Price of Helvetia registered shares at the reporting date in CHF 136.8 114.9 19.1 %
Employees of which segments Switzerland and Corporate 3 668 3 542 3.6 %
1 Based on the earnings per share (including interest on preferred securities through profit and loss) divided by the average shareholder capital (equity before preferred securities).
The supreme risk owner is the Board of Directors of Helvetia Holding AG (particularly the Investment and Risk Committee, Audit Committee and Strategy and Governance Committee) as well as the Executive Management. As the central bodies responsible for this function, they bear the ultimate responsibility for risk and define the risk strategy and risk appetite for the Group, both of which are aligned to the business strategy.
The central risk controlling role “Group Risk Management” is responsible for the improvement and development of the risk management system as well as for monitoring risks and controlling measures, and serves as a competence centre for the Group’s risk management. The Risk Committee is supported by specialised risk- controlling functions, such as the Group actuarial office and risk controlling in asset management. The internal auditor independently monitors the efficiency of the risk management system.
A detailed portrayal of the risks resulting from financial instruments and insurance contracts is provided in section 16 (from page 152) of the Financial Report.
These objectives are kept in balance by taking account of risk capacity and cost / benefit arguments. Furthermore, as part of our capital management, we pursue the goal of an interactive rating of financial strength from Standard & Poor’s of at least “A–” at Group level.
The European Insurance and Occupational Pensions Authority (EIOPA) has implemented a review process to determine the capitalisation under Solvency II. Helvetia is following these developments as well and is in a position to adapt the calculation logic to the changes and reflect them in its capital management in a timely (appropriate ) manner.
Proven asset liability management – tried-and-tested investment strategy Helvetia’s investment strategy is based on a time-tested asset liability concept. First, we derive a strategic asset allocation for each business unit and the Helvetia Group from a careful analysis of the liabilities. This satisfies both the high security requirements of the insurance business and also takes account of the yield expectations of each of the various stakeholder groups. As part of asset liability management, it is also ensured that there is always enough capital available for the ongoing strategic development of the Group and that the regulatory requirements are taken into consideration.
In doing so, the supervisory solvency requirements must be fulfilled at all times. In the life insurance business, the terms of fixed-income securities and liabilities are aligned with one another.
Due to the long maturities of the assets, the persistent phase of very low interest rates is only gradually affecting direct yields. At the same time, the reduction in the guaranteed interest rates included in life insurance policies also helps balance out this effect.
(30.7 %) and other institutional investors (49.4 %, excluding the above core shareholder). Shares pending registration increased slightly year- on-year, ending the year at 24.8 % (previous year: 23.4 %).
The year 2019 was a strong one for equities. Brexit and the trade disputes between the US and China only briefly dampened the positive underlying mood on the markets before the indices reached new record levels once more. The weakening momentum of various economies in the East and West meant that the major central banks continued or even resumed their expansive monetary policies. Due to the sustained low yield environment on the bond markets and thus a lack of alternatives to equities, the price barometers on numerous stock exchanges increased by 20 % or more. Measured by the Mid Cap Index, the Swiss equity market advanced 35.0 %. With a gain of 35.9 %, Swiss insurance stocks even exceeded this return slightly, while the Helvetia share lagged behind the market a little with an increase of 23.8 % following an outperformance in the prior year.
Subordinated bond CHF 225 million 4.00 % p.a. 30 years 2014
Subordinated bond EUR 500 million 3.375 % p.a. 30.5 years 2017
Bonds in circulation In 2019, the Helvetia Group did not place any new bonds on the capital market. However, a bond for CHF 150 million with a coupon of 1.125 % fell due for repayment on 8 April 2019. Helvetia has decided to reduce its debt ratio and to not refinance this bond.
Dividend per share2 5.00 4.80 1 Based on year-end price 2 Proposal to the Shareholder’s Meeting
For more information, please refer to pages 18 ff. in the company brochure.
1.1.2 Listed companies Helvetia Holding AG has its head office in St. Gallen and is listed on SIX Swiss Exchange AG in Zurich: security number 46 664 220, ISIN CH0466642201, ticker HELN and a market capitalisation of CHF 6,802.5 million as at 31 December 2019. Key data for investors is given on pages 8 to 9 under “Share and bonds”. Helvetia Holding AG is the only listed company in our Group structure.
The complete list of Group companies, including investments, is shown from page 178.
2. Capital structure 2.1 Capital Helvetia Holding AG has share capital of CHF 994,513.70, consisting of 49,725,685 registered shares with a nominal value of CHF 0.02 each. At the year-end price of CHF 136.80 per share, this equals a market capitalisation of CHF 6,802.5 million.
2.4 Shares and participation certificates The share capital comprises 49,725,685 fully paid-up registered shares with voting and dividend rights with a nominal value of CHF 0.02 each. There are no preferential rights or participation certificates. For more details concerning Helvetia shares, please refer to pages 8 to 9. On 31 December 2019, Helvetia held 267,932 treasury shares (0.54 %).
3. Board of Directors The Board of Directors of Helvetia Group is the highest management body of the company. It is responsible for the overall management and the strategic direction of the Group and it also appoints and monitors the Executive Management. The Board of Directors has ten members. Ms Doris Russi Schurter was elected Chairwoman at the 2018 Shareholders’ Meeting and confirmed in this role at the 2019 Shareholders’ Meeting. Dr Hans-Jürg Bernet did not stand for re-election at the 2019 Shareholders’ Meeting due to reaching the statutory age limit. He was not replaced.
The Board of Directors of Helvetia Holding AG As at: 31.12.2019
Professional background, exercising operational executive functions Until 1989 at Bülach District Court; 1989 – 2004 various managing roles at Winterthur Versicherungen, including CEO of Winterthur operations in the Czech Republic and Head of Mergers & Acquisitions at group level; 2004 – 2014 CEO of the Schweizerische National-Versicherungs-Gesellschaft AG, Basel; since 1 January 2015 Vice-President of the Board of Directors of Helvetia Insurance
Pro bono appointments Three appointments, in particular President of the National Committee of UNICEF Switzerland and Liechtenstein and on the Board of Pro Infirmis
Appointments at listed companies Chairwoman of the BoD of Luzerner Kantonalbank
Appointments at other companies Member of the BoD of Swiss International Airlines, Basel
Appointments at other companies Two appointments: Member of the BoD of Vitra Holding AG and member of the Swiss Take-over Board (TOB)
Professional background, exercising operational executive functions Credit Suisse: 1993 – 1998 various management roles in the Legal department of the Leu Group, 1998 – 2000 Member of a credit recovery task force, 2005 – 2007 Head of Legal & Compliance Corporate & Institutional Clients, 2007 – 2013 Head of Legal & Compliance Asset Management Switzerland; Zuger Kantonalbank: 2000 – 2005 Member of the Extended Executive Management (product, project and process management); independent Member of the BoD since 2014
Appointments at listed companies Chairman of the BoD of Bossard Holding AG, Zug
Appointments at other companies Four appointments, in particular member of the Liechtenstein Financial Market Authority (FMA), Vaduz; Member of the BoD of inventx AG, Chur
Pro bono appointments Member of the Board of Trustees of the Swiss Foundation for Work and Further Education (SSAW); Chairman of digitalswitzerland, Zurich
Appointments at listed companies Member of the BoD of VP Bank AG, Liechtenstein
Appointments at other companies Two appointments: Chairwoman of the BoD of the Upper Engadine Healthcare Foundation (SGO), Samedan, and Vice-Chairwoman of Sygnum Ltd, Zurich and Singapore
Christoph Lechner Professor and doctor of economics (University of St. Gallen), Swiss and German citizenship, Hettlingen, 1967
Professional background, exercising operational executive functions 1987 – 1995 various positions at Deutsche Bank, including Corporate Banking and Assistant to the Management (Germany); Corporate Finance (Singapore); 1995 – 2004 University of St. Gallen, promotion and habilitation, guest professor in the US (Wharton and Connecticut) as well as South America (IAE Argentina); since 2004 Professor of Strategic Management at the University of St. Gallen; Director at the Institute of Management (IfB)
Professional background, exercising operational executive functions 1993 – 2017 Accountant at KPMG, including assumption of responsibility for the auditing of large, listed, internationally active industrial firms as Global Lead Partner from 2003 – 2017; independent Member of the BoD since 2017
No pro bono appointments Member of the Supervisory Board of the Institute for Accounting, Controlling and Auditing (ACA) of the University of St. Gallen (HSG)
Secretary of the Board of Directors Barbara Bolliger Law degree (University of Zurich), lawyer
Appointments at other companies Seven appointments, in particular Chairman of the BoD of HSBC Private Bank (Suisse) SA, Geneva; and President of the Regulatory Board of SIX Swiss Exchange (previously registration office of SWX Swiss Exchange)
In addition, there are the following business relationships with companies represented by members of the Board of Directors: – Jean-René Fournier and Thomas Schmuckli represent Patria Genossenschaft, Basel.
3.3 Statutory rules regarding the number of activities allowed pursuant to Art. 12 para. 1 (1) VegüV According to Art. 32 (mandates outside the Group) of the Articles of Association ( com/content/dam/os/corporate/web/documents/ investor-relations/business-publications/statuten.
Financial report Corporate governance and the Audit Committee. The duties and powers of these committees are described in detail in the organisational regulations ( com/content/dam/os/corporate/web/documents/ investor-relations/business-publications/organisationsreglement.
(SGC) prepares the resolutions to be passed by the Board of Directors in the event of a change or redefinition of strategy. It monitors, in particular, strategy implementation, deals with mergers, acquisitions and disposals of companies or major portfolios, and prepares the required resolutions by the full Board of Directors. It also ensures good corporate governance within the Helvetia Group. The SGC assumes duties and powers that have been assigned to it by the Board of Directors, deals with issues entrusted to it by the Chairwoman that are not reserved for the full Board of Directors in accordance with the law, the Articles of Association or Group regulations, and discusses important and urgent issues.
c) The Investment and Risk Committee (IRC) formulates the investment concept, basic guidelines and investment strategy. It proposes the strategic ranges of asset allocation, approves the
The NCC convenes as often as business requires. 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 CEO takes part in an advisory capacity where topics that affect the Executive Management are concerned. The NCC met seven times in 2019, two times in the absence of one member of the Board of Directors. Most of the meetings lasted half a day.
The AC met four times in 2019. One member was absent from one of the meetings. The CEO, CFO, representatives of the external auditors and
The Chairwoman may take part in the meetings of the NCC, IRC and AC as a guest.
3.7 Information tools and control instruments regarding the Executive Management The Board of Directors is kept up to date in a variety of ways concerning Helvetia’s activities, its course of business and trends in the market. At its meetings, it requests regular 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 country managers and division heads, as well as the main projects, to be provided by the persons responsible, as necessary; – status of compliance with budget and other annual objectives as well as strategic plan values for several years; – results and findings of the audits conducted by the external and internal auditors which are in particular discussed by the AC 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.
Every month, the members of the Board of Directors receive key data concerning the course of business. They also periodically receive reports on current issues relating to governance as well as selected analyses and situation reports concerning market trends, market players and noteworthy occurrences. The regular reports submitted to the Board of Directors and its committees are listed in Appendix II of the organisational regulations (ht tps://www.helvetia.com/content/dam/os/ corporate/web/documents/investor-relations/ business-publications/organisational-regulation. pdf).
Helvetia has introduced and implemented a coordinated and formalised concept for risk management and risk control. Further information on risk management and risk control can be found on pages 4 ff.
The Board of Directors also has the Internal Audit unit at its disposal as an auditing and supervisory body that monitors compliance with legal and regulatory provisions, internal guidelines and directives systematically, purposefully and in a risk-oriented manner. It also receives reports concerning Helvetia’s general development and specific activities in the areas of corporate governance, compliance and risk management.
Financial report Executive Management 4. Executive Management The Executive Management is the highest executive body of the Helvetia Group and is responsible for implementing the strategy adopted by the Board of Directors.
The long-standing member of the Executive Management Dr Ralph-Thomas Honegger retired on 1 April 2019. Ralph-Thomas Honegger contributed his profound knowledge to Helvetia over the course of more than 30 years. He was a member of the Executive Management Switzerland from 1997 and as a member of the Group Executive Management assumed responsibility for investments from 2002. He handed over this area to Mr André Keller on 1 April 2019. André Keller joined Helvetia from AXA XL.
