Page 1

Annual report


Key figures in CHF

31.12.2017

31.12.2016

937.9 m

786.2 m

–799.2 m

–677.9 m

0.4 m

1.2 m

Total assets**

903.1 m

721.7 m

Equity**

159.0 m

158.6 m

230

182

Gross premiums earned (in CHF) Gross claims* Profit

Full-time equivalents**

* incl. change in reserves ** Total as at 31.12.


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 ______________________________________________________ 17

3.2.1 Business environment _______________________________________________ 17

3.2.2 Existing markets _____________________________________________________ 20

3.2.3 New markets _________________________________________________________ 22

3.3

Guarantees of success ______________________________________________________ 23

3.3.1 Technology and data are driving personalised

services forward _____________________________________________________ 23

3.3.2 Diversity creates opportunities – also for competitors  ___________ 24

3.4

Corporate governance

3.4.1 Group structure ______________________________________________________ 26

3.4.2 Organisation __________________________________________________________ 26

3.4.3 Compliance ___________________________________________________________ 28

3.4.4 Solvency II ____________________________________________________________ 28

____________________________________________________

26

3.4.5 Risk management ____________________________________________________ 28

3.4.6 Internal audit _________________________________________________________ 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

Auditors’ report _____________________________________________________________ 46


elipsLife | Annual report 2017

Preface

5

1 On the right track

The financial year 2017 was an eventful year for elipsLife, but the company remained on its growth path in spite of the challenging environment. Important foundations for future activities were also laid. The Board of Directors and the Executive Board are delighted that 2017, like the previous years, was a profitable year. Given the high expansion costs, the continued negative impact of the low interest rate environment and some major claims, this was not a foregone conclusion. I would like to warmly thank our customers and partners for their loyalty and good cooperation. I would also like to thank all elipsLife employees. It is their great ­commitment that is taking the company forward, and they are our incentive for positioning elipsLife as an attractive employer. The commitment of our employees made a definitive contribution to opening up promising perspectives. In the reporting year, elipsLife grew further, not least because of tapping into the German and Italian markets. While business was successful in Italy, we encountered obstacles in Germany. The advantages of our product are recognised, but because risk pension solutions are not inscribed in law in Germany, customers have to be convinced of the benefits, which requires much time. We have since expanded our offer so that we can also seamlessly replace existing company pension schemes. In the area of governance, the Board of Directors and the Executive Board are focusing on risk ­management. Organisational skills, know-how and professionalism were expanded further. In this way we are making sure that the monitoring of risks can keep tread with the company’s growth. In 2018 we will continue to promote our growth, but with a stronger focus on profitability. We wish to achieve this by expanding our business in Europe, by entering the US market, and by making additional investments in our products. The preliminary work is progressing well. In times of falling cession rates by direct insurers, elipsLife as an insurer offering group life insurance is securing its access to this lucrative risk pool. For this reason, elipsLife has evolved into a strategic pillar of the Swiss Re Group. Thierry Léger Chairman of the Board of Directors of elipsLife


Evolution into a strategic pillar of the Swiss Re Group


elipsLife | Annual report 2017

8

Foreword by CEO

2 Self-financed growth

In 2017, elipsLife further expanded its market share and increased the premium volume for its core business by some 30 %. The reporting year was shaped by many highs and lows, but specifically also by the continued strong growth in the established core markets of Liechtenstein, Switzerland and the Netherlands and by the first successes reported in the new markets of Italy and Germany. As there is no established second pillar market in Italy, it was slightly easier to penetrate the Italian market than the German market. In a very difficult market environment, we not only held on to our 25 % market share in Ireland, but also expanded on this share. At the end of 2017, around 578,000 people in Ireland were insured with elipsLife. In future, the focus in this country will fall on expanding our group life insurance business. The elipsLife Group’s total premium volume rose from CHF 786.2 million to CHF 937.9 million. This is an increase of 19 %. This success was dampened by the huge investments in new markets as well as some major claims in the Swiss accident business. Because of these two factors and a reinforcement of reserves, the profit was slightly down on the previous year at CHF 0.4 million (2016: CHF 1.2 million). At present, the established markets are funding the start-up operations in the new markets. The successful model of elipsLife will be copied for the expansion to the US. The world’s biggest risk market will be explored using the brand and with the IT systems of elipsLife, which allows us to capture additional economies of scale and to substantially improve our cost ratio. The expansion will also considerably change the structures of elipsLife, as different time zones and large distances now also have to be considered. In order to push ahead with the expansion and ensure that the most diverse requirements can be met in the future, the corporate structure of elipsLife was changed in 2017. Instead of a company structured along functional lines, elipsLife now has a regional structure. This significantly strengthens the role of the regions and countries, and the Europe and US regions are now also represented by a CEO on the Executive Board. To keep up with this organic and inorganic growth, a new position for a Head of Business Development & Strategy was created at Executive Board level. This structure may still seem slightly inflated at present, but as a fast-growing company we realise that structures have to be adjusted in advance of expected growth. Failure to do this can soon affect the quality of the services provided to customers and partners.


9

The continued development of a fully digitised insurance company is a permanent focal topic for elipsLife. In the reporting year, we once again commissioned new programs for our generic application landscape. One of the highlights is the automatic reservation engine, which introduces an almost fully automatic reservation process that is considerably more robust than the previous manual processes. We also successfully migrated all claims from the old systems to the new platform. The continued globalisation has consequences for our IT infrastructure, where ongoing modernisation requires investments. The cloud is another topic of interest for elipsLife. It is hoped that the high standards of data security that apply to the cloud have by now been recognised by the regulators, in which case cloud solutions may soon be possible. elipsLife has been part of Swiss Re Life Capital since 2016. With this embedding, elipsLife’s strategic importance for the Group’s growth plans has increased. This is reflected in the clearly defined expansion strategy. The integration also makes it possible to quickly and effectively implement specific measures to support future growth.

From a functional to a regional organisational structure. elipsLife is approaching its anniversary year with renewed strength: the company will celebrate its tenth birthday in autumn 2018. Few people could have imagined that in just ten years, elipsLife would have 1.6 million insured and a premium volume of almost one billion Swiss francs. A proud ­success. I would like to take this opportunity to warmly thank all the customers, partners and employees who made this success possible with their loyalty in the past ten years. Reto Toscan CEO of elipsLife


