Swiss Life's Declining Net Profits Amid Rising Tax Burdens: Assessing Long-Term Resilience and Strategic Repositioning

The insurance sector in Switzerland, long celebrated for its stability and innovation, now faces a dual challenge: a tightening tax environment and margin pressures. Swiss Life, a titan in the industry, has seen its net profits dip in the first half of 2025 despite robust performance in its fee-based businesses. This article examines how Swiss Life is navigating these headwinds, leveraging strategic repositioning to ensure long-term resilience in a high-tax, low-margin landscape.

A Tale of Two Halves: Profitability Under Pressure

Swiss Life’s 2024 financial year was a success story, with net profits surging 13% to CHF 1.26 billion, driven by a 33% rise in fee income from its Swiss Life Asset Managers division [4]. However, the first half of 2025 revealed cracks in this narrative. Net profits fell to CHF 602 million, a 5% decline compared to the same period in 2024, as tax expenses jumped by CHF 36 million to CHF 220 million [1]. This shift reflects the impact of 2025 tax reforms, which recalibrated the taxation of life annuities and introduced retroactive adjustments to existing contracts [3].

The new annuity tax rules, effective 1 January 2025, replaced a flat 40% income tax rate on annuities with a variable model tied to technical interest rates at contract inception. For Swiss annuities, 70% of profit shares are now taxed as income, a change that complicates balance sheet management and reduces after-tax returns for annuitants [3]. For Swiss Life, this means recalibrating product designs and enhancing disclosures to maintain customer trust while preserving margins.

Strategic Repositioning: Fee Income and ESG-Driven Growth

Despite these challenges, Swiss Life has not stood idle. Its Swiss Life 2027 strategy emphasizes three pillars: deepening customer relationships, enhancing advisory capabilities, and boosting operational efficiency. The company aims to elevate its fee result to over CHF 1 billion by 2027, up from CHF 875 million in 2024, while targeting an adjusted return on equity (ROE) of 17–19%—a significant leap from its previous 10–12% range [2].

A critical enabler of this strategy is the expansion of third-party asset management (TPAM). Assets under management in this segment grew to CHF 125 billion in 2024, with net new assets hitting CHF 9.3 billion in Q1 2025 [4]. This diversification into fee-based income, which rose 3% to CHF 659 million in Q1 2025, insulates Swiss Life from the volatility of insurance underwriting and annuity-related tax shocks.

Equally transformative is the company’s pivot toward ESG-aligned investments. New funds like Commercial Real Estate Switzerland ESG and Real Estate Switzerland Retirement and Healthcare ESG aim to raise CHF 150 million and CHF 200 million, respectively, by 2027 [4]. These initiatives align with global sustainability trends and position Swiss Life to capitalize on regulatory tailwinds, such as the EU’s Sustainable Finance Disclosure Regulation (SFDR).

Tax Challenges and Macroeconomic Headwinds

The 2025 tax reforms are not the only threat. Switzerland’s adoption of the OECD’s Global Minimum Tax (15% for firms with over €750 million in revenue) adds another layer of complexity for multinational insurers like Swiss Life [4]. Combined with regional disparities in corporate tax rates—ranging from 11.9% in Zug to 19.7% in Geneva—this creates a fragmented fiscal landscape that demands agile capital allocation [4].

Geopolitical risks further amplify these pressures. Trade tensions and potential U.S. tariffs on Swiss exports could dampen investment activity, particularly in real estate and retirement assets [5]. Yet Swiss Life’s Q1 2025 results suggest resilience: premiums rose 6% to CHF 7.9 billion, and fee income grew 3%, outpacing inflationary trends in key markets [4].

The Path Forward: Balancing Tax Efficiency and Innovation

Swiss Life’s long-term resilience hinges on its ability to balance tax efficiency with innovation. Its CHF 750 million share buyback program, set to expire in May 2026, and a dividend payout ratio of over 75% signal confidence in its capital structure [2]. Meanwhile, investments in automation and digital advisory tools aim to reduce operational costs by 10–15% by 2027, offsetting some tax-driven margin compression [2].

However, the retroactive application of annuity tax rules remains a wildcard. As noted by tax partner.ch, this creates uncertainty for both Swiss Life and its clients, potentially leading to a surge in policyholder inquiries and regulatory scrutiny [3]. The company’s response—enhanced transparency and product redesign—will be critical to maintaining its market leadership.

Conclusion

Swiss Life’s 2025 profit dip underscores the fragility of margins in a high-tax environment. Yet its strategic focus on fee-based growth, ESG investments, and operational efficiency offers a blueprint for resilience. While tax reforms and macroeconomic headwinds persist, the company’s proactive stance—raising its 2027 fee target and expanding into sustainable assets—positions it to outperform peers in the long term. For investors, the key question is whether Swiss Life can maintain its innovation momentum while navigating the regulatory and fiscal crosscurrents of 2025 and beyond.

Source:
[1] Swiss Life Half year results 2025 Financial Report EN [https://www.marketscreener.com/news/swiss-life-results-and-reports-swiss-life-half-year-results-2025-financial-report-en-ce7d59dadd88fe26]
[2] Our strategy – Swiss Life Group [https://www.swisslife.com/en/home/about-us/our-strategy.html]
[3] Change in the taxation of life annuities as of 1 January 2025 [https://taxpartner.ch/en/change-in-the-taxation-of-life-annuities-as-of-1-january-2025/]
[4] Swiss Life continues on its growth path in the first quarter of 2025 [https://www.swisslife.com/en/home/media/media-releases/newsfeed-eqs/adhoc/2025/20250520_0500.html]
[5] Switzerland: IMF Staff Concluding Statement—2025 Article IV Consultation Mission [https://www.imf.org/en/News/Articles/2025/06/30/07012025-mcs-switzerland-imf-concluding-statement-2025-art-iv-consultation-mission]