Professional background 1988 – 1990 worked in various courts, administration and law firms; 1991 – 1993 Court Clerk at the High Court of Lucerne; 1993 joined Helvetia: head of regional office in Lucerne; 2000 Member of the Executive Management of Helvetia Switzerland: Head of Sales; 2003 Member of the Group Executive Management and CEO Switzerland; in his current position since 1 September 2016
Appointments at listed companies Member of the BoD of Allreal Holding AG
Appointments at other companies Member of the Board Committee of the Swiss Insurance Association (SIA); Member of the BoD of economiesuisse; Member of the Board of Trustees of Avenir Suisse; Member of the BoD at two other non-listed companies
Appointments at other companies Chairman of the Helvetia Investment Foundation; Vice-President of the Swisscanto Vested Benefits Foundation of the Cantonal Banks; Member of the Board of Prevo AG, Basel; Member of the Strategy and Governance Committee of the Swisscanto Collective Foundation of the Cantonal Banks and Member of the Life Committee of the Swiss Insurance Association (SIA)
Professional background 1985 – 1995 Basler Versicherungen: various functions at the head office and agencies; Coop Life / Coop Versicherungen AG, Basel: 1995 – 1999 Head of Sales Switzerland; 1999 – 2001 Member of the Executive Management, Head of Marketing & Sales; Nationale Suisse: 2001 – 2005 Member of the Extended Executive Management Switzerland, Head of Market Region Mittelland; 2005 Member of the Executive Management; 2005 – 2010 Head of Customer Service Non-Life & Sales; 2010 – 2014 Head of Multi-Channel Sales Switzerland; 2015 joined Helvetia Insurance: Member of the Executive Management of Helvetia Switzerland; 2015 – 2016 Head of Sales Switzerland; Member of the Executive Management in his current role since 1 January 2017
Appointments at other companies Chairman of the BoD of Coop Rechtsschutz AG, Aarau; Chairman of the BoD of Medicall AG, Brüttisellen; Chairman of the BoD of YLEX AG, Aarau; Member of the Board of Trustees of Sanitas Health Insurance, Zurich, Member of the BoD of Helsana Rechtsschutz AG; Chairman of the Employers’ Association of Basel-Stadt
Professional background Until 1998 Swiss Bank Corporation / UBS AG; 1998 – 2009 Swiss Re: various management positions, including 2004 – 2007 Head of Asset Allocation, 2007 – 2009 Head of Alternative Equity Strategies; 2009 – 2014 Nationale Suisse: Head of Asset Management and Deputy CIO; 2014 – 2015 Catlin Group Ltd: Head of CIO Office, Deputy CIO; 2015 – 2019 XL Group Ltd, later AXA XL: Managing Director, Head of Global Asset Positioning, from 2017 Executive Vice President, Group CIO; 1 April 2019 joined the Helvetia Group and member of the Executive Management in his current role
Appointments at other companies Member of the BoD of MoneyPark AG; Member of the Investment Committee of the Swiss Insurance Association (SIA)
Professional background 1987 – 1992 Andersen Consulting (Accenture): Senior Consultant; 1992 – 1997 Texas Instruments Software (James Martin Associates): Senior Consultant; 1997 – 1998 Information Builders: Head of Services for French-speaking Switzerland; Providentia (Mobiliar Group): 1998 – 2000 Management of project port- folio, application architecture and web group; 2001 – 2003 Head of Customer Service and Member of Senior Management; Phenix Versicherung (Allianz Group): 2004 – 2007 Head of Life Insurance and Member of the Executive Management; 2008 – 2011 CEO and Delegate to the Board of Directors; joined Helvetia Insurance: 2011 Member of the Executive Management of Helvetia Switzerland and Head of Private Pensions; Member of the Executive Management in his current role since 1 January 2017
Paul Norton B.A. in history (University of Reading / UK); Chartered Accountant, British and Swiss national, Zurich, 1961,
Professional background 1983 – 1992 Price Waterhouse, London; 1992 – 1994 Revisuisse Price Waterhouse, Zurich; 1994 – 1996 Price Waterhouse, London; 1996 – 1999 Zurich Financial Services (ZFS), Centre Solutions, Head of Transaction Tax and Accounting Europe; 1999 – 2002 ZFS: Head of External Reporting; 2002 – 2007 Winterthur Insurance: Head of Corporate Development and Capital Management; 2007: since 1 July 2007 Member of the Executive Management in his current role
Appointments at other companies Member of the Finance and Regulation Committee of the Swiss Insurance Association (SIA)
Professional background Joined Swiss Re in 1995, last working as Senior Underwriter Property & Casualty; 2001 moved to Zurich Global Corporate Switzerland as Actuary Head; 2005 Chief Pricing Actuary Europe General Insurance; 2009 – 2011 Chief Underwriting Officer at Zurich Italy; 2012 joined executive management at Nationale Suisse as Head of Customer Service & Non-Life Switzerland and from 2013 as Head of Specialty Lines & Foreign Countries; since 1 January 2015 Member of Group Executive Management in current position
Note: the CVs of the members of the Executive Management are available on the Internet at about-us/overview/executive-management.html.
5. Compensation, shares and loans 5.1 Contents and method for determining compensation and participation programmes According to the VegüV, the Board of Directors is also in charge of general compensation issues and compensation models. It is supported in its work by the NCC, which provides advice to the Board of Directors at least once a year in the decision -making process in accordance with the internal organisational regulations and has final decision -making power in some areas. The (total) compensation of the members of the Executive Management is reviewed at regular intervals in cooperation with Kienbaum AG, a consulting firm specialising in compensation issues for insurers and financial services providers, and takes account of the function and responsibility assumed by each Executive Management member as well as the compensation paid by the Group’s competitors. In 2019, individual Executive Management functions were reviewed in light of impending organisational and personnel changes. Kienbaum AG has drawn up further compensation comparisons for other target groups for Helvetia in 2019. Members of the Executive Management do not participate in meetings of the Board of Directors in which discussions are held on issues relating to compensation and corresponding decisions are made.
Since 2017, the Board of Directors has only been granted fixed compensation, in which components of previously paid variable long-term compensation have been integrated.
4.3 Statutory rules regarding the number of activities allowed pursuant to Art. 12 para. 1 (1) VegüV According to Art. 32 (mandates outside the Group) of the Articles of Association ( he lve t ia.com/content/dam/os/corpora te/ web/documents/investor- relations/business - publications/statuten.pdf), members of the Executive Management may not hold more than five additional mandates with listed companies and ten additional mandates with non-listed companies. In practice, this rule is interpreted considerably more restrictively for members of the Executive Management as it is assumed that full-time members of the Executive Management have to invest their time at work primarily in the interests of the company and that external mandates should only be approved by way of exception (e.g. family companies or in order to gain additional experience by being a member of the board of another company).
Compensation can be paid by the company or by a company controlled by it (Art. 30 of the Articles of Association, dam/os/corporate/web/documents/investor- relations/business-publications/statuten.pdf). If there are any changes to the Executive Management during the course of a year, the company or the companies controlled by it are authorised to pay an additional amount for this period to each member of the Executive Management who joins the Executive Management or is promoted on the Executive Management after the date on which the Shareholders’ Meeting approved the compensation if the amount that was already approved is not sufficient to cover their compensation. The additional amount per compensation period may not exceed 40 % for the Chief Executive Officer and 25 % for the other positions on the Executive Management of the total maximum amount of compensation that was most recently approved for the Executive Management (Art. 29 of the Articles of Association, dam/os/corporate/web/documents/investor- relations/business-publications/statuten.pdf).
– Approval of the following total amounts by way of individual voting: a) fixed compensation of the Board of Directors for the period from the current Shareholders’ Meeting to the next Shareholders’ Meeting (prospective); b) fixed compensation of the Executive Management for the period from 1 July following the current Shareholders’ Meeting to 30 June of the next year (prospective); c) variable compensation of the Executive Management for the past financial year (retrospective ).
6. Co-determination rights of shareholders Helvetia observes the principle of equal treatment of shareholders.
The Board of Directors specifies the rules that govern participation in the Shareholders’ Meeting and the determination of voting rights. For independent voting proxies (who do not necessarily have to be shareholders themselves), it may stipulate regulations that deviate from the restriction of proxy voting to 10 % of the share capital. At the 2019 Shareholders’ Meeting, no individual shareholder with voting rights represented more than 10 % of the voting rights, with the exception of Patria Genossenschaft as individual shareholder and founding member of Helvetia in its current form. No specific exceptions with respect to voting rights restrictions or proxy voting were granted in the reporting year.
As a rule, the Ordinary Shareholders’ Meeting is held in April / May, but at the latest within six months after the end of the financial year. Extraordinary Shareholders’ Meetings take place
Each shareholder receives a personal invitation no later than 20 days before the meeting, including a detailed agenda, a brief explanation of the motions to be put forward, plus other explanations concerning significant occurrences in the reporting year. The invitation and agenda are also published in the Swiss Official Gazette of Commerce.
8.2 Audit fees In the reporting year, the fees charged by the auditors amounted to: CHF 3,675,934.00.
9. Information policy Helvetia communicates with shareholders, potential investors, retail investors and the general public comprehensively and on a regular basis. Shareholders receive a short letter to shareholders about the previous business year and most important key figures along with the invitation to the Shareholders ’ Meeting. The annual report and the letter to shareholders in spring as well as the interim report in autumn are made available to the general public. The documents are available on the website home/investors/overview/publications/annual- results.html and content/dam/os/corporate/web/documents/ inves tor- re la t ions/hal f - year- resu l t s/2019/ halbjahresbericht.pdf. Other current and archived information on the Helvetia Group is available on our website web/en/home.html. Topics include corporate governance, strategy, employees, charitable activities, branding, history and corporate responsibility as well as investor interests such as the key figures, corporate story, equity story, bonds, rating, annual and interim results and information about the stock including the current share price performance. In addition, further publications, media releases and important dates can be found here. Interested parties may also register online to receive the latest information on the company directly and to request particular publications. The following link can be used for this: helvetia.com/corporate/web/en/home/media- and-topics/overview/news-subscription.html.
Helvetia periodically meets with institutional investors and presents the published financial results at special roadshows. Our Investor Relations team will be pleased to assist with any personal enquiries; contact details are provided on page 199 of this financial report as well as on our website.
Base salary / basic remuneration Individual target achievement as % of base salary
Long-term compensation component (LTC) as % of base salary / basic remuneration
Board of Directors: uniform basic remuneration (exception: Chairwoman of the Board of Directors and Vice- Chairmen) with allowances for committees and committee chairpersons (cash)
– it is reasonable and competitive compared to the salaries paid by other companies in the same labour market and business sector; and
The BoD is in charge of general compensation issues and compensation models. It is supported in its work by the Nomination and Compensation Committee, which provides assistance to the BoD in the decision-making process in accordance with the internal organisational regulations and has final decision-making power in some areas. Pursuant to the Ordinance Against Excessive Compensation in Swiss Listed Companies (VegüV), the BoD compiles a yearly compensation report submitting the total amounts of fixed compensation of the BoD and fixed and variable compensation of the EM to the Shareholders’ Meeting for approval. No payment / share allocations may take place before the final approval of the compensation for the BoD and the EM by the Shareholders’ Meeting.
The delineation of powers for compensation matters is defined in Appendix I of the organisational regulations: corporate/web/documents/investor- relations/ business-publications/organisationsreglement.pdf.
Other compensation components Helvetia also offers employee benefits packages, which are attractive in a market comparison, to all its employees and managerial staff. The employee benefits insurance provides employees and their dependants with the assurance that they will
f) Severance pay, loans and discounts No provision is made for severance payments, and no such payments were made or promised in the past or in the reporting year. Loans are granted at usual market conditions. In principle, BoD members also do not benefit from any discounts (premium discounts, etc.) that are offered to the EM and the Helvetia employees.
be financially secure on retirement or in the event of illness, the incapacity to work or death, in a way befitting employees who work for a leading insurance company. Helvetia’s compensation systems as well as the employee benefits programmes, some of which can be optimised at an individual level, have proven their value; they are correct and fair, balanced and competitive, and the amounts that are paid can be justified at all times.
b) Variable compensation The final amount of the variable compensation, the total amount of which must also be approved by the SM before it is paid out, is dependent on the following three factors: Individual target achievement (20 % of fixed compensation ): This reference value is multiplied by the degree of achievement of the personal targets agreed with the line manager in advance. The result of this multiplication is paid out to the EM member in cash. The individual targets of an EM member can include quantitative and/or qualitative components and depend on his or her operational responsibility. Compensation for individual target achievement is due to the EM member regardless of the general business result.
(claw-back) in the event of poor business performance within the blocking period, if the reasons for this are material mistakes of the EM-member in the reference year.
The extent to which strategic objectives have been achieved (ranging from 0 % to 125 %) is fixed annually during the first quarter following the end of a financial year by the Nomination and Compensation Committee of the BoD on the basis of the criteria below. The Committee has additional room for discretion, allowing it to take additional criteria and an overall assessment into account, while remaining within the established upper limit of 125 %: – Profit: the reference figure is the annually reported Group profit for the period relative to the previous year.
– Growth: the reference figure is the growth in business volume in the active business sectors relative to the relevant market segment achieved in the financial year.
– Shareholder value: the reference figure is the overall performance (total return; share performance incl. dividends) of the Helvetia registered share compared with the performance of the Stoxx Europe 600 Insurance index (index of comparable European insurance stocks).
d) Shares and options The EM members 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 3). They therefore also benefit from the discount of 16.038 % that is granted because these shares are blocked for three years.
Financial report Compensation report 3. Helvetia employees in Switzerland: share purchase plan In 2005, an employee share purchase plan was introduced in Switzerland to allow employees to participate in the performance of Helvetia and thus to strengthen their personal ties to the company. Employees can purchase registered shares of Helvetia Holding AG at reduced prices. The number of available shares is specified by the BoD, taking account of the financial results and the functions of the employees concerned. The purchase price is calculated on the basis of the average stock market price during the five trading days following the publication of the financial results.
Executive Management of the market units The Executive Management abroad is compensated according to the local market conditions governing the compensation systems. The local compensation systems can include fixed and variable salary components. At Group level, members of the local Executive Management abroad are also paid a results-based Group bonus in the form of shares, based on a reference figure of 10 % of the local basic compensation. The reference figure is also multiplied by the LTC percentage of target achieved. This Group bonus has been designed to promote a sense of belonging to the Group of the Executive Management teams abroad.
II. Compensation paid to the Board of Directors and the Executive Management in 2019
This section provides information on the compensation, shares and loans granted to the BoD members and EM members with a reporting duty of the Helvetia Group in the 2019 financial year.