Notable premium growth of 30 % for the core business


elipsLife | Annual report 2017

12

Consolidated annual report

3 Consolidated annual report 3.1 | Management report 3.1.1 | Business development For elipsLife, 2017 was a year with many ups and downs. But some volatility is presumably a typical feature of “successful” start-ups that are in the process of growing up. While 2015 was overshadowed by the Swiss franc crisis and 2016 was dominated by low interest rates, 2017 for elipsLife centred on expansion, investments and volatility. Although interest rates remained low, the euro recovered against the Swiss franc, which helped elipsLife stabilise further. As the company is investing in new markets in the eurozone at present, however, the positive effect of the stronger euro did not have quite the same impact as the weak euro in 2015. The cost ratio could nevertheless be maintained at an advantageous 16.6 %, not least because of a policy of rigid cost control. Because of some major accident claims in the fourth quarter and the reinforcement of reserves for the Swiss disability business, earnings were not very good. The company also invested heavily in the expansion of its IT infrastructure and the further development of its core systems, both of which account for a major share of the total costs. As the new markets wrote comparatively little business they did not boost the profit, which was modest at CHF 0.4 million. However, elipsLife once again demonstrated its already considerable robustness in the reporting year: by now, the company can finance even major investments in new markets itself and still end the year in the black. Like 2016, 2017 was a year characterised by enormous growth. Premiums earned rose from CHF 786.2 mil­­lion to CHF 937.9 million. Premium volume for the core business improved from CHF 243.6 million to CHF 318.0 million, which equals an increase of almost 30 %. The Irish Medex business did well again and increased from CHF 542.6 million in the previous year to CHF 619.9 million. At the same time, total assets increased from CHF 721.7 million to CHF 903.1 million. The constant expansion of the target operating model continued to be a focal topic for elipsLife in 2017. After the new claims module was commissioned in the previous year and the new platform could therefore be operated end-to-end, all contracts were migrated in the reporting year and the automatic reservation engine was activated. The IT infrastructure was also adapted to the new global challenges and the front-end digitisation concepts were finalised, meaning that this concept can be implemented in the coming years.


13

Cost ratio, consolidated

Premiums and claims, consolidated

670.1 555.3

655.9 531.7

545.7 453.0

149 %

677.9

786.2

937.9 799.2

in CHF million

91 %

9 %

10.8 7.5

2.2 1.4

3.6 3.2

139.8 105.7

58 %

2009* 2010*

2011

2012

2013

2014

2015

2016

2017

2009* 2010*

2011

2012

4 %

4 %

5 %

5 %

6 %

2013

2014

2015

2016

2017

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

Premiums and equity, consolidated

in CHF million

in CHF million

655.9

545.7

7.4

7.0

670.1

12.3

786.2

937.9

Profit before income tax, consolidated

2009* 2010*

2011

2012

2013

2014

2015

2016

2017

2009* 2010*

2011

Gross premiums earned Equity * 2009 and 2010 only Elips Life Ltd, from 2011 consolidated figures

2012

2013

2014

2015

158.6

138.4

128.0

111.4

10.8 19.4

–3.5 2.2 9.3

–2.9

3.6 12.2

–3.3

2.6 139.8 59.2

3.2

2016

159.0

4.0

2017


elipsLife | Annual report 2017

14

Consolidated annual report

3.1.2 | Investments, equity, solvency Investments The investment strategy is still determined by the low interest rate environment. However, as both the investment portfolio and equity of elipsLife are growing steadily, it has become possible to switch investments to corporate bonds and credit bonds. In 2017, too, the performance was affected by high levels of cash and persistently low interest rates for short-term and secure asset classes. The net return for the reporting year was –0.2 %. Equity and solvency In the second year after the introduction of Solvency II in Europe, elipsLife worked constantly to further professionalise and consistently monitor its solvency regime. The Solvency II requirements were met to the utmost satisfaction of the regulator and the other stakeholders. The Solvency II ratio was 212 % for Elips Life Ltd and 141 % for Elips Insurance Ltd. No additional share capital increases were carried out in the reporting year.

3.1.3 | Risks elipsLife is engaged in further refining its risk management processes and controls. The objective is to further improve all well-established processes and to bring the new and less established processes up to the same high standards. In general it can be said that the strategic risks are more or less the same as in previous years. As a provider of biometric solutions only, elipsLife is mainly exposed to severe economic crises and pandemics. There are no other immediate risks, thanks to diversi­ fication in terms of geography, lines of business and customer size. The operational risks are constantly changing in the face of growing digitisation, and it is clear that dependence on systems and their providers is increasing. In this regard special mention should be made of the risks relating to data protection, which need to be analysed carefully in view of the new GDPR and ever more popular cloud solutions. This issue requires pragmatic as well as sustainable solutions. Following the globalisation of elipsLife, some structural risks such as the IT landscape and the availability of its IT systems have grown bigger, which required adjustments to the organisational structure, among others. The obvious financial risks include interest rate and currency risks. These risks, however, are manageable for elipsLife and would affect its solvency only in the event of hyperinflation. As elipsLife doubtlessly faces the biggest risks in underwriting, a major effort was made in the reporting year to introduce automatic reservation and take the first steps in portfolio analytics. This field should in future be expanded considerably in order to further refine the underwriting models, and in particular predictive underwriting.


15

Cost ratio, core business

Premiums and claims, core business 318.0

in CHF million

264.2

159.3 113.0

148.3 2012

91 % 58 %

64.5

96.3 2011

52.2 31.9

10.8 7.5

2.2 1.4

3.6 3.2

2009* 2010*

191.4

190.6

243.6

149 %

22 %

2013

2014

2015

2016

2017

2009* 2010*

2011

2012

19 % 16 %

16 %

16 %

17 %

2013

2015

2016

2017

2014

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

Premiums, core business

Full-time equivalents at end of financial year

Share by market

2 % 1 % 2 %

140

182

230

115 50 %

86 55

45 %

9 10

27

2009*2010* 2011 2012 2013 Switzerland The Netherlands Belgium Liechtenstein Other

* 2009 and 2010 only Elips Life Ltd, from 2011 consolidated figures

2014

2015

2016

2017


elipsLife | Annual report 2017

16

Consolidated annual report

Events after the reporting date At the time of reporting, no events had occurred after the reporting date that are not included in these 2017 annual financial statements.

3.1.4 | Future development elipsLife aims to acquire a substantial market share in the global group risk insurance pool, which is worth some USD 135 billion. To this end, the company is selectively expanding into global markets. The focus currently falls on the development of new markets such as the US, but other regions will be added in future. This growth will also be limited to the risk insurance business in order to keep the complexity to a manageable size. The IT landscape and elipsLife’s unique target operating model play a central role in these expansion plans. The target operating model turns the spotlight on digitisation. The objective is to make our services to our customers more flexible, while at the same time offering multi-channel options for interaction and the best possible price/benefit ratio. elipsLife will therefore continue to invest heavily in the digitisation of its processes so that it can remain a reliable partner for its customers in all insurance matters.


