a portfolio of more than 580 000 members. The health insurance business in Ireland currently accounts for a substantial share of the business activity of elipsLife Group. Inflation, which is between 6 % and 8 % in the private health insurance business, still has a considerable impact on private health insurers, partly also as a consequence of the competition for care specialists. The impact of inflation on the public sector is more muted, mostly owing to the clear communication of individual consumer rights in public hospital settings. There is intense price competition in the private health insurance market. However, this does not prevent Laya Healthcare from providing innovative and consistent benefits, such as its Mental Wellness Support Programme. With a volume of USD 0.39 billion, the Irish group insurance market for biometric risks may be relatively small, but is ideal for elipsLife with its exclusive focus on biometric growth. The Irish branch of Elips Life Ltd (ELAG) was established to introduce the elipsLife concept in Ireland: tailor-made and innovative solutions and support from a professional team at a fair price. elipsLife gained its first customers in the Irish group business for biometric risks in 2018. The team in Dublin combines experience in the Irish insurance business with international expertise, we look forward to further growing the business. The outlook for both business areas offers opportunities as well as challenges. The overriding trends in private health insurance of increased regulation, technology and inflation ensure that the environment is constantly changing. To counter this, elipsLife relies on innovation in its efforts to keep access to healthcare affordable. A long-term partnership between Laya Healthcare, elipsLife and its parent company Swiss Re provides a good foundation for continuing this success story. The objective of the group business for biometric risks is to establish the elipsLife brand in the market by supplementing our own experience with expert know-how – for example the partnership with Cognate Health, which makes it possible to offer effective case management services.


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Expansion to the USA, the largest group insurance market worldwide


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International presence

3.2 | USA With around USD 60 billion in insured benefits, the US is the world’s biggest market for group life and disability insurance. The industry is currently caught in a phase of consolidation and is ready for disruption driven by new technologies, evolving employee benefits and constantly growing customer demands. Exploiting opportunities offered by world’s biggest market Although new technologies have already led to enormous change in other areas of the industry, group life insurance continues to rely on outdated IT systems and inefficient service models. Insurance companies’ focus on cutting costs in the past years has resulted in a decline in their service offering and the reduction of direct contact with their customers. This situation opens up opportunities for elipsLife. Thanks to its lean operating model and its integrated and global IT platform, elipsLife can efficiently and speedily offer flexible and innovative solutions by specialised teams of advisors across various international markets. Building on more than a decade’s experience and successful growth in Europe, elipsLife now also offers personalised services to the US group insurance market from 2019. Different from competitors elipsLife’s highly qualified team of advisors not only offers personalised services, but also maintains efficient and sustainable contact with customers and business partners. We at elipsLife see ourselves as entrepreneurs and carefully select and train our employees in order to achieve our ambitious objectives. As elipsLife specialises in group insurance solutions and works with an integrated IT platform, our teams of advisors serve as central contact persons for our customers as well as our distribution partners. They offer solutions from a single source for all business cases, thus ensuring that all benefits are fully coordinated and that business decisions can be taken quickly. The global operating model and legacy-free IT system landscape guarantee efficient business processes and offer elipsLife sustainable cost advantages in the markets. The expertise gained in the group insurance business combined with our “boutique” approach to customer services and operational efficiency enable us to offer our customers excellent benefits at an attractive price. elipsLife pursues a business-to-business (B2B) distribution model and places its products and services on the market via insurance brokers and distribution partners, the objective being to establish meaningful partnerships based on sustainable and long-term relationships.