At the reporting date, a mortgage loan had been granted to Jean-René Fournier for CHF 765,000 (previous year: CHF 765,000). In the reporting year, the loan, a fixed mortgage at normal customer conditions, had the same interest rate as in the previous year of 1.57 %. There are no other employee discounts on insurance contracts, loans or guarantees.
Fixed compensation1 as at 31.12, in CHF, incl. AHV / IV / EO employer contributions
Total compensation of the Board of Directors 2 886 145 2 685 734 1 Since 1 January 2018, 30 % of the fixed compensation will be paid in shares blocked for a minimum of three years.
Financial report Compensation report 2. Compensation paid to the Executive Management In the reporting year, the EM members received fixed compensation totalling CHF 8,681,135. The fixed compensation includes all scheduled allowances, meeting attendance fees and expenses. Variable compensation of CHF 5,488,336 was granted to the EM. This is subject to approval by the SM. In the previous year, the members of the EM received fixed remuneration of CHF 8,168,521 and variable remuneration of CHF 4,532,669.
As part of this variable compensation, the EM was allocated LTC shares of CHF 2,287,913 (previous year: CHF 1.69 million). This corresponds to 16,749 shares at a price of CHF 136.60 as of the reference date 25 February 2020 (previous year: 14,115 shares at CHF 120.00).
Compensation for Executive Management as at 31.12., in CHF million 2019 2018
Salaries and other short-term benefits: – Fixed compensation (incl. expense allowances, child / education allowances, long-service awards, company car) 6 097 182 6 070 799
– Employer contributions to pension funds with respect to the fixed compensation 2 583 953 2 097 722
Total fixed compensation paid out 8 681 135 8 168 521
Keller in three years’ time in accordance with the LTC rule, will – like the LTC entitlements of the Executive Management for 2019 – be approved as part of the retrospective approval of the variable compensation of the Executive Management.
Payments to former EM members Following his retirement on 31 March 2019, a further amount of CHF 130,000 was paid to Ralph-Thomas Honegger for the performance of final work up to 31 May 2019 in connection with the introduction of his successor.
BoD for the period from the 2020 SM to the 2021 SM.
– Total amount of the fixed compensation for the EM for the period from 1 July 2020 to 30 June 2021.
– Total amount of variable compensation for the EM for the past financial year 2019.
As regards fixed compensation, these total amounts refer to different time periods in comparison to the figures given in section II and in reference to financial year 2019: SM to SM or 1 July to 30 June, 0.81 % (previous year: 1.34 %). The loan to Paul Norton of CHF 500,000 earned interest at 0.98 % in 2019 as in the previous year. The loan to David Ribeaud of CHF 595,000 earned interest at 0.89 % in 2019 (previous year: 0.89 %), the extra mortgage of CHF 420,000 earned interest at 0.95 % as in the previous year. There are no other loans or guarantees.
Ralph-Thomas Honegger, CIO of Helvetia, retired on 31 March 2019. André Keller took on his role on 1 April 2019 at the same time as being appointed a member of the Executive Management.
In accordance with Art. 29 of the Articles of Association (additional amount for compensation of newly appointed members of the Executive Management) and in compliance with the corresponding maximum amounts, an amount of CHF 187,697 was paid to André Keller in addition to the fixed remuneration already approved for the period from 1 July 2019 to 30 June 2020 (see also the explanations in section III / No. 2 as well as Art. 5.2 from page 31 in the chapter on “Corporate governance”). André Keller also received an amount of CHF 200,000 as compensation for his forfeited claims with his previous employer, which was allocated to him in the form of deferred shares. These deferred shares, which will only be transferred to the ownership of André
Financial report Compensation report respectively, of the year following the SM. These figures are therefore not directly comparable. To provide the reader with a comparison, however, the amounts to be approved are compared to the figures from the same period of the previous year (the amounts approved by the SM and actually paid out).
1. Approval of the total amount of fixed compensation for the Board of Directors for the period from the 2020 Shareholders’ Meeting to the 2021 Shareholders’ Meeting The Board of Directors reviewed its fixed compensation and decided not to adjust the rates for the basic and various additional payments for the 2020 / 2021 period.
2. Approval of the total amount of fixed compensation for the Executive Management for the period from 1 July 2020 to 30 June 2021 The fixed compensation for the EM up to 1 July 2020 has been reviewed. Function-related and indivi- dual adjustments will be made in individual cases. There are also changes to the proposed total amount owing to the reorganisation of the Executive Management planned for 1 May 2020 (new formation of an Executive Management Switzerland, new appointment of Martin Jara as CEO Switzerland and member of the Executive Management as of 1 May 2020 and transfer of the operational Swiss units and current Group functions “Private Pensions”, “Occupational Pension Plans”, “Non-Life” and “Distribution” to the new Executive Management Switzerland).
In accordance with Art. 29 of the Articles of Association, should there be changes within the EM during the course of the year, each member who joins the EM or is promoted within the EM following the granting of approval by the SM for the proposed compensation can be paid an additional amount for this period if the compensation
Total fixed compensation amount for the Board of Directors (prospective) SM to SM Prospective
Total fixed compensation Executive Management 7 750 000 8 214 288 8 300 000 – 1.0 % 1 Details of the earnings of the new CEO Switzerland from 1 May 2020 to 30 June 2020 will be reported in the 2020 Annual Report.
The Board of Directors requests approval from the Shareholders’ Meeting for total variable compensation for the Executive Management in the amount of CHF 5,500,000 for the past financial year 2019.
Total variable compensation Executive Management 5 500 000 4 532 669 4 550 000 – 0.4 % 1 Comprises the value of the deferred shares allocated as part of the LTC
We have audited the remuneration report dated 2 March 2020 of Helvetia Holding AG for the year ended 31 December 2019. The audit was limited to the information according to articles 14 – 16 of the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (the Ordinance) contained in section II on pages 41 to 45 of the compensation report.
In our opinion, the remuneration report for the year ended 31 December 2019 of Helvetia Holding AG complies with Swiss law and articles 14 – 16 of the Ordinance.
KPMG AG Financial Services Räffelstrasse 28 Postfach T +41 58 249 31 31 CH-8045 Zürich CH-8036 Zürich www.kpmg.ch
During the past financial year, global market conditions were less positive than they were in 2018. In both the US and the eurozone as well as in Switzerland, a slowdown in economic growth was observed relative to the previous year. While GDP growth of over 2 % is still expected for the US, the economy in the eurozone and Switzerland posted a weaker performance at just above and under 1 %, respectively.3 The persistently low interest rates also continued to pose a challenge for insurance companies. In keeping with economic growth, the global insurance market recorded a moderate increase in premium income, which was primarily driven by North American markets and emerging markets.
The markets in which Helvetia is active generate a volume of around USD 824 billion, representing almost 16 % of the global market1.
by positive price developments. For example, following a phase of declining prices spanning several years, prices in the continental European business with commercial customers increased once more, primarily driven by property insurance. The premium volume developed pleasingly in, among others, the German non-life business, where premium income market-wide rose by 3.2 %.4 With a 2.0 % increase in its premium volume, the motor vehicle business line accounted for a significant share of this growth. Growth was also recorded by the non-life business in Switzerland in 2019. However, at 1.7 % premium income grew less strongly than was the case in the previous year.5 The key contributors to this growth were the fire, natural hazard and property insurance business lines (+ 2.0 %) as well as personal insurance cover such as accident and health insurance products (+ 2.7 %). In contrast, motor vehicle insurance was slightly down (–0.5 %). Lower tariffs and reduced demand in the area of motor vehicle liability insurance are putting pressure on this business line.
In the past financial year, the life insurance business was also dominated by the low interest rate environment. Driven by China, the global premium volume in the life insurance segment increased by an estimated 2.3 %. However, the challenging market conditions hampered growth in developed markets. The premium volume in the European industrialised countries therefore fell slightly (–3 %). A slight increase of 0.6 % is anticipated for the business in Switzerland.5 The increase can primarily be attributed to the individual life business line, which posted growth of 2.0 % thanks to popular unit-linked products. The group life business recorded slight premium growth of 0.4 %.
With its available capacities, the global reinsurance market remains more than sufficiently receptive in order to cover the needs of primary insurers. In 2019, the claims from natural hazards were well below the 10-year average and significantly lower than in 2017 and 2018. Costly tropical cyclones primarily formed over Japan and with the Typhoons Faxai and Hagibis placed a considerable burden on the reinsurance market for the second time in succession. The impact of climate change as well as the regulatory environment and the changed risk landscape in the area of liability insurance are issues that the global reinsurance market will have to tackle both this year and in the years to come. The different assessments of these challenges by the reinsurance companies led to an inconsistent approach during the renewal phase up to 1 January 2020. The sum of all activities led to a further price increase in the US and in the specialist business lines, while the European business did not exhibit a clear recovery due to the overcapacities that continue to exist and the generated results.
Market environment in the European capital markets Following the weakness observed at the end of 2018, the investment markets embarked on a brilliant countermovement in 2019. The losses were already recouped during the first trading weeks on the new year and the uptrend continued almost unabated across the whole of 2019. In particular, the central banks, which initiated countermeasures in light of fears of an economic slowdown, also contributed to this development. The Federal Reserve cut key interest rates in three steps by a total of 75 basis points, while the European Central Bank once again became increasingly expansive and in autumn revived its bond-buying programme which was originally declared to end in 2018. The SNB maintained its negative interest rate policy and the key interest rate for sight deposits remained at – 0.75 %. These measures had a corresponding effect on interest rates. Yields on 10year German government bonds fell to an all-time low of – 0.70 % in August, levels that had previously only been seen for Swiss government bonds, whose ten-year yield temporarily fell below the – 1.0 % barrier and also reached an all-time low.
In this environment characterised by an expansive monetary policy, the equity markets reached new highs and closed the year with considerable gains. The major indices posted returns of 20 % and more.
The positive underlying mood was also reflected in risk appetite and credit spreads, which contracted markedly. Longer-dated bonds, in particular, performed very well. This was because, in addition to the general interest rate environment, credit spreads also narrowed, meaning that bond prices were driven even higher.
– Helvetia reports successful business development for 2019: IFRS net profit after tax increased by 24.9 % to CHF 538.1 million, while business volume grew by 5.6 % in original currency to CHF 9,454.1 million.
– Based on continuing solid technical results in life and non-life, a significantly stronger performance on investments and a one-off positive tax effect were the main drivers of the increased result.
– In the life business, the margin after costs increased as a result of positive valuation effects on investment-linked products and a better cost result. New business also developed very positively, with an increase in the new business margin to 2.9 %.
– In 2019, Helvetia generated operating cash production of CHF 279.3 million. Both the non-life and life insurance businesses contributed to that.
The IFRS net income after tax was at CHF 538.1 million in 2019 well above the IFRS net profit for the period of CHF 431.0 million in 2018. Based on solid technical results in life and non-life, strong investment results due to the favourable performance of the equity markets were the main driver of the good result. Finally, Helvetia benefited from a one-off positive tax effect in the amount of CHF 93.2 million. This was mainly due to the revaluation of deferred tax provisions in the course of the federal tax reform and related cantonal tax proposals in Switzerland.
In terms of business areas, both the life and non-life businesses increased their earnings compared to 2018. In life business, the margin after costs was increased. Important drivers of the improvement were positive valuation effects on investment-linked products and a better development of the cost result. The non-life technical result, on the other hand, declined because a favourable claims experience in the current year was unable to compensate for higher acquisition and project costs and lower run-off profits from reserves for losses from previous years. Both the life and non-life business also benefited from gains on investments and the positive tax effect mentioned above. The result in Other Activities was lower than in the previous year due to the usual consolidation effects in this business area and the cession of weather-related claims in Europe and large losses in Specialty Lines CH / International to Group reinsurance.
To reporting segments, Helvetia improved its results in Switzerland, Europe and Specialty Markets. In Switzerland, significantly higher results were recorded in life and non-life business compared to 2018. The increase is mainly due to better investment results, a higher margin after costs in the life business and the positive tax effect from the national and various cantonal tax reforms. In Europe, Helvetia generated a better result in the non-life business, which resulted on the one hand from a growth- related higher technical result and on the other hand from capital gains. The life result in Europe remained at the level of the previous year. Higher capital gains were outweighed by increased expenses for reserve strengthening – notably in Germany (ZZR) – and for policyholder participation. The Specialty Markets segment increased its result thanks to higher investment income and a higher technical income driven by increased volumes. Due to usual consolidation effects in the Group’s own funds, weather- related claims in Europe and large losses in Specialty Lines CH / International that were ceded to Group reinsurance as well as due to higher project costs the result of the Corporate segment declined year-on-year.
1 OC = Original currency 2 Equity without preferred securities 52 Helvetia Financial Report 2019
The net combined ratio at Group level is at 92.3 % and again meets the financial targets communicated as part of the helvetia 20.20 strategy. Compared to the previous year, the ratio increased (2018: 91.0 %). This was due to a higher claims ratio as well as higher acquisition and project costs. Besides a decline in run-off gains from reserves for losses from previous years, the claims experience for the current year remains positive, despite a more competitive environment in Switzerland, reflecting the continuing good quality of the portfolio. The decline in run-off gains stems mainly from Switzerland, predominantly due to the expected gradual run-off of whiplash loss reserves and of the reserves for the portfolios acquired from Alba and Phenix in 2010.