17

3.2 | elipsLife in the market 3.2.1 | Business environment Target markets elipsLife’s business activities focus on the European Economic Area and Switzerland, in particular on countries such as the Netherlands, Germany and Italy that either have well-established and developed three pillar systems or are moving in this direction. From 2018, elipsLife will also engage in its core business in Ireland. The social environment In the reporting year, Europe was confronted by upheavals such as Brexit, the effects of which can still not be reliably predicted. Although negotiations between the UK and the EU have started, it is still not clear how the UK’s exit from the EU should be structured, how the differences with the EU can be resolved, and whether the so-called “divorce bill” will be accepted. The impact on the free movement of persons and economic cooperation can also not be assessed yet. Political stability worsened in many European countries, and uncertainty about the political environment and political orientation has increased. E ­ ffected and threatening political shifts led to a loss of stability in the EU, with a corresponding impact on the pension systems. In the past year, for example, many jobs were shed as a result of consolidation, outsourcing and optimisation measures. Pressure on the employees that remain, and in particular the managerial employees, is constantly growing. Against this background, health management is gaining in importance. elipsLife, a leading provider of patient and care management, is further sharpening its focus on this sector. On the other hand, the greying of society is continuing unabated. Although the influx of immigrants partially compensates for falling birth rates and rising life expectancy, this is not a sustainable development. A better life expectancy may be a good thing, but it also mercilessly exposes the funding gaps in retirement provision. Politicians are challenged by these developments, but seem to want to foist off the political and employer risk on the employees. The macroeconomic environment in Europe The low interest rate trend continued unabated in 2017, and several markets applied negative interest rates. The euro strengthened substantially against the Swiss franc in 2017 and closely approached the level that was seen before the scrapping of the euro floor by Switzerland in January 2015. Although the European economy did very well in the reporting year, the uncertainties on the equity market and low interest rates remained. Given the persistently low interest rates, life insurers find it impossible to earn an appropriate return on their investments. The insurance industry is therefore still confronted by low technical interest rates, which not only has an impact on their current obligations, but also the anticipated premiums for insurance customers. As elipsLife only offers biometric solutions and does not have to provide a guaranteed income on savings premiums, the company is less strongly affected than the market as a whole. But the income that can be earned on equities and benefit reserves in the current low interest rate environment is small.


elipsLife | Annual report 2017

18

Consolidated annual report

The regulatory environment All major insurance companies in Europe have been subject to the new Solvency II guidelines since 1 January 2016. elipsLife implemented the required measures very efficiently and without encountering any major obstacles. In the reporting year, elipsLife’s solvency ratio was substantially better than the minimum requirements under the new guidelines, and elipsLife can look forward with confidence to future challenges under the new regime. The market environment The market environment for insurance companies in the reporting year was dominated in practically all areas by growing competition and falling prices. In this difficult climate, certain factors gained considerably in importance:

Technology (digitisation) is increasingly developing into a driver of innovation and new distribution models, and also plays an ever more important role in after sales processes. New technologies and their interactive functions are changing the value chain. While many insurers perceive this as a risk, elipsLife as a dynamic insurance company sees this development as an opportunity to identify and use new trends at an early stage. As costs are an important driver of prices, cost trends should be given the greatest possible attention. Short-term savings programmes on their own do not offer a solution, and it is much more important to sustainably reduce the costs. elipsLife is on the right track with its focused strategy and can now increasingly benefit from its integrated IT systems and lean process landscape. In many respects, data play a determining role. This includes data sovereignty as well as the ability to work with as much data as possible, both of which can give the company a competitive edge. Data play a central role in the optimum pricing of risks. As this promises a long-term price advantage, most big insurance companies manage their own data projects. Customers as well as brokers are challenged by the growing complexity. This complexity is born from many factors, including regulation, internationalisation, new employment models and changing pension systems. With its total solution approach, elipsLife aims to reduce this complexity for its customers as much as possible. The objective is to develop coordinated solutions compatible with traditional pension systems that will make service provision easier and create the greatest possible transparency. The success of the one-stop shopping concept for all personal insurance products speaks for itself: more and more customers are putting their trust in this approach.


International presence

Headquarters Liechtenstein (Triesen) Core markets Switzerland, branch office in Zurich The Netherlands, branch office in Amstelveen Germany, branch office in Cologne Italy, branch office in Milan Ireland, branch office in Dublin Other markets Belgium


elipsLife | Annual report 2017

20

Consolidated annual report

3.2.2 | Existing markets Switzerland/Liechtenstein In the reporting year, elipsLife sustainably expanded its position in the Switzerland/Liechtenstein market. This strong growth is all the more encouraging as the consolidation of pension funds and collective foundations continued, competition among biometric risk insurers intensified further, and pressure on prices rose once again. As a focused provider of total biometric solutions, elipsLife offers its customers and distribution partners tailor-made products for all their needs. Its range of employee benefits products (reinsurance and BVG white labelling) has been consistently expanded. With this measure, the number of tailormade and combined insurance solutions from a single source (daily benefits, accident insurance and employee benefits) could be increased substantially and the mix of insurance lines could be improved noticeably again in the reporting year. As a provider of biometric insurance solutions and services, elipsLife has been successfully engaged in case and care management for many years, and also offers its customers workplace health management. In the reporting year, the accident business, which is exposed to higher volatility in view of the relative size of the portfolio, posted several major claims, which had a negative impact on the annual result. The regulatory environment in Switzerland was dominated in the reporting year by the Pension Reform 2020. Following the rejection of the reform proposal by the Swiss voters, pensions will remain a focal topic in Switzerland in the coming years. Politics and business are challenged to develop new solutions and to intensify communication on this topic. The Netherlands elipsLife further strengthened its position and expanded its market share in the Netherlands in the reporting year. The expected consolidation process has started in the PPI market. The number of PPIs dropped from eleven to nine during the year and the number of insurance companies active in this market decreased by two. elipsLife nevertheless managed to strengthen its position and to establish partnerships with a majority of the PPIs, the objective being to join forces to push ahead with innovation and to work together even more closely. Six APFs (collective foundations for several employers in accordance with the EU’s IORP directive) are active in the Netherlands. Like pension funds, APFs are permitted to bear their own biometric risks. However, four APFs have decided to reinsure the biometric risks they currently carry in their port­ folios with elipsLife. The number of pension funds has gradually declined in the past ten years. In mid2017, 268 funds were still active in the market, but according to the Netherlands Central Bank, 45 of them are currently in liquidation. In general, small and medium-sized funds are looking for matching cover, which is offered by elipsLife as reinsurer.


