Swiss Life reports CHF 463 million net result for first half of 2005

Rolf Dörig, Group CEO, had this to say on the first-half performance: "These results confirm the progress we have been making over the last three years. We seized the growth opportunities abroad and increased our profitability in Switzerland. We are well on the way to improving the basic insurance result substantially on a sustainable basis. This will put us in a position to achieve a net result of CHF 1 billion by 2008."

The Swiss Life Group generated a net result of CHF 463 million for the first half of 2005. After allowing CHF 16 million for minority interests, CHF 447 million is attributable to shareholders. This translates into (diluted) earnings per share of CHF 12.93 and a return on equity of 13.4%. All segments and all countries contributed to this most welcome outcome.

Operating result improved 13% on a like-for-like basis
Two one-off impacts – restructuring costs and a special tax situation – had an influence on the results. The integration of «La Suisse» into Swiss Life has already entailed a charge of CHF 60 million in the first half of the year against the planned restructuring costs of CHF 80 million. A positive tax effect in the amount of about CHF 100 million was due to the partial release of a tax provision in France as the result of a change in the law and the restructuring of the real estate business in Switzerland. The impact of the fiscal effect on the CHF 541 million operating result (corresponding period of previous year: CHF 595 million) was negative because part of it (CHF 31 million) was allocated to policyholder bonuses. When making comparisons to the prior year period, it should also be borne in mind that the operating result at that time included a positive contribution arising from the operations which have since been sold in the UK (CHF 75 million), and in the other direction, an outlay for amortisation of goodwill (CHF 39 million). On a like-for-like basis the operating result thus rose by CHF 73 million or 13% over the same period of the previous year. Most of the operating result was generated by the insurance business (CHF 427 million) and banking operations (CHF 80 million).

Gross written premiums show organic growth of 6%
Gross written premiums (including deposits under investment contracts) came to CHF 11.6 billion in the first half of 2005. This meant that they achieved organic growth of 6% year-on-year, after adjustment for divestments, special situations and currency effects. While there was a slight decline in premiums on this basis in Switzerland (-3%), premium income abroad rose 16% in all (France: +16%, Germany: +2%, Netherlands: + 11%, Belgium/Luxembourg: +47%).

Excellent financial results – 8% (annualised) return on investments
The financial result for own-risk investments came to CHF 2.9 billion, matching that recorded in the same period of the previous year. While the direct return on investments fell slightly because of lower interest rates, realised and unrealised gains reached the level achieved in 2004. The direct return on insurance portfolio investments in the first half of the year came to 1.9% (not annualised). The non-annualised total return was clearly higher at 3.9%, which was mainly attributable to value growth by interest-sensitive investments due to the decline in interest rates. The annualised return on investments came to 8.0%, while risk was held at a low level. Net equity exposure stood at 2.1% as of 30 June 2005.

Insurance benefits down slightly
Insurance benefits paid decreased by 4% to CHF 8.5 billion net. The drop can be primarily attributed to a reduction in the business volume in Switzerland and a positive trend in claims experience. A total of CHF 870 million (corresponding period of previous year: 864 million) was appropriated for bonus distributions to policyholders.

Operating costs (adjusted) reduced another 2%
Operating costs were lowered by a further 2%. Operating expenses as a whole increased by CHF 59 million to CHF 1.5 billion. Restructuring costs of CHF 60 million, higher provisions due to the business growth and the increased expense for the amortisation of deferred acquisition costs contributed to this increase. As of 30 June 2005 the Swiss Life Group employed a workforce of 9266 on a full-time equivalent basis (end 2004: 9419). The decrease in the first six months of the year was mainly due to the integration of «La Suisse» into Swiss Life.

Equity up 19% to CHF 7.5 billion
Shareholder's equity rose by 19% in the first half of 2005, to CHF 7.5 billion. This rise resulted mainly from the increase in valuation reserves for bonds due to falling interest rates, as well as from the profit generated. Core capital for capital adequacy purposes, which includes deferred Group-related funds in addition to core capital per se, improved by 24% to stand at CHF 17.1 billion. The solvency margin of the Swiss Life Group climbed from 192% to 252% in the first six months of the year.

Embedded value per share equals CHF 248
Embedded value, which serves as an indicator of the value of the existing insurance portfolio, rose by 6% at the Swiss Life Group in the first half of 2005 to CHF 8.4 billion. The return on investments, clearly above the assumptions in the model, made a major contribution to the growth in embedded value. New business accounted for another CHF 23 million of the growth. The net margin on new business fell from 7.4% in the same period of the previous year to 3.4% due to the lower interest assumptions caused by market conditions. The result as of 30 June 2005 was an embedded value per share of CHF 248.

Adjusting the management structure to strategic priorities
In connection with the Group's strategic targets, the Board of Directors and the Corporate Executive Board have decided to streamline the management structure and make slight adjustments to the assignment of responsibilities in the Corporate Executive Board. This is primarily a matter of clearly delineating the responsibilities of the Group Head Office, the Swiss market organisation and the international business. Interfaces will be reduced, and better account will be taken of the different priorities in Switzerland (boosting profitability) and abroad (profitable growth). Bruno Pfister, the current Chief Financial Officer, will assume responsibility for the Group's international business. His successor as CFO of the Swiss Life Group, Thomas Müller, is CFO at Banca del Gottardo. Rolf Dörig, Chief Executive Officer, remarked about the appointment: "I am delighted that we were able to fill the key position of Chief Financial Officer with an in-house appointment. Thomas Müller is an outstanding leader with great experience in financial and risk management. He will be a real asset to the existing Corporate Executive Board." These organisational and management changes will come into force on 1 January 2006.

Transmission of today's events and further documentation
Today's events scheduled for 08.00 (presentation to analysts and investors, in English) and 10.30 (presentation for the media, in German) can be followed by visiting www.swisslife.com. All additional documentation concerning the half-year results can likewise be found there.


Information

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