– All country markets with significant growth in most lines of business, with property and motor business as the main growth driver
Strong growth in all three market units: – Specialty Lines CH / International: + 31.7 % (in OC) – France: + 30.9 % (in OC)
The net combined ratio amounted to 92.3 % and was thus at a higher level than in the previous year (2018: 91.0 %). The ratio remains at a very good level in line with the strategic target of <93 %. The following factors influenced the development: Increase in claims ratio (+ 0.6 % pts) to 61.7 % – Decline in run-off gains from reserves for losses from previous years predominantly in Switzerland (see page 61) – Partially compensated by a positive current year claims experience, which testifies to the continued very good portfolio quality
Broken down by segments and lines of business, business volume developed as follows in the reporting period: Development by segment
– Planned decline in traditional individual life business (– 6.9 %)
– Growth in group life business (+ 1.5 %) with pleasing development of new business in capital-efficient solutions (Swisscanto / BVG Invest)
– Strong volume growth in Italy (+ 23.3 % in OC) both in investment-linked products and in traditional business
– Strong growth in all markets except Austria (absence of large single premium contracts, as expected)
– Planned reduction in sales in Switzerland (– 6.9 %) – Growth in Europe driven by high demand for hybrid products in Italy
Group life business CHF 2,791.7 million + 1.8 % in OC
– Growth driver Swiss group life business (+ 1.5 %), particularly thanks to very successful new business in capital- efficient insurance products (Swisscanto / BVG Invest)
– Lower risk result due to a weaker disability result in the Swiss group life business
– Positive influence of fluctuations in the valuation of options for investment-linked products
Markedly higher gains on investments particularly due to the good equity market development
Significantly lower extraordinary result, as higher interest rate-related reserve strengthening in Switzerland and Europe and the absence of a positive one-off effect in the previous year in Switzerland (release of the cost of living adjustment fund) were partially offset by lower future conversion rate losses due to the new tariff in the Swiss group life business (one-off effect)
One-time positive effect from the revaluation of deferred tax provisions as a result of the federal tax reform and related cantonal tax reductions in Switzerland
New business in the life segment developed well in 2019. The new business margin rose by 1.2 % pts compared with the same period of the previous year and amounted to 2.9 % (2018: 1.7 %). The improvement was driven by the Swiss group life business. On the one hand, model changes, which led to lower capital requirements, had a positive effect. On the other hand, the new business margin also benefited from a more favourable business mix in Swiss group life due to higher new business growth with more profitable capital-efficient insurance solutions.
As at 31 December 2019, the embedded value of Helvetia Group amounted to CHF 3,924.9 million, an increase of CHF 277.8 million compared to the beginning of the year. The main driver behind the significant growth of 7.6 % is the aforementioned model change. The capital requirement is now based on that from the SST or Solvency II, increased by a safety buffer. In addition, expected changes, profitable new business, operational deviations and lower tax assumptions (tax reform in Switzerland) contributed to the growth. Economic deviations due to lower future investment returns, capital movements from dividend payments and exchange rate differences reduced the growth.
The IFRS result after tax of other activities in 2019 amounted to CHF – 84.8 million (2018: CHF – 48.9 million). The following factors contributed to the development of earnings: Usual consolidation effects of the funds allocated to this segment, which were negative in 2019 Lower technical result of intra-Group reinsurance, mainly due to participation in weather-related claims in the Europe segment and large losses in Specialty Lines CH / International Higher costs, mainly due to projects 57Helvetia Financial Report 2019
Investments securities 4 % | 2,095.7 Investment funds, alternative investments, derivatives property 8 % | 4,266.1 Investments with market risk borne by policyholder 4 % | 2,204.1 Money market instruments associated companies
Investment structure in the 2019 financial year Share in % | in CHF million
Change in unrealised gains and losses recognised in equity 1 432.0 – 639.3
– Increase in regular premiums by 2.7 % thanks to extremely successful new business in the capital-efficient solutions (Swisscanto / BVG Invest) and a positive development of existing business
– Slightly higher single premiums (+ 0.4 %) driven by a significant increase in new business at Swisscanto and BVG Invest 60 Helvetia Financial Report 2019
Increase in margin after costs thanks to the positive development of the cost result and the favourable influence of fluctuations in the valuation of options for investment-linked products: – Better savings result in individual life offset by decline in group life due to lower investment returns while expenses for interest on retirement assets remained unchanged
The better margin after costs, higher capital gains and the contribution to earnings from tax led to a material increase in expenses for policyholder participation
Deterioration of the cost ratio (+ 2.3 % pts) – Higher acquisition costs due to the expansion of the higher commissioned partner business – Additional costs for projects led to an increase in the administration cost ratio 61Helvetia Financial Report 2019
Helvetia achieved significant growth in the Europe segment in 2019: the business volume rose to CHF 3,083.2 million and was thus 7.2 % above the previous year’s figure after currency adjustments. In the Group currency, the Swiss franc, business volume increased by 3.5 %. The achieved IFRS result after tax amounted to CHF 127.9 million (2018: CHF 117.3 million), which represents an increase of 9.0 %.
In the business area non-life Helvetia generated premiums in 2019 in the amount of CHF 1,945.5 million (2018: CHF 1,904.8 million). Compared to the previous year, the Europe segment thus achieved growth of 5.8 % (in OC).
Austria CHF 363.0 million + 6.1 % in OC – Growth in all lines of business, most clearly in property business – All distribution channels contribute to growth
Spain CHF 350.5 million + 5.5 % in OC – Pleasing growth in all lines of business, with property business as the main driver in line with the economic trend
Germany CHF 312.0 million + 9.4 % in OC – Investment-linked insurance solutions as growth driver
Health / accident CHF 194.7 million + 4.9 % in OC
– Strong development in Germany (+ 14.9 % in OC), Italy (+ 34.6 % in OC) and Spain (+ 16.0 % in OC)
– As expected, decline in Austria due to lower volume resulting from large single premium contracts
– Germany and Austria with deliberate curtailment of sales of traditional guarantee products
The IFRS net income after tax in the business area non-life insurance increased by 11.2 % on the previous year to CHF 98.8 million (2018: CHF 87.6 million).
Additional expenses for interest rate-related reserve strengthening, notably in Germany (ZZR)
The following factors contributed to the development of the net combined ratio: Claims ratio at the level of the previous year (– 0.1 % pts) Better cost ratio (– 0.3 % pts) mainly due to higher premium volume
Helvetia grew significantly in the Specialty Markets segment in the reporting period. In addition to the premium volume, the result also developed positively.
In 2019, the Specialty Markets segment generated premiums of CHF 1,247.3 million (2018: CHF 1,019.5 million), which represents a strong increase of 23.7 % (in OC).
The market units allocated to this segment developed as follows: – Specialty Lines CH / International: CHF 343.1 million (+ 31.7 % in OC); significant increase in volume mainly driven by growth in the engineering line of business due to new business, new products and favourable price development – France: CHF 296.5 million (+ 30.9 % in OC); ongoing transformation from a pure transport insurer to a comprehensive provider of special insurance for SMEs led to an increase in premium volume – Active reinsurance: CHF 607.7 million (+ 16.5 %); growth as a result of positive development of existing business and price recovery in the US business and in the aviation sector
Increase in the claims ratio (+ 0.7 % pts) due to a less favourable development of a few major claims from previous years in France and Specialty Lines CH / International and a one-off effect from the commutation of a retrocession agreement in Active Reinsurance
In addition to the financing companies and the holding company, the Corporate segment includes the Corporate Center, the centrally managed investments (funds) and Group reinsurance. The IFRS profit after tax for this segment is CHF – 75.8 million below the IFRS result after tax in 2018 of CHF – 42.0 million. The decline is due on the one hand to the usual consolidation effects of the funds allocated to this segment, which are negative in the reporting period. On the other hand, weather-related claims in the Europe segment and large losses in Specialty Lines CH / International that were ceded to Group reinsurance depressed its technical result. Additionally Helvetia had higher project costs.
Net cost ratio 2019 Net cost ratio 2018 66 Helvetia Financial Report 2019
Summary of accounting policies 91 Segment information 103 Foreign currency translation
Goodwill and other intangible assets 108 Investments 121 Financial liabilities 124 Insurance business 134 Income taxes 137 Equity
Gains and losses on Group investments (net) 7.1.3 455.6 – 192.9
Income investments with market risk for the policyholder 7.1.5 469.4 – 215.7
Net benefits to policyholders and claims – 8 050.6 – 6 734.7
Earnings per share: Basic earnings per share (in CHF) 11.5 10.52 8.371
Change in unrealised gains and losses on investments 1 432.7 – 646.3
Valuation reserves for contracts with participation features 11.2.5 1 736.2 1 220.0
Acquisition of subsidiaries – – – – – – 0.1 – – 0.1 0.1 – – –
Purchase of treasury shares – – – 25.3 – – – – – 25.3 – – 25.3 – – 25.3
Income and expense that will not be reclassified to income – – – 5.2 – 1.5 – 1.9 4.8 – 0.1 4.7 – 4.7
Transfer from / to retained earnings – – – – 0.1 – – 15.5 – 2.7 – 18.3 0.0 – 18.3 18.3 0.0
Profit or loss for the period – – – – – 409.1 130.1 539.2 – 1.1 538.1 – 538.1
Realised gains and losses on property, equipment and intangible assets 1.8 1.0
Purchase of shares, investment funds and alternative investments – 1 772.6 – 1 966.9
Purchase of investments in subsidiaries, net of cash and cash equivalents – 26.4 – 3.7
Effect of exchange rate differences on cash and cash equivalents – 16.5 – 17.7
Other cash equivalents with a maturity of less than three months 72.1 165.1
Other disclosures on cash flow from operating activities: Interest received 690.8 746.2
Interest paid 37.8 38.7 1 “Other income and expenses not affecting cash” primarily contains the change to interest-accruing profit participation of owners of contracts with discretionary participation features.
The Board of Directors approved the consolidated financial statements and released them for publication at its meeting on 2 March 2020. The financial statements will be submitted to the shareholders for approval at the Shareholders’ Meeting on 24 April 2020.
2.1 Standards applied for the first time in the reporting year The following published sector-relevant standards (IAS / IFRS), interpretations (IFRIC) and amendments to the standards were applied by the Group for the first time on 1 January 2019: – IFRS 16 – Leases – Amendments to IAS 19 – Plan Amendment, Curtailment or Settlement – IAS 28 – Change in Long-term Investments in Associates and Joint Ventures – IFRIC 23 – Uncertainty over Income Tax Treatments of Situations and Transactions – Annual improvements to IFRS (cycle 2015 − 2017)
IFRS 16 establishes new rules for the recognition of leasing transactions, especially for lessees. Helvetia applied the modified retrospective approach for the transition from IAS 17 to IFRS 16, whereby any effects from the initial application on 1 January 2019 are booked to retained earnings and there is therefore no restatement of the figures from previous periods. Furthermore, the IFRS 16 disclosure requirements are not applied to the comparative figures. When transitioning, Helvetia made use of the practical expedient to only apply IFRS 16 to transactions that were already identified as leases at Helvetia Group under IAS 17.
Discount at initial application rate as at 1 January 2019 – 4.6
Helvetia is a rental property owner and lessor under IFRS 16. There are no accounting amendments resulting from these contractual relationships.
Financial report Summary of siginificant accounting policies 2.3 Consolidation principles All the material companies included in the consolidation have the same reporting periods. Smaller Group companies with different financial years prepare interim financial statements as of the reporting date of 31 December.
2.4.1 Translation of financial statements prepared in foreign currency Items included in the financial statements of such entities that do not have the Swiss franc as their functional currency were translated using the applicable closing rate. Items in the income statement are translated at the average exchange rates for the reporting period. The resulting translation differences are recorded in “Reserve for foreign currency translation differences” in equity, not affecting profit or loss. Upon (partial) disposal of a subsidiary, these currency differences, attributable to the subsidiary in question and accumulated in equity, are released through income. The rates applied in these financial statements are given in section 4.1 (page 103).
2.5.4 Insurance-specific estimate uncertainties The uncertainties regarding estimates in the area of technical results are explained in section 2.15 (from page 86). Any material change to the parameters used for the calculation of the provisions is commented on in sections 9.3 from page 128 (non-life business) and 9.4 on page 130 (life business).
All other items are of a mixed nature. The differentiation between the current and non-current balances of relevant items is explained in the Notes. The maturity schedule of financial assets, financial liabilities and provisions for insurance and investment contracts is described in section 16.5 (from page 167) as part of the risk assessment process.
Financial report Summary of siginificant accounting policies 2.7 Property and equipment Property and equipment are carried at cost less accumulated depreciation and accrued impairment. Depreciation is normally calculated using the straight-line method over the estimated useful life as follows: Furniture 4 – 15 years
2.8.1 Helvetia as lessee The Helvetia Group primarily presents itself as a lessee when renting business premises. Motor vehicles and other assets are also leased to a lesser extent.
A right-of-use asset and corresponding leasing liability are booked on inception of the contract. The right-of-use asset is initially recognised at acquisition cost. This basically corresponds to the leasing liability. The right-of-use asset is amortised using the straight-line method from the time of acquisition over the duration of the lease. If there are indications of an impairment, the recoverability of the right-of-use asset is reviewed and an impairment is booked if applicable.
The leasing liability corresponds to the present value of the leasing payments not yet paid on inception of the contract. Either the implied interest rate given in the leasing agreement or, in the absence thereof, an interest rate based on the rate Helvetia would have to pay for borrowing capital with maximum seniority in CHF, is used as the discount rate. The maturities of the liabilities are taken into consideration for their valuation. Country and currency-specific supplements are included for foreign Group companies.
Right-of-use assets are presented on the balance sheet under ”Property and equipment”. The lease liabilities come under “Financial liabilities from financing activities”.
Rental payments made under these agreements are booked as income and presented as part of “Current income from Group investments”.