21

elipsLife aims to distribute its products through renowned first-rate professional brokers, advisors and third-party administrators (TPAs). After a careful selection process, new partnerships were established with large brokers and TPAs in 2017. Germany For elipsLife in Germany, 2017 was a year dominated by building up the business. It was particularly important to create the conditions needed to meet the high expectations in the coming years. As second-pillar risk pension solutions are not inscribed in law in Germany, customers have to be convinced of the advantages of elipsLife’s products, which takes up much time. In this sense, elipsLife is engaged in preparing the market for its future activities in Germany. elipsLife therefore focused on three aspects: (I) Its positioning as a biometric niche player with broad-based expertise, (II) the development of insurance solutions offering risk cover and reintegration benefits, and (III) the cultivation and im­ plementation of relationships based on a spirit of partnership with industry brokers. An influential topic in Germany in 2017 was the shortage of qualified staff, which enhances the appeal of new approaches to employee recruitment and retention. In the fight for the best talent, growing numbers of employers are looking for unique selling propositions and innovative fringe benefits, in particular also with a view to meeting the changed demands of the younger generation. The occupational income protection offered by elipsLife alleviates the shortage of qualified staff by improving employer attractiveness and focusing on the targeted reintegration of sick specialists – a solution that creates real added value and perfectly suits the current labour market. In 2017, the preliminary work resulted in improved customer interest, better brand recognition and growing submission volumes. The first customers have already been acquired, which strengthens elipsLife for the next phase of market expansion in Germany. Italy elipsLife kicked off its business operations in Italy in the reporting year. Contracts were concluded with important partners from the private and public sectors. At present some 50,000 employees are insured, and the gross premiums written amount to around EUR 6 million per year. In spite of this encouraging development, elipsLife is still in its infancy in Italy. The future is very promising, however, particularly as it has become clear in 2018 that the Italian market is very open to a new market player. The priorities of elipsLife for 2018 are to refine its risk assessment process, in particular for major contracts, and to expand its range of insurance products and solutions. As the focus to date fell on the leading brokers in the metropolitan areas of Northern Italy and Rome, elipsLife will also push ahead with the expansion of its distribution channels. The long-term target is to acquire a market share of five to ten percent in the group life and health business in Italy, the total volume of which – excluding the costs of medical treatment – is EUR 2.1 billion. Entry into and growth in a new market go hand in hand with risks. elipsLife is therefore continuously monitoring its business and refuses to compromise on quality in favour of short-term gains. Rather, elipsLife is aiming for sustainable development, long-term profitability and high levels of customer satisfaction.


elipsLife | Annual report 2017

22

Consolidated annual report

3.2.3 | New markets The global market for biometric risks in employee benefits is worth more than USD 135 billion. In 2017, elipsLife was active in Liechtenstein, the Netherlands, Germany, Italy and Switzerland. Together, these markets account for a premium volume of USD 34 billion, which equals around 25 % of the global market. The entry into new markets underlines elipsLife’s plans for growth. Ireland In the reporting year, elipsLife laid the foundation for engaging in its core business in Ireland too from 2018. A branch office was opened in Dublin. The Irish market is hardly new territory for elipsLife. For many years the company has been successfully engaged in the Medex business (health insurance) in Ireland as a third-party administrator for Laya Healthcare. In order to exploit the cross-selling potential, elipsLife has decided to also offer group life insurance in Ireland. USA The US is the world’s biggest market for group health and life insurance. With a premium volume of some USD 60 billion, it accounts for 44 % of the global market. The US market, an attractive risk and income pool, is facing huge challenges, including growing customer demands, complex and ­outdated IT systems, a shift towards voluntary insurance solutions, and radical changes in the medical fields. As the US market is on the cusp of a major upheaval, this is the right time to enter the market. This expansion will be routed through a company which, like elipsLife, belongs to Swiss Re’s Life Capital unit. Under the “elipsLife” brand, this company will operate in the US as an independent legal carrier, for its own account and at its own risk. In addition to the expertise of elipsLife, it will in particular also use its systems and obtain other services from elipsLife. In this way, the cost base for these investments will be substantially improved.


23

3.3 | Guarantees of success 3.3.1 | Technology and data are driving personalised services forward The most recent growth of elipsLife was driven by a strategy of providing cost-effective and ­tailor-­made products and individual services. The pillars of this strategy are: • The same operating model for all countries worldwide • An efficient B2B distribution network • A lean and integrated operating platform without any remnants of old systems • A total solution approach and customer-centric benefit and care management Radical change brought about by technological development is a global megatrend, just like demographic change, rapid urbanisation, climate change or resource scarcity. The impact of technological progress is very diverse. In the traffic and transport sector, autonomous vehicles and robots are being used. Optical character and image recognition enables fully digital communication and interaction, which improve the speed and quality of information exchange. At home, networked ecosystems tap into a wide spectrum of data sources and sensors to provide personalised services. This is referred to as the “Internet of Things”, and sometimes also as the “Internet of You”. What these developments have in common is that they use technologies and data to drive smart devices and personalised services. elipsLife’s technology is based on the same principles: • Operational excellence targeting cost efficiency, which is achieved through digitisation and the automation of bulk processes • Flexibility and speed achieved by purchases of standardised infrastructure solutions, the application of modern standard technologies and the selection of experienced providers • Customer experience, in particular by matching the different channels to our customers and partners to enable personalised solutions and services • Data as the key factor, for example via real time business intelligence As with almost every new development, implementation is key when it comes to optimised usage. This is why elipsLife makes sure that its business and IT departments are aligned. At the same time this allows the company to act locally and think globally. With this understanding, elipsLife tries wherever possible to centralise, standardise and reuse – also with the goal of reducing complexity as much as possible. The principles of elipsLife’s current technological approach can be found in the basic components. The “front end” offers customers the elipsLife experience across many different channels, as a result of which its expertise in customer relationship management (CRM) and telecommunications is constantly improved. The “service layer” applies conventional logic to make information available that can be adjusted individually when necessary. Ongoing investments in “back end” data capture systems and automated processes for contract and benefit management ensure cost-effective and efficient services. As the cloud is an important factor for integration, elipsLife is keeping a close eye on promising developments in this field.


elipsLife | Annual report 2017

24

Consolidated annual report

The company thus has a good foundation for ongoing IT standardisation and the consolidation of important business applications as well as the development of increasingly modular, tailor-made solutions. To this must be added suitable standards for data security, which is an imperative for customers and partners as well as elipsLife’s reputation. These governance and security aspects are extremely important, specifically in a time when all partners attach importance to integration in the sense of cooperation between internal and external applications. Reason enough for elipsLife to continue investing in the latest developments in this field. The focus on IT centralisation and standardisation improves cost efficiency. Whereas the IT expenses to date were primarily incurred for the most important “back end” systems and the underlying corporate architecture, the current need for more flexibility and personalisation in business is requiring more investment in front-end, service layer and integration components. The rapid and flexible exchange of data between these components is likely to be one of the most important drivers of future success.

3.3.2 | Diversity creates opportunities – also for competitors elipsLife remained on a path of growth in 2017. In addition to the established country units in Switzerland/Liechtenstein and in the Netherlands, the existing markets now also include Germany and Italy. elipsLife has also entered the Irish market, and preliminary work to prepare for market entry in the US has started. In the reporting year, the international growth path required adjustments to the corporate structure. Instead of a company structured along functional lines, elipsLife now has a regional structure. To maintain a decentralised organisational structure, elipsLife needs a well-functioning and crosscountry exchange of information as well as optimised intra-Group cooperation. Efficiency is key – low costs are and will remain a strategic pillar – to ensuring the uniform implementation of the corporate values and service strategy as well as to enabling customers in all markets to benefit from innovative ideas. This exchange is fostered at all levels: from a company-wide induction programme for all new employees to the exchange of ideas between the regional CEOs and between these regional CEOs and the Executive Board. Celebrating diversity In this corporate context, diversity is particularly important. elipsLife does not reduce this concept to gender equality, but uses it as a springboard to create extensive equal opportunities for all the company’s employees under such diverse aspects as age distribution, origin, culture, nationality and mother tongue. At elipsLife, celebrating diversity not only means ensuring equal opportunities and preventing discrimination of any kind but, despite the diversity of the employees, also creating a common understanding and nurturing the same ways of thinking and acting among the entire workforce. This is a prerequisite for consistently implementing the corporate values formulated by elipsLife for its customer relationships such as “Creating win-win situations” and “Flexibility” in practice.


