“I have been insured privately with Helvetia for many years now. I have always valued professionalism and competence in my business partners. I believe that both my company and my children who help me run it should now benefit from this long-term relationship of trust.”
New division at Group level In September, the new division at Group level, “Strategy & Operations”, took over responsibility for the continued development of the strategy followed by Helvetia Group and its country markets as well as the implementation of strategic projects that affect the entire Group. With this change to its organisational structure, Helvetia highlighted the importance of the Group’s strategic and operational development and strengthened its market units. Helvetia will continue to focus on its growth strategy and the improvement of its market position in its existing markets, and the central bundling of its forces and know-how will support these efforts.
Election The terms of office of the individual Board members have been organised to ensure that onethird of the seats are up for election or re-election every year. The term of office of the individual members is determined on election and may not exceed three years, though re-election is permitted. Elections and re-elections take place separately. The directorships of Hans-Jürg Bernet, John Martin Manser and Pierin Vincenz will end at the 2009 Shareholders’ Meeting, but they will stand for re-election. No new members for the Board of Directors will be proposed at the Shareholders’ Meeting.
Hans-Jürg Bernet (1949) a St.Gallen, Swiss b Dr oec. HSG c 1977 joined Zürich Versicherungen, various management positions, including: 1993 member of the executive board of Zurich Switzerland, 2001–2005 CEO of Zurich Switzerland, 2001–2004 member of the expanded executive board of ZFS Group; 2002–2005 Vice-Chairman of the Swiss Insurance Association, 2001–2005 member of the board of directors and Vice-Chairman of the Sponsoring Institution of the Institute of Insurance Economics; d in particular member of the board of directors of the St.Gallen Cantonal Bank, two board mandates at non-listed companies and two board of trustee mandates.
Markus Gemperle has been with Helvetia since 1986, where he worked in various positions before most recently acting as the Head of Operations & Partners and serving as a member of the Executive Management Switzerland.
“In the last 20 years my insurance was always with SUR SEGUROS y PPEVISIÓN ESPAÑOLA. When this company was taken over by Helvetia I was worried that things would change, but their employees have reas sured me that everything is just as it used to be. In fact, in many respects the service is even better than before. I am quietly confident with Helvetia as I am always treated in a way I feel I deserve.”
Helvetia celebrated its 150th anniversary in 2008. To celebrate this event and recognise the confidence in and loyalty of the shareholders to Helvetia and at the same time to optimise the capital structure of the company, Helvetia reduced the nominal value of the registered share from CHF 10.00 to CHF 0.10 and paid out the difference of CHF 9.90 to its shareholders in the form of a nominal value dividend. This is where the share capital and conditional capital figures set out in 2.1 and 2.2 that took effect on 25 July 2008 came from.
There are no preferential rights, participation certificates or dividend-right certificates. For more details concerning the Helvetia share, please refer to pages 82 to 84.
Committees appointed by the Board of Directors In order to use the broad business experience of its individual members in its decision-making processes and to meet its supervisory reporting obligations, the Board of Directors has formed special committees from among its own members to assist the Board and the Executive Management in its management and control activities: Strategy and Governance Committee, Compensation Committee, Investment and Risk Committee, and Audit Committee. The duties and powers of these committees are described in detail in the organisational regulations, and the composition of each committee is presented on page 18.
3.7 Information and control tools The Board of Directors is kept up to date in a variety of ways concerning the activities of Helvetia, its course of business and trends in the market. At its meetings, it requests information concerning: Content and outcome of matters dealt with by the various Board Committees, including all resolutions and proposals – all committees are required to submit copies of their minutes without delay, Course of business and market trends, to be provided by the CEO and the individual national managers and division heads, as well as main projects, to be provided by the persons respon sible, as necessary, Status of compliance with budget and other annual objectives as well as strategic plan values for several years, Results and findings of external and internal auditors, which are discussed by the Audit Committee and recorded in its minutes, The most important strategic, financial and operational risks, any changes to them and risk management measures that have been taken or are planned, Compliance with legal and regulatory provisions and internal regulations, Significant developments and events that could influence the interests of stakeholders, spontaneously on the occurrence of special events, otherwise in a detailed annual report and a condensed interim report.
should be fixed to account for the responsibility carried by the function holder, the quality of his or her work and the effort and time involved in carrying out the work. is assessed individually as well as in relation to the Group’s overall result every year. The relationship between the compensation paid to employees and the Group’s sustainable earnings power must be in balance. In this context, the various agreements on objectives contain annual objectives as well as long-term strategic and sustainability objectives that satisfy the interests of the shareholders. must be reasonable and competitive compared to the salaries paid by other companies in the same labour market and business sector. must be reasonable when the lowest and highest salaries within Helvetia are compared. must be simple, transparent and comprehen sible. Consistency in the concept and application of the compensation system allows us to calculate future salary expenses and to compare the figures from year to year.
