Business development 74 Market environment 76 Helvetia Group’s performance 78 Development of business activities 80 Investments 82 Business units
Strategic ambition Helvetia Group’s ambition is to grow dynamically and sustainably in selected regions of Central and Southern Europe while preserving our attractive business portfolio. We want to be a leading provider in our home market of Switzerland and systematically further improve our position in our foreign markets. We value meaningful geographic diversification and an appropriate balance between the profitable non-life business, the high-potential pension business and the cyclical reinsurance business.
– Further development of IT; systematic implementation of a cross-border IT target architecture
– Organic growth at the level of the market average or above
Return on equity (ROE) temporarily slightly below 10 % due to low interest environment
On the other hand, it should also generate returns. With regard to our ongoing investment activity, these facts require us to monitor risks and update our strategy to account for new developments.
New products in financial year 2013 The continual ageing of the population, fewer people working in future and social security systems which are coming under increasing pressure – demographic change is both a challenge and an opportunity for Helvetia. The foreseeable additional cuts in statutory pension schemes are further stimulating demand for private pension solutions.
Helvetia blog Helvetia launched its own online dialogue platform, the “Helvetia blog” at the end of 2012. This supplements the insurance group’s existing Internet presence through informative and surprising stories from Helvetia’s world. The company blog lends itself to acting as a dialogue platform, particularly through the opportunities of social media interconnectedness. The first blog went online in the country market of Switzerland in November 2012. The country market of Austria has had an active blog since February 2013, Germany’s blog was launched in August 2013 and Spain and Italy’s blogs have been online since December 2013. The Helvetia blog is one of the best new developments of social media in the German-speaking part of Europe and won two prizes in financial year 2013: The renowned Corporate Publishing panel awarded the blog a silver in the “Best of Corporate Publishing” (BCP) competition in June 2013. With over 650 publications submitted, BCP is the largest competition for corporate communication in Europe. In October 2013 the Helvetia blog also won silver at the 2013 Econ Awards in Berlin in the “Digital Media” category. Mobile technologies have never been so popular and are continuing to gain influence rapidly. Helvetia shows how insurers too can use these technologies to improve their claims processes while customers benefit from additional services.
− Financing with single premium − Guaranteed capital at the end of the contract − Product partner: Leonteq Securities AG
Helvetia is thus firmly focused on the guiding principle of good corporate governance. It is clearly committed to sustainable economic activity, protecting natural resources and fulfilling its social responsibilities. This is based on a Groupwide sustainability strategy which Executive Management authorised in February 2013.
Methods for risk analysis and control The diverse risk environment requires the use of differing methods of risk analysis. Helvetia Group uses the Swiss Solvency Test from the Swiss supervisory authorities as a primary instrument for analysing and quantifying market, counterparty and technical risks. The company uses internal models here, including for the areas of market risk and technical risk. Risks are controlled and limited by means of hedging instruments, specific product design, reinsurance protection, limit systems (including exposure control and loss limits), diversification strategies, process optimisations and other measures.
Appointments at other companies Six appointments, in particular President of the För­ dergesellschaft des Instituts für Versicherungswirtschaft at the University of St Gall.
Helvetia wants to meet the demanding legal and ethical expectations of its shareholders and all other stakeholders by providing comprehensive and transparent reporting and responsible and value-oriented corporate governance, to the best of its knowledge and in good faith. The main aims here are to further strengthen confidence in Helvetia Group, to safeguard the interests of our customers, and to ensure and sustainably enhance the value of the Group, while also taking account of the best interests of the public. We successfully ensure that the principles of good corporate governance are consistently implemented and continually optimised throughout the Group. For the Board of Directors, the Executive Management and all employees of Helvetia, corporate governance is a continuous process that is periodically reviewed and used to integrate new developments, findings and requirements into daily professional life and responsibilities. The fact that the Group has its own Corporate Governance Officer underlines its willingness and efforts to practice proper corporate governance. Good corporate governance can only be truly effective if it is constantly oriented to the Group’s strategy and positioning. For more information, please refer to pages 12 et seq.
As this primarily concerns the implementation of mandatory law, in this Annual Report the relevant facts (especially voting procedures and compensation issues) are presented as if the articles of incorporation had already been adapted to VegüV.