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Most important successes In 2018, elipsLife focused on preparations for its entry into the US group insurance market. The first step was to acquire Mapfre Life Insurance Company, an insurance company with excellent ratings (A/a+) from A.M. Best that is licensed to operate in 49 states as well as the District of Columbia. This acquisition allows elipsLife to underwrite group insurance business throughout the US. The name of Mapfre Life Insurance Company was changed to Elips Life Insurance Company. The company will operate under the elipsLife brand name. The next step was to develop a line of group insurance products for the US market, including life and accidental death and dismemberment insurance solutions and short- and long-term occupational incapacity and disability insurance solutions. All of these products were approved by the Interstate Insurance Product Regulation Commission. In addition to these traditional insurance products, elipsLife also offers its US customers absence management solutions and services relating to selfinsured disability and work accommodation. elipsLife Insurance Company set up its US administrative headquarters in Schaumburg, a suburb of Chicago in Illinois. A team of some 20 experts boasting more than 20 years’ experience in the insurance industry on average currently not only handles all core functions such as sales, underwriting, customer service and claims processing, but also central corporate functions such as accounting, HR and IT. The final step was to adjust the processes and our IT platform to ensure that elipsLife’s global operating model can cope with the characteristic features of the US market – including the management of absences in accordance with the Family and Medical Leave Act (FMLA) and the deduction and reporting of withholding tax due on compensation payments in accordance with the legal provisions of the US and the individual US states. Outlook elipsLife is particularly proud of the fact that it managed to successfully recruit highly qualified sales and underwriting specialists in the US. They will initially focus on developing the markets in the Midwest and in New England. The reason for focusing on these market regions lies in the business opportunities on offer as well as the possibility of recruiting qualified talent in this region who have proven expertise in group insurance and enjoy a good reputation among the brokers in their region. elipsLife has been offering competitive group insurance solutions for medium-sized enterprises and other interested parties from 2019. The intention is to use the experience and feedback gained from insurance brokers and customers in the Midwest and New England to invest further in expanding our regional presence as well as our range of products and services.


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Contents


elipsLife | Unternehmensbericht 2018

Contents

Differentiation with solutions from a single source

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elipsLife in the spotlight

4 elipsLife in the spotlight 4.1 | Total-solution approach elipsLife aims to establish itself in all relevant markets as a leading provider of tailor-made biometric insurance solutions. Biometric risks refer to life and all its financial consequences. These include the consequences of accidental death, occupational incapacity and disability. At elipsLife, the term “insurance solution� does not simply refer to traditional insurance cover in the form of policies, general terms and conditions of insurance and the related insurance premiums. Rather, the market service offered by elipsLife comprises a comprehensive bundle of products that are tailored specifically to the well-being and needs of its customers. Bundling of insurance solutions and services What is special here is that elipsLife offers its insurance solutions locally with one team and via one central IT platform. These coordinated services provided by a single source makes life easier for customers: one contact person only, no duplication, suitable insurance solutions tailored to specific customer needs, one integrated IT platform and efficient claims processing. This offer from a single source substantially reduces coordination input and thus also the costs for the employer. This results in lower total costs and more sustainable premium rates. The practical implementation of the totalsolution approach is only possible because elipsLife has the capability to consistently process all contract and benefit data with its multinational crossover IT platform. Focus on customer needs elipsLife pursues a clearly defined objective: it helps employers to keep their employees healthy, and in doing so, promotes productivity and alleviates the shortage of qualified staff. This focus shapes the composition of the range of total-solution products in all markets. elipsLife adapts its products to the requirements of the local markets. We offer death and disability cover as basic components in all markets. In some markets such as Switzerland and now Italy too, these are supplemented by components such as insurance for short absences, daily sickness benefits insurance and accident insurance. This makes the total-solution approach even more effective – right from the earliest possible moment after the insured event. Biometric insurance solutions show strong growth Successful cooperation with our distribution partners who give us access to their customer base requires top-quality services in our interaction with brokers, a trusting relationship and an attractive, comprehensive and tailor-made range of insurance products. Corporate customers wish to insure the biometric risks of their employees so as to safeguard their business performance and meet the legal requirements. They are reliant on a healthy, satisfied and productive workforce. The option of reintegrating qualified employees into the workforce after an accident or serious sickness is of vital importance in times when there is a serious shortage of experts. The total-solution approach provides the necessary tools for this.


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The employees of our customers also have clearly defined expectations of biometric insurers, both with regard to prevention and the handling of claims. It should be remembered that physical and in particular mental disorders have been increasing at an alarming pace in our modern performance society over the past decades. The consequences are well-known: in all Western countries, benefits and pensions in the field of biometric solutions are rising sharply.