25

Diversity gives a competitive edge With this understanding, diversity also gives a competitive edge. The honest exchange of opinions and new viewpoints adds an element that enriches and advances the company. A productive and innovative corporate atmosphere is essential and can best be achieved by the involvement and cooperation of people with the most diverse experiences, ideas, thought processes and viewpoints. This paves the way to further innovation, which in turn has a positive effect on customer relationships. By celebrating diversity, elipsLife not only endeavours to live up to society’s demand for equal opportunities, but also to give itself an important competitive edge. Its growing internationalisation and integration into the Life Capital organisational unit of Swiss Re are shaping and changing the day-to-day operations of elipsLife – also with regard to language. The ties to Life Capital have become closer for reasons of corporate governance and efficiency. As a result, English – which has long been the corporate language of Swiss Re – has also been the corporate language of elipsLife since spring 2017. At the same time, local language is central to elipsLife’s communications with its customers. To maintain the balance between the local language (external) and English (internal), the company invested heavily in language training for its employees in the reporting year, particularly in English courses. This is an expression of the celebration of diversity across all countries, languages and seniority levels. 19 nationalities at elipsLife The opening up of new markets and resulting cross-country collaboration are reflected in the personnel structures. By this time, elipsLife has 254 employees (55 % men, 45 % women) from 19 nationalities. Only around 50 % of the workforce is Swiss. Employee numbers have also shifted with regard to location: only around 60 % of employees now work in Zurich, and this percentage is expected to decline as business activities in the other countries expand.


elipsLife | Annual report 2017

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. This in particular also includes the processes for capturing and managing all risks and the maintenance of effective internal control systems.

3.4.1 | Group structure 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 Ltd has branches in Switzerland (Zurich), the Netherlands (Amstelveen), Germany (Cologne), Italy (Milan), Ireland (Dublin) and Curaçao. Elips Insurance Ltd has a branch office in Italy (Milan).

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. All the members of the Board of Directors were re-elected at the Annual General Meeting on 10 April 2017. These are: Thierry Léger (Chairman), Julien Descombes (Vice-Chairman), Ian Patrick, Philip Long and Claus Kriebel. The current members of the Board of Directors cover a broad spectrum of competence and international experience. For reasons of efficiency, the Board members of the parent company Elips Life Ltd also sit on the Board of Directors of Elips Insurance Ltd. Given its manageable size, the Board of Directors did not establish any committees. As none of the Board members is entrusted with the management of elipsLife, the separation of powers between the Board of Directors and the Executive Board and the required independence of the Board of Directors are guaranteed. The Board of Directors passes its resolutions with a simple majority of the votes cast. In compliance with the supervisory requirements, the Board of Directors has delegated the management of the company to the Executive Board. It remains responsible for the following tasks in particular: • Determining the overall strategy, in particular with regard to the fields of business and the target markets • Approving the financial plan and the annual financial statements • Defining the organisational principles and approving important changes to the management ­functions


27

• Adopting the principles of governance, compliance and risk management as well as the code of conduct • Approving acquisitions and sales transactions as well as transactions that are generally considered to be important • 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 four ordinary 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. Executive Board A new organisational structure was adopted to account for the company’s ongoing growth and the planned expansion into new markets. The heads of the individual markets are now responsible for the former Sales & Operations divisions. Products now comprises Products, Processes & Solutions as well as Pricing & Actuarial Services. This division is headed by Bart den Hartog, who replaced Christian Jaggy who left elipsLife in the middle of the year. A new Strategy & Business Development division headed by George Harbut was established. The CEOs of the “Europe” and “Americas” regions will now also sit on the Executive Board. As these positions were not yet filled in the reporting year, Reto Toscan served as interim CEO. In the reporting year the Executive Board therefore consisted of the following persons: • Reto Toscan, CEO • Alberto Franceschetti, CFO & CRO, Finance & Risk Management • Bart den Hartog, CPO, Products (from May 2017) • George Harbut, Strategy & Business Development (from October 2017) • Kaspar Weiss, CTO, Technology The Executive Board usually meets once a month. The meetings are also attended by the Head of HR & Central Services, the Head of Legal & Compliance and the CEOs of the core markets Switzerland/ Liechtenstein and the Netherlands. Auditors The external auditor carries out all the audits required under the law and the articles of incorporation. The auditors are appointed by the Annual General Meeting for one year. PricewaterhouseCoopers Ltd, Zurich (PwC) was confirmed as the auditors by the shareholders at the Annual General Meeting on 10 April 2017. Although PwC carried out an additional audit for elipsLife, this audit had no impact on the independence of the auditor, neither in terms of its content nor in terms of its scope. PwC was not mandated to provide advisory services to either Elips Life Ltd or Elips Insurance Ltd.


elipsLife | Annual report 2017

28

Consolidated annual report

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, which was completely revised in the reporting year. Internal directives and compliance process 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.

3.4.4 | Solvency II The Solvency II legislation entered into force in the countries of the European Union and the European Economic Area (EEA) at the beginning of 2016. In the reporting year, elipsLife once again met all Solvency II requirements regarding equity capital and reporting in full. • The regulatory equity capital of both legal entities of elipsLife considerably exceeds the minimum requirements under the new guidelines. elipsLife has also implemented the controls needed to make sure that its capital base remains strong in the future. • As at 31 December 2017, the Solvency II ratio was 212 % for Elips Life Ltd and 141 % for Elips Insurance Ltd. • Comprehensive stress tests are carried out and the risk profile is adjusted to ensure that both legal entities of elipsLife will meet the minimum capital requirements of Solvency II (capital ratio of 100 %) even in the case of extreme events. • In addition to the reporting requirements that had to be met in 2016, the reports on solvency and financial condition had to be published for the first time in 2017. elipsLife met this obligation in good time.