Helvetia’s compensation principles and policy are simple, transparent, state-of-the art and – in particular when compared to the principles applied by our most important competitors – well-balanced. As in past years, these principles comply with the values held by Helvetia Group. The Board of Directors considers the compensation policy applied by Helvetia to be exemplary.
1.3 Cross-holdings There are no cross-holdings that exceed 3 % of the capital or voting rights.
– Helvetia, the Vontobel Group and the Raiffeisen Group are cooperation partners in the areas of consulting and the sale of financial services.
Company profile Corporate governance request, take part in the meetings in an advisory capacity. The CEO, CFO, representatives of the external auditors and the head of Internal Auditing attend its meetings in an advisory capacity. The attendance rate was 100 % at meetings held to discuss the financial statements. In order to deal with specific issues, the Committee may call on internal or external specialists to attend its meetings, which is regularly the case. The AC met three times in 2013 with all of its members attending. Most of the meetings lasted half a day.
c) The Investment and Risk Committee (IRC) formulates the investment concept, basic guidelines and investment strategy, proposes the strategic bandwidths of asset allocation, approves the investment strategy and supervises the investment activities of Helvetia Group. It determines the most important risk strategies, the risk tolerance, risk appetite and applicable risk limits, and monitors all non-strategic and non-operational risks as well as the related risk management measures and compliance with limits. It convenes as often as business requires. The CEO, CFO, CIO as well as the Head of Risk Management attend the meetings in an advisory capacity; in 2013, they attended all meetings. In order to deal with specific issues, the Committee may call on internal or external specialists to attend its meetings, which is regularly the case. The IRC met four times in 2013. At each of two meetings, one Board member was absent. Most of the meetings lasted half a day.
The Board of Directors is in charge of general compensation issues and compensation models. It is supported in its work by the Nomination and Compensation Committee. A new feature resulting from the Ordinance Against Excessive Compensation in Swiss Listed Companies (VegüV) is that it is now mandatory for the Board of Directors to compile a yearly compensation report, followed by the final approval of the compensation for the Board of Directors and the Executive Management by the Shareholders’ Meeting. Therefore no payment / share allocations may take place prior to this date. Therefore, as of 2014, the Shareholders’ Meeting has the following competencies in matters concerning compensation: a) Review of the compensation report and thus the principles and conditions under which the compensation of the members of the Board of Directors and the Executive Management are determined. b) Approval of the following total amounts: – fixed compensation to the Board of Directors for the period from the current Shareholders’ Meeting up to the next Shareholders’ Meeting (prospective ); – fixed compensation to the Executive Management for the period from the 1 July following the current Shareholders’ Meeting up to 30 June of the next year (prospective); – variable compensation to the Board of Directors for the financial year then ending (retrospective ); – variable compensation to the Executive Management for the expired financial year (retrospective ).
c) Expenses and benefits in kind The reimbursement of expenses is governed by written regulations. The members of Executive Management are entitled to a Helvetia company car which they may also use for private purposes for a fixed fee. The employer does not grant any other benefits in kind.
A new tranche product was also successfully established in Spain in 2013, and this supported this growth. Together with the positive performance of pure risk products, this made it possible to offset the decline in traditional savings life insurance policies in line with strategy.
Realised gains and losses on sale of affiliated and associated companies – 14.7 0.0
The Consolidated financial statements of Helvetia Group were prepared in accordance with the International Financial Reporting Standards (IFRS) and under the historical cost convention with the exception of adjustments resulting from the IFRS requirement to recognise investments at fair value. Fair value measurement methods are explained in section 2.6 (page 104).
IFRS 13 aims to create uniform and consistent guidelines for determining fair value, for which various standards were previously used.
Provision for future policyholder participation 899.7 – 33.3 866.4 1 270.3 – 20.7 1 249.6
The fair value of financial assets is equal to the price at which an asset could be sold on the valuation date in a normal business transaction between market participants.