2.8.3 Accounting principles in force until 31 December 2018 If a lease agreement transfers all risks and rewards incidental to the ownership to Helvetia Group, the lease is classified and treated as a finance lease. The finance lease agreements of Helvetia Group are limited to lessee agreements. At inception of the lease agreement, recognition occurs at the lower of the present value of the minimum lease payments and the fair value of the lease object. The leasing liability is recognised in the same amount. The leasing instalment is broken down into an amortisation component and a financing component. Financing costs are apportioned over the term so as to achieve a constant rate of interest on the remaining balance of the liability. The depreciation of the asset follows the rules for depreciating tangible assets. All other lease agreements are classified as operating leases. Payments – less any reductions – made under operating lease agreements are charged to the income statement on a straight-line basis over the term of the lease.
2.10 Impairment of tangible assets, right-of-use assets, goodwill and other intangible assets The carrying value of tangible assets, right-of-use assets or an intangible asset amortised using the straight-line method is tested for impairment if there is evidence for impairment. Goodwill and intangible assets with an indefinite useful life are reviewed for impairment annually in the second half of the year. They are also tested for impairment again if there is evidence of impairment.
An intangible asset is impaired if its book value exceeds its recoverable amount. The recoverable amount is measured as the higher of fair value less cost to sell and value in use. Fair value less cost to sell is the amount obtainable from the sale of an asset at current market conditions after deducting any direct disposal costs. Value in use is the present value of estimated future cash flows expected to be generated from the continuing use of an asset and from its disposal at the end of its useful life. For
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. The income from the properties is determined on the basis of the current rental index and adjusted to the assessment horizon on the basis of the current rental potential.
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 date. In the second phase, the unlimited capitalised income value for the time following the first ten years is calculated and also discounted as of the valuation date. The risk-adjusted discounted rates used for the DCF valuation are based on the current condition, use and location of the property in question. The cash flows used for the forecast are based on the rental income that can be earned in the long term. Rental income is recognised on a straight-line basis over the lease term.
Financial assets held for an indefinite period and which cannot be classified to any other category are classified as “available-for-sale” (AFS). AFS investments are carried in the balance sheet at fair value. Unrealised gains and losses are recognised directly in equity with no impact on profit or loss. Upon disposal or impairment, the gains and losses accumulated in equity are released through income.
For AFS financial assets, the recoverable amount at the reporting date equals the fair value. For non-monetary AFS financial assets, such as shares and investment fund units, any additional impairment loss after the initial impairment is immediately recognised in the income statement. The impairment is not reversed, even if the circumstances causing the impairment cease to apply. Valuation gains are recognised in equity until disposal. For monetary AFS financial assets, such as interest-bearing securities, the impairment is reversed through profit or loss if the circumstances causing the impairment cease to apply.
2.15 Insurance business Direct business comprises assumed primary business and business ceded to reinsurers. Indirect business consists of active reinsurance business and business retroceded to reinsurers. The technical items are described as “gross” before deduction of ceded business and as “net” after the deduction.
Contracts that are considered insurance products in the formal sense of the law and mainly carry financial risk rather than any significant technical risk are not insurance contracts but are treated as financial instruments, unless they carry a discretionary participation feature (DPF), in which case they are classified as insurance contracts. Under IFRS, discretionary participation features are contractual benefits where, in addition to the guaranteed benefit, the policyholder has a claim to the realised or unrealised investment returns on certain assets or to a share of the insurance company’s profit or loss. This additional benefit must form a significant proportion of the overall contractual benefit, and its amount or timing must be at the insurance company’s discretion.
Reserve estimates and the assumptions on which they are based are reviewed continuously. Valuation changes are entered as profit or loss on the income statement at the time of the change.
A Liability Adequacy Test (LAT) is carried out on every reporting date to determine whether, taking into consideration expected future cash flows, the existing liabilities of each sector (property, motor vehicle, liability, transport and accident / health insurance) at all Group companies are adequately covered up to the reporting date in order to ensure a loss-free valuation. Expected future premium income is compared to expected claims expenses, expected administration and acquisition costs and expected policyholder dividends. If the expected costs exceed the expected premium income, the loss reserves are increased – without prior amortisation of the deferred acquisition costs.
Portions of the valuation differences in relation to local accounting principles allocated to contracts containing discretionary participation features which affect either the net income or unrealised gains in equity are also reserved under “Provisions for future policyholder participation”. The portion is equal
Financial report Summary of siginificant accounting policies to the percentage rate which sets the minimum participation level of policyholders in the respective revenues under local statutory or contractual regulations. This participation in income is credited or debited to the item “Provision for future policyholder participation” through profit or loss. Similarly, the portion of unrealised gains or losses is recognised in the provisions without affecting profit or loss.
The remaining gains – either through profit or loss or with no impact on the results – that relate to contracts with a discretionary participation feature (i.e. every share for which no legal or contractual obligations exist) are recorded under “Valuation reserves for contracts with participation features” within equity.
2.15.3 Reinsurance Reinsurance contracts are contracts between insurance companies. As in primary insurance business, there must be sufficient risk transfer for a transaction to be booked as a reinsurance contract, otherwise the contract is considered a financial instrument.
2.17 Income taxes Actual income tax assets and liabilities are calculated using the currently applicable tax rates. Income tax assets and liabilities are only recognised if a reimbursement or payment is expected.
Financial report Summary of siginificant accounting policies 2.23 Employee benefits Employee benefits include short-term employee benefits, post-employment benefits, other long-term employee benefits and termination benefits.
Short-term employee benefits are due in full within twelve months after the end of the reporting period. They include salaries, social security contributions, holiday and sickness pay, bonuses and non-monetary benefits for active employees. Expected expenses for entitlements that can be accumulated, such as accrued holiday and overtime entitlements, are recognised as short-term liabilities at the balance sheet date.
2.24 Share-based payments Share-based payment transactions include all compensation agreements under which employees receive shares, options or similar equity instruments or the granting Group company assumes obligations that depend on the price of its shares. All share-based payment transactions with employees are recognised at fair value.
2.26 Offsetting of assets and liabilities Assets and liabilities are netted in the balance sheet when there is a legal right to offset the recognised amounts and only the net position has actually been reported.
In the life business, the Helvetia Group offers various product lines, such as life insurance, pension plans and annuity insurance.
Net change in unearned premium reserve – 8.8 7.1 – 31.0 – 20.7 – 86.2 – 28.4 0.7 – 0.5 – 3.3 0.3 – 128.6 – 42.2
Claims and benefits paid (life) – 3 363.8 – 3 004.8 – 621.2 – 624.7 – – – 14.2 – 10.5 14.2 10.5 – 3 985.0 – 3 629.5
Income attributable to deposits for investment contracts – 8.6 – 4.5 – 95.3 31.0 – – – – – – – 103.9 26.5
Profit or loss before tax 399.4 401.7 185.9 149.3 74.4 43.8 – 94.9 – 46.9 0.0 0.0 564.8 547.9
Current income on Group investments (net) 739.2 755.1 193.6 209.2 28.7 20.7 6.1 22.6 – 20.5 – 20.3 947.1 987.3
Profit or loss for the period 427.5 320.9 127.9 117.3 58.5 34.8 – 75.8 – 42.0 0.0 0.0 538.1 431.0
Gains and losses on Group investments (net) 91.2 22.8 28.3 1.9 2.2 2.4 18.5 4.5 – – 140.2 31.6
Claims and benefits paid (life) – 159.6 – 149.5 – 232.3 – 228.4 – 85.9 – 87.5 – 143.4 – 159.3 – – – 621.2 – 624.7
Profit or loss from operating activities 47.8 28.6 56.5 41.0 42.0 44.7 44.2 39.4 0.0 – 190.5 153.7
Profit or loss before tax 47.1 27.9 52.7 37.3 41.9 44.7 44.2 39.4 0.0 – 185.9 149.3
Profit or loss for the period 29.3 29.4 36.2 24.6 32.0 34.0 30.4 29.3 0.0 – 127.9 117.3
Income investments with market risk for the policyholder 145.7 – 78.6 95.3 – 31.0 13.5 – 6.4 113.5 – 54.5 – – 368.0 – 170.5
Total revenues from external customers 1 221.0 904.5 1 013.1 812.5 508.6 480.3 606.4 463.8 191.2 188.8 3 540.3 2 849.9
Income attributable to deposits for investment contracts – – – 95.3 31.0 – – – – – – – 95.3 31.0
Gains and losses on Group investments (net) 360.1 – 104.8 48.9 – 37.1 46.6 – 51.0 – – 455.6 – 192.9
Reinsurers´ share of benefits and claims 19.7 20.2 253.9 202.9 110.3 72.6 – 226.9 – 150.9 157.0 144.8
Net benefits to policyholders and claims – 5 457.0 – 4 283.1 – 2 480.4 – 2 379.9 – 110.7 – 68.8 – 2.5 – 2.9 – 8 050.6 – 6 734.7
Profit or loss from operating activities 213.7 197.7 471.2 420.5 2.3 – 43.2 – 16.5 – 17.0 670.7 558.0
Profit or loss for the period 224.4 147.9 398.5 332.0 – 84.8 – 48.9 0.0 0.0 538.1 431.0
Depreciation and amortisation on tangible and intangible assets – 29.8 – 19.0 – 30.0 – 27.0 – 4.0 – 1.8 – 3.9 – 4.5 – – – 67.7 – 52.3
Reversal of impairment losses on tangible and intangible assets affecting income – – 0.4 0.2 – – – – – – 0.4 0.2
Share-based payment transaction costs – 1.3 – 1.1 – – – – – 2.9 – 0.6 – – – 4.2 – 1.7 by business activity: Life Non-life Other activities Elimination Total in CHF million
Acquisition of owner-occupied property, equipment and intangible assets 118.8 54.0 24.9 34.4 6.0 2.0 9.2 13.7 – – 158.9 104.1
Acquisition of owner-occupied property, equipment and intangible assets 14.5 12.1 127.6 67.2 16.8 24.8 – – 158.9 104.1
Share-based payment transaction costs – 0.4 – 0.4 – 0.9 – 0.7 – 2.9 – 0.6 – – – 4.2 – 1.7
Gross premiums and deposits received 9 454.1 9 073.3 4.2 5.6 1 Currently, all deposits from investment contracts life relate to the country markets Italy and Switzerland.
Financial report Foreign currency translation 4.1 Exchange rates The Swiss franc, euro, US dollar and British pound are the functional currencies in the individual business units of Helvetia Group. The following exchange rates apply to the translation of these financial statements and foreign currency transactions: Exchange rate at reporting date 31.12.2019 31.12.2018
Other foreign currency translation gains and losses are reported under the items “Other expenses” and “Other income”.
Right-of-use assets now reported under IFRS 16 – – – 42.0 – – – – – 105.5 – 63.5 –
Change in scope of consolidation – – – – 0.0 0.0 – – – – 0.0 0.0
Revaluation gains on transfers to investment property – – – 7.6 – – – – – – – 7.6
Book value as of 31 December 20.7 9.7 371.3 407.5 49.3 52.2 37.0 20.7 85.3 – 563.6 490.1
Change in the scope of consolidation 28.3 3.4 7.2 0.9 35.5 4.3
Book value as of 31 December 1 149.0 1 129.1 190.8 134.7 1 339.8 1 263.8 Book value as of 1 January 1 129.1 1 134.9 134.7 90.4 1 263.8 1 225.3
Goodwill impairment test Goodwill is tested annually for impairment (see section 2.10, from page 83).
Current income on financial assets (gross) 709.6 758.0 13.0 14.0 722.6 772.0
Current income on financial assets (net) 695.4 744.6 13.0 14.0 708.4 758.6
Investment management expenses on property – 85.4 – 88.9 – – – 85.4 – 88.9
Current income from investment property (net) 251.7 242.7 – – 251.7 242.7
Current income from investments (net) 947.1 987.3 13.0 14.0 960.1 1 001.3 1 Derivatives comprise current income on derivative financial assets and derivative financial liabilities.
Investment management expenses on property include all maintenance and repair costs as well as the operating expenses for property that did not generate rental income during the reporting year. The latter amounted to CHF 4.6 million in the reporting year (previous year: CHF 4.1 million).
Interest income from investments at fair value through profit or loss stood at CHF 10.9 million (previous year: CHF 15.1 million).
The gains and losses reported for the HTM category represent book gains and losses from foreign currency translations.
The table above includes increases in impairment losses on financial assets of CHF 7.5 million (previous year: CHF 15.8 million) as well as impairment loss reversals on financial assets of CHF 1.5 million (previous year: CHF 2.6 million).
Income investments with market risk for the policyholder 469.4 – 215.7
Derivative financial assets 122.2 116.4 238.6 as of 31.12.2018 Notes Group investments
Transfer from / to property and equipment – 18.9 0.4 – 18.5 31.4
Transfer to investment property held for sale – 519.6 – – 519.6 –
Investment property held for sale Helvetia currently manages a property portfolio of CHF 7.5 billion and has other projects in the implementation phase. Helvetia is now planning to sell some of its properties to a Swiss real estate fund. Investors will thus gain access to a broadly diversified real estate portfolio with high-quality investment properties. The mandate to manage these properties was transferred from the fund to Helvetia Asset Management AG. Helvetia has thus strengthened its earnings base from the services business.
The real estate fund will be launched in 2020. The fund is a third-party fund that does not belong to the Helvetia Group.