“Total solution” pays off as a “triple win”: for the corporate customer, the employee and the insurer. The good news: our experience with prevention and case management measures clearly shows that most affected people wish to return to their jobs and that many of them successfully do so with professional help. The total-solution service package is key to this process. A single contact person handling a claim and a single case manager ensure that the sick or injured person receives close support, which significantly increases the chances of successful reintegration. This is also of benefit to the employer – and its attractiveness in the labour market. “Total solution” bundles financial benefits and support services before and after the claim. This pays off as a “triple win”: for the corporate customer, the employee and the insurer. Case management too: preferably from a single source A total-solution approach can enormously simplify the process of reintegrating an employee affected by a claim into professional life. A reintegration programme has to cover many aspects and the case manager carries a complex responsibility. He can act as coordinator of all units or directly support the affected person. One thing is certain: the earlier the programme is started, the less support is needed. This is because a relationship of trust is built up early and the required measures can be assessed quickly. Close cooperation with the employer is essential as the employer’s support in finding a solution is crucial. The other members of the affected person’s team also have to be involved in the process as they are often confronted by a heavier workload during the course of the programme. Solutions and benefits from a single source offer many advantages. A total-solution provider like elipsLife makes sure that the foundation for successful case management is laid very soon after the insured event. The coordination process is greatly simplified, and the affected employee has a single contact person for all matters.


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elipsLife in the spotlight

4.2 | Service differentiation In the knowledge that elipsLife as a young insurance company providing retail services can primarily differentiate itself from its competitors by offering a first-class service, it pursues a very focused customer-centric service strategy. Availability, lean processes and short decision-making procedures are just as much a part of a first-class service as subject expertise, know-how, efficient benefit management, prevention measures and successful case management. Supplementary benefits generate added value for the customer. For example, elipsLife’s customers are serviced by a single dedicated contact person for all products. Or a claim is processed as a single whole. This means that elipsLife does not experience the time constraints caused by the internal forwarding to another department of more complex and longer claims covered by different products due to the longer duration. As a result, the customer only needs to notify the claim and submit the required documents once – which significantly reduces the red tape. The process is then coordinated by the Claims department, which makes it possible to provide early and holistic support in a potentially complex case. Personalised support makes it easier to meet specific customer needs and build up trust in the relationship. Another example is the work of the elipsLife case managers. Thanks to the integrated approach, they can support complex cases for the entire duration, making it possible to identify and approach any issues that may affect the customer across all cases. During detailed discussions with the customer, they compare the individual performance indicators to the average values for the total population or the relevant sector, analyse the deviations and discuss possible measures. These can include, for example, changes to the workplace design or infrastructure as well as the corporate culture.


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Increased focus on prevention In the context of occupational health management, elipsLife monitors the developments that follow on diagnosis of claims and makes the required services available. For instance, it has become clear over the past few years in Switzerland that absences relating to mental health problems are increasing disproportionately. Based on this observation and as a consequence of feedback from customers, elipsLife introduced a specific mental health service module in 2018. This module focuses on prevention and the identification of vulnerable employees. The objective is to recognise signs of burnout early enough to take appropriate measures. Together with the customer’s managers and HR officers, the factors causing stress are identified, addressed and alleviated, where possible. The implementation and effect of the measures can be monitored for the duration of the customer relationship and suggestions for changes can be made. Customers rate their experience with elipsLife ... In a broad-based survey last year, elipsLife asked more than 400 customers about their satisfaction with its customer service. The customer survey, which was based on the net promoter score method, in particular measured the willingness to refer the company to other people and the degree of satisfaction with a number of service dimensions of elipsLife. Thanks to the excellent participation rate by the customers who were contacted, the outcome is encouragingly reliable. Most of the responding customers perceive elipsLife as a trustworthy and reliable partner. This is notably positive for our “total-solution customers”, i.e. those customers who obtain very diverse biometric insurance solutions and benefits from a single source. Satisfaction with the individual service units involved in claims handling, case management, contract management and individual underwriting is well into positive territory for most customers. elipsLife’s essential service parameters for a dedicated case manager and the continuity of the claims handling process were identified by 82 % of the customers as the most important element of service differentiation. Speed and availability were identified as the areas offering potential for customer service optimisation. Not surprising, really, as these two criteria at times posed a serious challenge for elipsLife in the aftermath of the fast growth experienced in the previous year and the related sharp rise in the number of claims and customer queries. ... and provide valuable feedback for customer service optimisation The range of feedback and comments made it possible to prioritise customer requirements and to identify new focal areas for the optimisation and expansion of our service strategy. The ongoing development of the digital information and communication channels was mentioned quite often, for example the portal functions providing individual and uncomplicated updates about the status of a case. These customer requirements mostly overlap with the strategic ambitions of elipsLife regarding the expansion of its service range and its digital expertise. elipsLife will continue to position itself in the market with excellent customer service that meets the needs of its customers.


