The group chief financial officer of Swiss Life has faced pressure from analysts to provide IFRS 17 and 9 reporting numbers ahead of its half-year results. 

IFRS 17 took effect this year, with many insurers also opting to adopt IFRS 9 at the same time to avoid mismatches. However, firms have yet to provide full disclosures under the new standards. So far, many have produced initial impacts of the transition to IFRS 17 and 9.  

Some re/insurers plan to provide full reporting in IFRS 17 with restated comparative information for 2022 during their first quarter results. For instance, Scor and Allianz intend to disclose such information on 11 and 12 May respectively. 

Swiss Life launched a conference on Wednesday this week explaining the expected implications of the transition to IFRS 17 and 9, but full reporting under the new standards will not be available until the firm announces its half-year results, scheduled for 6 September this year. 

Asked on Wednesday when analysts will receive “new reporting templates”, CFO Matthias Aellig said that more granularity will be available at HY and that Q1 and Q3 reporting “will continue as [it is] in the past to have a focus on fee, cash and premium as in the past.”

Another analyst said it would “make life incredibly difficult for analysts to not have any figures in advance of half-year results season, which is already an incredibly busy time”, while a third argued it would be “quite difficult” to model the company’s earnings for HY “blind with no real financial supplement”. 

Aellig defended his decision by saying the company had already estimated its contractual service margin, which represents the firm’s future profits, and the directional impacts based on 2022 full-year results. 

Aellig insisted the new standards will only change the presentation of accounting but the firm’s underlying business is unaffected. 

“This means our focus on strengthening the quality of earnings remains key and there will be no change to capital management,” he said. 

Swiss Life expects to generate a pre-tax CSM of CHF 17.5bn (£15.5bn) as of 1 January 2022. CSM was defined by Aellig as a “stock of unearned future profits that is a liability and release to P&L over time”.

However, like many re/insurers, the firm’s shareholders’ equity is expected to drop from CHF 15.7bn at 2021 year-end under IFRS 4 and IAS 39 (the predecessors of IFRS 17 and 9) to CHF 8.3bn under the new standards as of 1 January 2022. This is because, upon transition, the shareholder share of unrealised gains or losses under contracts with direct participation features will be recognised in the CSM.

Aellig said because of this shift, the new shareholders’ equity is best considered in conjunction with the CSM, on a post-tax basis. The new figure amounts to about CHF 22bn, an increase of about 40% compared with the IFRS 4 shareholders’ equity.

Many insurers such as Aviva and Just Group have also presented their shareholders’ equities together with their future profits.

 

 

There are three different methods of IFRS 17 to measure liabilities: building block approach, premium allocation approach and variable fee approach. 

The BBA is the ‘default’ measurement model for insurance contracts. For contracts with a coverage period shorter than one year, there is an option to choose PAA as a simplified measurement model. 

For contracts with direct participation features such as with-profit or unit-linked contracts, entities are required to use the VFA.

Around 99% of Swiss Life’s total insurance liabilities are accounted for under the VFA.

“For Swiss Life, these are the individual and group-life businesses in Switzerland, savings and pensions businesses in France, insurance business in Germany and the group pension business at our international business division,” Aellig explained.

The remaining 1% will be accounted for under the BBA and the PPA.

Aellig said the BBA is applied to the firm’s long term non-participating businesses, such as credit life business in France and reinsurance business in Switzerland.

Swiss Life’s French health and protection and property and casualty portfolios, as well as the group risk business for its international segment, are accounted for under the PAA, given the short-term nature of these contracts.