Investment funds – interest-bearing securities 64.0 33.4 61.7 34.5 2.3 – 1.1 64.0 33.4 35.0 33.4 29.0 – – –
Total financial assets at fair value 35 005.5 33 075.3 30 906.1 31 210.1 2 857.1 1 424.4 35 005.5 33 075.3 18 540.6 17 584.8 15 733.9 14 949.0 731.0 541.5 1 Excl. assets receivables from insurance business and reinsurance.
Investments with market risk for the policyholder 4 149.7 3 332.2 3 597.1 3 188.8 4 149.7 3 332.2 3 530.5 2 814.6 619.2 517.6 – –
Total “available-for-sale” (AFS) 26 334.4 25 657.7 23 477.3 24 233.3 2 857.1 1 424.4 26 334.4 25 657.7 13 007.1 12 623.9 13 277.7 13 020.4 49.6 13.4
Derivative financial assets for hedge accounting 6.4 13.8 – – 6.4 13.8 – – 6.4 13.8 – –
From the previous year's CHF 541.5 million of “Level 3” investments as at 31 December 2018, – sales in the amount of CHF 67.4 million (previous period: CHF 16.9 million) were made.
Total equity- and equity-index instruments 1 719.9 690.1 731.3 3 141.3 2 662.5 130.1 108.4
Total derivatives for hedge accounting 78.9 – – 78.9 648.2 2.0 10.0 7.7.3 Derivatives for hedge accounting
Gains and losses reclassified to the income statement – 3.7 0.1
The amounts transferred to the income statement are reported in “Gains and losses on Group investments ”.
7.8 Maturity dates and impairment of financial assets 7.8.1 Analysis of past due financial assets without impairment
Reversal of impairment losses – 1.5 – 2.6 – – – 1.5 – 2.6
Foreign currency translation differences – 0.1 0.1 – – – 0.1 0.1 7.9 Fair value of SPPI financialinstruments Helvetia exercised the option to postpone the implementation of IFRS 9.
Below, we have reported the fair value of the financial instruments within the scope of IFRS 9 and held by Helvetia on the reporting date. Further information on SPPI financial instruments is provided in section 16.6.2 (from page 172).
Financial assets that give rise to cash flows that are solely payments of pricipal and interest (SPPI) 40 087.8 39 232.0 856.6 – 871.6
The Helvetia Group classifies financial liabilities according to their origin as financial liabilities from financing activities, financial liabilities from insurance business and other financial liabilities. Financial liabilities from insurance business are reported as a component of the insurance business in section 9.8 (page 133).
Section 16.5 (page 167) contains a maturity schedule of loans and financial liabilities.
Minority interests in own funds 328.6 258.3 217.5 209.7 328.6 258.3
The bonds in liabilities are measured at amortised cost. The interest expense from bonds treated as liabilities is reported in the income statement at CHF 32.8 million (previous year: CHF 34.6 million) under “Financing costs”. The interest expense from bonds in equity is recognised as a dividend distribution in equity.
Some rental agreements contain extension options in favour of Helvetia. In case they are exercised they would yield additional future rental payments of CHF 18.4 million.
Helvetia Holding AG CHF 150 Mio. 1.125 % 2 013 08.04.2019 1.17 % –6 150.0
Helvetia Schweizerische Versicherungsgesellschaft AG CHF 225 Mio. 0.75 % 2 014 28.10.2020 0.85 % 224.8 224.6
Upon the acquisition of MoneyPark in 2016, the minority shareholders were granted the option of selling their shares to Helvetia at 95 % of the fair value. The options can be exercised in 2020 (minor shareholders only), 2022 and 2027. In 2017, Helvetia granted the minority shareholders of INZMO the option of selling their shares at fair value to Helvetia in 2022.
The expected purchase price of these shares at CHF 39.9 million (previous year: CHF 48.0 million) is included under “Financial liabilities at fair value”. The valuation method used for the calculation of the liabilities belongs to the “Level 3” category. Otherwise the “Other financial liabilities” were valued using “Level 2” measurement methods.
Total reserves for insurance business 47 990.8 46 033.2 443.6 458.8 47 547.2 45 574.4 9. Insurance business
Actuarial reserves for insurance contracts life 35 008.2 34 187.7 51.8 59.6 34 956.4 34 128.1
Provision for policyholder participation – life contracts 2 208.0 1 542.1 – – 2 208.0 1 542.1
Unearned premium reserve for insurance contracts life 185.5 194.4 3.9 4.3 181.6 190.1
Reserves for non-life insurance contracts 6 311.7 6 163.5 387.9 394.9 5 923.8 5 768.6
Total reserves for insurance contracts 43 713.4 42 087.7 443.6 458.8 43 269.8 41 628.9
Provision for policyholder participation – investment contracts 162.4 71.1 – – 162.4 71.1
Reserves for investment contracts with descretionary participation features 2 924.4 2 789.6 – – 2 924.4 2 789.6
Total reserves for investment contracts 4 277.4 3 945.5 – – 4 277.4 3 945.5
Total reserves for insurance business 47 990.8 46 033.2 443.6 458.8 47 547.2 45 574.4
Further details on technical reserves for the life and non-life business can be found in the following tables. A maturity schedule of the reserves for insurance contracts and investment contracts is provided in section 16.5 (page 167).
Estimated loss reserves as of 31 December 734.2 73.2 120.0 92.1 120.7 198.5 377.7 323.5 557.8 850.2 1 448.8 4 896.7
Loss reserves as of 31 December 4 865.9 1 Effects of the acquisition of Nationale Suisse and Basler Austria in 2014 2 Effects from the acquisition of the French transport insurance business of Gan Eurocourtage in 2012 3 Due to the demarcation effect for contracts on an underwriting year basis (active reinsurance, parts of the transport business), the claims cost increased in the second insurance year.
Year of loss occurrence before 2010 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total in CHF million
Financial report Insurance business 9.4 Life business The actuarial reserve is normally calculated in a three-step process. In a first step, the actuarial reserve is computed based on local standards. These include applicable local parameters such as interest rates, mortality, surrender rates, expenses and additional biometric parameters which are usually set at the time of contract conclusion and vary by country, year of issuance and product. If the reserves prove to be insufficient from a local point of view, they are increased in most countries in a second step. A required reserve increase may be spread over several years in the local financial statements, depending on local requirements and circumstances. In a third step, the Liability Adequacy Test (LAT) finally applies Group-wide uniform standards to test whether the actuarial reserves included in the local financial statements (including additional reserve increases less local deferred acquisition costs) are sufficient.
Across the Group the LAT required an allocation of additional actuarial reserves of CHF 10.5 million as of 31 December 2019 (previous year: CHF 17.1 million).
Insurance conditions and risks in the life business are described in section 16.3 (from page 156). Sensitivities of actuarial reserves are outlined in section 16.3.3 (from page 158).
Investments with market risk for the policyholder 4 266.1 3 519.4
Financial report Insurance business 9.5 Reinsurance assets as of 31.12. Notes 2019 2018 in CHF million
The receivables and liabilities from insurance business are primarily short term. A maturity schedule of the liabilities is provided in the table in section 16.5 (page 167). The amortised cost of the receivables usually equals the fair value. The method used for determining the fair value is allocated to the “Level 2” category.
Due from agents and brokers 6.1 5.1 7.8 6.6 5.2 4.2 2.1 – 0.5
Deposit liabilities from reinsurance contracts 64.7 68.4 64.7 68.4 64.7 68.4
Total financial liabilities at fair value 1 353.0 1 155.9 1 353.0 1 155.9 1 353.0 1 155.9
Deposit liabilities for credited policyholder profit participation Deposit liabilities for credited policyholder profit participation include interest-bearing credit balances already contractually allocated to the holders of individual life insurance policies and policyholder dividends from Group life insurance business that are either available early or only when the insurance benefits fall due, depending on the applicable insurance terms and conditions.
Deposits for investment contracts Deposits for investment contracts come from insurance contracts without significant insurance technical risk and without discretionary participation features. With these contracts, the policyholder participates directly in the performance of an external fund or external index. The change in fair value is solely due to changes in the performance of the underlying investment fund or index.
Amounts paid into or from these deposits do not affect revenues and are not recorded in the income statement, but are offset against the deposit. The features of these products are very similar to those of insurance contracts, apart from the fact that there is hardly any insurance technical risk. Insurance conditions and risks are described in section 16 (from page 152).
Total income taxes 26.7 116.9 10.2 Change in deferred tax assets and liabilities (net)
Increase / reduction in taxes resulting from: tax-exempt income or income taxed at a reduced rate – 8.6 – 7.1 non-deductible expenses 8.1 9.9
Change from net investment hedge 21.8 7.6 – – 21.8 7.6
Foreign currency translation differences – 85.5 – 66.6 – – – 85.5 – 66.6
Change in liabilities for contracts with participation features – 664.1 313.5 117.2 – 79.3 – 546.9 234.2
Total that may be reclassified to income 704.9 – 391.8 – 127.1 75.7 577.8 – 316.1
Provision for future policyholder participation 82.6 234.1 316.7 1.3 8.6 9.9
Property, equipment and intangible assets 1.6 – 1.6 77.8 1.6 79.4
Valuation differences on shares in subsidiaries of CHF 3,978.5 million (previous year: 3,276.5 million) did not lead to the recognition of deferred tax liabilities, as a reversal of the differences through realisation (dividend payment or sale of subsidiaries) is unlikely in the near future, or the gains are not subject to taxation.
Net tax assets from losses carried forward 12.9 22.3 10.6.2 Losses carried forward without tax assets recognised As at 31 December 2019, no tax assets were recognised for losses carried forward of CHF 94.8 million (previous year: CHF 95.1 million), as the related tax benefits cannot be expected to be realised with the current earnings situation of the respective companies. These loss carryforwards do not have an expiry date. The tax rates applicable to material losses carried forward for which no tax assets were recognised range between 17.0 % and 28.9 % (previous year: 17.0 % bis 28.9 %).
The treasury shares that were granted to Helvetia Group employees at favourable terms under the Helvetia employee share purchase plan did not come from the company’s own stock but were acquired on the market. This resulted in a loss of CHF 1.6 million (previous year: CHF 1.5 million), which was charged to the capital reserve without affecting profit or loss. This amount represents the difference between the purchase price and the reduced price for employees.
In the reporting year, Patria Genossenschaft paid CHF 45.0 million into the bonus reserves of Helvetia Schweizerische Lebensversicherungsgesellschaft AG (previous year: CHF 45.0 million). This was credited to equity without affecting profit or loss and allocated in total to “Provision for future policyholder participation” under liabilities in accordance with its purpose.
Shares outstanding 1 A five-for-one share split was implemented on 10.5.2019. The figures have been adjusted retrospectively.
The reserve is adjusted at the reporting date by the portion relating to contracts with participation features and deferred taxes. The portion reserved for the owners of contracts with participation features is transferred to “Liabilities”. This item plus foreign exchange influences amounts to CHF 664.1 million (previous year: CHF − 313.5 million). The remaining portion regarding contracts is allocated to the "Valuation reserve for contracts with participation features in equity" (see section 11.2.5, page 140).
Gains reclassified to the income statement due to disposals – 66.0 – 176.2 – – – – – 66.0 – 176.2
11.2.3 Reserve for foreign currency translation differences The reserve for “Foreign currency translation differences” results from the translation of financial statements prepared in foreign currency into the Group’s reporting currency (Swiss franc) as well as the effective portion of the net investment hedge for foreign exchange gains and losses on investments in subsidiaries with a foreign reporting currency.
During the reporting year, a transfer of CHF 0.0 million was made (previous year: CHF − 0.1 million) to retained earnings as a consequence of disposals of owner-occupied properties transferred to investment property.
Losses reclassified to the income statement due to disposals 19.2 7.2 – – – – 19.2 7.2
11.4 Deferred taxes recognised in other comprehensive income Deferred taxes recognised directly in other comprehensive income arise from valuation differences that primarily result from the fair value valuation of AFS financial assets and value changes related to the transfer of property and the revaluation of benefit obligations. On the reporting date, they amounted to a total of CHF 200.5 million (previous year: CHF 97.5 million).
Profit or loss for the period 538 136 648 431 011 515
Earnings for shareholders and non-controlling interests 519 334 148 412 678 546
Earnings for shareholders without non-controlling interests 520 415 253 414 233 316
Helvetia Group is required to report to the Swiss Financial Market Supervisory Authority (FINMA) in Switzerland. FINMA also acts as the European Group Supervisor of Helvetia Group. The Group is also subject to supervisory requirements in the form of minimum solvency margins, compliance with which can lead to restrictions with regard to the dividends of Helvetia Holding AG.
“Non-technical provisions” primarily consists of provisions for liabilities resulting from official regulation, provisions arising from other tax obligations, provisions for restructuring expenses and liabilities due to agents. The share of provisions classified as current is CHF 146.9 million (previous year: CHF 119.9 million).
The Group investments included in the plan assets are set out in section 13.3.8 (page 147). There are other funded defined benefit plans in place in Germany.
In addition, unfunded defined benefit plans are in place in Germany, Austria, Italy, Spain and France. 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.
Fair value of plan assets (–) – 3 142.8 – 2 837.3
Defined benefit obligation as of 1 January 3 380.6 3 441.9
Defined benefit obligation as of 31 December 3 844.8 3 380.6
As at 31 December 2019, 90.1 % (previous year: 89.8 %) of the pension obligations resulted from pension plans in Switzerland.
Fair value of plan assets as of 1 January 2 837.3 2 885.7
As at 31 December 2019, 99.5 % (previous year: 99.3 %) of the plan assets related to pension plans in Switzerland.
Expenses for defined benefit plans are recognised in the income statement under “Operating and administrative expenses”. Expected employer contributions toward defined benefit plans for the next year amount to CHF 67.2 million.