The compensation concept is reviewed by the Compensation Committee to ensure that it is state of the art and appropriate in the 4th quarter of every year. At the same time the Committee determines the fixed compensation for the members of the Executive Management for the next financial year. Any changes to the compensation regulations for the Board of Directors must be approved by the full Board. As for all employees of Helvetia in Switzerland, the variable payments to the members of the Board of Directors and the Executive Management are determined at the end of the first quarter when the key figures for the previous financial year are available. These payments also depend on the degree to which the previously agreed individual and business objectives were attained. This allows us to compare and disclose the compensation paid out in the reporting year in the same annual report. The variable components are paid out in the 2nd quarter of the year following on the reporting year.
e) Shares and options The members of the Executive Management in Switzerland can on a voluntary basis acquire the maximum number of shares available to them under the employee share purchase plan. The same conditions apply as for all other employees of Helvetia in Switzerland (see section 5.3). They therefore also benefit from a discount of 16.038 per cent which is granted because these shares are blocked for three years. There is no share option plan.
Helvetia Annual Report 2008 cent (= CHF 56.04) arising from the vesting period of three years plus an anniversary discount of CHF 143.36 per share. The number of shares that an employee could buy was limited according to his or her function.
8. Auditors 8.1 Duration of mandate, term of office of lead auditor The independent auditors KPMG Ltd, Zurich, have served as the auditors of Helvetia Holding AG and the consolidated subsidiaries since 2005. The auditors’ mandate must be renewed by the Shareholders ’ Meeting every year.
Solid investment result and positive performance Current income from the securities, mortgage and real estate portfolio is encouraging and the portfolio returned 3.3 per cent. Thanks to this sta-
Excellent operating result for non-life business As confirmed by the 1.6 per cent premium growth, Helvetia Switzerland once again held its own in the extremely competitive non-life market. The gross premiums totalled CHF 627.0 million. Helvetia strengthened its market position not only in the private customer segment, but also in the corporate customer segment where it launched a new and simplified SME product. At the same time business was expanded in the property (+1.5 per cent), liability (+2.3 per cent) and motor vehicle (+1.7 per cent) segments. A large array of measures designed to improve the efficiency of our inhouse sales force are bearing fruit. In addition, our niche strategy with innovative models for insurance lines such as photovoltaic and jewellery insurance is seeing first signs of success. We are forging ahead with our plans to open up new sales channels, for example in motor vehicle insurance, and we have identified much potential for future growth in this area. In order to achieve our objective of gaining market proximity and efficiency, the business areas have been reorganised according to sales channel.
Non-life market share gains In the non-life business, the gross premium volume improved by 3.1 per cent to CHF 625.8 million (growth in CHF: –1.1 per cent). This is well above the market average and mainly derives from the core business, property insurance, which grew particularly strongly at 8.1 per cent in original currency. Several new relationships, such as a participation in a competitor’s portfolio, have contributed to this success. Motor vehicle insu rance was the only segment to report a decline, which is explained by the price war and the negative economic environment.
Focus on cost management As part of the Group-wide cost-cutting programme, Germany took an important step towards efficiency improvement and cost reduction in 2008 and created the best possible conditions for future premium growth. As a result of further improvements in business process design and structural adjustments, the number of employees was also reduced further. In 2009, important measures related to the Group-wide cost-cutting programme will be introduced in the form of the streamlining of the branch network and changes to the organ isational structure to improve efficiency.
The 2008 stock exchange year was shaped by the subprime debacle and the credit crunch, which started in 2007 and unfolded to their full extent in the reporting year. Illiquid credit markets and loss of confidence led to highly volatile equity markets. Most European stock exchange indices reported losses well in excess of 40 per cent – the Europe STOXX 50 was down 48 per cent at the end of the year, while the Swiss Performance Index (SPI) posted a loss of 34 per cent for the year.