3.4.5 | Risk management The principal objective of risk management at elipsLife remains the identification, analysis and measurement of current and future risks and opportunities. The goal is to create a corporate risk profile that not only secures the continued existence (solvency) of elipsLife, but also makes a defining contribution towards increasing the value of the company. In order to account for the business dynamic, which is shaped by rapid corporate growth and progressive geographic expansion in a fast-changing environment, elipsLife applies a proactive approach to risk management that emphasises the “first line of defence”. As elipsLife is a subsidiary of Swiss Re, this proactive risk management approach is based on the principles of risk management applied by the Swiss Re Group. Given the increasing size and growing importance of elipsLife within this Group,


29

the company focuses on the continuous improvement of its risk management processes. In doing so, it consistently implements the risk management principles of Swiss Re. In the reporting year, further progress was made and important results were achieved in all four areas of the Group Risk Policy: • Controlled risk-taking: elipsLife’s risk management guidelines were improved further, first by upgrading the internal control system (ICS) so that it can also handle regulatory requirements on short notice, and second by fully aligning the risk management concept to the rules and risk matrix applied Group-wide by Swiss Re. • Clear accountability: A new organisational structure based on regional management was introduced in July 2017. The new structure has implications for the risk-accepting functions at elipsLife. The risk management processes were adjusted accordingly to guarantee the best possible transparency regarding all material risks and the management of these risks. • Open risk culture: In 2017 too, one of the most important objectives was to ensure effective risk management by promoting a strong risk-return culture at all company levels. • Independent risk controlling: To ensure effective risk monitoring, risk management should be independent. The Chief Financial Officer (CFO) of elipsLife also acted as the interim Chief Risk Officer (CRO) for the past three years, aiming to establish a strong risk management culture within the company. As elipsLife has since gained in business and entrepreneurial maturity, a decision was taken to fully adopt the Swiss Re Group’s principle of independent risk control, to separate the CFO and CRO functions and to create an additional CRO position. According to the organisational model that applies to all business units and legal entities of Swiss Re, the new CRO will report to the CRO of Swiss Re Life Capital and ultimately to the CRO of Swiss Re Group. This further strengthening of the risk management process will ensure continued security and stability for elipsLife, its customers, the insurance supervisor and the parent company Swiss Re. At the same time, the careful balancing of risks and opportunities will make a substantial contribution to improving the company’s value.

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.


Competitive advantage thanks to process digitisation


elipsLife | Annual report 2017

32

Consolidated financial statements

4 Consolidated financial statements

4.1 | Consolidated balance sheet Assets (in CHF)

31.12.2017

31.12.2016

A. Intangible assets

17 206 709

13 231 171

3 051 490

——

14 155 219

13 231 171

320 334 801

230 712 579

2. Bonds and other fixed-interest securities

206 007 499

190 209 967

6. Deposits with banks

114 327 302

40 502 612

400 249 577

401 834 277

12 546 392

7 254 685

372 992 772

310 541 802

12 888 743

82 017 508

——

508 468

I. Costs for establishing and expanding business operations

IV. Other intangible assets

B. Investments

III. Other investments

D. Other receivables

I. Receivables from own insurance business

1.

Due from policyholders

c) Due from other policyholders

2. Due from insurance brokers

II. Accounts receivable from reinsurance business

1.

c) Due from other insurance brokers Due from affiliates

3. Due from other debtors

III. Other receivables

1.

Due from affiliates

3. Due from other debtors

E. Other assets

84 732

——

1 736 938

1 511 814

160 977 496

72 739 535

2 071 361

1 732 262

158 906 135

71 007 273

F. Accruals

4 324 724

3 209 622

I. Accrued interest and rent

2 674 317

2 426 594

III. Other accruals

1 650 407

783 028

903 093 307

721 727 184

I. Tangible assets (excluding land and buildings) and inventories

II. Current deposits with banks, post office deposits, checks and cash on hand

Total assets


33

Liabilities and equity (in CHF) A. Equity

31.12.2016 158 586 301

12 400 000

12 400 000

I. Called-up capital

II. Organisation fund

III. Capital reserves

IV. Retained earnings

V. Loss carryforward

1.

VI. Annual profit

1.

Subscribed capital

Statutory reserve

D. Insurance technical reserves

31.12.2017 158 962 641

10 100 000

10 100 000

124 800 000

124 800 000

908 347

587 892

10 377 953

9 468 080

376 341

1 230 328

414 172 617

370 274 083

I. Unearned premium reserve 253 690 423

210 352 778

—189 147 823

—126 186 372

1. Gross amount

205 492 257

186 371 666

2. Reinsurers' share

—92 298 175

—60 425 925

1. Gross amount 2. Reinsurers' share

II. Mathematical reserve

III. Reserve for outstanding claims

1. Gross amount 2. Reinsurers' share

491 176 998

299 499 842

—268 307 399

—153 436 139

IV. Provision for premium refunds

1. Gross amount 2. Reinsurers' share

V. Claims equalisation reserve

VI. Other technical reserves

26 402 190

22 594 678

—14 686 760

—9 480 092

1 085 889

609 676

1 807 836

747 939

2. Reinsurers' share

—1 042 818

—373 970

F. Other provisions

1. Gross amount

14 119 047

7 585 033

II. Provision for taxes

6 196 430

2 124 068

III. Other provisions

7 922 617

5 460 966

213 313 144

113 282 578

99 251 230

69 094 899

35 480 135

16 629 924

G. Deposit liabilities from insurance business ceded to reinsurance H. Other liabilities

I. Liabilities from own insurance business

II. Accounts payable on reinsurance business

3. Due to other creditors 1.

Due to affiliates

3. Due to other debtors

——

——

868 641

——

60 079 039

50 785 805

V. Other liabilities

1. Tax liabilities

2. Social security liabilities

5. Other liabilities to other creditors

I. Deferrals Total liabilities and equity

728 943

462 568

2 094 474

1 216 602

3 274 628

2 904 290

903 093 307

721 727 184

As the responsible actuary for elipsLife I herewith confirm that the insurance technical reserves reported in the balance sheet as per 31 December 2017 were raised in accordance with the applicable statutory provisions and acknowledged actuarial principles. Florian Dally | Responsible Actuary | Elips Life Ltd | Elips Versicherungen Ltd | Zurich, 23. March 2018


elipsLife | Annual report 2017

34

Consolidated financial statements

4.2 | Consolidated income statement Income statement (in CHF)