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Corporate governance

5 Corporate governance The structures and processes defined by elipsLife ensure management of the business units in line with the principles of good corporate governance and facilitate efficient cooperation between the Board of Directors and the Executive Boards of the individual companies. Elips Life Ltd, Elips Insurance Ltd and Elips Life Insurance Company are regulated insurance companies and are therefore obliged to comply with the relevant supervisory requirements regarding corporate governance. This in particular also includes the processes for capturing and managing all risks and the maintenance of effective internal control systems. Elips Life Ltd and Elips Insurance Ltd have their registered offices in Triesen and are subject to supervision by the Financial Market Authority (FMA) of Liechtenstein. Elips Life Insurance Company is domiciled in Missouri and is subject to supervision by the Missouri State supervisory authority.

5.1 | Group structure The elipsLife Group belongs to the Life Capital business unit of Swiss Re. The sole shareholder of Elips Life Ltd is Swiss Re Life Capital Ltd in Zurich. Elips Insurance Ltd is a wholly owned subsidiary of Elips Life Ltd. Elips Life Insurance Company is a subsidiary of ElipsLife Americas Inc (Delaware), which is owned by Swiss Re Life Capital Americas Holding Inc (Delaware). The latter is owned by Swiss Re Life Capital Ltd in Zurich. Elips Life Ltd operates in the EU and Switzerland and has branches in Switzerland (Zurich), the Netherlands (Amstelveen), Germany (Cologne), Italy (Milan) and Ireland (Dublin). Elips Insurance Ltd has a branch office in Italy (Milan). Elips Life Insurance Company is licensed to do business in all US states except New York as well as in the District of Columbia.

5.2 | Organisation The organisational structure of elipsLife with the Products, Finance, IT and Strategy & Business Development units that are responsible for the whole Group ensures uniform business processes and controls. Sales and Operations, i.e. the units with direct customer contact, are managed locally. Thanks to the wide-ranging independence of these two business areas, the local units can focus optimally on the country-specific needs of their customers, while the centralised units ensure low-cost processing with standard processes, systems and controls. The CEO Europe and the CEO Americas sit on the Executive Board.


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In 2018, the Executive Board consisted of the following persons: • Reto Toscan, Group CEO • Alberto Franceschetti, CFO • Bart den Hartog, CPO • George Harbut, Strategy & Business Development • Christoph Gaus, CEO Europe (from 1 June 2018) • Eric Herbelin, CEO Americas • Kaspar Weiss, CTO Christina Müller, Chief Risk Officer (from September 2018), Miriam Bregy, Head of HR, Daniela Banz, Head of Marketing & Communication and Benjamin Heusi, Head of Legal & Compliance attended the meetings of the Executive Board in an advisory capacity.

5.3 | Risk governance At elipsLife, risk governance is based on three lines of defence. As the first line of defence, the management teams of the different business areas are responsible for the monitoring of risks. This includes the definition of effective processes and systems with functioning internal controls and documented procedures. The second line of defence is handled by the Risk Management and Compliance units, which are independent of the business areas. These units are responsible for the monitoring of risks in terms of quality as well as quantity and the prevention of breaches of laws and ordinances. Group Internal Audit (GIA) of Swiss Re is the third line of defence and is responsible for assessing the effectiveness of the governance, risk management and controlling processes. This includes an assessment of the performance of the first and second lines of defence.

5.4 | Risk management Given the rapid growth of the company and its expansion in geographic terms, the first line of defence is of central importance for elipsLife. As part of the Life Capital business unit, elipsLife has to follow the risk governance guidelines of the Swiss Re Group, and therefore bases its risk management on Swiss Re’s four principles: controlled risk taking, clear accountability, independent risk controlling and an open risk culture.


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Corporate governance

A clearly defined risk mandate and risk monitoring system safeguard elipsLife’s sustainable added value. Based on clearly defined powers of attorney, the individual employees are the owners of the risks assumed by them. Employee incentives are aligned to elipsLife’s superordinate business objectives. An open risk culture should lead to an atmosphere of trust and reduce the possibility of negative surprises regarding the cause and possible scope of losses. Under the management of the Chief Risk Officer, the Risk Management unit is responsible for the independent monitoring of risks and advises the Executive Board and the Board of Directors on the material aspects of all risks. As it is involved in all important decision-making processes, it guarantees the constant controlling of risks.