Financial report Employee benefits 13.3.5 Revaluation of benefit obligations in CHF million
Duration of the defined benefit liability (in years) 16.1 14.7 17.7 15.9
Expected long-term rates of return on plan assets are based on long-term expected interest rates and risk premiums and on the target plan asset allocation. These estimates are based on historical rates of return for individual asset classes and are made by specialists in the field and pension actuaries.
Financial report Share-based payments 14.1 Employees of the Helvetia Group in Switzerland The Helvetia employee share purchase plan enables employees to acquire registered Helvetia Holding AG shares. With this plan, employees can directly and voluntarily participate in the added value created by the Group at preferential conditions. All employees of Helvetia in Switzerland are eligible if they are in regular employment (not on notice) and entitled to variable compensation. The number of available shares is specified by the Board of Directors, taking account of the functions of the employees concerned. All shares acquired in this manner are transferred to the ownership of the employee upon receipt and are subject to a mandatory vesting period of three years. The costs associated with the share purchase plan in 2019 were recognised in the income statement at CHF 1.6 million (previous year: CHF 1.5 million).
14.2 Members of the Board of Directors The Board of Directors receive 30 % of fixed compensation – converted at the closing price on the first working day in March prior to the Shareholders' Meeting of the following year – blocked for a minimum of three years.
14.4 Members of the Executive Management teams of the foreign subsidiaries The members of the Executive Management teams of the foreign subsidiaries receive a variable salary component from the Group in addition to the local compensation which is calculated by multiplying the extent of target achievement by a reference figure equalling 10 % of the basic salary. This results-based component is paid out in the form of 5 662 shares (previous year1: 5 150). The conversion price per share is calculated as described in section 14.3. All shares acquired in this manner are transferred to the ownership of the Executive Management members upon receipt and are subject to a mandatory vesting period of three years. The share-based payments for the 2019 financial year amounted to CHF 0.7 million (previous year: CHF 0.6 million).
1 A five-for-one share split was implemented on 10 May 2019. The figures have been adjusted retrospecitvely.
– to Beat Müller at a total sum of CHF 1,170,000 (previous year: 1,170,000). The loan of CHF 986,000 earned interest at 0.81 % (previous year: 1.40 %), the extra mortgage of CHF 184,000 at 0.81 % (previous year: 1.34 %).
– to David Ribeaud at a total sum of CHF 1,015,000 (previous year: CHF 1,015,000). In the reporting year, the loans earned interest as follows: CHF 595,000 at 0.89 % (previous year: 0.89 %) and CHF 420,000 at 0.95 % (previous year: 0.95 %).
Financial report Related-party transactions 15.2.3 Shares of Group Executive Management The shares held by the members of the Executive Management and persons closely related to them as of the end of the year are listed in the following table: Number of shares
In addition to the ownership of shares as reported, the active members of the Group Executive Management have deferred claims to a total of 32,130 shares acquired under the LTC programme.
Regula Wallimann (member) 675 250 1 Stood down from the Board of Directors of Helvetia with effect from 3 May 2019. 2 A five-for-one share split was implemented on 10.5.2019. The figures have been adjusted retrospectively.
Board of Directors Within the stipulated parameters, the Board of Directors delegates operational aspects of risk management. For example, the monitoring of the Group’s risk profile is delegated to the Investment and Risk Committee (IRC). The structural aspects of risk management (structure of the risk management organisation and the internal control system) are delegated to the Audit Committee.
Executive Management The Executive Management is responsible for implementing and complying with the strategies, business principles and risk limits defined by the Board of Directors, analysing the risk position of Helvetia Group, capital planning, defining the corresponding control measures and ensuring the necessary external transparency. The topics of risk and capital management are addressed directly in the Executive Management meetings under the direction of the Chief Risk Officer (CRO). The Risk Committee is also managed by the CRO and advises the Executive Management. It coordinates, monitors and assesses the risk decisions and financing and hedging measures of all business units. Other permanent members of the Risk Committee at Group level are the Chief Financial Officer (CFO), Head of Capital Management, Head of Actuarial Life, Head of Portfolio Strategy and Risk Management and Head of Legal and Compliance. Other specialists can be invited to attend Risk Committee meetings when required and depending on the topic. The entire committee meets at least quarterly and it holds regular discussions at monthly meetings. The Risk and Capital Reporting department, which reports to the CRO, ensures that there is sufficient risk and capital transparency: – The Own Risk and Solvency Assessment (ORSA) informs the Executive Management and the Board of Directors of the capitalisation and key risks that affect Helvetia Group (including the risk strategy and management).
Internal Audit The internal audit unit, an independent in-house team reporting directly to the Chairman of the Board of Directors, monitors the course of operations and business, the internal control system and the efficiency of the risk management system of the Group. While the risk controlling functions are responsible for the ongoing monitoring of the Group’s risk management system, the internal audit unit monitors the effectiveness, appropriateness and efficiency of the risk management measures at irregular intervals and identifies weaknesses.
Gross premiums by sector and country in the non-life business as of 31.12.2019 Switzerland Europe Specialty Markets Total in CHF million Germany Italy Spain Austria
Active Reinsurance 607.7 607.7 as of 31.12.2018 Switzerland Europe Specialty Markets Total in CHF million Germany Italy Spain Austria
This table was created using principles on which the segment reporting in section 3 (from page 91) is based. Group reinsurance is included in the “Corporate” segment and in the “Other activities” business area. Information on gross premiums and cessions in these segments can be found in section 3. The role of Group reinsurance is shown in the following sections. The description below of the risks is also relevant for the Group reinsurance business as some of the risks of the non-life business are transferred in the form of reinsurance to the “Corporate” segment so that a centralised transfer can then be made to the reinsurance market.
In addition to the prospective risk of a risk premium being too low, there is also the retrospective risk of inadequate provision for known losses or lack of reserves for losses that have occurred but are not yet known. In terms of large risks, there is more uncertainty associated with estimating future claims payments as it can take a longer time to process such claims. In the case of sectors such as liability, a longer period of time can also pass between the occurrence of a loss and it becoming known. The change in such losses can have a major impact on the technical result. For example, a change in the net claims ratio of + / – 5 percentage points would have a positive or negative effect of CHF 201.1 million (previous year: CHF 194.9 million) on the income statement (without taking account of tax effects ).
The following two important exceptions apply to the guaranteed bases: First, no interest guarantees exist for the unit-linked insurance policies. However, there may be some products that guarantee the payment of a minimum survival benefit. Secondly, in Switzerland, premiums for insurance policies for disability pensions are not guaranteed for policies underwritten since mid-1997, and may be adjusted.
For the majority of the products there is no guaranteed rate for the risk premiums for death and disability or for the cost of premiums. These premiums may therefore be adjusted annually by Helvetia Switzerland. Upon the occurrence of an insured event, the resulting benefits are guaranteed up to the agreed expiry date or for life. Interest is credited annually on the savings premiums; the interest rate for the mandatory savings component is established by the Federal Council, while Helvetia Group itself can set the rate for the non-mandatory savings component. The mandatory interest rate has been 1.00 % since 2017 and it will remain at that level for the coming year. The interest rate set by Helvetia Group for the non-mandatory component has been 0.25 % since 2017 and will remain at that level for the coming year.
For the mandatory component of the insurance policy, it is forbidden to exclude someone from a company’s insurance on account of ill health. However, certain benefits may be excluded in the non-mandatory part, or a premium for the increased risk may be required. However, there is no obligation to insure a company. On the basis of benefits previously claimed by the company and based on estimates of future claims potential, it is established during the underwriting process whether and under what conditions the company will be insured.
If, in the portfolios exposed to greater mortality, more policyholders die than expected, shareholders may suffer losses once the buffer of profit participation has been exhausted. The analyses carried out show that this risk can be considered very low. However, an increase in mortality rate in these portfolios, which have to be increased due to high interest rate guarantees, has a small impact on the amount of the increase in reserves. If, in the portfolios exposed to longevity, policyholders live longer than expected, shareholders may have to bear losses. As life expectancy is continuously rising, when setting up reserves, the current mortality rate as well as expected trends of the increase in life expectancy are taken into account. These reserves of portfolios exposed to longevity are very sensitive to assumed life expectancies and assumed interest rates.
Interest rate risk Shareholders may have to bear losses if the guaranteed interest included in premiums and reserves cannot be generated. This could happen if, for example, interest rates remain very low in the long term. To counteract such developments, both the technical interest rate for new contracts in individual insurance and the BVG minimum interest rate for new and existing contracts are adjusted to the new interest rate. At the end of 2019, the highest guaranteed interest rate in individual insurance was in Spain, where older policies still include a guaranteed minimum interest rate of up to 6 %. These guarantees are partially covered by corresponding assets and the residual risk is covered by supplementary reserves. In the other countries the maximum guaranteed return is 4.0 % in EUR and 3.5 % in CHF. Rising interest rates could cause a greater number of endowment contracts to be cancelled. However, as in most countries premature contract terminations are associated with significant tax consequences and products with high interest rate sensitivity are usually subject to a deduction to take account of lower fair values of the underlying investments when the contract is terminated, this risk can be considered low.
The main market risks to which the Group is exposed are interest rate risk, exchange rate risk and equity price risk. The Group is also exposed to the real estate market through a significant portion of real estate in its investment portfolio. Market risks affect the income statement and both the asset and the liability side of the balance sheet. The Group largely manages its real estate, mortgages and securities itself. External providers mainly manage assets invested in convertible bonds and private debt. Savings accumulated in unit-linked policies are invested in a wide range of own and third- party funds, equities and bonds. The market risks associated with these funds lie with Helvetia Group’s insurance customers.
Loans (LAR) incl. money market instruments 2 562.0 2 262.9 3 286.9 1 528.2 164.9 9 804.9
Held-to-maturity investments (HTM) 158.8 270.1 594.0 1 112.1 – 2 135.0
Available-for-sale investments (AFS) 770.3 5 783.1 8 352.7 9 646.8 1 781.5 26 334.4
Derivative financial assets for hedge accounting 6.4 – – – – 6.4 as of 31.12.2018 < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Available-for-sale investments (AFS) 881.8 5 628.3 8 675.0 9 115.1 1 357.5 25 657.7
Derivative financial assets for hedge accounting 13.8 – – – – 13.8
A statement on the ALM situation of a portfolio can be made by comparing the technical interest rate for reserves with investment returns. The following illustration shows aggregate data on the average interest rates that Helvetia has to earn on its reserves in order to be able to provide the guaranteed benefits. The technical interest rate ranges from 0.05 % to 4 %.
Actuarial reserves for insurance and investment contracts: – excluding interest guarantee 851.4 – 1 527.3 –
Gross, not taking into account the latency calculation and derivatives – 203.9 204.9 – 194.7 195.2
Market risks are mitigated through hedging strategies. Out-of-the-money put options are largely used to comply with internal loss limits. Direct investments in equities represent 6.7 % (before hedging) of the Group’s financial assets (excluding investments from life insurance policies with the market risk borne by the customers). A substantial portion is hedged against the risk of significant losses.
A “reasonable possible change” in the risk factors affecting the sensitivity analysis is defined as every symmetrical bracket that covers a range of possible share price changes where the probability of it occurring over a period of one year is between 10 % and 90 %. Sensitivities are shown for the borders of the chosen bracket that meets these conditions.
A “reasonable possible change” in the risk factors affecting the sensitivity analysis is defined as every symmetrical bracket that covers a range of possible exchange rate changes where the probability of it occurring over a period of one year is between 10 % and 90 %. Sensitivities are shown for the borders of the chosen bracket that meets these conditions.
Financial report Risk management as of 31.12.2019 CHF EUR USD Others Total in CHF million
Goodwill and other intangible assets 1 051.2 288.6 – – 1 339.8
Current income tax assets 13.4 8.4 0.2 – 22.0 as of 31.12.2019 CHF EUR USD Others Total in CHF million
Provision for future policyholder participation 1 982.1 445.5 – – 2 427.6
Financial liabilities from financing activities 630.6 699.6 169.1 34.4 1 533.7
Financial liabilities from insurance business 659.7 1 208.1 1.3 0.0 1 869.1
Goodwill and other intangible assets 962.5 301.3 0.0 – 1 263.8
Unearned premium reserve (gross) 1 574.1 – – – – 1 574.1
Total reserves for insurance and investment contracts (net) 6 905.9 12 321.4 7 728.1 16 173.8 1 289.3 44 418.5
as of 31.12.2019 Callable at any time < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
Total financial and other liabilities 2 181.8 2 135.9 441.5 772.4 5.6 339.9 5 877.1 as of 31.12.2018 Callable at any time < 1 year 1–5 years 5–10 years > 10 years Without maturity Total in CHF million
The above figures may differ from the amounts reported in the balance sheet, as these represent undiscounted cash flows. The allocation of financial liabilities and other liabilities to the category “callable at any time” is based on the counterparty’s contractual cancellation right. The majority of these contracts can be terminated both in life and in non-life business within one year at the latest.
Fair Value Maturity of non-discounted flows of funds as of 31.12.2018 < 3 months 3–6 months 6–12 months > 1 year in CHF million
16.6.1 Risk exposure Helvetia Group is mainly exposed to counterparty risk in the following areas: – Counterparty risks arising from interest-bearing securities money market instruments and net cash positions. The amount of gross counterparty risk exposure in connection with interest-bearing securities and money market instruments is shown in the tables in section 16.6.2 (page 172). The maximum default risk of the net cash position corresponds to “Cash and cash equivalents” in the consolidated balance sheet.