2017

2016

II. Insurance technical account

1. Premiums earned, net

304 334 069

331 123 234

a) Gross premiums written

962 318 022

811 349 966

b) Reinsurance premiums ceded

—651 346 681

—470 115 153

c) Change in unearned premium reserve, gross

—24 392 600

—25 129 428

d) Change in reinsurers' share in unearned premium reserve, gross

17 755 327

15 017 850

2. Investment income

515 278

686 073

c) Current income from other investments

508 531

672 903

e) Gain on disposal of investments

4. Other insurance technical income, net

5. Claims incurred, net

a) Claims incurred

aa) Gross amount

bb) Reinsurers' share

b) Change in reserve for outstanding claims

aa) Gross amount

bb) Reinsurers' share

6. Change in other insurance technical reserves, net

a) Change in actuarial reserve

aa) Gross amount

bb) Reinsurers' share

b) Change in other technical reserves

7. Expenses for premium refunds

6 748

13 170

38 244 355

28 546 056

—285 885 394

—284 739 059

—693 480 840

—652 863 728

471 821 614

373 634 961

—103 448 201

—1 713 092

39 222 033

—3 797 201

24 051 442

—14 719 327

2 867 027

—35 603 417

22 034 442

20 926 944

—850 026

—42 854

—6 971 087

51 397

8. Expenses for own insurance business, net

—59 334 573

—49 031 950

a) Acquisition costs

—54 278 211

—44 955 478

b) Administration expenses

—5 056 361

—4 076 472

9. Investment expenses

—962 798

—492 755

a) Asset management and interest expenses

—958 670

—492 755

c) Loss on disposal of investments

14. Result of insurance technical account

—4 128

——

13 991 292

11 423 669

13 991 292

11 423 669

III. Non-insurance technical account 2. Result of insurance 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

4 964 886

585 352

—11 803 069

—9 359 824

7 153 109

2 649 197

—6 580 306

—1 159 079

—196 463

—259 790

376 341

1 230 328


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 12 June 2015 on the Supervision of Insurance Undertakings (Insurance Supervision Act; VersAG) and the Ordinance of 25 August 2015 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. 2017

2016

Company

Elips Insurance Ltd

Elips Insurance Ltd

Activities

Insurance

Insurance

100 %

100 %

INVESTMENTS IN AFFILIATES

Capital share

elipsLife is part of Swiss Re Life Capital, Zurich. Swiss Re Life Capital is a subsidiary of Swiss Re Group. The consolidated financial statements of Swiss Re Group can be obtained from: Swiss Reinsurance Company Ltd | Mythenquai 50 / 60 | P.O. Box | 8022 Zurich | Switzerland www.swissre.com


elipsLife | Annual report 2017

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. Foreign exchange gains for items with a duration of one or more years are regarded as unrealised and recorded as provisions. The following rates were used for translation to CHF: Balance sheet

Income statement

31.12.2017

31.12.2016

2017

2016

EUR / CHF

1.1702

1.0718

1.1092

1.0906

USD / CHF

0.9744

1.0161

0.9845

0.9837

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 costs for establishing and expanding business operations as well as 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 %

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 Tangible assets and inventories are measured at historical cost and depreciated using the straight-line method over the expected useful life. The following depreciation rates apply: Useful life

Depreciation rate

10 years

10 %

Interior finishing

5 years

20 %

Hardware/equipment

4 years

25 %

Furniture

Current deposits with banks, post office deposits and cash on hand are recognised in the balance sheet at par value. Accruals Accruals are recognised at par value. Insurance technical reserves The insurance 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 mathematical reserve comprises the mathematical 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 0.5 % 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 mortality) 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 2017

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. Deposit liabilities from insurance business ceded to reinsurance The deposit liabilities include the amounts held back as collateral under reinsurance contracts. The amount is based on the valuation of the underlying reinsurance items. 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 The intangible assets changed as follows:

IN CHF

Balance at 01.01.

Additions

Disposals

Value adjustments Write-downs

Balance at 31.12

——

3 051 489

——

——

——

3 051 489

Other intangible assets

13 231 171

7 438 283

——

—31 605

—6 482 629

14 155 220

Total

13 231 171

10 489 772

——

—31 605

—6 482 629

17 206 709

Start-up and business expansion costs

The movement in ‘Start-up and business expansion costs’ is due to the acquisition of brand rights. The additions to ‘Other intangible assets’ include capitalised expenses of CHF 2 998 193 for internally produced assets (previous year: CHF 2 703 222).


elipsLife | Annual report 2017

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. The sharp increase on the previous year is related to the increase in the insurance technical reserves. Deposits with banks include fixed deposits with terms of one to 12 months for CHF 113 464 609 (previous year: CHF 40 000 000) and cash not yet invested of CHF 862 693 (previous year: CHF 502 612).

IN CHF Bonds and other fixed-interest securities Deposits with banks

Balance at 01.01.

Additions

190 209 967

68 535 425

Disposal Redemption

Foreign currency effect

Balance at 31.12.

—60 964 982

—3 912 776

12 139 865 206 007 499

40 502 612 227 497 477 —153 700 816

——

28 029 114 327 302

BONDS AND OTHER FIXED-INTEREST SECURITIES IN CHF Historical cost

31.12.2017

31.12.2016

213 502 677

195 881 602

—7 495 178

—5 671 636

Carrying amount 31.12.

206 007 499

190 209 967

Market value 31.12.

209 859 286

195 713 302

Amortisation

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. Accounts receivable from reinsurance business due from affiliates amounted to CHF 12 888 743 (previous year: CHF 82 017 508). These claims at the end of 2016 were set off against the increase in the quota share reinsurance for existing business as per 1 January 2017 and have thus been substantially reduced. elipsLife has the contractual right to set off the outstanding accounts payable and receivable for the reinsurers.


41

Tangible assets and inventories Tangible assets and inventories changed as follows:

Disposal Redemption

Foreign currency effect

Balance at 31.12.

——

—165 541

3 162

1 123 525

——

—321 327

3 271

646 614

130 054

——

—161 426

5 426

301 221

975 533

——

—648 293

11 860

2 071 361

Balance at 01.01.

Additions

Furniture

875 533

410 370

Hardware/equipment

529 561

435 109

Interior finishing

327 167 1 732 262

IN CHF

Total

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

31.12.2017

31.12.2016

I. Called-up capital

12 400 000

12 400 000

II. Organisation fund

10 100 000

10 100 000

124 800 000

124 800 000

III. Capital reserve IV. Retained earnings V. Profit/loss carryforward VI. Annual profit Total equity

908 347

587 892

10 377 953

9 468 080

376 342

1 230 328

158 962 641

158 586 301

In the 2017 financial year, no contributions were made to the capital reserve. The 2016 annual profit was appropriated as follows: IN CHF Annual profit for 2016 Allocation to retained earnings Profit carried forward

1 230 328 320 455 909 873

Insurance technical reserves The insurance technical reserves totalled CHF 414 172 617 on the reporting date (previous year: CHF 370 274 083). The increase in the insurance technical reserves is directly related to the growth experienced by elipsLife’s insurance business. The year-on-year increase in the reinsurers’ share is related to the increase in the quota share reinsurance for the Irish health insurance business as per 1 January 2017.


elipsLife | Annual report 2017

42

Consolidated financial statements

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 27 875 295 were deducted from the gross unearned premium reserve (previous year: CHF 23 965 261). 31.12.2017

31.12.2016

1. Gross amount

253 690 423

210 352 778

Unearned premium reserve

281 565 717

234 318 039

Deferred acquisition costs

—27 875 295

—23 965 261

2. Reinsurers' share

—189 147 823

—126 186 372

Unearned premium reserve

—210 571 001

—140 565 529

21 423 178

14 379 157

UNEARNED PREMIUM RESERVE IN CHF

Deferred acquisition costs

Both the mathematical reserve and the reserve for outstanding claims contain provisions for claim handling and settlement costs. The mathematical reserve at the end of the year included loss reserves of CHF 10 176 499 (previous year: CHF 6 785 308), which were recognised upon takeover without affecting the income statement. At the same time, loss reserves of CHF 683 489 (previous year: CHF 165 014) were transferred to third parties without impact on the income statement. 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 Prepaid premiums for the following year

2017

2016

8 320 364

211 800

3 233 507

5 196 629

Accounts payable due to insurance brokers*

23 926 264

11 221 495

Total

35 480 135

16 629 924

Accounts payable due to policyholders

*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.


