This is the sixth year for which private life insurers in Switzerland have provided comprehensive financial reporting on occupational pension schemes. A positive operating profit of CHF 610 million for 2010 was reported. 92.1% of the income generated, which amounted to over CHF 7.7 billion, flowed back to the policy holders. The average earnings distributed therefore exceeded the legally prescribed minimum of 90%.
After the endurance test in 2008, the 2010 operating profit showed a second consecutive normal year for the ten private life insurers. In 2010, the savings, risk and cost processes of the ten companies resulted in an income amounting to over CHF 7.7 billion, 92.1% of which flowed back to 2.2 million policy holders in the form of insured benefits, increased technical provisions and participation in surpluses. For the second year running, life insurers made a positive operating profit of CHF 610 million which allowed them to further improve their equity capital backing.
Savings and risk processes: positive results but higher currency and credit risks
The private life insurers were able to achieve a good investment result in 2010. The yields on capital investments were at a similar level to 2009. The valuation reserves that had fallen into negative territory in 2008 continued the recovery that had started in 2009 and solvency improved. The high share of nominal value fixed-income securities issued by private sector and government borrowers have had a negative effect on returns and have also meant greater exposure to currency and credit risks. The results of the risk process fell slightly, which was partly due to premium reductions and partly as a result of higher claims costs. The overall positive result allowed CHF 892 million to be allocated to strengthening technical provisions.
Fall in per capita costs: further potential for increased efficiency
The operating costs reported per capita allowed on average a reduction of 6.1% from CHF 459 in 2009 to CHF 436 in 2010. The costs inevitably vary widely, depending on whether a company offers primarily standardised mass products or individually, but more expensive customised solutions. Generally, however, negative results in the costs process are still attributable to the potential for improving administrative efficiency.
Returns lie under assumptions
As a rule, pension costs are calculated by transforming retirement assets with so-called conversion rates, which are based on life expectation assumptions of pensioners and relate to the returns attainable on retirement assets transferred from previous pension funds. The yield assumptions are currently well above 3%. Due to the low interest on retirement assets, the average annualised return on insurance obligations dropped considerably. The average net annualised return on invested capital amounted to 2.95%.
