28 Guarantees and Commitments
| In CHF million | ||||
|---|---|---|---|---|
| 31.12.2023 | 31.12.2022 | |||
| Financial guarantees1 | 15 | 14 | ||
| Loan commitments | 297 | 378 | ||
| Capital commitments for alternative investments | 123 | 568 | ||
| Capital commitments for real estate investments | 378 | 611 | ||
| Other capital commitments | 123 | 138 | ||
| Contractual obligations to purchase or construct investment property | 728 | 1 077 | ||
| Commitments to construct inventory property | 178 | 261 | ||
| Other contingent liabilities and commitments | 75 | 147 | ||
| Total | 1 917 | 3 195 | ||
| 1Of which relating to investments in associates | 5 | – | ||
Financial guarantees
The Group has issued financial guarantees and similar instruments. Financial guarantees provide for specified payments to be made to reimburse the holder for a loss incurred in the event that a client fails to make payment when due.
Loan commitments
The Group has also entered into irrevocable commitments to extend credit in the form of loans and other instruments. They represent undrawn credit lines which are available to clients to secure their liquidity needs. With respect to credit risk, these commitments are contingent upon clients maintaining certain credit standards, and the Group monitors its exposure on a regular basis.
The total amount of credit commitments includes commitments to lend at fixed rates, which expose the Group to interest rate risk. These commitments are entered into for restricted periods of time. As at 31 December 2023, committed principal amounts totalled CHF 75 million for commitments in Swiss francs (31.12.2022: CHF 89 million) and CHF 107 million for commitments in euro (31.12.2022: CHF 158 million). The range of committed interest rates is 0.70% to 3.47% for commitments in Swiss francs and 1.15% to 3.62% for commitments in euro.
Capital commitments for real estate and alternative investments
They represent unfunded commitments to make investments in direct private equity, private equity funds, infrastructure and hedge funds. Such commitments do not involve credit or market risk, as the Group purchases investments at market value at the time the commitments are invoked.
Other capital commitments
They represent agreements to provide liquidity to protection funds in the insurance industry, commitments to make investments in real estate funds and other commitments.
Contractual obligations to purchase or construct investment property
They mainly relate to projects for the purchase or construction of investment property in Switzerland and Germany.
Contractual obligations to construct inventory property
Contractual obligations for repairs and maintenance of inventory property are included in this line item and amounted to CHF 51 million as at 31 December 2023 (31.12.2022: CHF 109 million).
Other contingent liabilities and commitments
The Group is involved in various legal proceedings, claims and litigation generally relating to its insurance operations. The outcome of such current legal proceedings, claims and litigation could have a material effect on operating results or cash flows when resolved in a future period. However, in the opinion of the management these matters are adequately provided for as at the balance sheet date.
It had been announced in the media release of 14 September 2017 that Swiss Life was engaged in discussions with the US Department of Justice (DOJ) concerning its prior cross-border business with US clients. As a result of the advanced discussions with the DOJ about the resolution of their inquiry, Swiss Life had taken a provision of CHF 70 million charged against the 2020 results to address the financial component of the expected resolution. As disclosed in a press release dated 14 May 2021, Swiss Life reached a resolution with the DOJ. The resolution is in the form of a Deferred Prosecution Agreement (DPA) with a three-year term. The financial payments required as part of this resolution were in line with the provision of CHF 70 million.