The carrying values of financial assets that are not classified as “at fair value through profit or loss” (LAR, HTM, AFS) are regularly reviewed for impairment. If objective and substantial evidence indicates permanent impairment at the reporting date, the difference between cost and the recoverable amount is recognised as an impairment through profit or loss. An equity instrument is impaired if its fair value is considerably or constantly below cost (see also section 2.6, page 104). Debt instruments are impaired or sold if it is probable that not all amounts due under the contractual terms will be collectible. This usually happens when contractually agreed interest or redemption payments are stopped or are in arrears, if the debtor suffers from serious financial difficulties and / or if the rating falls below a specific threshold value. If, in order to avoid impairment, new conditions are negotiated for mortgages or loans, the mortgages or loans in question continue to be recognised in the balance sheet at amortised cost.
Life Non-life Other activities Elimination Total in CHF million adjusted adjusted adjusted adjusted
Income from unit-linked investments 104.7 137.3 – – – 0.0 – – 104.7 137.3
Realised and book gains and losses on financial assets held for trading – 4.9 – 34.4
The gains and losses reported for the HTM class also contain book gains from foreign currency translations. The above table includes increases in impairment losses on investments of CHF 1.2 million (previous year: CHF 11.1 million) as well as impairment loss reversals on investments of CHF 0.6 million (previous year: CHF 1.4 million).
Income from unit-linked investments 104.7 137.3 7.1.5 Income from unit-linked investments
Financial report Investments 7.3 Investments by segment as of 31.12.2013 Notes Life Non-life Other and elimination Total in CHF million
Total “available-for-sale” (AFS) 17 020.0 15 998.3 16 214.1 14 659.8 805.9 1 338.5 17 020.0 15 998.3 16 808.7 15 806.1 204.2 188.8 7.1 3.4
Total financial assets at amortised cost 12 680.8 12 464.3 12 680.8 12 464.3 13 114.3 13 473.6 5 681.4 6 140.2 7 432.9 7 333.4 – –
Helvetia Group classifies financial liabilities according to their origin as financial liabilities from financing activities, financial liabilities from insurance business and other financial liabilities. Helvetia Group applies the usual financial covenants to its financial liabilities, but these are not expected to have any material impact on the contractual conditions (e.g. due date, interest rate, collateral, currency). The valuation methods used to calculate the fair value for financial liabilities belong to the “Level 2” category. Section 17.5.1 (page 186) contains a maturity schedule of loans and financial liabilities.
The bond is measured at amortised cost. The effective interest rate used for the valuation is 1.17 %. At the reporting date, the bond’s carrying value stood at CHF 149.6 million (previous year: CHF 149.9 million). Interest expenses of CHF 2.1 million (previous year: CHF 2.9 million) for the bond are recognised in the income statement under “Financing costs”.
Deposit liabilities from reinsurance contracts 106.9 120.8 106.9 120.8 106.9 120.8
Actuarial reserves for insurance contracts life 27 596.3 25 866.4 70.0 74.7 27 526.3 25 791.7
Helvetia Holding AG and its subsidiaries are subject to a range of restrictions in the stock corporation and supervisory regulations with regard to the dividends that may be distributed to the parent company or respective owners.
The plan assets consist mainly of the following financial assets: in CHF million
Members of the Group Executive Management may conclude insurance contracts, loans and other services under the terms and conditions currently in effect for employees. At the reporting date a mortgage loan had been granted to Philipp Gmür for CHF 1,000,000 (previous year: CHF 1,000,000). In the reporting year the loan, a fixed mortgage at employee conditions, earned interest at 1.65 % (previous year: 1.92 %). There are no other insurance contracts, loans or guarantees.
Prospective share-based payment (LTC) acquired in the reporting year2 1 602 449 1 102 300
Group­wide, the insurance technical risks in the non­life business are dominated by natural hazards. The approach to reinsurance reduces the claims remaining from a nat­ ural event or individual risk at Group level to a maximum of CHF 25.0 million, except in very rare cases (previous year: CHF 25.0 million). For more information about the qual­ ity of reinsurance and claims settlement, please see sections 17.6 “Counterparty risk” (from page 193) and 9 “Insurance business” (from page 147). In 2013, 14.4 % (previ­ ous year: 11.4 %) of the premiums written in the non­life business were ceded to reinsur­ ers.