If a portfolio of insurance contracts or investment contracts is acquired, an intangible asset is recognised for an amount that equals the present value of all future gains minus the solvency costs included in the acquired contracts. What is known as the 'value in force' (VIF) is amortised in proportion to the gross gains or gross margins over the actual term of the acquired contracts. This term is usually between three and ten years. The VIF is tested for impairment every year.
The DCF valuation method is a two-tier gross rental method based on the principle that the value of a property equals the total of future earnings on the property. In the first phase, the individual annual cash flows for a property over the next ten years are calculated and discounted as of the valuation
Financial assets held for an undetermined period and which cannot be classified to any other categ ory are classified as available-for-sale (AFS). AFS investments are carried on the balance sheet at fair value. Unrealised gains and losses are recognised directly in equity with no impact on profit or loss.
Those financial liabilities that are either held for trading or irrevocably classified upon initial recognition as 'designated as at fair value through profit or loss' are recognised at fair value. The latter classification is given to deposits if they are associated with investment contracts or products for which the policyholder benefit is almost ident ical with the investment return. For these deposits for investment contracts without a discretionary participation feature (see Note 2.13), only the withdrawals and allocations that are part of the operating result are recorded in the income statement. The risk and cost portions of premiums from policyholders are recognised in the income statement and recorded in the position 'Other income'. The policyholder’s deposit is directly credited or debited with the investment portion of the premium.
Notes to the consolidated financial statements of Helvetia Group 2008 risks have been transferred. Net commission is carried directly to the income statement.
Post-employment benefits pertain to defined con tribution plans and defined benefit plans. The amount of the employers’ contributions for defined contribution plans depends on the employee ser vices rendered during the reporting period and is charged directly to the income statement. For defined benefit plans, pension obligations and related expenses are calculated at each balance sheet date by a qualified actuary, using the projected unit credit method. The actuarial assumptions applied to the calculations consider the regulations of the respective countries and Group companies. Changes in the assumptions or differences between the expected and actual return from the plan’s assets are actuarial gains and losses. Actuarial gains and losses to be depreciat ed in the income statement are recorded for each individual plan using the 'corridor method', under which recognition is only required if the balance of the accumulated, unrecognised actuarial gains and losses exceeds the greater of 10% of the present value of the defined benefit obligations and 10% of the fair value of plan assets at the end of the previous reporting period. The portion of actuarial gains and losses outside the 10%-cor ridor is recognised in the income statement over the expected average remaining working lives of the employees participating in the plans.
or the country market Spain that were previously included in 'Operating and administrative expenses' were reclassified to 'Claims incurred including claims handling costs (non-life)'. This results in a change to the prior year figures of CHF 19.8 million.
In accordance with the Group’s accounting policies, deposits from investment contracts were not recognised in the income statement.
The goodwill resulting from the acquisition of Helvetia Compañía Suiza S.A. (previously: Previsión Española S.A.), Seville, was tested for impairment on the basis of the following growth and discount rates, assuming cash flows in perpetuity: Assumptions: Growth rate 1% Risk-adjusted discount rate after taxes 12.05%
Interest income from investments at fair value through profit or loss stood at CHF 17.0 million (previous year: CHF 11.0 million).
Balance as of 1 January 48.3 46.2 Change in the scope of consolidation – – Additions 8.5 – Disposals 0.0 – Unrealised gains and losses in equity 0.0 0.0 Share of profits for the year 1.1 2.6 Dividends paid –1.0 –0.6 Impairment (net) – – Foreign currency translation differences –0.9 0.1
(e.g. maturity, interest rate, securities and currency ). Financial liabilities at fair value equal the amount repayable on the due date. Note 17.4.1 contains a maturity schedule of loans and financial liabilities.
Total financial liabilities from insurance business 2 616.1 1 295.3 2 616.1 1 295.4 2 616.1 1 295.3
Balance as of 1 January 24.4 26.0 Change in the scope of consolidation – – Allocation/release 0.9 –0.8 Used amounts –0.8 –0.9 Foreign currency translation differences –0.1 0.1
If the reserves prove to be insufficient from a local point of view, they have to be increased in most countries in a second step. A reserve increase recognised as necessary may be spread over several years in the local financial statements, depending on local requirements and circumstances.
