Private life insurers in Switzerland generated income amounting to CHF 7.7 billion in the financial year 2011, of which 91.9% flowed back to the policy holders. Life insurers' operating result for occupational pension schemes was positive for the third consecutive year totalling CHF 628 million, the greater part of which was used by life insurers to strengthen their solvency capital. The economic environment for life insurers has, nonetheless, remained very demanding.
The saving, risk and cost processes of the eight private life insurers active in occupational pension schemes generated an income of CHF 7.7 billion in the reporting year 2011, of which 91.9% flowed back to roughly 2.15 million policy holders in the form of insured benefits, increased technical provisions and surplus participation. Average earnings distribution therefore exceeded the statutory prescribed minimum quota of 90%. Since the crisis year of 2008, the eight life insurers have now reported a positive operating result for the third year in a row. The operating result for 2011 amounted to CHF 628 million. Life insurers used a major part of this result to increase their solvency capital. In contrast, dividend distributed to shareholders only amounted to CHF 11 million.
Saving and risk processes: positive results, greater need for reinforcement measures
In 2011, private life insurers obtained a good investment result in the saving process (see below). Returns on capital investments were similar to those in 2010 and 2009. The average net capital investment return during the period from 2005 to 2011 was 2.79%. Despite premium reductions, the result from the risk process improved significantly due to a sharp decline in claims in disability insurance. This positive result meant that a total of CHF 1,133 million could be allocated to strengthening technical provisions for old-age pensions and survivors' pensions.
Cost process: decline in per capita costs, potential for further efficiency
The per capita operating costs reported decreased on average by 2.7% compared to the previous year, marking a decline for the fifth consecutive year. While per capita costs in 2007 still amounted to CHF 462, they were only CHF 391 in 2011. As a rule, negative results in the cost process indicate that there is still scope for more administrative efficiency. Per capita costs naturally depend heavily on whether a company mainly offers standardised mass market products or individually tailored insurance solutions which are subsequently more expensive.
Outlook for 2012
The current economic crisis is not yet over. Financial difficulties confronting many states and banks, exposure to currency and credit risks, and the very low interest rates present life insurers with great challenges.
Disclosure makes comparisons possible
For the seventh time, private life insurers in Switzerland have provided comprehensive financial reporting on occupational pension schemes. The years of effort by the supervisory authority to achieve greater transparency through disclosure has had a positive effect on the behaviour of insurance providers. Key data such as those on costs, distribution policy and investments reveal market participants' strengths and weaknesses, and make it possible to draw comparisons with competitors. This is all to the advantage of companies looking for retirement fund cover with private life insurers, and also to their employees.
What are the saving, risk and cost processes?Saving process: This process involves accruing retirement assets, converting them into retirement pensions and managing old-age and survivors' pensions. Income from the saving process consists of the net capital investment returns.
Risk process: This process involves the payment and handling of death and disability benefits (in the form of lump-sum and pension benefits). It also involves income or expenses triggered by the death of pensioners, for instance expenses for survivors' pensions which are triggered by this death. Income from the risk process corresponds to the risk premiums received.
Cost process: The income from the cost process consists of the cost premium. Expenses from the cost process include expenses incurred from distributing and managing occupational pension products as well as administrative and operating costs. (This excludes asset management costs that are accounted for directly in the saving process. This also excludes the cost for claims management and the cost of disability and survivors' pensions, which are accounted for directly in the risk process). |
Contact
Tobias Lux, Media Spokesperson, phone: +41 (0)31 327 91 71, tobias.lux@finma.ch