5.5 | Compliance 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. The Compliance unit issues internal guidelines, trains the employees and monitors compliance with the regulatory requirements in accordance with the compliance charter adopted by the Board of Directors. 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.

5.6 | 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.


elipsLife | Unternehmensbericht 2018

Contents

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39


elipsLife | Business Report 2018

40

Consolidated financial statements

6 Consolidated financial statements

6.1 | Consolidated balance sheet Assets (in thousands thousandsUSD) USD) US GAAP US GAAP Investments

Note

31/12/2018

31/12/2017

unaudited

unaudited

B1 B1

Equity securities Fixed-income securities available available for for sale sale Fixed income securities Short-term Short term investments

28 860

——

477 608

191 094

24 291

51 956

530 759

243 050

Reinsurers’ share of unearned premium reserves

205 175

216 105

Reinsurers’ share of claims reserves

501 721

420 506

investments Total Investments Insurance assets

I\`ejli\ijÊ j_Xi\ f] gifÓk Zfdd`jj`fej gifm`j`fe

20 917

17 540

Deferred acquisition costs

B2 B2

27 164

28 608

Receivables from policyholders and brokers

B3 B3

375 681

392 529

Receivables from reinsurers insurance assets Total Insurance

523

——

1 131 181

1 075 288

154 563

251 852

Other assets Cash and cash equivalents

B4 B4

Tangible assets

2 336

2 128

Intangible assets

B5 B5

25 585

18 162

Tax assets

B6 B6

14 167

7 599

Other assets

B7 B7

621

5 090

197 272

284 831

1 859 212

1 603 169

other assets Total Other assets Total assets


41

thousandsUSD) USD) Liabilities and equity (in thousands US USGAAP GAAP

Note

31/12/2018

31/12/2017

unaudited

unaudited

Liabilities Insurance liabilities

Unearned premium reserves

B8 B8

274 616

288 966

Claims reserves

B9 B9

916 065

707 569

B10 B10

35 434

31 583

22 207

23 533

255 244

243 792

32 416

33 250

Gifm`j`fe ]fi gifÓk Zfdd`jj`fej Reinsurers’ share of deferred acquisition costs Funds withheld under reinsurance traties treaties

B11 B11

Payables to policyholders and brokers Payables to reinsurers Insurance liabilities Total insurance

3 925

14 032

1 539 907

1 342 725

Other liabilities Income tax liabilities Other liabilities

B6 B6

18 291

12 491

B12 B12

68 178

74 502

Other liabilities liabilities Total other Total liabilities Equity Share capital Share premiums / capital Capital contributions contributions Share based compensation Share-based compensation

86 993 1 429 718

B13 B13 13 584

11 084

195 088

140 088

1 150

596

Currency translation adjustment, net of tax

—2 983

—754

Unrealized Unrealised investment gains, net of tax

10 405

8 744

3 403

13 564

Retained earnings

86 469 1 626 376

8eelXc gifÓk&cfjj

Total equity Total liabilities and equity

12 189

129

232 836

173 451

1 859 212

1 603 169


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Consolidated financial statements

6.2 | Consolidated income statement Income statement (in thousands thousandsUSD) USD) US GAAP US GAAP

Note

2018

2018

unaudited

unaudited

1 114 841

977 723

Premiums Gross written premiums

C1 C1

Change in unearned premium reserves Reinsurers’ share of premiums Reinsurers’s share of change in unearned premium reserves Total premiums

508

—25 051

—731 898

—698 528

—592

54 975

382 859

309 119

—659 528

—606 746

Claims Claims paid

C2 C2

Reinsurers’ share of claims paid Change in claims reserves Reinsurers’ share of change in claims reserves Total Claims claims

490 966

399 910

—220 322

—183 087

100 052

141 818

—288 832

—248 105

—93 065

—84 968

Commissions Commissions paid

C3 C3

Change in deferred acquisition costs Reinsurers’ share of commissions paid Reinsurers’ share of change in deferred acquisition costs Other technical expenses commissions Total Commissions

