Asset and liability management (ALM), with its long-term approach, uses the risk evaluations made as a basis for the investment strategy. When

• the policyholder assets,
• the company’s free reserves, and
• the equity

are invested, defined criteria with regard to security, return and liquidity are always taken into account.

Swiss Life manages investments in such a way that the use of economic risk capital is consistent with its risk appetite. Insurance liabilities can be split into

• a guaranteed segment, corresponding to the guaranteed minimum interest rate;
• a non-guaranteed segment (bonus component), which is subject to fluctuations over the course of time, because the amounts to be distributed are directly influenced by developments on the financial markets or by legal requirements.

Further factors in addition to economic considerations have to be taken into account for asset allocation, such as regulatory requirements and international accounting standards. The level of equity (solvency), the need for liquidity and the requirements of rating agencies also entail restrictions in investment activities.

When determining its annual distribution, Swiss Life seeks to harmonise the interests of policyholders and shareholders.

• Policyholders want a guaranteed minimum interest rate coupled with regular and appropriate bonuses.
• Shareholders are looking for adequate compensation in the form of dividends and capital gains for the equity capital they provide.

In designing products, Swiss Life coordinates asset and liability management and the distribution policy to ensure that future developments on capital markets have as little impact as possible on profitability. Product design guidelines have been introduced throughout the Group to ensure that the product design principles are observed.

Swiss Life reviews the product design principles every six months and the economic viability of new business every three months. This enables the company to adapt the conditions of sale for the individual products to a constantly changing environment.

Swiss Life manages the ALM process centrally. Responsibility for the Group-wide ALM process rests with the Group Chief Financial & Risk Officer. The areas of risk management, asset management, actuarial services, product management and financial management determine the ALM process, for which the Group Chief Financial & Risk Officer has the overall responsibility and which is monitored by the Board of Directors' Investment and Risk Committee. Decisions which apply to the entire Group are implemented at local level by the units concerned.