For example, a 10 % increase in mortality at all companies of Helvetia Group would have no negative effect. A 10 % reduction in mortality, however, would have an impact on the amount of the reserves for pension insurance. In this scenario, the increase in re­ serves would have a negative impact on the income statement of CHF 49.7 million (pre­ vious year: CHF 51.7 million). A 10 % increase in the disability rate would, however, have no effect. This is due to the sufficient safety margins. A 10 % reduction in the dis­ ability rate would also result in no change in the reserves. It should be noted, however, that sensitivities do not normally exhibit linear behaviour, so extrapolations are not pos­ sible. Please see section 17.5.2 (page 189) on the effect of changes in interest rates on equity and the income statement.
Helvetia Group is mainly exposed to counterparty risk in the following areas: – Counterparty risks arising from interest­bearing securities and money market instru­
Kingdom of the Netherlands AAA 492.6 427.0 13.0 52.6 – – – – – –
No important events occurred before or on 27 February 2014, the date on which these consolidated financial statements were completed, that are likely to have a material im­ pact on the financial statements as a whole.
– The corporate acquisitions made in 2012 that were not individually material had a total cash purchase price of CHF 23.6 million. With a recognised carrying value of CHF −28.3 million (assets: CHF 554.0 million, insurance technical reserves: CHF 562.2 million, other liabilities: CHF 20.1 million), goodwill in the amount of CHF 57.8 million, CHF 5.9 million was recognised through profit or loss. If the acqui­ sition had been finalised on 1 January 2012, the Group’s gross premium would have amounted to a total of CHF 7,008.0 million. The impact on the consolidated net profit cannot be determined.
The board of directors is responsible for the preparation of the consolidated financial statements in accordance with the 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 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 approp r i ­ ate accounting policies and making accounting estimates that are reasonable in the circumstances.
In our opinion, the consolidated financial statements for the year ended 31 December 2013 give a true and fair view of the financial position, the results of operations and the cash flows in accordance with International Financial Reporting Standards (IFRS) and comply with Swiss law.
Report of the Statutory Auditor to the General Meeting of Shareholders of Helvetia Holding AG, St Gall.
+1 % change to risk discount rate – 10.5 % – 10.4 %
+1 % change to new money rate 8.3 % 9.0 %
Value of new business (APE) in % 20.3 % 9.9 %
Service Glossary of capital funds which an insurance company needs to en­ sure that it can always meet its liabilities from insurance policies. Currently, insurance groups domiciled in Switzer­ land are subject to two different solvency systems. While the “Solvency I” system, which has been in force for ma­ ny years, requires sufficient volume­based capital to cover the insurance obligations, the required capital is calculat­ ed on a risk basis for the “Swiss Solv ency Test” (SST) which entered into force on 1 January 2011.
Solvency, Solvency I, Swiss Solvency Test The term “solvency” refers to the minimum supervisory capital adequacy requirements that must be met by an in­ surance company. To calculate this, the available capital is compared to the required capital, with the available capital being the equity that is available to cover the re­ quired capital. The required capital is the minimum amount
Versicherungs­AG Chairman of the Board of Directors D­60311 Frankfurt / Main
Zurich Hohlstrasse 560, 8048 Zurich 058 280 85 85 Donato Carlucci
Consolidated equity per share in CHF 372.2 366.3 392.0 435.4 445.0
Business development Market environment remained solid in 2013 and the German non-life business was helped by the economic recovery, with a marked tendency towards price increases in individ ual lines of property insurance (e.g. motor vehicle or residential buildings) being observed. The main source of claims in 2013 was storm damage in Germany and Austria, which will be reflected in the combined ratios of European insurers. In addition, the low interest rate environment in the non-life business also had a negative impact on profitability. The life insurance business in 2013 was dominated by conditions in the capital market. The biggest problem in 2013 was once again the low interest rate environment, as investments that had been consider ed safe yielded very low returns. With regard to business volume, all Helvetia country markets showed renewed signs of growth. The foreseeable further cuts in statutory pension schemes will boost demand for private pension solutions. The turmoil in the financial markets has increased the demand for products with financial guarantees and yield-oriented financial investments. Many life insurance companies have therefore responded with new products to reflect this trend.
Net claims ratio 2013 Net cost ratio 2013 Net claims ratio 2012 Net cost ratio 2012 1) Previous year’s cost ratio resp. combined ratio restated due to application of amended IAS 19.
Total liabilities and equity 44 511.6 42 497.1 1 Data for the financial year 2012 has been adjusted in accordance with amendments to the accounting and valuation principles.