—76

1 646

107 101

99 673

206

—4 200

—737

—499

13 429

11 652

GifÓk Zfdd`jj`fej

GifÓk Zfdd`jj`fej gX`[

—19 784

—10 082

:_Xe^\ `e gifm`j`fe ]fi gifÓk Zfdd`jj`fej

—4 490

—6 846

I\`ejli\ijÊ j_Xi\ f] gifÓk Zfdd`jj`fej gX`[

11 907

2 833

I\`ejli\ijÊ j_Xi\ f] Z_Xe^\ `e gifm`j`fe ]fi gifÓk Zfdd`jj`fej

KfkXc gifÓk Zfdd`jj`fej KfkXc GifÓk Zfdd`jj`fej

Total insurance technical accounts Administrative expenses

C4 C4

4 135

6 989

—8 232

—7 106

99 224

65 560

—79 867

—58 777

Other accounts Investment result Exchange gains/losses Other income and expenses Total other accounts Total income before income tax expense

—1 191

2 306

2 720

—2 782

200

—355

1 729

—831

21 086

5 952

Income taxes

—8 897

—5 823

E\k gifÓk&cfjj E\k GifÓk&Cfjj

12 189

129


43

6.3 | Notes to the consolidated financial statements 6.3.1 | General accounting principles A1 Basis of presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP). A2 Principles 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, Elips Insurance Ltd, Elips Life Americas Ltd and Elips Life Insurance Company. A3 Use of estimates in the preparation of financial statements The preparation of financial statements requires management to make significant estimates, actuarial assessments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the related disclosure. A4 Foreign currency remeasurement and translation Transactions denominated in foreign currencies are remeasured to the respective subsidiary’s functional currency at average exchange rates. Monetary assets and liabilities are remeasured to the functional currency at closing exchange rates, whereas non-monetary assets and liabilities are remeasured to the functional currency at historical rates. Remeasurement gains and losses on monetary assets and liabilities and trading securities are reported in earnings. Remeasurement gains and losses on available-for-sale securities are reported in shareholders’ equity. For consolidation purposes, assets and liabilities of subsidiaries with functional currencies other than US dollars are translated from the functional currency to US dollars at closing rates. Revenues and expenses are translated at average exchange rates. Translation adjustments are reported in shareholders’ equity. The following rates were used: Balance sheet

Income statement

31/12/2018

31/12/2017

2018

2017

CHF / USD

1.0149

1.0263

1.0224

1.0157

EUR / USD

1.1434

1.2009

1.1822

1.1266


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Consolidated financial statements

6.3.2 | Balance sheet B1 Investments The company’s investments are split into equity securities, fixed-income securities and short-term investments. Equity securities are measured at fair value. Changes in fair value are recognised in net income. All fixed-income securities are classified as available-for-sale. They are carried at fair value, based on quoted market prices, with the difference between the applicable measure of cost and fair value being recognised in shareholders’ equity. Interest on fixed-income securities is recorded in the investment result when earned and is adjusted for the amortisation of any purchase premium or discount. Realised gains and losses on sales are included in earnings and are calculated using the specific identification method. Short-term investments are measured at fair value with changes in fair value recognised in net income. elipsLife considers highly liquid investments with a remaining maturity at the date of acquisition of one year or less, but greater than three months, to be short-term investments. B2 Deferred acquisition costs elipsLife incurs costs in connection with acquiring new insurance business. Some of these costs, which consist primarily of commissions, are deferred as they are directly related to the successful acquisition of such business. Deferred acquisition costs are amortised in proportion to premiums earned. B3 Receivables Premium receivables which have been invoiced are accounted for at face value. They are regularly assessed for impairment. Evidence of impairment is the age of the receivable and/or any financial difficulties of the counterparty. Allowances are set up in relation to the time a receivable has been due and the financial rating of the debtor, and can be as high as the outstanding balance. B4 Cash and cash equivalents Cash and cash equivalents include cash on hand and short-term deposits. B5 Intangible assets The intangible assets comprise costs for establishing and expanding business operations, purchased and proprietary software as well as insurance licences for the US business. External direct costs of materials and services incurred to develop or obtain software for internal use, payroll and payroll-related costs for employees directly associated with software development are capitalised and amortised on a straight-line basis through earnings over the estimated useful life. B6 Tax assets and liabilities Tax assets and liabilities are recognised based on the difference between financial statement carrying amounts and the corresponding income tax bases of assets and liabilities using enacted income tax rates and laws. A valuation allowance is recorded against deferred tax assets when it is deemed more likely than not that some or all of the deferred tax assets may not be realised. elipsLife recognises the effect of income tax positions only if sustaining those positions is more likely than not. Changes in recognition or measurement are reflected in the period in which a change in judgement occurs.


