2009 is the fifth year for which private life insurers in Switzerland have provided comprehensive financial reporting on occupational pension schemes. 91.9% of all income from the savings, risk and cost processes in 2009 flowed back to insured persons in the form of insured benefits, increased technical provisions and participation in surpluses. Average earnings distribution therefore exceeded the legally prescribed minimum of 90%.
After the financial crisis of 2008, a return to normality took place in 2009. Of the total income of 7,749 million CHF from the savings, risk and cost processes in 2009, 91.9% flowed back to insured persons in the form of insured benefits, increased technical provisions and participation in surpluses. Business subject to a statutory minimum of 90% achieved a distribution ratio of 92.4%. A total of 940 million CHF was allocated to surplus funds, while participations in surpluses in the amount of 450 million CHF were paid out to insured persons. Life insurers made an operating profit of 630 CHF million in the occupational pensions business in 2009, a recovery from the losses seen in 2008.
As at 31 December 2009, eleven private life insurers operated the group insurance for occupational pension schemes covering 2.14 million insured persons (2008: 2.16 million). Technical provisions amounted to 124.2 billion CHF (2008: 121.9 billion).
Guaranteed insurance liabilities are covered
To ensure that insurance liabilities are fully covered, special assets referred to as tied assets are held separately from other assets specifically for this purpose. Tied assets are subject to strict investment regulations concerning asset quality, risk diversification, admissible asset classes, risk management and administration.
Distribution ratio exceeds statutory minimum
Most occupational pension business is subject to a statutory minimum ratio. This was met once again in 2009: 92.4% of proceeds earned from the savings, risk and cost processes flowed back to insured persons in the form of insured benefits, increased technical provisions and participation in surpluses (2008: 100%).
Positive results from the savings process
The recovery in capital markets was reflected in a return to positive results in the savings process. By contrast, results from the risk process declined slightly as a result of cuts in premiums and higher claims. The good results overall allowed 837 million CHF to be allocated to strengthening technical provisions. Following a loss of 906 million CHF the previous year, insurers enjoyed an operating profit of 630 million CHF in 2009.
Per capita costs up slightly
Per capita costs rose slightly from 424 CHF to 428 CHF (as compared to 502 CHF in 2005). This came about because the number of insured persons fell while at the same time insurers’ costs rose slightly from the previous year. Three out of the eleven life insurers (2008: one of eleven) reported positive results from the cost process, while one broke even. The others made a loss from the cost process.
Compensatory role of the surplus fund
940 million CHF was allocated to the surplus fund. Insured persons were allocated 450 million CHF, which demonstrates the compensatory effect of the surplus fund. Legal requirements allow only very limited distributions from surpluses following a year when a loss has been reported. At the same time, money transferred to the surplus fund must be allocated to insured persons within five years.
Money accrued in the surplus fund is not a vested benefit and may be used as risk-bearing capital. Insured persons thereby contribute collectively to preserving the value of their retirement savings.
Disclosure makes comparisons possible
The years of effort by the supervisory authority to achieve greater transparency through disclosure are having a positive effect on the behaviour of insurers. Key data such as on costs, distribution policy and investments reveal market participants' strengths and weaknesses and make it possible to draw comparisons with competitors. This can only benefit insured persons.
Alain Bichsel, Head of Communications, Phone +41 (0)31 327 91 70, email@example.com