Change in the scope of consolidation 0.2 – 1.4 – 1.6 –
Notes to the consolidated financial statements of Helvetia Group 2008 10.4 Deferred tax assets and liabilities in CHF million
Deferred acquisition costs (life) 0.8 1.3 – – Property, equipment and intangible assets 5.3 5.9 51.1 18.2
11.2.2 Retained earnings Accumulated non-distributed earnings of Helvetia Group are recognised in the balance sheet as 'Retained earnings'. Besides freely disposable funds, they also comprise statutory reserves and reserves bound by the articles of association which are sustained by the net profit for the year and are subject to restrictions on distributions.
Basic earnings per share (EPS) are calculated on the weighted average number of shares outstanding of Helvetia Holding AG and the portion of the Group’s net profit for the year attributable to shareholders. Diluted earnings for both reporting periods correspond to the basic earnings, as no convertible instruments or options that could have a dilutive effect are outstanding.
Kind of benefit: Other long-term employee benefits – – 14.1 14.7 Short-term employee benefits 0.9 1.2 46.7 52.6
Unfunded defined benefit plans are in place in Germany, Austria, Italy and Spain. The accumulated pension obligations are recorded as pension liabilities in the balance sheet of the employer. These pension plans cover benefits for retirement, death, disability or termination of the employment contract with consideration given to local labour laws and social legislation in the individual countries. The benefits are fully financed by the employer.
Present value of defined benefit obligation (–) –1 489.3 –1 469.2 –1395.7 –1 379.0 Fair value of plan assets (+) 1 295.7 1 418.6 1402.4 1 274.0
Notes to the consolidated financial statements of Helvetia Group 2008 15.2.3 Total compensation paid to members of the Board of Directors and the Group Executive Management The following table lists the total compensation paid to the members of the Board of Directors and the Group Executive Management: in CHF 20081 20072
The most important objective of Helvetia Group’s risk management is to systematically identify, analyse and monitor all significant risks as well as manage them effectively and efficiently through the risk management organisation and hedging policy. This creates the requisite risk transparency, as well as transparency for external stakeholders. Risk transparency for its part allows the Group to allocate its capital in a risk-appropriate manner, thereby supporting the financial management of the company.
(b) Risks arising from clusters, accumulations and trend changes Apart from assumed reinsurance, property insu rance is limited to Europe. The insurance risks are geographically well-diversified and there is a good balance between commercial and private customers in the total property portfolio. The geographical distribution of risks has not changed significantly compared to the previous year.
Large risks for insured individuals are ceded to various reinsurers through excess-of-loss reinsu rance with the deductible varying by country.
Annual interest is credited to the investment portion of the premiums. The interest rate on the mandatory savings portion is set by the Swiss Federal Council, while the interest rate on the extra-mandatory portion is determined by Helvetia Group.
Options (planned exercise) – – – – – Other (exercise not planned) 107.5
Counterparty risk includes risks of default and changes in value. The risk of default refers to the possibility of the counterparty becoming insolvent, while the risk of changes in value is related to the possibility of a financial loss due to a change in the counterparty’s credit rating or a change in credit spreads in general. The risk of counterparties failing to meet their obligations is continuously monitored. Helvetia Insurance works with various counterparties with good credit ratings in order to minimise counterparty risk.
Rating of interest rate instruments, loans and derivative financial assets in CHF million as of 31.12.2008 AAA AA A BBB BB and lower Not rated Total
Board of Directors’ Responsibility The Board of Directors is responsible for the prep aration and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) and the requirements of Swiss law. This responsibility includes designing, implementing and maintaining an internal control system relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. The Board of Directors is further responsible for selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.
Volume of new business The volume of new business is the new business written in the reporting year. The annual premium equivalent (APE) is a measure used to compare single premiums and regular premiums and is calculated as the new annual premiums plus 10 per cent of the new single premiums.
Greece (sold 1997), the Netherlands (sold 1995) and Canada (sold 1999) 1974 Merger of Helvetia Feuer and Helvetia Allgemeine, St.Gallen 1986 –1988 Further Helvetia subsidiaries established in Spain, Italy and Germany 1992 Start of partnership between Helvetia and Patria 1996 Establishment of Helvetia Patria Holding 1998 Acquisition of La Vasco Navarra (Spain), acquisition of the portfolio of NCD (Italy) 1999 Merger of the two companies La Vasco Navarra and Cervantes Helvetia to form Helvetia CVN,
This document may contain projections or other forward-looking statements related to Helvetia Group which by their very nature involve inherent risks and uncertainties, both general and specific, and risks exist that predictions, forecasts, projections and other outcomes described or implied in forward-looking statements will not be achieved. We caution you that a number of important factors could cause results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include