43

Deposit liabilities from insurance business ceded to reinsurance The amount of CHF 213 313 144 (previous year: CHF 113 282 578) is related to the reinsurance contract for the Irish health insurance business with American International Reinsurance Company Ltd, which entered in force on 1 January 2016. Other liabilities Other liabilities mainly comprise insurance taxes in Ireland of CHF 59 716 638 (previous year: CHF 50 615 358).

4.3.4 | Notes to the consolidated income statement Premiums earned Premiums earned are assigned to the life and non-life business of elipsLife as follows: 2017 IN CHF Gross premiums written Reinsurance premiums ceded

2016

Life insurance

Non-life insurance

Life insurance

203 143 091

759 174 931

149 790 720

Non-life insurance 661 559 246

—103 999 978

—547 346 702

—76 251 256

—393 863 897

Unearned premium reserve, net

–1 100 059

–5 537 214

2 264

—10 113 844

Total net premiums earned

98 043 054

206 291 015

73 541 729

257 581 506

The gross premiums written derive from the following markets: 2017

2016

7 837 524

2 574 612

The Netherlands, Belgium, Luxembourg

163 325 141

116 645 281

Ireland

642 088 110

567 902 167

Switzerland

142 669 835

123 237 833

IN CHF Liechtenstein

Italy

5 273 172

3 662

Other

1 124 240

986 411

962 318 022

811 349 966

Total gross premiums written

The life insurance premiums are comprised as follows: 2017

2016

Premiums for group contracts:

203 143 091

149 790 720

of which recurring premiums

203 143 091

149 790 720

IN CHF

of which single premiums Premiums for policies without profit participation Premiums for policies with profit participation

——

——

191 337 411

117 044 252

11 805 680

32 746 468


elipsLife | Annual report 2017

44

Consolidated financial statements

Other insurance technical income This is mostly commission income on reinsurance business ceded to companies of the Swiss Re Group. Commission is determined at arm’s length. Claims paid Claims paid (gross) include cost allocations under VersAV Annex IV par. 24 of CHF 14 135 250 (previous year: CHF 13 898 213). Expenses for premium refunds 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 2017 financial year, commission payments (acquisition, renewal and portfolio commission) amounted to CHF 26 322 589 (previous year: CHF 28 265 328). 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 Investment income Redemption of bonds and other fixed-interest securities Total current income from other investments

2017

2016

4 449 207

4 654 949

—3 940 677

—3 982 046

508 530

672 903

2 620

13 170

Asset management expenses

—958 670

—492 755

Profit/loss from investments

—447 520

193 318

Profit/loss from disposal of investments

Other expenses from ordinary activities ‘Other income from ordinary activities’ includes foreign currency gains of CHF 4 380 972 (previous year: loss of CHF 857 694 included in ‘Other expenses from ordinary activities’). Income taxes In the 2017 financial year, elipsLife incurred income taxes of CHF 6 580 306 (previous year: CHF 1 159 079).


45

4.3.5 | Other disclosures Personnel expenses and remuneration for the Board of Directors and Executive Board In the 2017 financial year, elipsLife employed 204.6 people on average (previous year: 161.2). Personnel expenses (before the capitalisation of expenses for internally created assets) totalled CHF 39 391 982 in the ­reporting year (previous year: CHF 26 989 940). This amount includes salaries and wages of CHF 29 851 670 (previous year: CHF 20 107 850), social insurance contributions and contributions to retirement benefit plans of CHF 5 908 494 ­(previous year: CHF 4 272 307), and other personnel expenses of CHF 3 631 818 (previous year: CHF 2 609 783). In the reporting year, the total remuneration paid to the Executive Board amounted to CHF 3 278 729 (previous year: CHF 2 766 667). The members of the Board of Directors are not paid directly for their activities. Auditors’ fees The auditors’ fees for the audit of the 2017 annual financial statements amounted to CHF 313 545. This includes the audit of the FMA report and the annual report. CHF 35 289 was invoiced in the reporting year for other auditing and attestation services. Restricted assets For the branches in Zurich, Amstelveen, Cologne, Milan and the office in Basel, rent deposits have been pledged as security of CHF 633 839 (previous year: CHF 618 591). According to the regulatory provisions for insurance business in Curaçao, an amount of CHF 218 722 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 10 April 2018.


elipsLife | Annual report 2017

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.

To the General Meeting of Elips Life Ltd Triesen Report of the group auditor As group auditor, we have audited the consolidated financial statements (balance sheet, income statement and notes) and the consolidated management report of Elips Life Ltd for the year ended 31 December 2017. 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 consolidated 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 consolidated financial statements. We have also assessed the accounting principles used, significant estimates made and the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements and the consolidated management report comply with Liechtenstein law and the company's articles of incorporation. The management report is in accordance with the financial statements. We recommend that the financial statements submitted to you be approved. PricewaterhouseCoopers Ltd

Enrico Strozzi

Michael Stämpfli

Auditor in charge

Zurich, 20 April 2018

PricewaterhouseCoopers AG, Birchstrasse 160, Postfach, CH-8050 Zürich, Switzerland Telephone: +41 58 792 44 00, Telefax: +41 58 792 44 10, www.pwc.ch PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.


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 44, kontakt@elipslife.com elipsLife branch office in the Netherlands Startbaan 8, P.O. Box 191, 1185 XR 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 9475 8590, F +39 02 9475 8599, contatto.it@elipslife.com elipsLife branch office in Ireland College Park House, 20 Nassau St, Dublin 2, Ireland T +353 196 10 140, F +353 196 10 149, info.ie@elipslife.com

Photos Cover: Mönch and Jungfrau (4 107 m / 4 158 m), Bernese Oberland, Switzerland Page 4: Pollux (4 092 m), Valais, Switzerland Pages 6 and 7: Silberhorn (3 695 m), Bernese Oberland, Switzerland Pages 10 and 11: Finsteraarhorn (4 274 m), Bernese Oberland, Switzerland Pages 30 and 31: Breithorn and Grosshorn (3 780 m / 3 754 m), Bernese Oberland, Switzerland

Publishing details The English translation is provided for information only. The original German version is the official version of the audited document. © elipsLife 2018


www.elipsLife.com

elipsLife Landstrasse 40 9495 Triesen Liechtenstein T +423 239 95 55 F +423 239 95 54 contact@ elipslife.com

elipsLife Annual report 2017  
elipsLife Annual report 2017  
Advertisement