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B7 Other assets Other assets mainly include non-insurance technical debtors as well as accrued interest and rent. B8 Unearned premium reserves Unearned premium reserves consist of the unexpired portion of insurance provided. B9 Claims reserves Claims reserves are accrued when insured events occur and are based on the estimated ultimate cost of settling the claims. A provision is also included for claims incurred but not reported, which is developed on the basis of past experience adjusted for current trends and other factors that modify past experience. The establishment of the appropriate level of reserves is an inherently uncertain process involving estimates and judgements made by management, and therefore there can be no assurance that ultimate claims and claim adjustment expenses will not exceed the loss reserves currently established. These estimates are regularly reviewed, and adjustments for differences between estimates and actual payments for claims and for changes in estimates are reflected in income in the period in which the estimates are changed or payments are made. B10 Provision for profit commission The provision for profit commission is calculated based on the terms of the relevant insurance contracts and on the relevant actual claims experience for these contracts. B11 Funds withheld under reinsurance treaties Funds withheld include the amounts held back as collateral under reinsurance contracts. The amount is based on the valuation of the underlying reinsurance items. B12 Other liabilities Other liabilities mainly include insurance taxes for medical expenses business which are due to Irish Authorities (2018: USD 56 million; 2017: USD 61 million). The remaining amounts (2018: USD 12 million; 2017: USD 13 million) nearly exclusively relate to deferred expenses. B13 Equity 2018 equity includes a capital injection of around USD 58 million by the sole shareholder Swiss Re for the funding of the newly established/acquired US entities. In 2018, an amount of around USD 10 million was shifted from “Currency translation adjustment” to “Retained earnings” due to the split of EMEA entities into regional sub-entities with own local functional currencies being in some cases different from the previous overall functional currency. 2017 US GAAP equity is around USD 10 million higher than equity recognised in the consolidated 2017 Liechtenstein GAAP financial statement. This difference is mainly due to investment assets valuated under US GAAP at fair value, whereas Liechtenstein GAAP valuation follows the prudency principle at a lower value.


elipsLife | Business Report 2018

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Consolidated financial statements

6.3.3 | Income statement C1 Gross written premiums “Gross written premiums” 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, single premiums and payments for annuities. C2 Claims paid “Claims paid” comprise all payments made in the reporting year, including pension payments and policy surrender payments as well as claim settlement costs. C3 Commissions paid Commissions paid include the expenses for the acquisition and renewal of insurance contracts. C4 Administrative expenses The administrative expenses mainly include salaries, IT expenses and the rent for office buildings.

6.3.4 | Events after the reporting date elipsLife has evaluated events from 31 December 2018 through the date this report was issued. There were no material subsequent events that need disclosure.


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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, kontakt@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 41, kontakt@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, kontakt.de@elipslife.com elipsLife branch office in Italy Via San Prospero 1, 20121 Milan, Italy T +39 02 8295 8900, F +39 02 8295 8909, contatto.it@elipslife.com elipsLife branch office in Ireland 6 Ely Place, Dublin 2, D02 E896, Irland T +353 196 10 140, F +353 196 10 149, contact.ie@elipslife.com elipsLife Insurance Company 1450 American Lane, Suite 1100, Schaumburg, Illinois 60173, USA T 1-833-847-5708, F 1-630-259-4809, contact.us@elipslife.com

Photos Cover: Schreckhorn (4 078 m), Bernese Oberland, Switzerland Pages 6 and 7: Eiger (3 970 m), Bernese Oberland, Switzerland Page 13: MĂśnch (4 107 m), Bernese Oberland, Switzerland Page 19: Fieschergletscher (4 000 m), Bernese Oberland / Valais, Switzerland Page 27: Grand Teton (4 199 m), Wyoming, USA Pages 30 and 31: Liskamm (4 527 m) and Gornergletscher, Valais, Switzerland Page 39: Grosses Fiescherhorn (4 049 m), Bernese Oberland / Valais, Switzerland

Š elipsLife 2019


elipsLife Landstrasse 40 9495 Triesen Liechtenstein T +423 239 95 55 F +423 239 95 54 Elips Life Insurance Company 1450 American Lane, Suite 1100 Schaumburg, Illinois 60173, USA T 1-833-847-5708 F 1-630-259-4809

www.elipslife.com