– Counterparty risks associated with loans and mortgages: The largest items in the asset class of loan form the promissory note loans (93.3 %), as well as policy loans (5.1 %). The policy loans are secured through life insurance policies. Since only a certain percentage of accumulated capital (<100 %) is invested, this asset class can be classified “fully secured”. Gross exposure (without taking account of collateral) is of relatively little significance when assessing the counterparty risks from the mortgage business: mortgages are secured by an encumbrance, and a part of the mortgage is often additionally secured by a pledged life insurance policy, resulting in a correspondingly low loss ratio. Against this background, the counterparty risk from mortgages can be assumed to be low.
– Counterparty risk from transactions with derivative financial instruments: refer to section 16.6.2 (page 172) for the amount of gross counterparty risk exposure in connection with derivative financial instruments. A small part of the derivative instruments is traded on a stock exchange, so there are no counterparty risks. Most of the outstanding receivables from the OTC derivatives are covered by collateral. The scope of the hedging with cash collateral is CHF 124.6 million (previous year: CHF 138.9 million). Existing netting agreements are also relevant. Refer to the table for detailed information about derivative financial instruments.
– Counterparty risks from alternative investments and bond funds: the largest positions in the “alternative investments” asset class are private debt instruments (99.4 %) and structured products (0.6 %). There is also a credit risk from the bond and money market funds managed by external providers, of which 25.7 % can be attributed to infrastructure funds.
– Counterparty risks from the insurance business: the default of other counterparties (policyholders, insurance agents, insurance companies) may lead to a loss of receivables from the insurance business. On the balance sheet, the maximum gross exposure would correspond to the items shown in section 9.7 (from page 131) “Receivables from policyholders, insurance agents and insurance companies ” (after deducting receivables from the reinsurance business recognised under “Credit risk exposure from ceded reinsurance”). However, these receivables are largely of a short-term nature. In addition, the receivables from policyholders represent the largest group in this class. Since the insurance cover is linked to the fulfilment of the contractual obligations on the part of the customer, the resulting risk is low for the insurance company.
– Counterparty risks from financial guarantees and loan commitments: detailed information on contingent obligations can be found in section 12 (page 142).
The information relevant for setting the level of the counterparty risk exposure includes information on balance-sheet netting and on existing netting agreements regarding financial assets and liabilities. The relevant information is summarised in the table below. As there are no financial instruments netted on the balance sheet at Helvetia Group, the table shows the extent to which netting agreements for financial instruments exist, even if no netting takes place on the balance sheet. The netting agreements are ISDA and Swiss Master Agreements for OTC derivatives transactions. In the event of insolvency or if one of the parties does not fulfil its contractual obligations, there is a mutual right to close the current derivatives contracts and to offset outstanding receivables with liabilities and collateral received within the netting agreement.
Financial report Risk management 16.6.2 Credit quality of exposures and credit risk concentrations The following analyses show the gross exposure to interest rate instruments, loans and derivative financial instruments, excluding collateral. They do not include investments where the credit risk is borne by the holders of life insurance policies. “Alternative investments” covers private-debt instruments and structured products. Investment funds with credit risk are restricted to bond and money market funds. The securities and issuer ratings of recognised rating agencies were used to show credit quality. Private-debt instruments are listed as “Not rated”, the underlying counterparties can, however, mainly be allocated a B rating.
Alternative investments – – – – – 701.9 701.9 of which SPPI financial assets 12 115.9 8 726.5 5 219.6 4 377.1 1.7 6 254.7 36 695.5 as of 31.12.2018 AAA AA A BBB BB and lower Not rated Total in CHF million
Investment funds – – – – – 114.0 114.0 of which SPPI financial assets 12 079.6 8 214.9 5 243.8 4 355.4 9.5 6 115.7 36 019.0
Credit quality of ceded reinsurance as of 31.12.2019 Exposure Share in %
Issuer rating Book value total Securities rating Bonds Money market instruments Derivative financial assets Borrower’s note loans Other loans as of 31.12.2019 AAA AA A BBB and lower Not rated in CHF million
Issuer rating Book value total Securities rating Bonds Money market instruments Derivative financial assets Borrower’s note loans Other loans as of 31.12.2018 AAA AA A BBB and lower Not rated in CHF million
Mortgage Bond Bank of the Swiss Mortgage Institution AAA 1 716.6 1 716.6 – – – – – – – –
Central Mortgage Bond Institution of the Swiss Cantonal Banks AAA 1 554.9 1 554.9 – – – – – – – –
European Investment Bank AAA 680.3 680.3 – – – – – – – –
United States of America AAA 494.8 494.8 – – – – – – – –
Cantonal Bank of Lucern AA 479.0 – 459.0 – – – 10.0 – 10.0 –
Mortgage Bond Bank of the Swiss Mortgage Institution AAA 1 675.6 1 675.6 – – – – – – – –
United States (Govt) AAA 511.4 511.4 – – – – – – – –
On 24 January 2020, Helvetia announced its decision to acquire a majority holding in Spanish insurer Caser (Caja de Seguros Reunidos, Compañia de Seguros y Reaseguros S.A.). This acquisition will further strengthen the European business.
Helvetia has reached an agreement with various shareholders with respect to the sale of their equity stakes. The other shareholders have the option to sell their shares to Helvetia at the same conditions. Helvetia expects that it will ultimately acquire a holding of up to 70 % in Caser. The purchase price for a targeted holding of just under 70 % in Caser is approximately of EUR 780 million. The purchase price will be paid in cash.
Opening balance and goodwill were not available when the consolidated financial statements were completed. They will be prepared following completion of the acquisition. Access to Caser will be restricted until that time. Helvetia expects the acquisition to be completed in the first half of 2020. The acquisition is subject to approval by the competent competition and supervisory authorities.
Financial report Scope of consolidation 18.1 Events in the reporting year The following events led to a change in the scope of consolidation for Helvetia Group in the reporting period: – On 25 April 2019, Helvetia Asset Management AG was founded with its head office in Basel. – On 10 June 2019, the holding in MoneyPark AG was increased from 77.267 % to 78.594 % as part of a capital increase. The holding was increased during the remainder of the year through share purchases to 82.152 %.
Warranty GmbH based in Dietikon. The company specialises in specific insurance solutions for electronic and electrical devices that are distributed directly at the point of sale via distribution partners. Helvetic Warranty acts here as an interface between distribution partners and insurers and provides comprehensive services that cover all aspects from the initial sale to the handling of claims. The purchase price was CHF 35.0 million in cash paid on the purchase date. Goodwill of CHF 28.3 million was recognised in connection with the acquisition. The goodwill represents future earnings potential through strengthening of the sale of insurance products via specialist retailers in the B2B2C business. It is assigned to the “Switzerland” segment and is not expected to be deductible for tax purposes.
– In 2019, the investment in INZMO GmbH, Berlin, increased from 50.60 % to 58.2 %. – In 2019, the investment in Gesnorte S.A., Madrid, increased from 27.7 % to 29.55 %. – In 2019, the share capital in Helvetia Venture Fund S.A. increased by EUR 7.5 million. – In 2019, Helvetia established the fund Helvetia Allegra ONE. – The fund Helvetia Allegra 50 was deconsolidated in 2019.
– On 23 March 2018, Helvetia Assurances SA acquired 36.46 % of Seasecure Holding SAS, Marseille. – On 9 May 2018, Helvetia Allegra Fonds, Nyon, was founded. – On 28 August 2018, the equity capital of Helvetia Vermögens- und Grundstücksverwaltung GmbH,
Financial report Scope of consolidation 18.3 Group companies as of 31.12.2019 Business activities Holding in %
Financial report Scope of consolidation as of 31.12.2019 Business activities Holding in %
Helvetia Compagnie Suisse d’Assurances S.A., Direction pour la France, Le Havre2 Non-life 100.00 full EUR
KPMG AG Financial Services Badenerstrasse 172 P.O. Box Telephone +41 58 249 31 31 CH-8004 Zurich CH-8036 Zurich Internet www.kpmg.ch
We have audited the consolidated financial statements of Helvetia Holding AG and its subsidiaries (the Group), which comprise the consolidated balance sheet as at 31 December 2019 and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies.
Technical reserves recognize the valuation of obligations from life insurance policies. For this purpose, management has to make estimates and assumptions on the occurrence of future insured events (death, disability, survival) as well as the corresponding insurance contract settlement costs.
Actual benefits paid may be different from the booked reserves, but overall, the insurance company must dispose of sufficient technical reserves.
In essence, we have reviewed the technical reserves as follows:  Involving actuaries as part of the audit team.
 Reconciliation of data used to calculate technical reserves with the sub-systems using random samples.
 Testing of the operating effectiveness of selected key controls for the calculation of the loss reserves and the integrity of the data used in the actuarial calculation.
The value in use is calculated using the discounted cash flow (DCF) method, which is in particular influenced by expected future cash flows, the applied discount rates as well as the growth rates. Therefore, the calculation of the value in use involves elements of uncertainty and is subject to management’s judgment’s.
For the goodwill position, we have principally performed the following audit procedures:  Testing of the operating effectiveness of selected key controls in connection with Goodwill Impairment Test.
 Reconciling the budget and forecast values used in the goodwill impairment test with the figures approved by the Board of Directors.
 Assessing sensitivity analyses concerning budget achievement, discount rates as well as growth rates.
 Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report, unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
At the disposal of the Shareholders’ Meeting 1 145.1 1 133.9
Profit carried forward to new account 96.4 895.2 1 2019: CHF 5.00 per registered share 2018: CHF 4.80 per registered share A five-for-one share split was implemented on 10.5.2019. The figures have been adjusted retrospectively.
187Financial statements of Helvetia Holding 2019 1. Principles 1.1 General The 2019 financial statements of Helvetia Holding AG were prepared in accordance with the provisions of Swiss accounting law (chapter 32 of the Swiss Code of Obligations). The applied valuation principles comply with the law. The material valuation principles that are not prescribed by law are discussed below.
2.2 Financial assets The loan to Helvetia Schweizerische Versicherungsgesellschaft AG was repaid in the amount of CHF 149.2 million. The outstanding amount stands at CHF 68.8 million.
2.3 Shareholdings On the reporting date, Helvetia Holding AG owned the following direct investment: Reported company capital Holding as of
2.5 Maturity structure of interest-bearing liabilities in CHF million up to 1 year 0.0 150.0
189Financial statements of Helvetia Holding 2019 3. Other information 3.1 Full-time equivalents Helvetia Holding AG does not have any employees.
3.4 Additional information for companies listed on the stock exchange The information on investments of the members of the Board of Directors and the Executive Management required under Art. 663c para. 3 of the Swiss Code of Obligations is provided in the Notes to the 2019 consolidated financial statements of the Helvetia Group under chapter 15.
3.5 Ownership interests of members of the Board of Directors and the Executive Management Information on the allocation of ownership interests to the members of the Board of Directors and the Executive Management is provided in the Notes to the 2019 consolidated financial statements of the Helvetia Group under chapter 15.
The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of Swiss law and the company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of internal control.
Economic changes, including changes to unrealised gains and losses on investments (equity and real estate) – 229.4 – 346.8
+1 % change to risk discount rate – 7.0 % – 8.0 %
–10 % change to fair value of real estate – 6.3 % – 13.4 %
+1 % change to new money rate 6.8 % 9.6 %
Value of new business in % PVNBP 3.3 % 1.4 %
Present value of new business premiums (PVNBP) 2 878.1 2 634.0
Net premiums earned on own account They correspond to the premiums written in the reporting year for the entire business on own account, whilst taking into consideration the changes to the unearned premium reserves.
Return on equity (ROE) Ratio of result to equity: based on the earnings per share (including interest on preferred securities through profit and loss) divided by the average shareholder capital (equity before preferred securities).
Helvetia Group Jens Wiesenhütter a.i. P. O. Box, CH-9001 St Gallen Phone +41 58 280 50 33 www.helvetia.com media.relations@helvetia.ch
Helvetia Group Doris Oberhänsli P. O. Box, CH-9001 St Gallen Phone +41 58 280 55 83 www.helvetia.com doris.oberhaensli@helvetia.ch
Cautionary note regarding forward-looking information This document is made by Helvetia Group and may not be copied, altered, offered, sold or otherwise distributed to any other person by any recipient without the consent of Helvetia Group. Although all reasonable effort has been made to ensure the facts stated herein are accurate and that the opinions contained herein are fair and reasonable, this document is selective in nature and is intended to provide an introduction to, and overview of, the business of Helvetia Group. Where any information and statistics are quoted from any external source, such information or statistics should not be interpreted as having been adopted or endorsed by Helvetia Group as being accurate. Neither Helvetia Group nor any of its directors, officers, employees and advisors nor any other person shall have any liability whatsoever for loss howsoever arising, directly or indirectly, from any use of this information. The facts and information contained herein are as up-to-date as is reasonably possible and may be subject to revision in the future. Neither Helvetia Group nor any of its directors, officers, employees or advisors nor any other person make any representation or warranty, express or implied, as to the accuracy or completeness of the information contained in this document.
Explanatory notes on the use of alternative performance measures are available at www.helvetia.com/annual-results.
Provisions for insurance and investment contracts (net) 41 143.0 42 315.3 44 385.5 44 418.5 46 194.2 of which Group financial assets and investment property 45 036.3 46 471.6 48 629.2 48 583.5 50 227.8
Helvetia Group Alessandra Albisetti Szalay Investor Relations Coordinator P. O. Box, CH -9001 St Gall www.helvetia.com alessandra.albisetti@helvetia.ch